Plaintiff v Defendant

Supreme Court of Victoria|2007-02-22|Before: GILLARD J

APPLICATION TO EXTEND TIME to bring proceeding under Part IV of the Administration and Probate Act 1958 - Substantial delay - Whether estate finally distributed within meaning of s.99 of the Act - Principles in High Court case of Easterbrook v Young [1977] HCA 16; (1977) 136 CLR 308 applied - Creation of trusts in will - Trusts established - Beneficiaries next of kin - Estate not distributed - Application not statute barred - Arguable case that will failed to provide adequate provision for maintenance and support - Time extended.

1 This is an application by the plaintiff in a proceeding issued by originating motion, seeking an order extending the time in which to bring a proceeding pursuant to Part IV of the Administration and Probate Act 1958 ("the Act"). The motion also seeks substantive relief pursuant to s.91 of the Act.

2 The plaintiff, Marjorie Groser ("the plaintiff"), was born on 2 October 1923, is presently aged 83 years, and is the widow of Adrian Charles Noel Groser, deceased ("the deceased"), who died on 8 December 2000 aged 80 years.

3 The defendant, Equity Trustees Ltd ("Equity Trustees") was the executor of the will of the deceased. It obtained a grant of probate in this Court on 29 March 2001. It is the trustee of a number of trusts created by the will.

4 The plaintiff and the deceased had two children, daughter Christine, born on 20 March 1963, and son Anthony, born on 24 September 1966. Both are married. The daughter resides with her husband and children in Mt Eliza and the son resides with his wife in Sydney. His wife recently gave birth to a child.

5 The daughter and the son, now aged 43 and 40 respectively, are not parties to this proceeding. They are beneficiaries under the will, as are their children. Evidence was placed before the Court as to their attitude to this application to extend time and both have indicated that they have received legal advice, do not wish to be heard on this present application, and do not wish to oppose the extension of time. Equity Trustees, as the representative of the deceased, has the onus of upholding the will, and opposed the application to extend time.

6 The deceased was a heavy smoker and died from cancer. He executed his last will on 12 July 2000.

7 The deceased was a pilot who flew during the Second World War. He was a commercial pilot employed by Ansett until he retired in 1975. The plaintiff did not work and was occupied in home duties throughout the marriage. The plaintiff and the deceased married on 30 August 1956.

The Will

8 The will is a five page formal document, prepared by somebody with legal experience. It is a detailed will, and the result of much thought by the deceased. It creates a number of trusts in succession, culminating in the creation of a charitable trust called the "Adrian C. Groser Trust".

9 After appointing Equity Trustees as his executor and trustee, the deceased left a number of pecuniary legacies, which were paid, totalling some $26,000. Clause 3 gave a life interest to the plaintiff in the matrimonial home situated at 35 Torwood Avenue, Glen Waverley ("the home").

10 At the date of death, the plaintiff and the deceased were residing at the home. The deceased also owned a holiday house at 10 Sheridan Road, Rosebud ("the Rosebud property"). The structure of the will is that the deceased left a life interest in the home for the plaintiff and created a trust of all his other real and personal property, to be divided into 10 equal parts and to be held and distributed in certain ways.

11 It is necessary to set out clause 3 of the will. It provided:

"3. I DEVISE my property situate at and known at the date of this my Will as 35 Torwood Avenue Glen Waverley (or any other property forming my principal place of residence at my death) to my Trustee UPON TRUST for the use and enjoyment of my wife MARJORIE OLIVE GROSER for life subject to her paying all rates taxes and other outgoings on the said property and to her keeping the said property in good and tenantable repair and insured against loss to the satisfaction of my Trustee and I EMPOWER my Trustee at any time during the lifetime of MARJORIE OLIVE GROSER upon her written request so to do to sell the said property either by public auction or by private treaty on such terms and conditions and for market value and to purchase either at public auction or by private treaty and upon such terms and conditions and for such price as my Trustee in its absolute discretion shall think fit out of the said net proceeds of sale such other dwelling-house self-contained unit or flat or retirement village unit notwithstanding that the latter may not return the full purchase price at the time of sale and to hold the same UPON TRUST for the use and enjoyment of my said wife MARJORIE OLIVE GROSER upon the same terms hereinbefore stated in respect of my original residence and upon the death of my said wife the said property whether original or substituted shall fall in to and form part of my residuary estate AND IF there is a surplus at any time (after allowing for all usual expenses associated with such sale and purchase) after the sale of a property and the purchase of a substituted property the surplus shall immediately fall in to and form part of my residuary estate."

12 It is noted that the home was to be held on trust for the use and enjoyment of the plaintiff for life. She was given the power to call upon the trustee to sell the property, and out of the net proceeds of sale to purchase another property as a residence and to hold the same on trust for her. The clause went on to provide that upon the death of the plaintiff, the property would fall into the residuary estate, which, together with any surplus upon an earlier sale, was to form part of the residuary estate.

13 In mid 2001, at the request of the plaintiff, the home at Glen Waverley was sold and a property situated at 3/44 Colstan Court, Mt Eliza ("Mt Eliza property") was purchased. Whether or not the clause authorises the sale of the Mt Eliza property and the purchase of another residence for the plaintiff is a moot point. In my opinion, the clause does not authorise the acquisition of what I might call a third residence. I say this because, first, the authority to sell the Glen Waverley home refers to "to sell the said property" and, secondly, if there was a surplus at any time after a sale, the surplus was to fall into and form part of the residuary estate. In my opinion, it would not be open to the trustee now to sell at the request of the plaintiff the Mt Eliza property and acquire, for example, a retirement village unit.

14 Clause 4 dealt with the balance of the real and personal property. This was given to Equity Trustees upon trust, and after payment of various expenses the balance was to be held -

"UPON TRUST to be divided into ten equal parts to be distributed as follows:

a) SIX (6) parts to my trustee to be held UPON TRUST as a separate trust fund (herein called 'Marjorie's Fund') to be invested as herein permitted until the date of death of the survivor of my wife MARJORIE OLIVE GROSER and myself (which date is herein called 'Marjorie's distribution date') and until such date TO PAY to my wife MARJORIE OLIVE GROSER the actual net income derived therefrom and after Marjorie's distribution date TO DIVIDE Marjorie's Fund into two equal parts and TO DISTRIBUTE one part into each of Christine's Fund and Anthony's Fund (both last-mentioned funds constituted as hereinafter provided);

b) TWO (2) parts to my trustee to be held UPON TRUST as a special trust fund (herein called 'Christine's Fund) to invest as herein permitted until the date of death of the survivor of my daughter CHRISTINE WENDY HARRISON and myself (which date is herein called 'Christine's distribution date') and the said CHRISTINE WENDY HARRISON shall be the designated person.

c) TWO (2) parts to my trustee to be held UPON TRUST as a special trust fund (herein called 'Anthony's Fund') to invest as herein permitted until the date of death of the survivor of my son ANTHONY PAUL GROSER and myself (which date is herein called 'Anthony's distribution date') and the said ANTHONY PAUL GROSER shall be the designated person."

15 Clause 4 divides up the balance of the estate on trust between the plaintiff and the two children. The plaintiff was to receive six-tenths of the balance of the estate, which was to be held upon trust, and she was entitled to receive the actual net income derived from the corpus. After what was described as her "distribution date", that is, her date of death, the six-tenths of the trust estate were to be divided into two equal parts and paid into the trust funds created for the two children.

16 It is noted that each child was to receive two-tenths of the balance of the estate "as a special trust fund", which was to be invested until the date of death of the said child and the deceased.

17 Clause 5 dealt with a situation where assets were held as a special trust fund for a designated person. The clause dealt with the trustee's obligations with respect to the application of the assets. Following on from clause 4 and dealing with the children's trusts, the assets were to be held as a separate fund with powers of investment and management. It then provided, subject to the balance of the clause, that the beneficiaries of each trust fund were the designated person, that is, each of the two children, and the descendants of the children. The trustee was authorised to pay the income of the particular fund to the child and his or her descendants. It then provided that the trust fund was to be held on prescribed trusts until the distribution date defined for the trust fund. In fact, the distribution date was the date of the death of each of the children.

18 Clause 5(e) then dealt with the trust after the distribution date of each trust fund. After the payment of certain sums, the balance, if any, was then to be transferred into a charitable trust to be held in perpetuity, called the "Adrian C. Groser Trust". Clause 6 of the will dealt with the charitable trust.

Assets and Value of Estate

19 The statement of assets and liabilities prepared by Equity Trustees revealed that the estate at the date of death comprised:

(i) the family home at Glen Waverley;

(ii) the holiday home in Rosebud;

(iii) a motor vehicle; and

(iv) a variety of investments, including interest bearing securities and shares.

20 The total value of the estate was $1,482,413.73.

The Application

21 The plaintiff in her originating motion claims an order under Part IV of the Act, on the basis that the distribution of the estate of the deceased effected by his will did not make adequate provision for her proper maintenance and support.

22 According to the affidavit in support of the application, the plaintiff asserts that she has no capital to put towards a comfortable nursing home, in the event that her health deteriorates to the point where she needs substantial care.

23 The plaintiff is out of time to make this application. She makes application pursuant to s.99 for an extension of time. Section 99, which has been in similar form since it was introduced in 1937, requires an application for adequate provision out of an estate to be made within six months after the date of the grant of probate. The section relevantly provides -

"99. Time within which application may be made

No application shall be heard by the Court at the instance of a party claiming the benefit of this Part unless the application is made within six months after the date of the grant of probate of the will or of letters of administration (as the case may be):

Provided that the time for making an application may be extended for a further period by the Court after hearing such of the parties affected as the Court thinks necessary, and this power shall extend to cases where the time for applying has already expired but in all such cases the application for extension shall be made before the final distribution of the estate and no distribution of any part of the estate made prior to the application shall be disturbed by reason of the application or of any order made thereon."

24 It is noted that the application for extension shall be made before the final distribution of the estate. An employee of Equity Trustees, Shaun Richard Manuell, swore an affidavit on 8 December 2006, in which he set out in chronological form the various steps taken in the course of the administration, and concluded by asserting that the estate has been finally distributed and hence the application to extend time must fail.

25 The delay in bringing this proceeding after the expiration of the six months period is approximately four years and 11 months. This is a substantial period of delay.

Extending Time - Principles

26 The principles which guide the Court on an application such as the present have been discussed in a number of cases.

27 First, it is noted that a wide discretion is given to the Court, but the Act does not specify any criterion to be considered in the exercise of the discretion. Secondly, the application must be made prior to the final distribution of the estate. Further, where a distribution has in fact occurred, it cannot be disturbed. This is because the rights of the beneficiaries have become conclusive and indefeasible.

28 Prejudice is a weighty factor in a court's consideration, if beneficiaries are likely to be prejudiced by the extension of time. In this case, if time is extended both children may be affected by an order made in favour of the mother, however this is a prejudice which flows from the order and is not the type of prejudice which the courts have recognised. Sometimes prejudice occurs because, as a result of the delay, distribution has been made to some beneficiaries and not to others and it is the latter whose property rights are affected in a way which is unfair. In that situation, a beneficiary carries a burden which would otherwise have been spread across all beneficiaries if the application had been made in time.

29 The authorities also establish that the Court must take into account the period of delay and any excuse given for it. Of course, any prejudice which could not be overcome if the time was extended is a matter of weight.

30 The cases establish that the onus is on the plaintiff to show some reason for the exercise of the discretion to extend time.

31 In the case of Re Guskett,[1] Herring CJ described the Court's approach as follows: [2]

"Now, s.147 (now s.99) as already indicated, commences with a prohibition against the hearing of an application, unless it is made within the time specified. It is clear, therefore, that the legislature intended that application should be made within this period. The proviso to the section must be read in the light of its context, and when so read, it does no more than enable the Court to grant an indulgence to an applicant in appropriate circumstances. It is for the applicant to make out a case that will justify the granting of the indulgence sought. He has to show reasons why his failure to apply within the time allowed should be excused. Every case will have to be dealt with on its own facts, but it would seem necessary for the applicant to satisfy the Court that the circumstances are such as to make it unjust for him to be penalised for being out of time. As, moreover, he is seeking an indulgence, he should apply promptly for an extension of time."

32 It is observed that later in his judgment, his Honour[3] placed reliance on the fact that if a person has known of his or her rights in the past and has chosen not to exercise them, that person cannot come back years later and demand an extension of time because it is now thought desirable to exercise those rights. As his Honour observed:

"She had her opportunity and such injustice as she may now consider herself to be suffering is her own doing and not one brought about by the time limit from which she seeks to be relieved."

33 In Neil v Nott,[4] the High Court on appeal from the Full Court dealt with an appeal from the refusal to extend time where the application was four months and one day out of time.

34 In that case, the High Court noted that the illness and financial state of the applicant was sufficient to entitle him to a brief indulgence "to allow consideration of his moral claim unless it appeared that the administration of the estate would be prejudiced by that extension of time. No prejudice was shown: the executors, perhaps to conserve the estate, did not appear in the Supreme Court to oppose Mr Neil's application."[5]

35 It is interesting to observe that the period in question in that matter was just over four months, that the applicant was suffering illness and his financial estate was parlous, and that in the absence of any prejudice, the Court was of the view that time should be extended.

36 Whether or not the strength of the claim by the applicant is a relevant matter to take into account is a moot point. A number of judges have held that it is irrelevant. In Re Guskett, supra, Herring CJ said[6] that it was irrelevant. This view was followed in Re Barrett, deceased;[7] Coffey v Bennett;[8] and Nenke v Nunn.[9]

37 In my respectful opinion, the strength or otherwise of the substantive claim is relevant. There is nothing in s.99 which precludes consideration of the strength of a claim and in my opinion, to deny a strong claim in circumstances where no prejudice would be suffered by any person if time was extended, would be to cause an injustice. In Re Barrett, deceased,[10] Scholl J referred to New Zealand cases which clearly recognised the relevance and importance of the strength of the plaintiff's case. In my opinion, the strength of the case is important and a relevant factor to take into account. The period of delay and the reason for it, whilst important, are not factors which carry much weight in the absence of real prejudice and in the face of a strong claim. I expressed the latter view in the case of Valbe v Irlicht.[11] In a recent decision, Hansen J disagreed with that view. See Ashhurst v Moss and ors,[12] where his Honour observed that he would not go as far as I had because in his view "such an approach carries a risk of unduly elevating the weight to be accorded to the strength of the claim, when the Act confers a wide discretion to decide whether, in all the circumstances, time should be extended." I respectfully disagree. What I said was that given a situation where there is a strong claim and the absence of prejudice, the period of delay and the reason for it are factors which would not normally carry much weight. What I was stating was not a principle of law. It was an observation of a factual nature based upon the circumstances. It was not an observation which in any way fettered the discretion and was merely a guide as to the relevant weight to be attached to certain factors. As it was no more than a guideline, it must of course give way to the particular circumstances of the case.

38 Justice is the paramount consideration, and to deny a person an extension of time in the face of a strong claim could amount to an injustice.

39 The question of whether the case is arguable is relevant, but if the Court came to the view that the applicant would fail in the application for further provision, then time should not be extended.[13] In Re McPhail, Gowans J referred to the question of the prospects of success and whether there was an arguable case.

The Delay

40 It is necessary to now summarise the facts deposed to by the plaintiff in explaining the delay.

41 When the deceased died, the plaintiff had savings accumulated from moneys inherited from her mother, and some shares. She applied for and obtained a Department of Veterans' Affairs pension. She now receives $480 per fortnight. The said sum is tax free.

42 After the death, the plaintiff became aware of the terms of the will and asserted that she was a little disappointed that she was only receiving the income. I observe that the will followed a traditional form of will, namely, a life interest in real estate to the widow, to provide her with a home, and income for life of a sufficient sum to enable her to live comfortably.

43 I interpolate to observe that the plaintiff's net taxable income for the financial year ending 30 June 2005 was $52,647. Included in that sum was $8,000 she received per annum from her late father's estate. It is necessary to add to that sum $12,480, being the tax free pension. Conservatively, she is in receipt of at least $1,000 net per week. Her taxation return for the year ending 30 June 2006 was not produced to the Court, but I am prepared to infer that the amount of her net taxable income was no less than the amount for the preceding financial year.

44 Some time in 2001-2002, both children sought and obtained a benefit from the estate commensurate with their entitlement.

45 The plaintiff deposes that by November 2001 she was content to accept the will. She said she had not personally sought any legal advice about whether the terms of the will were appropriate.

46 The daughter, Christine, sought legal advice from a firm of solicitors in November 2001. This arose because it was proposed that Equity Trustees would make an interest free loan out of her fund to her and her husband of approximately $200,000, to assist them to purchase a property, and that this would be secured over the property. This transaction in fact took place. It is an interest free loan secured by mortgage over their property. Upon Christine's death, the loan will have to be repaid. However, of course, the advantage of it was that there was no interest payable and with the drop in value of money it represented a substantial benefit to her.

47 The solicitor sent a letter of advice to the daughter, dated 28 November 2001, in which he summarised the effect of the will, and then said:

"As I discussed with you, I do not consider that the will properly provides for you. In addition, for what it is worth, I do not think that the provision for your mother is proper. Nonetheless, I note that you, your brother and your mother are content to accept the terms of the will and do not wish to challenge them."

48 The plaintiff, in her affidavit in support of the application, referred to this letter and produced it. She stated that despite what is said in that letter, she did not receive any such advice, nor did she seek any such advice. Taking into account that the plaintiff was not cross-examined and that there was no evidence to the contrary, I accept that she did not seek legal advice in relation to the terms of the will or whether they were appropriate.

49 Later, circumstances changed. The daughter, Christine, resided with her husband and family at Mt Eliza. The plaintiff requested Equity Trustees to sell the home at Glen Waverley in 2001. This was done, and Equity Trustees purchased a property at Mt Eliza, which was settled in July 2001. She has resided there ever since.

50 The plaintiff stated that her health has deteriorated, which is not surprising, bearing in mind that she is now aged 83 years and will be 84 in October of this year. She stated that she was diagnosed with osteoarthritis of the lower back in 2001, which, again, bearing in mind her age, is not surprising. She had a tumour on the left cheek which was removed in October 2002 and a tumour removed from her nose in May 2003. She was diagnosed with likely heart problems in July 2004. In August 2004, the plaintiff was diagnosed as suffering from Bell's Palsy and in April 2005, was diagnosed with skin cancers on the cheek. She was an inpatient at the Peter MacCallum Institute, being treated for cancer in August/September 2006.

51 It is the plaintiff's concern about her health, and in particular the need for some form of nursing home accommodation in the near future, which has caused her to reconsider the effect of the husband's will.

52 On 27 March 2005, the plaintiff met with her present solicitor to consider her rights, but because of health difficulties did not advance the matter until 31 October 2005, when she saw him again. On 28 November 2005, she had a conference with counsel, who gave her some advice as to the claim. The proceeding was issued on 18 August 2006.

The Plaintiff's Financial Position and Concern

53 The evidence reveals the plaintiff's assets as follows:

(i) cheque account - about $10,000 is the balance;

(ii) term deposit of $4,000;

(iii) Esanda debenture stock of $8,046;

(iv) motor vehicle worth about $8,000;

(v) household furniture and contents of about $10,000;

(vi) income account with Equity Trustees in the sum of $38,860.70 as at 30 June 2006;

(vii) $8,000 per annum from late father's trust;

(viii) tax free pension of $12,480 per annum.

54 Realistically, she has at least $1,000 per week for her upkeep and living expenses.

55 The plaintiff is concerned about the state of her health and seeks to obtain a capital sum from the estate which could be used for nursing home care. However, her affidavit does not go into any detail as to what may be involved, whether she would require a capital sum for a bond, and how much she would require. The plaintiff does not outline her present state of health, whether she needs assistance and care in a nursing home situation, or whether she could continue to reside at home, with or without assistance. It is noted that she has recently had a fall and that she does spend time living with her daughter, who looks after her. It is to be noted that she has a capital sum in the order of $60,906 and a weekly income of at least $1,000.

Distribution of the Estate

56 If, by the time of the institution of this present proceeding on 18 August 2006, there had been a final distribution of the estate, the application must fail. Up until the High Court decision of Easterbrook v Young,[14] the law was clear and had been applied in many cases in Australia, following a line of authorities in New Zealand. The law established that when the executors had got in all the estate, completed their executorial duties and assented to the dispositions of the will taking effect, so that thereafter the executors held the estate as trustees for the persons entitled, there had been a final distribution of the estate.

57 The law was clear and had been established by a line of New Zealand authorities. The established principle was that assets ceased to be part of the estate once they were held by the personal representative in the capacity of a trustee for the beneficiaries.[15] The line of authority was accepted in Queensland in Re Donkin deceased[16] and was recognised in this Court in Brown v Holt.[17] In Re McPhail,[18] Gowans J considered the authorities and applied them in this State. He held that there was a final distribution of the estate once the only assets not transferred were held by the personal representative in the character of a trustee for beneficiaries.

58 The High Court in Easterbrook's case, supra, considered the authorities and held that they were wrong.

59 In that case, the High Court was dealing with New South Wales legislation which was similar to the Victorian legislation. Section 5(1) of the Testator's Family Maintenance and Guardianship of Infants Act 1916 (NSW) required an application for provision to be made out of an estate within 12 months from the grant of representation, and empowered the court to extend time for application, provided that any such application "shall be made before the final distribution of the estate, and no distribution of any part of the estate made before the application shall be disturbed by reason of the application or of an order made thereon." The Victorian s.99 contained words to the same effect as the NSW Act.

60 The headnote of Easterbrook's case provided that the completion of the administration of an estate, so that the personal representative holds any assets still in his hands on trust for the beneficiaries or next of kin, does not take the assets out of the estate of the deceased for the purposes of the Act.

61 Mr Flower of counsel, who appeared for Equity Trustees, submitted that the law established by the High Court was confined to a situation where in the course of the administration the property was held in trust, but if the will created a new trust, the principle did not apply and in those circumstances there was a final distribution of the estate.

62 It therefore becomes necessary to closely consider the reasoning of the Court. The facts can be briefly summarised. The deceased died intestate leaving a small estate, the only asset being a cottage which had been during his lifetime the family home. He was survived by his widow and two sons. Letters of administration were granted to one of the sons on 9 September 1959. Having paid the debts and expenses, the administrator in 1959 published a notice of intention to distribute the estate. Under the law, the estate was to be divided three ways and given to the widow and the two sons in equal shares. In 1960, the title to the cottage was transmitted into the name of the administrator. After the death, the widow, with the agreement of the two sons, continued to live in the cottage. Some 14 years later, in 1973, the widow applied for an order under the New South Wales Testator's Family Maintenance Act and sought an extension of time. At first instance the judge dismissed the application. He held that the administration of the estate had been completed and that the estate had been finally distributed.

63 The reasoning of the High Court can be summarised as follows:

(i) The Court considered the relevant statutory provisions concerning the jurisdiction to make provision out of the estate, the exercise of the jurisdiction, the time limit in which to bring a proceeding and the power to extend time.

(ii) The Court observed that its decision would apply to all jurisdictions in Australia. At p.315, the Court said:

"Testator's family maintenance legislation throughout Australia is in relevant respects in common form, the New South Wales Act being a typical example, with the consequence that the decision in this case will determine the meaning and effect of comparable provisions elsewhere in Australia."

(iii) The Court stated that whether the line of authority which had established the principle about final distribution was correct depended upon a proper construction of the Act. That principle was expressed by the Court at p.315 as follows:

"In approaching the Act, we do so with the knowledge that earlier decisions have taken the change in the capacity in which the personal representative holds the assets left by the testator as ending the capacity of the Court to interfere with the dispositions of the will or the statutory trusts applicable in the case of intestacy."

"Whether the change in the capacity of the executor or administrator, if indeed in the latter case there is any such change, in whose hands or name the property remains is relevant to the construction of the Act?"

(iv) After considering the relevant provisions of the Act, the Court concluded:

(a) "The evident purpose of the Act is to place the assets of the deceased passing to the personal representative at the disposal of the Court in the provision of maintenance for the nominated dependents of the deceased. Because the Court's order has effect as a codicil, the property over which provision may be ordered includes property which, but for the order, would have been beneficially owned either wholly or partly by donees under the will or next of kin under an intestacy. It is plain that the burden of an order is to be thrown on property to which persons are beneficially entitled under the will or on an intestacy."[19]

(b) The Act gave power to vary an order made or revoke it on application by persons beneficially interested who had been disadvantaged by the Court order.

(c) Section 11(3) of the New South Wales Act gave express power to the Court to make provision even though there had been an actual distribution of the property to persons beneficially entitled. Their Honours observed:

"The Act in so providing (i.e. s.11(3)) assumes that the sub-section at least covers the case where executorial or administrative duties have already been fully performed before such distribution has taken place."

(d) The important policy matter was that the effect of a court's order is a codicil operating as on the death of the deceased and their Honours went on to state:

"(This) underline(s) the fact that the provision of a beneficial interest under the will is no bar to the Court's power to make provision for maintenance if needs be out of what is theirs or, but for the order, would be the beneficial property of a beneficiary under the will."

Their Honours observed that s.11(3) underlined that policy.

(e) The policy is inherent in the terms of the provision extending time (our s.99). That provision does not stop an extension of time if the distribution has only been partial. The provision is concerned with complete distribution.

(f) The contrasting of the various provisions supports "the policy of placing within the power of the Court under s.3 all that passed to the personal representative on the grant of probate or letters of administration."

(g) Their Honours finally concluded -

"Bearing in mind the nature and purposes of such legislation, it is our opinion that the disabling circumstance in s.5(2A) is the actual distribution of the estate, its removal from the hands or name of the person or representative and its placement in the hands or name of the testamentary or statutory beneficiary. There is nothing in the language or policy of the Act to suggest that the change in the capacity in which the personal representative holds assets he has received on the grant of probate or letters of administration constitutes either a removal of those assets from the power of the Court under s.3 or a relevant distribution of the estate."[20]

(h) The words "distribute" and "distribution" used in the legislation are not used in a sense of changing the capacity in which an asset is held "but clearly in the sense of a physical parting of that asset and its placing in the hands or name of an intended beneficiary."

64 At p.317, the Court expressed its opinion as follows:

"It is, in our opinion, only when the personal representative has parted with all the assets which came to his hands by the grant of probate or letters of administration that there has been a final distribution of the estate of the testator or intestate. The consequences of the contrary view - the view taken in the deciding cases - seem to us to illustrate its unacceptability."

65 The Court then considered examples which would defeat the purpose of the legislation. For example, application within time but nevertheless between the date of the application and the Court's order administration had been well completed. As the Court observed, the power to make provision "is referable to a state of affairs at the time the order is made."[21] As their Honours stated, if the earlier line of authority was correct then no order could be made even though the application was in time.

66 Another example was that the administration could be completed very quickly and the estate was to be held on trust for a charity and hence, within the period in which a proceeding could be brought, the executor became a trustee of the charity. This was the very thing, the Court pointed out, which the Act was designed to deal with.

67 The Court then considered the various cases and observed that save for one case, insufficient attention was given to the basic question of the construction of the words of the Act in context, taking into account the purpose and policy of the statute. As their Honours observed, it would be incongruous to deny jurisdiction as soon as the executorial duties were complete. To so hold would frustrate the purpose of the legislation.

68 It is observed that one of the factors which had some influence upon the reasoning of the High Court was the presence in the New South Wales legislation of a sub-section, being s.11(3), which authorised the Court to make an order that provision be made even though the assets had in fact been distributed. There was no equivalent provision in the Victorian Act. Nevertheless, in the case of Re Jones,[22] McInerney J was of the view that where the point was taken that there had been a distribution in a proceeding which was issued within time, the Court did have power to make an order for provision out of the estate, even though at the time the order was made the assets had been distributed to the intended beneficiaries. In reaching that conclusion, McInerney J relied upon the High Court decision. There was no suggestion in the judgment that the reasoning of the High Court did not apply in Victoria. In a later case of Re Lago,[23] Brooking J, in dealing with an extension of time, was faced with the argument that the executors had done everything in their power to transfer the real estate to themselves as the beneficiaries. All documents were lodged with the Titles Office but had not been finally registered before the Court hearing. Brooking J referred to Easterbrook's case, noting that the High Court had held that the bar to extension was the actual distribution of the estate. His Honour said:[24]

"... The disabling circumstance was 'the actual distribution of the estate, its removal from the hands or name of the person or representative and its placement in the hands or name of the testamentary or statutory beneficiary.' ... Elsewhere the Court referred to 'a physical parting with the asset, i.e. by delivery or by transfer of title', 'a physical parting with that asset and its placing in the hands or name of an intended beneficiary'; 'a complete removal of the whole of the assets of the deceased from the hands or name of the person or representative' (the Court being at this point concerned with final distribution) and to property's being physically handed over or transferred to the intended beneficiary'."

69 His Honour then went on to state what Easterbrook's case established, when he said:

"To begin with, Easterbrook's case itself makes it plain that in ss.99 and 99A of the Administration and Probate Act, _'_distribution' is an act of delivery or transfer, not something that may result from the transmogrification[25] of the personal representative."

70 Brooking J did not raise any doubts about the application of the principles stated by the High Court to the Victorian legislation.

71 Whilst the High Court referred to s.11(3) of the New South Wales legislation, which underlined the policy, in my respectful opinion, the matters that the High Court considered and took into account to reach their conclusion apply equally to the Victorian legislation, including the recent amendments to Part IV. The principles stated by the High Court apply in this State.

72 In my opinion, the decision of the High Court is correctly summarised in the headnote, as follows:[26]

"But only the complete removal of the whole of the assets of the deceased from the hands or name of the personal representative will be a bar to the extension of time under s.5(1) if the time should otherwise be extended. But an order made under s.3 after the extension of time to apply cannot disturb an actual distribution made before the application for extension."

73 One can substitute for s.5(1), s.99, and for s.3, s.91 of the Victorian legislation. It follows that although the administration of the estate has been completed, the fact that the personal representative holds any assets still in its hands on trust for a beneficiary or next of kin does not amount to a final distribution of the estate within the meaning of s.99.

Has there been Final Distribution?

74 As at today, Equity Trustees holds both real and personal property of the estate in trust for beneficiaries, which of course include the next of kin, namely, the plaintiff and the two children of the marriage. Equity Trustees holds the following properties in trust:

(i) The legal estate of the Mt Eliza property is vested in Equity Trustees, which holds it for the benefit of the plaintiff.

(ii) Equity Trustees holds personal estate for the benefit of the plaintiff, a separate fund for the daughter Christine, and a separate fund for the son Anthony.

(iii) Equity Trustees holds the legal estate of the Rosebud property, which it holds on trust for the benefit of the son Anthony.

75 Equity Trustees may also hold some personal estate as residuary estate in trust for the benefit of those named in the will.

76 I am satisfied that there has not been final distribution of the estate of the deceased which would bar the application under s.99 for an extension of time.

77 I should say something more about the position of the son Anthony's beneficial interest in the Rosebud property. The evidence revealed that some time in November 2001, the son wished to have the Rosebud property appropriated to him. Under the terms of the will, a fund was set up for him and the evidence revealed that the fund had a corpus of something in the order of $200,000. In order to achieve the request, it was necessary for the plaintiff and her two children to agree and on 11 January 2002, the plaintiff and the daughter, Christine, did agree to the establishment of a constructive trust on the basis that the value of the property was $110,000. The transaction was carried out, in that the amount of the property was debited against Anthony's fund. Due to an oversight, Equity Trustees did not have the property transferred into its name until after the issue of the present application, but before it had notice of it. The property was registered under the Transfer of Land Act 1958 on 20 October 2006, although the application was lodged the previous day. The proprietor is noted as Equity Trustees as the legal personal representative of the deceased.

78 It is clear that a trust was established when the transaction was completed between the interested parties back in 2001 and at that point in time, Equity Trustees was constituted the trustee of the property for the benefit of Anthony and that has continued ever since. Whether or not this resulted in a final distribution of that portion of the estate is a question I do not have to answer. However, I draw attention to the concluding words of s.99. If time is extended, I would have thought that there are sufficient assets held in trust, namely, the Mt Eliza home and the cash in the trust funds for the plaintiff and the two children, to meet any order that may be made for further provision.

Should Time be Extended?

79 The first issues for consideration and determination are the period of delay, the explanation for same and whether any person would suffer prejudice if time was extended.

80 The delay was a substantial one, of approximately four years and 11 months. I have summarised the evidence of the plaintiff in relation to the delay. Counsel for Equity Trustees was critical of the explanation given.

81 In many cases, the explanation for a delay will carry very little weight. In cases where a person has been misled as to rights, the explanation may carry substantial weight. But more often than not, where a person seeks an indulgence from a court to overcome a period of delay, the explanations are usually the product of some anxious thought in an endeavour to show the delay was innocent or not negligent. Whether an explanation is adequate or inadequate seems to me, in many cases, to be of little moment. However, if a person was misled then that is a matter of substance.

82 What is important in considering the period of delay is the question of prejudice if the indulgence is granted. But absent prejudice, a period of delay and an inadequate explanation should not stand in the way of a just result.

83 In Re Guskett, supra, Herring CJ[27] was of the view that there must be a sufficient explanation for the delay because the applicant was seeking an indulgence. As I say, in my view it is not an indispensable prerequisite to an extension of time that an explanation is given which can be described as adequate. There are more important factors to weigh in considering whether the discretion should be exercised in favour of the plaintiff.

84 Mr Flower emphasised that the plaintiff accepted that she had knowledge of her right to make an application in November 2001, and that at the time she saw the will she understood she was only entitled to receive income out of the estate. I accept her evidence, as I have indicated earlier, that she did not seek and obtain her own independent legal advice, and that the statement made in the letter written to her daughter concerning the plaintiff's attitude was not correct. It was also emphasised that she has not acted promptly. She first took steps to obtain advice in March 2005, yet the application was not issued until some 17 months later. However, one thing is clear, and that is with her deteriorating health becoming more apparent, she started to give further thought to a situation where she may need full-time care, and appreciated that the will was defective in that regard and did not give her the necessary capital sum to meet such a contingency.

85 It was that fact which caused her to further consider her position and ultimately to seek advice. But the important question is, if time is extended, is that likely to cause any prejudice to any person? Counsel for Equity Trustees did not suggest any prejudice, save for a possible prejudice to the son, Anthony, in relation to the Rosebud property.

86 The will is structured in a way that involves a number of phases. At the moment, all interested parties are still in the first phase. The first phase covers the collection of the estate, distribution of legacies and the establishment of the various trust funds plus the trusts involving the residential properties. The next phase occurs on the death of the plaintiff.

87 Anthony's interest in the Rosebud property is as an equitable owner of the estate for life. This arrangement was entered into and the trust created with the consent of all parties. It had the effect of reducing the cash in Anthony's fund created under the will. However, in my opinion, if an order is made in favour of the plaintiff on the application, the order would not affect the position of Anthony and his interest in the Rosebud property, assuming there was power to do so. In my opinion, a realistic outcome of a successful application for further provision would result in further provision being met out of the plaintiff's fund and/or the sale of the Mt Eliza property.

88 In my opinion, the delay, the explanation, whether it be good, bad, adequate or inadequate, and the question of prejudice do not singly or cumulatively tell against the grant of this application.

89 That brings me to the next question and that is whether the claim would be hopeless if time was extended. In other words, what are the prospects of the plaintiff establishing her case? Is it arguable?

90 The evidence before the Court is in certain respects thin and raises a number of questions. In particular, there is no evidence as to the present state of health of the plaintiff and whether or not she requires supervision and/or nursing services. There is no evidence as to whether she is able to continue to live on her own. There is no evidence as to the likely future with respect to nursing care. Finally, there is no real evidence as to whether her present income and small amount of assets would be sufficient to provide her with nursing home facilities.

91 If I was satisfied that clause 3 of the will should be construed to authorise and permit Equity Trustees as trustee to sell the Mt Eliza home and use the net proceeds to purchase a retirement village unit, or to use the proceeds for the cost and expenses incurred because the plaintiff was in a nursing home, I would dismiss this application because in those circumstances I would be of the view that the deceased had made proper provision. During the hearing, views were expressed by counsel, and indeed their instructing solicitors, as to what clause 3 meant. On one view, it was said that the clause covered such a situation, whereas the other view was that it did not. My provisional view is that clause 3 does not enable Equity Trustees to sell the Mt Eliza property and use the funds to purchase a retirement village unit or provide for nursing home accommodation and care. I suspect that it was the intention of the deceased to make proper provision for his widow, which would include sufficient funds for her to be properly cared for in her old age. It follows that in my opinion, because of the doubts about clause 3 and its interpretation, the plaintiff has a good, arguable case that the will did not make proper provision for a situation where the her health deteriorated to the point where she needed the care and services provided by a nursing home.

92 It follows that in my opinion, there should be an extension of time and I propose to so order.

93 The difference between adequate provision and inadequate provision in this will is a fine line. Because it does turn on what is meant by clause 3, it seems to me that the parties should be able to compromise this application for relief expeditiously, without running up large legal costs. Provision could be made to the effect that Equity Trustees be authorised to sell the Mt Eliza property when the plaintiff reaches a point where she can no longer live alone and to provide the funds for either the purchase of a retirement village unit or for the cost and expenses incurred by the plaintiff as a resident of a nursing home. I would have thought a judge of this Court would form the opinion that the jurisdiction has been enlivened appropriately and would make an order to that effect. Of course, they are provisional views without the benefit of argument. In the end it will be a matter for consideration by the parties and, eventually, determination by the Court.

Orders

94 Subject to any submissions by counsel, I propose to make the following orders:

(i) That pursuant to s.99 of the Administration and Probate Act 1958, the time within which the plaintiff may bring an application for further provision out of the estate of Adrian Charles Noel Groser be extended to 18 August 2006;

(ii) That the costs of the plaintiff of and incidental to this application be paid out of the estate of the deceased, on a solicitor-client basis;

(iii) That the defendant's costs of and incidental to the application be had and retained out of the estate of the deceased;

(iv) That liberty to apply is reserved.

95 The next step would be to refer the matter to a Master in order to give directions. I would be prepared to make an order for directions, including an order for mediation, and to authenticate the order.

[1] [1947] VicLawRp 28; [1947] VLR 212.

[2] At p.214.

[3] At p.215.

[4] [1994] HCA 23; (1994) 68 ALJR 509.

[5] At p.511.

[6] At p.215.

[7] [1953] VicLawRp 45; (1953) VLR 308 at 312.

[8] [1961] VicRp 41; [1961] VR 264.

[9] [1967] WAR 79.

[10] Supra at p.312.

[11] [2001] VSC 53 at p.31.

[12] [2006] VSC 287 at [111].

[13] See Re Walker [1967] VicRp 116; [1967] VR 890 at 892; Re McPhail [1971] VicRp 65; [1971] VR 534 at 548.

[14] [1977] HCA 16; (1977) 136 CLR 308.

[15] See Re Lerwill [1955] NZLR 858.

[16] [1966] Qd R 96.

[17] [1961] VicRp 69; [1961] VR 435 at 441.

[18] [1971] VicRp 65; [1971] VR 534.

[19] At pp.315-6.

[20] At pp.316-7.

[21] See p.318.

[22] [1978] VicRp 28; [1978] VR 272.

[23] [1984] VR 705.

[24] At p.708.

[25] Transformation; to change.

[26] Supra at p.309.

[27] At p.215.

At a glance

Court

Decision date

Before

Source

Judgment (45 paragraphs)

Parties

Legislation Cited (24)

Cases Cited (2)