Application of Valda Ann Haberfield and Anor
[2014] NSWSC 1421
•19 September 2014
Supreme Court
New South Wales
Medium Neutral Citation: Application of Valda Ann Haberfield & Anor [2014] NSWSC 1421 Hearing dates: 19 September 2014 Decision date: 19 September 2014 Before: White J Decision: Refer to paras [15] and [16] of judgment.
Catchwords: EQUITY - trusts and trustees - application for judicial advice under s 63 of the Trustee Act 1925 (NSW) - application for judicial advice by executors and trustees whether justified making distribution to beneficiaries on particular basis - where will provided for reduction of beneficiary's entitlement under will by such amount which remained outstanding on loan granted to that beneficiary by another beneficiary - whether executors and trustees justified in adjusting beneficiaries' entitlements based on their knowledge of amount of loan outstanding after considering the available evidence Legislation Cited: Trustee Act 1925 (NSW)
Probate and Administration Act 1898 (NSW)Category: Principal judgment Parties: Valda Ann Haberfield (1st Plaintiff)
Alan Charles Priest (2nd Plaintiff)Representation: Counsel:
A Joseph (Plaintiffs)
Solicitors:
Priest Legal (Plaintiffs)
File Number(s): 2014/162915
Judgment
HIS HONOUR: This is an application under s 63 of the Trustee Act 1925 (NSW) for judicial advice as to whether the executors and trustees of a will would be justified in making a distribution to the beneficiaries on a particular basis. The application concerns the estate of Ivy May Everett who died on 23 July 2012. By her will, Mrs Everett left the residue of her estate between various family members in equal one-sixth shares. The gifts were subject to adjustment under cl 4 of the will. That clause provided:
"4 IF AT MY DEATH my son ROBERT LEON EVERETT has not repaid all monies borrowed from my daughter VALDA ANN HABERFIELD in relation to the acquisition by him of a truck using monies loaned by VALDA ANN HABERFIELD THEN the amount of ROBERT LEON EVERETT's entitlement under clause 2(c) of this Will shall be adjusted and reduced such that the total amount owing to VALDA ANN HABERFIELD shall be deducted from his entitlement under that clause of my Will and that sum shall be paid to VALDA ANN HABERFIELD in addition to any other entitlement she has under this Will on the basis that VALDA ANN HABERFIELD acknowledges to my Trustees and ROBERT LEON EVERETT that she has no further claim against ROBERT LEON EVERETT in respect of the truck debt."
The application for judicial advice is brought by the executors, one of whom Mr Priest, is a solicitor. The other executor is Ms Valda Haberfield. She is a beneficiary affected by any adjustment to be made to her and her brother Leon's entitlement under cl 4.
Mr Priest deposes in substance, that he believes from banking records and invoices provided to him, that the truck debt, the subject of cl 4, totals $33,600. He believes that there was no repayment of that debt prior to the deceased's death, and that therefore, an adjustment of that sum should be made to the entitlements under the will of Valda Haberfield and Robert Leon Everett (Leon Everett).
Judicial advice is sought as to whether the plaintiffs, as trustees, would be justified in determining the amount of the adjustment to be made pursuant to cl 4 and in adjusting the entitlements of the beneficiaries based
on their knowledge of the amount of the loan by Ms Haberfield to Mr Everett in relation to the acquisition of the truck in question after considering all available evidence.
It is clear that the adjustment to be made under clause 4 of the will is in respect only of what is described in clause 4 as the "truck debt". However, the entitlement of Mr Everett or Ms Haberfield to their respective shares of the estate will depend upon the objective facts as to whether there was any amount of the truck debt outstanding as at the date of the deceased's death.
Mr Priest believes that the sum of $33,600 was outstanding, and provides evidence as to the basis of that belief which indicates that the belief is reasonably held. Nonetheless, the beneficiaries' entitlements depend upon the objective facts, not upon any discretion of trustees. It seems to me that there are two ways of proceeding. One way is that when the estate is administered and available for distribution, the trustees could give notice of their intention to distribute pursuant to s 60 of the Trustee Act. Presumably, the executors will also have given notice pursuant to s 92 of the Probate and Administration Act 1898 (NSW).
If, having given those notices (which when given to Leon Everett and Valda Haberfield would specify a proposed adjustment of $33,600 to what would otherwise be their entitlements to the estate) the trustees did not receive notice of a claim by either Leon Everett or Valda Haberfield that he or she should be entitled to a greater share of the estate, then it appears to me that the trustees, not having notice of such a claim, could distribute the estate and would be protected against any later claim (Trustee Act s 60(5)).
On the other hand, if the trustees did have notice of such a claim by either Mr Everett or Ms Haberfield, then if they were to distribute the estate with notice of that claim but without regard to it, they would be personally liable to make good any deficiency in the distribution if the affected beneficiary established that claim. The trustees could obtain protection against such a claim by giving notice under s 93 of the Probate and Administration Act, the effect of which would require the claimant to institute a proceeding within three months, failing which the claim would be barred.
The alternative course proposed by proceeding on the basis of judicial advice could achieve much the same ends.
If the advice sought were given, the trustees, in accordance with the advice, would still be required before distributing the estate, to give notice to any person whose rights as beneficiary might be prejudiced by the distribution (Trustee Act, s 63(8)). That would include, on the face of it, both Leon Everett and Valda Haberfield, as both might contend that they were entitled to a greater sum than the trustees proposed to distribute.
Section 63(10) of the Trustee Act then provides that:
"Any person who claims that his or her right as beneficiary would be prejudiced by the distribution may, within such time as may be prescribed or as may be fixed by the Court, apply to the Court for an order or direction as the circumstances may require while that application is pending, trustees would be required to abstain from making the distribution."
The effect of proceeding under s 63 would be, in substance, the same as if the trustees proceeded by the giving of notices, including, if necessary, a notice under s 93 of the Probate and Administration Act 1898, except that the time limits for a beneficiary to make a claim could be specifically fixed by the court's order under s 63(10).
It seems to me on balance that the greater flexibility under s 63 provides the preferred mode of proceeding. But I do not think advice should be given precisely in the terms as sought in the plaintiffs' counsel's written submissions.
It appears to me that rather than stating that the trustees would be justified in adjusting entitlements "based on [the trustees' knowledge] of the amount loaned ... after considering all the available evidence" the advice should be based upon the evidence that the plaintiffs have provided in relation to the adjustment that is proposed. I am told by counsel for Mr Priest that his co-executor, Ms Haberfield, agrees with the adjustment proposed by him. Without knowing what different view Mr Priest or Ms Haberfield might arrive at on the basis of "all the available evidence", I could not form a view as to whether it was appropriate for them to act in a way which might be different from that presently proposed. The will does not leave any adjustment to the trustees' discretion.
Accordingly, subject to any submissions counsel may have as to the appropriate form of order, I propose to order that:
1) The plaintiffs be advised that they would be justified in distributing the estate of the late Ivy May Ann Everett on the basis that an adjustment is to be made to the entitlements of Robert Leon Everett and of Valda Ann Haberfield by reducing the amount of Robert Leon Everett's entitlements under cl 2 (c) of the will by the sum of $33,600 and adding that amount to the sum to be paid to Valda Ann Haberfield to her entitlement under the will.
2) I direct that the plaintiffs, before distributing the estate, are to give notice to Robert Leon Everett and Valda Ann Haberfield of this advice.
3) I fix the time of 28 days after the giving of notice pursuant to order 2 as the time by which any application is to be made to the Court by either Robert Leon Everett or Valda Ann Haberfield or both of them, for any order for the distribution of the estate to be made on any other basis.
[Counsel addressed.]
In my view, the application is a proper one to be made and the plaintiffs, as executors and trustees, are entitled to be indemnified in respect of the expenses incurred in the application. I order that the costs of the plaintiffs be paid on an indemnity basis out of the estate.
[Orders accordingly.]
Decision last updated: 16 October 2014
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