Re Viertel and Cases Following It
148Re Viertel [1997] 1 Qd R 110 involved a situation where a couple who were specific devisees of a testatrix's house had also been appointed as her attorneys under an enduring power of attorney. After the testatrix had become incapable, and in ignorance of the gift to them in the will, the attorneys sold the house. Thomas J held that it was a disposition of which the testatrix was not aware, and was probably one of which she would have disapproved. He held, "with some hesitation" (110), that there had been no ademption of the specific devise. He did so on the basis that "the rule recognised by Stuart V-C in Jenkins v Jones [(1866) LR 2 Eq 323] above is an historical exception to the consequences of ademption and that the present circumstances fall within that exception."
149No question arises of whether Re Viertel should be followed in New South Wales, because a statutory provision covers the type of situation with which Re Viertel was concerned. The statutory provision is s 22 Powers of Attorney Act 2003 , which states:
"(1) Any person who is named as a beneficiary (a named beneficiary) under the will of a deceased principal who executed an enduring power of attorney has the same interest in any surplus money or other property arising from any sale, mortgage, charge or disposition of any property or other dealing with property by the attorney under the power of attorney as the named beneficiary would have had in the property the subject of the sale, mortgage, charge, disposition or dealing, if no sale, mortgage, charge, disposition or dealing had been made.
(2) The surplus money or other property arising as referred to in subsection (1) is taken to be of the same nature as the property sold, mortgaged, charged, disposed of or dealt with.
(3) Except as provided by subsection (4), money received for equality of partition and exchange, and all fines, premiums and sums of money received on the grant or renewal of a lease where the property the subject of the partition, exchange, or lease was real estate of a deceased principal are to be considered as real estate.
(4) Fines, premiums and sums of money received on the grant or renewal of leases of property of which the deceased principal was tenant for life are to be considered as the personal estate of the deceased principal.
(5) This section has effect subject to any order of the Supreme Court made under section 23.
(6) A person is named as a beneficiary under a will for the purposes of this section if:
(a) the person is referred to by name in the will as being a beneficiary, or
(b) the person answers a description of a beneficiary, or belongs to a class of persons specified as beneficiaries, under the will.
(7) This section does not apply to any person to whom section 83 of the NSW Trustee and Guardian Act 2009 applies."
150It is apparent that s 22 is designed to perform the same function, concerning dispositions of property under an enduring power of attorney, as was achieved by s 48 Protected Estates Act , and is now achieved by s 83 2009 Act , concerning dispositions of property made with legal authority in the course of an administration of the estate of an incapable person.
151In my view Re Viertel has come to an incorrect view of the law. It accepts the sort of argument that was put, and rejected, in In re Freer ([138] above).
152Jenkins v Jones , on which the decision in Re Viertal purported to be based, was a case where a farmer had made a will that appointed his wife and son as executors. The will gave a specific bequest to his son of certain of his farming stock. The farmer became incapable, following which his wife and son sold the farming stock. However, they did not have any authority to deal with his estate at that time. That lack of authority would have amply justified the court's conclusion that the legacy had not been adeemed. By contrast, in Re Viertel the attorneys had full legal authority to sell the house.
153However, it must be recognised that in Jenkins v Jones , Stuart V-C did not base his decision explicitly upon the lack of authority of the son and wife. After recognising the general situation that a legacy was adeemed if its subject matter did not exist at the time of the testator's death, he continued at 328:
"But quite another consideration arises where, after the testator has given a specific thing, and without his knowledge, perhaps against his wishes, or tortiously, another person has sold it or has done enough to wholly alter its character."
154He recognised at 328 that the insanity of the testator made him "consequently incapable of exercising any act of volition either in regard to revoking the gift which he had made, or as to converting it."
155He then said at 328-329:
"The case most nearly approaching to the present is Re Pilkington's Trusts [(1865) 6 New Reports 246], where the bonds which the testator gave specifically were converted by no act of his own, but by a resolution of the company - they no longer remained the specific things which the testator had given. It seemed to me clear that the testator had shown no intention to deprive the legatee of the property in its converted state. He had done nothing to deprive the legatee of the things given, and as they were found to exist, though in a different shape, I decided that they passed to the legatee. What is this case? The farming stock ceased to exist, but the money was placed in a bank and there remained, and it clearly represented the value of the subject-matter of the bequest. The person who changed the character of the chattels was the legatee, to whom and for whose benefit they had been specifically bequeathed.
The case of Durrant v Friend [(1852) 5 De G & Sm 122; 64 ER 1145] is a more extraordinary one than the present. Sir James Parker, in his judgment, made use of observations which seem to me to have a very pregnant meaning as applied to the facts of this case. There property which had been specifically given was insured, and the testator and the specific things bequeathed were lost at sea, and the legacy failed. But Sir James Parker said that if, at the death of the testator, the things which he had given had remained in specie, the policy of insurance would have been something to hold in trust for the specific legatee. Though I think that the decision in that case was a strong one, still I do not desire to raise a doubt as to its being sound law. I think that as it was by no act of the testator that the chattels were converted, for he never intended any conversion, but intended that the specific legatee should have his farming stock, I ought to refuse the motion ... It has been said that Taylor v Taylor does not govern this case; that it does not go so far, inasmuch as although there was an agreement for a sale of the specific things bequeathed, still they existed in the same state as at the death of the testator. But in what respect does that case differ materially from the present? The intention of the testator in this case is clear. The conversion of the stock was inevitable, and I cannot hold that the specific legatee's claim to the proceeds ought to be rejected." (emphasis added)
156In Re Viertel at 112 Thomas J quoted the passages I have emphasised from Jenkins v Jones . He clearly regarded those passages as the decisive ones, as immediately quoting them he said that Stuart V-C " therefore accepted the legatee's claim to the proceeds ". However, to understand the general words that Stuart V-C used it is necessary that they be read in their context: Quinn v Leathem [1901] AC 495 at 506; Commonwealth v Bank of New South Wales (1949) 79 CLR 497 at 637-638; R v Beserick (1993) 30 NSWLR 510 at 517; Leaway v Newcastle City Council (No 2) [2005] NSWSC 826; (2005) 220 ALR 757 at [75]-[84]. The context may be discovered by examining in more detail the cases cited in the key passages of Jenkins v Jones quoted at [155] above.
157Re Pilkington's Trusts (1865) 6 New Reports 246 involved a testator who had made a specific legacy of some bonds in an American company. Under New York legislation a scheme of arrangement was entered that involved the formation of a new company and an exchange of the bonds for securities of the new company. The testator accepted the benefit of the arrangement, and paid money to enable the exchange of securities to occur. He made a codicil that confirmed his will after this exchange of securities had occurred. Stuart V-C held that the new securities passed to the specific legatee. He said, at 247:
"Now there might be cases ... where it would appear that the specific chattel fixed upon by the legatee as answering the description of what was given to him would not be allowed to pass to him by the description; for if by the mere voluntary act of the testator, with no motive whatever but that of changing the chattels for his own purposes, he sold the specific chattel and invested the exact sum of money in another specific chattel, the result was that by his own voluntary act he annihilated the subject matter of the gift, and it could not be held that what he had thus altered in specie was covered by the description of the specific chattel given by the will.
In the present case what was done, although in a sense a voluntary act of the testator, was done with reference to a particular quality of the subject matter of the bequest, which made the operation, if not essential, yet an act of importance with a view to the value of the particular chattel which was given"
158He held that the bequest was not adeemed because, at 247:
"How could it be said that there was here nothing remaining upon which the terms of the bequest could operate, when, owing to the peculiar quality of the chattel that was described, it might undergo a change, which it did undergo, and had undergone at the time the testator made his codicil? He thought, looking at the quality of these bonds, and the way in which they had been dealt with by the testator before his codicils, that the chattels now averred to answer the description of the bequest were the chattels properly intended by the words of the will; and that upon the true construction of the will it passed, and the Court was bound to give effect to the specific bequest."
159Fairly clearly, the testator's knowledge that the conversion had taken place at the time he made his codicil is a piece of surrounding circumstances that could properly enter into a construction of the gift.
160Durrant v Friend (1852) 5 De G & Sm 343; 64 ER 1145 involved a specific legacy of some items that had been insured. The goods perished at sea, and the testator drowned. Parker V-C held that the insurance money fell into the residue of the estate of the testator. His reasoning, at 346, 1147 was:
"... if the testator had died before the destruction of the chattels, then an interest in them would have vested in the legatees, and the executors would have been trustees of the policy of insurance for them; but if the chattels had perished, and the testator had subsequently died, the benefit of the policy would not have passed to the legatees, but it would have been a right of action in the testator in his lifetime, and the loss would have fallen on the legatees, but the benefit of the policy would have constituted part of the testator's estate. In this case the testator and the chattels had perished together, and it was difficult to say how such a case should be dealt with; it was essential to the right of the legatees that they should have some interest in the chattels; but as they were destroyed at the same time that the testator lost his life, the legatees never had, as he thought, any interest in them; and, therefore, their claim to the money in which the chattels were insured must fail."
161If the testator had died before the chattels were destroyed the will would have operated to pass the chattels to the legatee. The effect of the subsequent destruction of the chattels would be decided in accordance with principles that govern what is to happen if a specifically given item of property is destroyed after the testator's death and before it is transferred to the legatee. That is quite a different situation to that of a living person whose property is converted without his authority, or other proper legal authority.
162Taylor v Taylor concerned a shopkeeper who became insane. His wife, the people named as executors of his will and the residuary legatees named in that will joined in an agreement for the sale of the leasehold premises and stock in trade. That was done without any proceedings in lunacy having been taken. The testator died before the contract of sale was completed. Sir W Page Wood V-C held, in an action brought concerning the administration of a deceased estate of the testator, that it was appropriate for the agreement to be carried into effect. However, he also said, at 479-480, 1016 that:
"... the stock in trade consists of property which in its nature required to be dealt with. No one can entertain a doubt that it was right that this property should be disposed of, the lady being incapable herself of carrying on the business. In strictness, however, the proper course would have been to have taken out a commission of lunacy, but that was not done; and, not being done, there was no person in a position to do any act which could confer a lawful title to any portion of the property, except the title which would be given by the sale of articles to customers, which passed by delivery in the ordinary course of trade. Sales effected in that manner not analogous to the preceding which was taken, and, perhaps, very properly in this case ... it was not an agreement which at the time of the testator's death was binding on his property, and therefore, there being no equity between legatees, the legatees must take it, according to the trust declared by the will, in its converted state. I found my decision on this -- that at the time of the testator's death this portion of his estate consisted in fact, not of money, but of the leasehold premises and stock in trade, which passed by that description to his specific legatees."
163That case clearly recognised the lack of authority of the widow, executor and residuary legatees to effect a sale that had the effect of adeeming the legacy.
164Against this background, it seems to me that Jenkins v Jones was based upon the conversion of the farming stock, in the particular circumstances, not effecting a change in substance in the subject matter of the bequest. That is a decision (perhaps a dubious decision, but it is unnecessary to decide) very specifically tied to the facts of the case. It is not in my view a decision that when a testator who has become incapable does not know of the sale of an asset, or does not intend to sell the asset, precludes ademption occurring. Even though he referred to Taylor v Taylor , Stuart V-C took it to be an example of a sale in circumstances of necessity, that did not alter the substance of a bequest. In my view, that overlooks a significant part of the ratio in Taylor v Taylor , arising from the lack of authority of those who effected the conversion of the assets.
165Jenkins v Jones has not been treated in subsequent English authority as establishing the principle requiring knowledge or intention on the part of a testator before a specific gift can be adeemed. It was referred to in argument in Jones v Green two years later (at 588), yet Sir George Giffard V-C regarded it as quite clear that a sale of a lunatic's property effected with authority could adeem a specific gift ([137] above). It was referred to in the argument in In Re Freer ([138] above), but cut no ice with Chitty J.
166The decision in Re Viertel was also based on Re Larking , a case in which a dealing by the committee of a lunatic without authority from the court to carry out that dealing was held not to affect the way in which the lunatic's will would otherwise have operated. However, the essential fact for the outcome in Re Larking was that the action of the committee was carried out without legal authority.
167Re Viertel also relied on the decision in In re Dorman deceased [1994] 1 WLR 282. Dorman held that there was no ademption of a gift of "the balance of my Barclays higher deposit account number 10327719" when an attorney with an enduring power of attorney closed that account and paid the proceeds into a different account of the same branch of Barclays Bank. That conclusion was arrived at because:
- as a matter of construction of the will, the legacy "was effectively reference to a fund of money" (287), and the fund of money still existed, in the new account; and
- there was great similarity in the terms on which the two accounts were held, so the second account was substantially the same thing as the first account (287).
168At 288 Neuberger QC makes some additional observations concerning "the conclusion I have come to" - that is to say, those observations are not the reason for the conclusion. It is at that stage that he says that:
"... the conclusion I have come to appears to me to accord almost certainly with what the deceased would have intended had she known of the removal of the monies from the first account to the second account. I think it unlikely that she knew of the transfer from the first account to the second account. It was the third defendant who effected the transfer on her behalf, and he was unaware of its potential effect on the terms of the will.
Of course, in accordance with the observations I have cited from In re Slater [1907] 1 Ch 665, 675, the act of a general agent, as the third defendant was, must bind an estate with regard to ademption with all the same consequences as if it had been the act of the testator. However, in the same passage Sir Gorell Barnes P does appear to indicate that the testator's knowledge of the facts that give rise to the alleged ademption is important, presumably because in the absence of such knowledge the testator would not have had an opportunity of altering his will." (emphasis added)
169The decision in Re Viertel at 112 drew upon the portions I have emphasised from this section of the decision in Dorman . Those portions are not part of the ratio. They refer to facts that might provide a judge with comfort that the decision arrived at for other reasons is in accordance with the merits of the case, but they do not provide legitimate reasons for concluding that no ademption had taken place. It is the passage that I have not emphasised that in my view should have been of critical importance in Re Viertel .
170Though Re Viertel also considered various American and Canadian authorities, it did not consider the English line of authorities that I have discussed at [137]-[147] above, relating to when a specific gift of a person who had become incapable was adeemed.
171Overall, the American and Canadian authorities discussed in Re Viertel revealed a division of opinion, but Thomas J made special mention of Re Estate of Pearl Swoyer, Deceased 439 NW 2d 823 (SD 1989), a decision of the Supreme Court of South Dakota. I do not agree with a view of Judge Rich QC in Banks v National Westminster Bank plc [2005] EWHC 3479 (Ch); [2006] WTLR 1693; [2005] All ER (D) 159 at [22] that the decision in Swoyer proceeds on the construction of the statutes which regulate ademption in South Dakota. Rather, in Swoyer , Sabers J had recognised at [1]-[3] that South Dakota authority established that ademption statutes were exclusive and the court did not need to address common law rules. However, he then said that the relevant South Dakota statutes " do not address a situation where testatrix is mentally incompetent from before the time her property was sold until her death" . Thus, Sabers J went on to consider the general law, and it was the general law that determined the outcome. At [4] he described the division in American opinion on the topic as follows:
"A minority apply the 'identity test' which considers only whether the property is part of the testator's estate at the time of death ... If the property is not among the decedent's assets, there has been an ademption.... The majority of jurisdictions considered the testator's intention as material and a testamentary gift is adeemed only where it appears that such was the testator's intent ... The courts focusing on the testator's intent holds that there is no ademption where the testator becomes incompetent and the subject matter of a specific bequests or devise is sold by a guardian."
He preferred what he described as the " majority rule" .
172In my view there is an insuperable obstacle to applying this reasoning in Australia. It is that English authority from times when English authority was regarded as stating relevant Australian law, and current Australian authority, both hold that ademption operates in accordance with the principle that is the minority view in the United States.
173The conclusion in Re Viertel at 116, was: " The result should be no different than if a stranger had converted or misapplied an asset in circumstances where the proceeds of the asset can be traced." I do not agree. Rather, the only circumstance in which it is legitimate for the proceeds of sale of a specifically given item of property to pass to the intended donee of that property, other than where the sale has been effected without authority or in some other fashion wrongfully, is where the specifically given asset has not been changed in substance. That is the law as stated in the passage from In Re Slater at 672 that I have quoted at [132] above, as stated in the High Court in Harrison v Jackson , Fairweather v Fairweather and Pohlner v Pfeiffer ([130] and [135] above) and as accepted in this Court in Perpetual Trustees Co v Robbins ([134] above).
174Re Hartigan; ex parte the Public Trustee (WASC, Parker J, 9 December 1997, unreported) is a decision on an ex parte application for advice to the administrator of an incapable person's estate. The likely last will made a specific devise of the incapable person's house. The house was her only asset of significance. Parker J noted that the case before him differed from Re Viertel in that in Hartigan the administrator who was proposing to sell the house knew of the terms of the will. However he held that "heart of" the reasoning in Re Viertel "turns on the sale of property by a person other than the testator at a time when the testator is incapable of selling the property or of altering and existing will to give effect to the testator's intentions in the changed circumstances" . He held it was not a material distinction whether or not the person effecting the sale knew of the terms of the will. I agree with that aspect of the decision. Parker J advised the administrator that if the proceeds of sale of the house were paid into a separate fund the sale would not adeem the devise. No mention was made of there being any legislation in Western Australia analogous to s 83 of the 2009 Act . In my view this decision is mistaken, for the same reasons that Re Viertel is mistaken. It is because the sale of the house by a person with authority to do so would have the effect of adeeming the specific devise that legislation like s 83 was enacted.
175Johnston v Maclarn [2002] NSWSC 97 is a decision of Young CJ in Eq (as His Honour then was) on a pleading point. In the course of it his Honour said:
13 Roper on Legacies , 4th ed (William Benning & Co, London, 1847) at pp 329 and following, sets out the general rule with respect to the ademption of specific legacies. The learned author says:
"The word 'ademption' when applied to specific legacies of stock or of money ... must be considered as synonymous with the word 'extinction'. For it should be observed, that if stock, securities, or money, so bequeathed, be sold or disposed of, there is a complete extinction of the subjects, and nothing remains to which the words of the will can apply (a): for if the proceeds from such sale or disposition were to be substituted and permitted to pass, the effect would be ... to convert a specific into a general legacy."
...
15 As Roper notes at p 331, this view of ademption means that the testator's intention is irrelevant. The only thing to be ascertained is whether the testator possessed the property in the specific gift at the time of his death. If he did not, the legacy is adeemed by annihilation of the subject.
16 Roper's approach has been followed ever since; see eg In re Rudge [1949] NZLR 752, 761, where Callan J affirms that:
"In questions of ademption ... the primary inquiry is not for the testator's intention. The test appears to be whether at his death the property of which the testator has made a specific gift in his ... will still belonged to him."
176I gratefully adopt those statements as correctly reflecting Australian law.
177In Christensen v McKnight , Hodgson J said that ademption depends on the intention of the deceased as disclosed by the will, although not upon any subsequent intention. He also said that if "the intention disclosed by the will is to give particular real estate and nothing else, then it does not matter how the deceased ceased to have the real estate to give." However, those statements do not differ in substance from those of Young CJ in Eq. It is by a process of construction that one identifies the intention of the deceased as disclosed in the will. As with any "intention" derived by a process of construction of a document, this is an objective intention, namely what the well-informed bystander would take from the words of the will to be the intention of the maker of the will. It can be ascertained with the aid of evidence of surrounding circumstances, that enable the court to carry out the thought experiment of placing itself in the testator's armchair for the purpose of construing the will. If the objective intention so ascertained is that a particular donee will receive a particular item of property, and as a matter of fact the donor does not own such an item of property at the time of his or her death, the gift is adeemed. Christensen v McKnight provides no justification for treating any subjective intention of a testator, or lack of it, as affecting how ademption operates.
178In Johnston v Maclarn Young CJ in Eq continued at [17]-[19]:
".... there is authority that there is an exception [to a gift being adeemed if its subject matter does not belong to the testator at the time of his death] where it can be shown that the property ceased to be part of the testator's estate because of the unauthorized action of an agent (see eg Basan v Brandon (1836) 3 Sim 171; 59 ER 68) or committee in lunacy; see eg Re Larking (1887) 37 Ch D 310).
In Jenkins v Jones (1866) LR 2 Eq 323, 328, Stuart VC considered that there was an exception to the ademption rule where the annihilation had taken place without the testator's knowledge, even if it had occurred with implied authority. He based himself on Shaftsbury v Shaftsbury (1716) 2 Vern 747; 23 ER 1089, to which I shall return. Other cases can be found to the footnotes of Jarman on Wills , 8th ed Vol 2 (Sweet & Maxwell Ltd, London, 1951) at p1068.
Although, it is a tad difficult to reconcile these cases with principle, see In re Slater [1907] 1 Ch 665, 671, they remain good law. This was the conclusion reached by Thomas J in Re Viertel [1997] 1 Qd R 110 after reviewing all the authorities including American and Canadian cases and texts.
179He explained Shaftsbury's Case at [22]:
"... The Earl of Shaftsbury made a will giving the contents of his leased house to the Countess. He then went to Naples for his health and died without returning to England. Whilst he was away, a steward negotiated the surrender of the lease and removed the contents to another site. The steward wrote to the Earl who approved the arrangement. The court held that the Countess took nothing, but said that, had the goods been removed by fraud to disappoint the legacy or by a tortious act, the result would have been otherwise."
180For the reasons given earlier I respectfully disagree that Jenkins v Jones established an exception to the ademption rule "where the annihilation had taken place without the testator's knowledge, even if it had occurred with implied authority." In Jenkins v Jones , the wife and son had no authority at all to sell the farming stock.
181Banks v National Westminster Bank plc [2005] EWHC 3479 (Ch); [2006] WTLR 1693; [2005] All ER (D) 159 was an ex parte decision. It arose from facts that differed from those of Re Viertel only in that in Banks the attorneys who effected the sale knew of the provisions of the will. Judge Rich QC at [14] said that that difference is "does not appear to me to be a sensible ground for distinguishing the present case" .
182Judge Rich at [22]-[23] is under a misapprehension that it was only by s 101(1) Mental Health Act 1983 (Eng) that a provision analogous to s 83 2009 Act was introduced into the law of England, but that error does not in my view affect his ultimate conclusion. He noted at [26] that Jones v Green was decided two years after Jenkins v Jones , and that Jenkins v Jones was cited in it but not commented on. After setting out the ratio of Jones v Green including the passage I have quoted at [137] above he continued, at [28]-[29]:
"It seems to me that that conclusion stands with the decision in Jenkins v Jones only if Jenkins v Jones is confined to cases where the disposal which would otherwise result in an ademption is not only made without the testator's knowledge but also without either his or any other lawful authority. In Jenkins v Jones the decision does not depend upon the ignorance of the testator; it is the absence of his intention to convert the property, because of course his family were acting without either his consent or other lawful authority, which, in my judgment, justifies the court's decision.
I accept Thomas J's view that Jenkins v Jones had not been overruled. It is not, however, in my judgment, authority for the proposition for which Mr Dew contends. It is authority only for what was adumbrated in Shaftsbury's case , namely that if the subject-matter is extinguished by fraud or by tortious acts unknown to the testator then an ademption would not follow."
183In my view this conclusion misstates the basis on which Stuart V-C decided Jenkins v Jones . Further, it is the presence of legal authority to convert the property that should have been critical in Re Vietel . Absent matters such as dishonest dealings, a principal is bound by the acts of his attorney within the scope of the authority conferred, even if the principal has no intention to carry out the specific act that the attorney has carried out. This is no different to the way in which an incapable person is bound by acts, performed with proper legal authority, of whoever is administering his or her affairs, whether that administration is occurring under a court or Guardianship Tribunal management order or an enduring power of attorney.
184Orr v Slender [2005] NSWSC 1175; (2005) 64 NSWLR 671 arose concerning an elderly man whose only substantial assets were a home unit and a sum of money. His will made a specific devise of the home unit, and gave the residue to the plaintiff. He also appointed the plaintiff as his attorney, under an enduring power of attorney. A consequence of the legislation establishing the institution of enduring powers of attorney was that the attorney did not have authority to do any act "as a result of which a benefit would be conferred on the attorney" . After the man became incapable, the attorney sold the home unit, and used a large part of the proceeds to pay for an accommodation bond at a hostel. Nicholas J held that the specific gift was thereby adeemed. He adopted the explanation of ademption given by Young CJ in Eq at [13] and [15] of Johnston v Maclarn , and noted its consistency with the decisions in Christensen v McKnight and Jones v Green . He held, at [30]-[31], that the limitation on the attorney's authority did not apply to the sale of the home unit, because that limitation applied only where the act of the attorney was a direct cause of a benefit to him. Hence he held it did not prevent an indirect benefit to the attorney, such as arose when the sale of a home unit had the indirect consequence that the attorney became entitled to any surplus proceeds of the sale by virtue of being the residuary beneficiary under the will. I note that the sale occurred before, in particular, s 22 Powers of Attorney Act 2003 became applicable, and that s 22 would now have the effect that it was the specific devisees who would receive the surplus proceeds. Even so, his Honour was in my view correct in holding that the specific devise was adeemed by the sale. The cases of Re Viertel and Shaftsbury v Shaftsbury were cited in argument, but not discussed in the judgment.
185Re Viertel has been followed in several other first instance decisions: Mulhall v Kelly [2006] VSC 407; Ensor v Frisby [2009] QSC 268; [2010] 1 Qd R 146; Moylan v Rickard [2010] QSC 327; Simpson v Cunning [2011] VSC 466; Public Trustee v Lee [2011] QSC 409. Other first instance decisions have noted the conflict in the authorities concerning the correctness of Re Viertel but did not need to decide whether Re Viertel was correct: Re Blake [2009] VSC 184; (2009) 25 VR 27 at [55]; Power v Power [2011] NSWSC 288 at [36].
186When one is considering whether the disposition of an asset of an incapable person has adeemed a specific gift made by that person's will, there is no legitimate basis of principle on which a disposition effected pursuant to an enduring power of attorney should operate in any different way to a disposition effected pursuant to the authority of the court, or of the NSW Trustee. Re Viertel did not consider the whole of the well-established line of English cases that show that the disposition of an asset of an incapable person in accordance with the court order results in an ademption of a specific gift of that asset. Insofar as it considered Jenkins v Jones and In Re Larking from that line of cases, it did not appreciate the basis upon which they had been decided.
187Victoria has an analogue to s 83 to the 2009 Act , but does not have an analogue to s 22 Powers of Attorney Act . Hargrave J noted this in Simpson v Cunning , and at [42] said that "there is no sound reason why a sale by an administrator, appointed to fill the gap where there is no enduring power of attorney, should lead to a different result that a sale by an attorney in like circumstances." As a matter of social policy, I agree. However, if one is considering what the law actually is, it seems to me that it is of critical importance that the only reason why a sale by an administrator does not adeem the subject matter of the specific gift totally is because there is a statute that permits any surplus proceeds arising from a sale by an administrator to be notionally treated as being themselves the subject matter of the specific gift. The reason why the statutory provision was enacted was precisely because, absent the statutory provision, ademption occurs as a result of such a sale. When there is no analogous Victorian statutory provision concerning sales effected under power of attorney, proper application of principle must require that the ademption occur.
188YOUNG JA : I am indebted to Campbell JA for his deep scholarship, particularly that exhibited in Appendix B.
189Going back to examine the law of lunacy and the law of inheritance in the early 19 th Century is no easy task. Not only does one find inconsistent decisions, succession to land and succession to personal property were dealt with by different court systems and lunacy cases were often dealt with on the basis of what the judge thought the incapable person would have done in a particular case. Thus, in Re Alderson (1808) Collinson on Lunacy (Reed, London, 1812) Vol 1 p 297, Vol 2 p 574, Lord Eldon LC allowed a gift to a son of the lunatic for the premium to allow him to be articled to a solicitor.
190When I first considered this matter, it seemed to me that the line of cases in Queensland which have had some following elsewhere, commencing with Re Viertel [1997] 1 Qd R 110 and particularly Ensor v Frisby [2009] QSC 268; [2010] 1 Qd R 146; 4 ASTLR 169 were well reasoned decisions which might provide assistance in the instant appeal.
191However, when one reads extensively and carefully the 19 th century cases, one reaches the reluctant view that the Queensland judges were misled in those cases by misapplication of the 19 th century law in some of the authorities on which their decisions were based.
192As Campbell JA points out, those decisions read what Stuart VC said in Jenkins v Jones (1866) LR 2 Eq 323, 328 literally, though expansively. When one considers the cases to which Stuart VC referred, particularly Shaftsbury v Shaftsbury (1716) 2 Vern 747; 23 ER 1089 and Durrant v Friend (1852) 5 De G & Sm 343; 64 ER 1145, one can see that the rule is that ademption applies even if the loss of the property occurs without the testator's knowledge or consent and innocently, such as the loss by shipwreck in Durrant v Friend.
193It would be appropriate for those law publishers who issue indices for noting up purposes to consider that Jenkins v Jones , Re Viertel and Ensor v Frisby were not followed in this appeal insofar as they state the principle of ademption too widely.
194The only other comment I would make is that care must be taken in the future as to how the money set aside is to be treated. It is clear that resort may be had to it to maintain the protected person. Management consideration needs to be given as to whether any part of the interest on the money set apart should augment the fund in recognition that, had the realty not been sold, it would have most likely appreciated in value.
195Further, cases such as Re Barker (1881) 17 Ch D 241, 245 and Re Freer (1882) 22 Ch D 622, 627 note that merely setting proceeds of sale apart in a separate account may not be sufficient to alter the rights of parties. Particularly as Mr A is not a party to the present proceedings, it must be made clear that the proper beneficiary of the moneys set apart when the protected person dies is not being decided in this appeal.
196Accordingly, I agree with the orders that Campbell JA proposes for the reasons he gives.
197SACKVILLE AJA : I am grateful to Campbell JA for setting out the facts and the legislation relevant to this appeal. I agree with the orders proposed by his Honour and generally with his Honour's reasons, but I wish to make some observations of my own.
198The present case has some curious procedural features. The appellant (" RL ") applied under s 63 of the Trustee Act 1925 (" Trustee Act ") or, alternatively, under s 83(5) of the NSW Trustee and Guardian Act 2009 (" Guardian Act "), for judicial advice in relation to two questions. The questions are set out by Campbell JA (at [51]). In addition, RL sought an order, pursuant to s 83(5) of the Guardian Act, that s 83 of the Act did not operate to require any of the proceeds of sale attributable to the garage to be set aside for the benefit of any person, other than the protected person (" PBL ").
199RL commenced the proceedings because she was dissatisfied with the direction given by the NSW Trustee and Guardian (" NSW Trustee ") on 10 June 2010. The NSW Trustee directed RL to set aside the sum of $75,000, being the agreed value of the garage. As Campbell JA has explained, the garage was specifically devised to Mr A under the terms of PBL's will, made before PBL became a protected person.
200The direction made by the NSW Trustee contemplated that the sum of $75,000 could be used, if required, for PBL's continuing maintenance and welfare. The direction was affirmed on an internal review. However, the review decision added a " note of caution " that the earmarked sum of $75,000 could not be used for PBL's maintenance or welfare until the balance of her funds had been exhausted. As Campbell JA has observed (at [28]), the note of caution was apparently intended as a variation of the direction given on 10 June 2010.
201RL could have sought review of the NSW Trustee's decision in the Administrative Decisions Tribunal (" ADT "), pursuant to s 70(1) and (3) of the Guardian Act, since the decision was a " reviewable decision " as defined in s 8 of the Administrative Decisions Tribunal Act 1997 (" ADT Act "). The ADT, upon an application for a review of a reviewable decision, is to decide what the correct and preferable decision is having regard to the material before it, including any relevant factual material and any applicable law: s 63(1) ADT Act. The ADT has power to join a person as a party to the proceedings if the ADT considers that the person ought to have been joined as a party or is a person whose joinder is necessary to the determination of all matters in dispute in the proceedings: s 67(4) ADT Act. Had an application for review been made to the ADT, it could have made an order joining Mr A as a party, since he clearly had an interest in the preservation of the fund representing the proceeds of sale of the garage.
202Instead of instituting proceedings in the ADT for review of the NSW Trustee's decision, RL elected to seek judicial advice in the Supreme Court. The advice was initially sought ex parte , but the Court directed that the NSW Trustee (a statutory corporation) be joined and it acted, in effect, as a contradictor. It appears that Mr A was given notice of the proceedings but, despite his obvious interest in the outcome, was never joined as a party. No point was taken by either as to the consequences, if any, of Mr A's non-joinder.
203RL's summons sought only judicial advice on the questions identified by the primary Judge and did not seek additional relief, except the order under s 83(5) of the Guardian Act and the customary prayer for such " further or other orders as the Court thinks appropriate ". The summons was subsequently amended to seek directions pursuant to s 61(1) of the Guardian Act but, as Campbell JA has pointed out (at [54]), the amendment was misconceived.
204RL's decision to seek judicial advice rather than review by the ADT perhaps may have been influenced by a belief that the application was more likely to result in an order that RL's costs be paid out of PBL's estate. In certain circumstances, the ADT has power to award costs in relation to proceedings before it: ADT Act, s 88(1A), (2). However, it is not entirely clear whether the statutory criteria the ADT is required to take into account would permit it to order that the costs of parties on the review of a decision of the NSW Trustee be paid out of the estate of the managed person.
205The primary Judge construed s 83(5) of the Guardian Act as supporting declarations and orders that the " Sale Fund " was not to be spent until the " Other Funds " were exhausted and that the Sale Fund was to be invested separately from the Other Funds. His Honour took the view that because s 83(2) of the Guardian Act requires the " surplus money " arising from any sale to be of the same nature as the property sold, the surplus money had to be preserved until other funds in the managed person's estate were exhausted (at [94], [99]).
206His Honour did not merely answer the questions that had been submitted to the Court for judicial advice. In addition, he made what were described in this Court as " freestanding " declarations and orders. These declarations and orders had not been sought by RL and the NSW Trustee had not filed a cross-claim. Nonetheless, Mr Ellinson SC, who appeared for the NSW Trustee both before the primary Judge and on appeal, assured this Court that RL's representatives had not objected to the declarations and orders being made.
207In my view, the reasoning of the primary Judge reads too much into s 83 of the Guardian Act. Section 83(2) states that the " surplus money " arising from the sale of real property is taken to be of the same nature as the property sold. However, this statutory direction does not necessarily lead to the conclusion reached by the primary Judge. It is one thing for proceeds of the sale of a garage to retain their " nature " as real property. It is another to read the legislation as requiring the proceeds of sale of an asset to be set aside in order to preserve a specific devise or bequest of the asset (where the gift is in a will made by the managed person before she became incapable). In other words, the statutory direction that the proceeds of sale of the garage retain their nature as real property does not establish that the proceeds of sale should be segregated from other assets of PBL and preserved intact until the other assets are exhausted. In substance, I agree with the reasoning of Campbell JA on this issue (at [96], [103]).
208On the appeal, as Campbell JA points out, Mr Ellinson relied on ss 64 and 65 of the Guardian Act to support the declarations and orders made by the primary Judge. No notice of contention was filed (as it should have been) on behalf of the NSW Trustee. Nonetheless, Mr Thomson, who appeared with Mr Barlin for RL, did not object to Mr Ellinson relying on ss 64 and 65.
209For the reasons given by Campbell JA, I think that ss 64 and 65 of the Guardian Act support the declarations and orders made by the primary Judge, subject to the exceptions and modifications proposed by his Honour. I agree that, having regard to the small sum at stake in the litigation, the orders deal appropriately with the procedural difficulties I have identified. I therefore agree with the orders proposed by Campbell JA.
210RL has in substance failed in her appeal against the answers, declarations and orders made by the primary Judge. It follows that no order for costs of the appeal should be made in her favour against the NSW Trustee.
211I do not doubt that the Supreme Court had jurisdiction to entertain RL's application for judicial advice. This is so notwithstanding that RL could have challenged the NSW Trustee's decision by seeking review of the decision in the ADT, perhaps at less cost. But the existence of the jurisdiction to entertain RL's application does not necessarily mean that this Court should order that RL's costs should be paid out of PBL's estate, whether on an indemnity basis or otherwise. An applicant's choice of forum should not dictate a favourable costs order regardless of the outcome of the application.
212RL is one of the three residuary beneficiaries under PBL's will (see the primary judgment, at [6]). She therefore has had a personal interest in pursuing the appeal, although she shares that interest with the other two residuary beneficiaries (her siblings). Bearing in mind that RL's appeal has been unsuccessful, if there was any risk that an order for the payment of RL's costs out of PBL's estate would leave PBL without adequate resources for her ongoing maintenance and welfare, I would not make such an order. However, in the particular circumstances of this case, there appears to be no risk that PBL will be left without adequate resources. Accordingly, I also agree with the costs orders proposed by Campbell JA.
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Decision last updated: 19 March 2012