Capaldo v Gretsas
[2022] SASC 117
•14 October 2022
Supreme Court of South Australia
(Civil: Application)
CAPALDO v GRETSAS & ORS
[2022] SASC 117
Judgment of the Honourable Justice Stanley
SUCCESSION - ADMINISTRATION OF ESTATE - DISTRIBUTION - GENERALLY
SUCCESSION - CONSTRUCTION AND EFFECT OF TESTAMENTARY DISPOSITIONS - CONSTRUCTION GENERALLY
This is an application by the executrix seeking advice and direction pursuant to s 69 of the Administration and Probate Act 1919 (SA); a declaration as to the construction of the deceased’s will; and an order directing the Registrar-General to remove a caveat registered over the real property forming part of the estate.
The applicant is the executrix and trustee of the estate of her late father. The respondents, the deceased’s daughters, are the beneficiaries of the estate.
As part of the administration of the estate, the applicant wishes to sell the real property forming part of the estate and distribute the proceeds together with the other assets of the estate equally amongst the beneficiaries.
The first respondent and second respondent oppose this course and wish the properties to be distributed to the beneficiaries in specie to be held by them as tenants in common in equal shares.
The deceased’s will does not include an express power to sell the real property forming part of the estate.
The first respondent has lodged a caveat over the real property forming part of the estate claiming an estate or interest in fee simple as a beneficiary of the will.
Held:
1. The applicant, in her capacity as executrix, is advised and directed that it is within her power to sell and call in the real property forming part of the estate.
2. The Registrar-General is directed to remove the caveat registered by the first respondent over the real property forming part of the estate.
3. The costs of and incidental to the application are to be paid out of the estate.
Administration and Probate Act 1919 (SA) ss 46, 51, 69; Real Property Act 1886 (SA) s 191, referred to.
Barclay v Owen (1889) 60 LT 220; Barns v Barns (2003) 214 CLR 169; Burke v Public Trustee [2022] SASCA 64; Farrelly v Phillips (2017) 128 SASR 502; Galvasteel v Monterey Building (1974) 10 SASR 176; Garwoli v Garwoli [2015] SASC 1; Howe v Lord Dartmouth (1802) 32 ER 56; In the Estate of Just (No 2) (1974) 7 SASR 515; In the Estate of Nies (Deceased) [2014] SASC 93; Michael v Callil (1945) 72 CLR 509; Pagels v MacDonald (1936) 54 CLR 519; Re Wheaton [1937] SASR 19; Yule v Irwin (No 2) [2016] SASC 178, considered.
CAPALDO v GRETSAS & ORS
[2022] SASC 117Civil
STANLEY J:
Introduction
Maria Capaldo, in her capacity as executrix of the estate of her late father, Georgios Tsarouchas (the deceased), seeks advice and direction pursuant to s 69 of the Administration and Probate Act 1919 (SA) (APA); a declaration as to the construction of the deceased’s will; and an order directing the Registrar-General to remove a caveat registered over properties which form part of the assets of the deceased’s estate.
The deceased’s last will was made on 7 October 1988 (the will). The will appointed his wife, Asimina Tsarouchas as the sole executrix and left her the whole of his estate both real and personal absolutely. In the event that she predeceased him the will appointed Ms Capaldo as his sole executrix and trustee and the respondents, his daughters, Zaharoula Gretsas, Margarita Douventzidis and Ms Capaldo, as the beneficiaries of the estate. The deceased died on 11 May 2020. His wife had predeceased him. Probate of the will was granted to Ms Capaldo on 12 November 2020.
The estate consists of real and personal property. The real estate consists of the deceased’s former residence at Frank Street, Para Hills, and two investment properties at Cowra Street, Mile End and Ebor Avenue, Mile End (the properties). Mrs Gretsas has lodged a caveat over the properties asserting an estate or interest in fee simple as a beneficiary of the will.
In addition to the properties, there was a further investment property in Currie Street, Adelaide (the Currie Street property), which formed part of the assets of the estate. That property was sold by Ms Capaldo, with the consent of Mrs Gretsas and Ms Douventzidis (the other sisters), on 31 May 2021. The proceeds of the sale were placed into an estate account held with the Commonwealth Bank.
The issue
A dispute has arisen between Ms Capaldo, in her capacity as executrix of the deceased’s estate, and the other sisters in relation to the sale of the properties.
An executor has no power to sell the assets of an estate except under an authority expressly or impliedly conferred by the terms of the will. It is not always necessary that a power of sale should be expressly stated in the will. Sometimes the nature of the dispositions made by the testator, either together with or independently of the nature of the assets of the estate, result in the implication of a power of sale.
As part of the administration of the deceased’s estate, Ms Capaldo wishes to sell the properties and distribute the proceeds together with the other assets of the estate equally amongst the beneficiaries. The other sisters oppose this course. They wish the properties to be distributed to the three beneficiaries in specie and to be held by them as tenants in common in equal shares. They contend that it was the deceased’s wish that his three daughters would inherit the properties equally and manage them as partners and that if one of them did not wish to participate as a partner, then the other two daughters would buy out the existing daughter at market value. They contend that this reflects the deceased’s intention at the time he made his will. They contend that consistent with this intention, the will does not include an express power to sell the properties. They contend that the terms of the will restrict Ms Capaldo’s power of sale of the properties solely for the purpose of paying the estate’s debts. It is common ground that it is not necessary to sell the properties for the purpose of paying the debts of the estate. Ms Capaldo contends that the terms of the will empower her to sell the properties of the estate for the purpose of distribution of the converted residuary estate to herself and her sisters.
This gives rise to a question of construction of the will. In circumstances where the other sisters are joined to the application for advice and direction, the Court may make a binding determination in relation to the proper construction of the will.[1]
[1] Burke v Public Trustee [2022] SASCA 64 at [42]-[43] per Livesey P in dissent (Doyle JA and Stanley AJA agreeing on this issue).
The task of the Court when construing a will is to discover the intention of the testator.[2] In this case the constructional choice is between an implied general power of sale or an implied power of sale limited to paying the debts and testamentary expenses of the estate.
[2] In the Estate of Nies (Deceased) [2014] SASC 93 at [11].
Principles of construction of wills
In Farrelly v Phillips, I set out the principles applicable to the construction of wills:[3]
[3] (2017) 128 SASR 502 at [23]-[32].
The task of a court when construing a will is to discover the intention of the testator. In Perrin v Morgan, Lord Romer said:
I take it to be a cardinal rule of construction that a will should be so construed as to give effect to the intention of the testator, such intention being gathered from the language of the will read in the light of the circumstances in which the will was made.
Lord Simon said:
… [t]he fundamental rule in construing the language of a will is to put on the words used the meaning which, having regard to the terms of the will, the testator intended. The question is not, of course, what the testator meant to do when he made his will, but what the written words he uses mean in the particular case – what are the “expressed intentions” of the testator.
In Fairbairn v Varvaressos Campbell JA cited with approval the dicta of Bryson J in Perpetual Trustee Co Ltd v Wright, where his Honour said:
… one’s task is, first, if it be possible, to ascertain, what was the basic scheme which the deceased had conceived for dealing with his estate, and, then, so to construe the will as, if it be possible, to give effect to the scheme so revealed.
In Muir v Winn Bryson AJ observed:
It is necessary to seek to understand the scheme of a testator’s dispositions. Where the terms of the will are perfectly clear search for the scheme may be of little use, but where the language is obscure or the effects of the literal reading and the reasoning impliedly underlying it are startlingly unlikely, as in this case, the scheme of dispositions is very important.
The appellant seeks to rely upon the so-called “armchair principle”. This was described in Allgood v Blake by Blackburn J as follows:
The general rule is that, in construing a will, the Court is entitled to put itself in the position of the testator, and to consider all material facts and circumstances known to the testator with reference to which he is to be taken to have used the words in the will, and then to declare what is the intention evidenced by the words used with reference to those facts and circumstances which were (or ought to have been) in the mind of the testator when he used those words … the meaning of words varies according to the circumstances of and concerning which they are used.
There are two qualifications to the armchair principle. First, when the court considers the circumstances known to the testator, it is only the circumstances existing at the time the testator made his will that may be considered. Second, extrinsic evidence cannot be used to make words in a will bear a meaning which on the face of the will they are incapable of conveying. This is sometimes described as the “incapable meaning rule” or the “plain meaning rule”. In relation to the armchair principle, Lord Romer observed in Perrin v Morgan, that when seated in the armchair the court is not entitled to make a fresh will for the testator merely because it strongly suspects that the testator did not mean what he plainly said.
In Marley v Rawlings, the Supreme Court of the United Kingdom has recently approached the construction of wills on the same basis as the interpretation of contracts. The Court adopted the objective theory to ascertaining the testator’s intention, which it found to be consistent with the armchair principle. Lord Neuberger, with whom Lord Clarke, Lord Sumption and Lord Carnwath agreed, said:
When it comes to interpreting wills, it seems to me that the approach should be the same. Whether the document in question is a commercial contract or a will, the aim is to identify the intention of the party or parties to the document by interpreting the words used in their documentary, factual and commercial context. As Lord Hoffmann said in Kirin-Amgen Inc v Hoechst Marion Roussel Ltd, “No one has ever made an acontextual statement. There is always some context to any utterance, however meagre.” To the same effect, Sir Thomas Bingham MR said in Arbuthnott v Fagan that “courts will never construe words in a vacuum”.
Of course, a contract is agreed between a number of parties, whereas a will is made by a single party. However, that distinction is an unconvincing reason for adopting a different approach in principle to interpretation of wills: it is merely one of the contextual circumstances which has to be borne in mind when interpreting the document concerned. Thus, the court takes the same approach to interpretation of unilateral notices as it takes to interpretation of contracts: see Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd.
...
[T]he approach to the interpretation of contracts ... is therefore just as appropriate for wills as it is for other unilateral documents. This may well not be a particularly revolutionary conclusion in the light of the currently understood approach to the interpretation of wills (see eg Theobald on Wills, 17th ed (2010), chapter 15 and the recent supplement supports such an approach as indicated in Royal Society for the Prevention of Cruelty to Animals v Sharp). Indeed, the well known suggestion of James LJ in Boyes v Cook that, when interpreting a will, the court should “place [itself] in [the testator’s] arm-chair”, is consistent with the approach of interpretation by reference to the factual context.
(Citations omitted).
Marley v Rawlings has been applied in a number of single judge decisions in Australia.
This approach is conducive to coherence in the law of construction of instruments consistent with the approach taken in the joint reasons of Heydon and Crennan JJ in Byrnes v Kendle.
While the task of the Court in construing the will is to ascertain the intention of the testatrix, the Court must take care to avoid interpreting the will on the basis of some a priori assumption about the testatrix’s intentions. The surest guide to the testatrix’s intention is the language of her will. Her expressed intentions are embodied in its text read in light of the surrounding circumstances in accordance with the armchair principle. The search is for her expressed intentions, not what she meant to say, but what she actually said.
[Citations omitted].
In this case there is limited evidence of the deceased’s knowledge of relevant surrounding circumstances at the time that the will was executed which is admissible for the purpose of ascertaining his intentions as expressed in his will. It appears that the will was prepared by a solicitor, Arthur Drikas, but the will file has been lost and Mr Drikas is deceased.
Accordingly, the deceased’s intention is to be ascertained from a consideration of the text of the will read as a whole and having regard to the surrounding circumstances known to the deceased at the time that the will was made. The only surrounding circumstance admissible for the purpose of this application is the testator’s knowledge of the nature and extent of his estate.
The will
The will provides:
THIS IS THE LAST WILL AND TESTAMENT of me GEORGIOS TSAROUCHAS of 8 Frank Street Para Hills in the State of South Australia Company Director.
1. I REVOKE all former wills and testamentary dispositions previously made by me.
2. I APOINT my wife ASIMINA TSAROUCHAS to be the sole executrix and trustee of this my will PROVIDED HOWEVER that if my wife predeceases me or survives me but dies before obtaining a grant of probate of my will or is unable to or unwilling to obtain a grant of probate of my will then I APPOINT my daughter MARIA TSAROUCHAS to be the sole executrix and trustee of this my will.
3. IF MY WIFE ASIMINA TSAROUCHAS survives me by a period of twenty eight days I GIVE DEVISE AND BEQUEATH the whole of my estate both real and personal of whatsoever nature and wheresoever situate after payment thereout of my debts and funeral and testamentary expenses to her absolutely.
4. IN THE EVENT of my said wife predeceasing me or not surviving me for the space of twenty eight days as aforesaid I GIVE DEVISE AND BEQUEATH the whole of my real and personal estate of whatsoever nature and wheresoever situate unto my trustees UPON TRUST for my children in equal shares as tenants in common PROVIDED that if any child of mine should die in my life time leaving issue who shall attain or shall have attained the age of twenty one years such issue shall take and if more than one then equally between them the share which his her or their parent would have taken under this my will had such child lived to survive me.
5. IN THE EVENT of any of my said children predeceasing me or not surviving me for the space of twenty eight days without issue I DIRECT that the share which such child would have taken under this my will shall pass to my surviving children.
6. I EMPOWER my trustees:
(a) During the minority of any beneficiary under this my will to apply the whole or such part as my trustee shall think fit of the income of the vested expectant or presumptive share of any such child for or towards his or her maintenance education or benefit with power to pay the same to the guardian for the time being of such child or grandchild or to any person with whom such child or grandchild may be living without being in any way answerable for the application thereof.
(b) To postpone the sale calling in and conversion of any part of my real leasehold or personal estate as my trustees shall in their absolute discretion deem fit without being liable to account therefore notwithstanding that it may be of a wasting speculative or reversionary nature.
(c) During the period of any such postponement to manage and order all the affairs thereof as regards letting occupation repairs insurance’s receipts of rents and allowances to tenants and all other matters and to deal therewith in a proper and due course of management as if beneficially entitled thereto.
(d) To retain the share or debenture holdings in any company or companies which I may hold at the time of my death for such period as my trustees in their absolute discretion deem fit without being liable to account therefore notwithstanding that any such share or debenture holdings may not be investments of the kind authorised by law for the investment of trust monies.
(e) To invest any part or parts of my residuary estate in such investments or securities as they shall think fit and to vary the same from time to time at their discretion PROVIDED that my trustees shall not be personally responsible or liable for any loss which may be incurred as the result of any such investment or variation.
7. I DIRECT that my trustees or any of them may become directors or servants of any company or companies in which hi may hold shares or debentures at the time of my death and may receive renumeration attaching to such office or offices without being liable to account for the same and that my trustees or any of them may be qualified as a director or director’s (if the Articles so allow) by the holding in their his or her own name or names of shares belonging to my estate PROVIDED that they he or she execute a declaration of trust thereof in favour of my estate generally accompanied by the certificate of such shares and that they he or she account to my estate for all dividends or bonus’ payable in respect thereof.
IN WITNESS THEREOF I have hereunto set my hand this 7th day of October 1988.
Power of sale for the purpose of distribution
Reading the will as a whole, it is tolerably clear that the deceased intended to confer upon his executrix a power of sale for the purpose of distribution of his estate. It follows that the executrix’s power of sale is not to be confined to the payment of debts in the administration of the estate.
In coming to this conclusion, I acknowledge that the will does not expressly confer such a power of sale. However, there are features of the text of the will which satisfy me that such a power of sale is implied.
The principal feature of the deceased’s intention to confer a power of sale for the purpose of, inter alia, distribution is the terms of clause 6(b) of the will which empowers his trustees [sic]:
[t]o postpone the sale calling in and conversion of any part of my real leasehold or personal estate as my trustees shall in their absolute discretion deem fit without being liable to account therefore notwithstanding that it may be of a wasting, speculative or reversionary nature.
Postponing the sale of any part of the real property of the estate implies the existence of a power of sale having been conferred on the executrix and trustee appointed under the will. It implies a general power of sale rather than a power confined by the terms of s 51 of the APA.
Section 51 of the APA provides:
(1) Every executor or administrator shall, whether there is a charge of debts, or a trust for payment of debts, or not, have the same power of sale of real estate for payment of debts as an executor now has with regard to personal estate.
(2) No person purchasing real estate of a deceased person from his executor or administrator shall be bound or concerned to inquire as to the existence of debts, the necessity for sale, or the application of the purchase-money.
Section 51 of the APA simply empowers the sale of real estate for the purpose of payment of debts. It is a specific conferral of power rather than a general limitation of the power of the executor or administrator. As s 51 of the APA confers such a limited power, there is no need for the will to impliedly confer the same limited power of sale.
The second feature which supports the construction I favour is the terms of clause 4 of the will which, in part, makes provision for what is to occur in the event of the deceased’s wife predeceasing him, by gifting, in that event, the whole of his real and personal estate of whatsoever nature and wheresoever situate unto his trustees [sic] upon trust for his children in equal shares as tenants in common. At the time that the deceased made his will, he must have known that his assets included the properties as well as the Currie Street property. If he had intended that his executrix would not be empowered to sell assets of the estate other than for the purposes of administration, I consider that the deceased would have expressly gifted the properties to his three daughters in the event that they were to take under the will in specie as tenants in common. This is particularly so in the circumstances of this case where the other sisters do not contend that the Currie Street property should have been dealt with in this way under the will. There is nothing on the face of the will which would support an intention on the part of the testator to empower a sale of the Currie Street property but not the properties.
The third feature which supports the construction I favour is the further provision in clause 4 of the will which stipulates what should occur to the share of any of the deceased’s children who should predecease him leaving issue who shall attain or have attained the age of 21 years. The will provides that such issue shall take and if more than one then equally between them, the share which their parent would have taken under the will had they survived the deceased. This provision is inconsistent with an intention on the part of the deceased to gift to his children the properties in specie as tenants in common for them to operate in partnership.
The implication of a general power of sale is also supported by the absence of any express conferral of power in clause 4 of the will for payment of the deceased’s debts, funeral and testamentary expenses. Such power must be implied as arising out of the office of executor and being executorial. Plainly, the will implies that the executrix is conferred with powers necessary for the administration of the estate. The conferral of such powers by implication provides some further support for the implied conferral of a general power of sale.
The fourth feature which supports the construction I favour is that the implication of a power of sale for the purposes of distribution is supported by the broad conferral of power on the executrix by the other provisions of clause 6 of the will. Clause 6(a) of the will empowers the deceased’s trustee during the minority of any beneficiary to apply the whole or such part of the income of the vested expectant or presumptive share of any such child towards their maintenance, education or benefit. Clause 6(e) of the will empowers the deceased’s trustee to invest any part or parts of the residuary estate in such investments or securities as they think fit. These broad powers implicitly contemplate that the personal assets of the deceased’s estate may not be sufficient for these purposes. In which case the conferral of a general power of sale of the deceased’s real estate assets is necessary to effect the deceased’s testamentary intentions.
Further, the construction I favour is supported by the reasons of the High Court in Pagels v MacDonald.[4]
[4] (1936) 54 CLR 519.
In Pagels v MacDonald the testator bequeathed his wife a life interest in his real and personal estate and directed that at her death it should be “equally divided” between his youngest son and his six youngest daughters, each to have an equal share. The testator then appointed executors. The testator’s widow occupied the land during her life. After her death, a grant was made of letters of administration with the will annexed of the unadministered estate of the testator. The administratrix desired to sell the land. At issue was whether the will empowered her to sell the land and distribute the proceeds amongst the named beneficiaries.
The High Court held that by the terms of the will, and as an incident to the office of the administratrix of the unadministered estate, she was empowered to sell the real estate for the purpose of distribution.
Latham CJ said:[5]
The only gift to the children of the testator is contained in the words “and at her death to be equally divided between” the children “each to have an equal share.” There is thus no direct gift of the real and personal estate to the children. There is a direction that the real and personal estate is to be equally divided between them. The question submitted to the Court relates only to the real estate. If the real estate is transferred to the children as tenants in common in equal shares they will each hold an undivided interest, and no division will have taken place. Accordingly I am of opinion that the direction to divide the land implies that the executors should sell the land and divide the proceeds.
[5] (1936) 54 CLR 519 at 523-524.
Starke J said:[6]
In Victoria, the real and personal estate of a deceased person vests in the legal personal representative. His main duties consist in paying debts and expenses and distributing the property of the deceased amongst the persons entitled thereto.
…
Must the division be in specie, or has the legal personal representative power to sell the property and distribute the proceeds amongst those entitled? In my opinion, the question depends upon the proper interpretation of the will. If it is plain that there is to be “a division of the property; that the property to be so dealt with is to go – not the land in specie, and the money in specie – but to go among certain persons in certain shares and proportions, without any distinction as to land or money, then the legal personal representative must have power to effectuate the purposes of the will and sell the property.
…
But under the terms of the will the realty and personalty are blended, and directed to be divided amongst a somewhat numerous class. Such a direction makes it clear, I think, that the testator intended a sale, and that the legal personal representative of the testator should effect his purpose and sell and divide the proceeds of the property amongst those entitled thereto.
[6] (1936) 54 CLR 519 at 527-528.
Dixon and Evatt JJ said:[7]
The question is whether upon the proper interpretation of the will [the legal personal representative] has a power of sale.
In our opinion the powers belonging to the executors included a power of selling the real and personal estate for the purpose of distribution among the seven children after the widow’s death. The direction to divide the real and personal estate among the seven children does not mean, we think, that an equal division in specie is to be made of the land and chattels of which the testator’s estate was composed, nor does it mean that the seven children are upon their mother’s death to stand possessed of the chattels in co-ownership and by transfer or conveyance obtain estates in fee simple as tenants in common. It is a residuary gift of mixed realty and personalty among a number of persons and the natural construction of the word “divide”, together with the reference to equality of shares, is as a direction to distribute proceeds.
…
Inasmuch as it is the function of the executor to administer the whole estate of the testator, and for that purpose he has the same powers of conversion in respect of realty and personalty, expressions contained in the will referring to division, distribution, or the like, or importing, according to their prima facie meaning, some active dealing with assets, may properly be understood as implying a direction to the executor both in the case of personalty and of realty.
In the present case, the will requires a division after payment of debts of the whole of an estate which must have been composed of assets of divers descriptions, including live stock, plant and land. This appears to us to imply a conversion.
…
[T]he view that the duty of the executors was to convey the property to the remaindermen as tenants in common. It is true that there seems to have been no devise to the executors; the duty so to convey would appear to arise out of the office of executor and to be executorial. But the will indicated an intention that the devisees should take in specie.
In the present case it was open to the executors to convert before the death of the tenant for life and we think that in the absence of agreement among the beneficiaries to take in specie, conversion became imperative when the period of distribution arrived.
[7] (1936) 54 CLR 519 at 528-530.
McTiernan J said:[8]
The will in the present case does not express or imply a wish on the part of the testator to give a specific part of the residuary estate to his son and each of his daughters in the form of real or personal property other than money, or if any part of the estate remained unrealised after the payment of debts, to give such part in specie to his son and daughters as co-owners. … The direction that after the death of the life tenant the residue was “to be equally divided” between the children named, “each to have an equal share”, was given with respect to property which might consist of mixed realty and personalty or of either of these classes or of the balance of the proceeds of sale after payment of debts. This direction is no more than an expression of the testator’s wish that the executor should distribute the residue in equal shares between the children named. It does not direct that the whole or any part of the residue, if it consisted of land or chattels, should be appropriated in specie.
[8] (1936) 54 CLR 519 at 532-533.
The other sisters submit that Pagels v MacDonald is distinguishable because the will does not include any provision for the distribution or division of the deceased’s estate to the children. I do not accept this submission.
The implication of a power of sale for the purpose of distribution is not as strong in this case as it was in Pagels v MacDonald. However, notwithstanding the absence of any express provision in the will for the distribution or division of the estate, the reasons of the High Court lend some support for the implied conferral of such power in this case. In this case, like Pagels v MacDonald, the estate assets are to be dealt with so as to go among certain persons in certain shares and proportions without any distinction as to land or shares and money, rather than the land in specie and the shares and money in specie. Under the terms of the will, the real property and the personal property are blended and are gifted to the sisters equally. In those circumstances I consider that the executrix must have power to effect the purposes of the will and sell the properties and divide the proceeds amongst the beneficiaries. As Dixon and Evatt JJ, in their joint reasons made clear, the residuary gift of mixed real and personal property among a number of beneficiaries in equal shares was a direction to distribute the proceeds. That is the position in this case. This is not a case where the will indicated an intention that the devisees should take in specie.[9]A similar conclusion, based on implications arising from the text of the will, was reached in Re Wheaton by Reed AJ following the High Court’s decision in Pagels v MacDonald.[10]
[9] Pagels v MacDonald (1936) 54 CLR 519 at 530 per Dixon and Evatt JJ and 532-533 per McTiernan J.
[10] [1937] SASR 19.
In addition, authority for the sale of the properties for the purposes of distribution is an incident of the office of the executrix.[11]
[11] Pagels v MacDonald (1936) 54 CLR 519 at 533 per McTiernan J.
An executor has absolute dominion over the estate of a deceased for the purposes of distribution.[12] In Barclay v Owen, in a passage approved by Nicholson J in Yule v Irwin (No 2),[13] Kay J said:[14]
[A]n executor has absolute dominion over the personal property of the testator; he can sell it, mortgage it, dispose of it, and of course he can divide it, for that is the very reason why he is appointed. … In Williams on Executors it is stated over and over again that an executor has absolute dominion over the estate for the purposes of distribution; and to say that he is bound to come to an agreement with the residuary legatee, or to sell the estate and divide the purchase money, is a proposition with which it is impossible to concur. Of course, he must do it fairly, but if done fairly nothing can be said about it.
[12] Yule v Irwin (No 2) [2016] SASC 178 at [167].
[13] [2016] SASC 178 at [167].
[14] (1889) 60 LT 220 at 222-223.
The other sisters submit that Barclay v Owen is confined to personal estate.[15] They submit that the reasoning of Nicholson J in Yule v Irwin (No 2) is incorrect.[16] They submit that Nicholson J misconstrued the comments in Barclay v Owen as applying to real estate. They submit that the comments could not apply to real estate because the executor in that case had not devised the real estate of the deceased. I do not accept this submission. Kay J in the above passage plainly was stating the law as set out in Williams on Executors in relation to the power of an executor over a deceased estate for the purposes of distribution. While the observation was obiter, that does not make it wrong. Kay J went on to reject the proposition that an executor was bound to sell the estate and divide the purchase money. To reject that proposition does not deny the contrary proposition that an executor is empowered in their discretion, subject to any express or implied contrary direction in a will, to sell the assets of the estate for the purposes of its distribution.
[15] (1889) 60 LT 220 at 222-223.
[16] [2016] SASC 178 at [167].
This construction necessarily excludes the construction contended for by the other sisters that the purpose of clause 6(b) of the will is to overcome the rule in Howe v Lord Dartmouth.[17]
[17] (1802) 32 ER 56.
The rule in Howe v Lord Dartmouth is that where residuary personal estate is given in succession the assumption is, in the absence of evidence of contrary intention, that it was intended that the beneficiaries should enjoy the same thing in succession. In order to give effect to that intention, the rule is that the trustees are required in the interests of a beneficiary for life to realise such parts of the trust property as consist of reversions or future interests and, in the interests of beneficiaries in remainder, to realise any wasting assets. The money realised must be laid out in permanent investments, and the person entitled for life then receives the income earned by those investments.[18] In other words, in circumstances where a deceased’s estate consists of, or includes, a hazardous asset susceptible to wasting, an executor has an implied duty to sell the asset and an implied power to do so (i.e., a trust for sale).
[18] Michael v Callil (1945) 72 CLR 509 at 517 per Latham CJ.
The rule in Howe v Lord Dartmouth is limited to personal estate.[19] By contrast, clause 6(b) of the will expressly includes real property. Further, the submission that clause 6(b) of the will is intended to overcome the rule in Howe v Lord Dartmouth cannot be accepted, as confining the operation of clause 6(b) of the will in that way would be otiose given the provisions of ss 46 and 51 of the APA.
[19] Michael v Callil (1945) 72 CLR 509 at 526 per Rich J.
The caveat
Ms Capaldo, in her capacity as executrix, seeks an order directed to the Registrar-General to remove a caveat lodged by Mrs Gretsas. The caveatable interest which Mrs Gretsas claims is an estate or interest in fee simple as a beneficiary of the will. Ms Capaldo submits that Mrs Gretsas has no proprietary interest in the properties. Once Ms Capaldo was granted probate of the will, the whole of the deceased’s estate was vested in her. Ms Capaldo submits that Mrs Gretsas cannot maintain the caveat she has lodged because she has no legal or beneficial interest in the properties.
Pursuant to s 191(1) of the Real Property Act 1886 (SA) (RPA), any settlor of land or beneficiary claiming under a will or settlement, or any person claiming to be interested at law or in equity, whether under an agreement, or under an unregistered instrument, or otherwise howsoever in any land, may lodge a caveat in the Lands Titles Registration Office. The other sisters submit that a beneficiary does not need to claim an interest. The beneficiary only needs to claim “under a will… in any land”. They submit that s 191 of the RPA does not require a beneficiary to establish any beneficial or legal interest in the land in order to lodge a caveat. They submit that Mrs Gretsas was entitled to lodge the caveat because she was claiming the land under the will as one of three beneficiaries.
However, the issue is not whether Mrs Gretsas had a right to lodge the caveat, the issue is whether she is entitled to maintain the caveat or whether the Court should order its removal.
Pursuant to s 46 of the APA, upon the death of the deceased, the properties vested in Ms Capaldo as the executrix of the deceased’s estate. While s 191(1) of the RPA provides a beneficiary with the right to lodge a caveat, it does not confer upon the beneficiary a caveatable interest. To maintain a caveat, a beneficiary must establish a caveatable interest.
Mrs Gretsas seeks to rely upon the reasoning in Garwoli v Garwoli.[20] However, Judge Dart in that case only considered the standing of a respondent to lodge a caveat. Judge Dart did not consider any issues beyond that and in particular, he did not make a determination as to whether or not the respondent had an interest in the real property such that the caveat could be maintained.
[20] [2015] SASC 1 at [11].
A caveatable interest is a proprietary interest in the properties.[21] The whole of the property of the deceased, both real and personal, is held by his executrix, Ms Capaldo, for the purpose of carrying out the functions and duties of administration. Mrs Gretsas, as a residuary legatee, does not have a beneficial interest in any particular asset in the hands of the executrix during the course of administration. The right of a residuary legatee is to due administration of the assets in accordance with the duties of the executrix.[22]
[21] Galvasteel v Monterey Building (1974) 10 SASR 176.
[22] Barns v Barns (2003) 214 CLR 169 at [50].
Ms Capaldo, in her capacity as executrix, currently holds the legal titles to the properties, none of which have been appropriated to the benefit of any particular beneficiary such that the beneficiary has an interest in an identifiable asset to which Ms Capaldo has become trustee.
In Yule v Irwin (No 2) Nicholson J said:[23]
The distinction to be drawn is that between the situation where an estate is still being administered by the executors such that the legal and beneficial rights of the estate vest in the executors and the circumstances where the executorial function has ended in respect of a particular asset or assets which ending is evidenced by the assent of the executors to their holding of that asset for a particular beneficiary. When looking at it from the perspective of a beneficiary, the distinction is between the situation where a beneficiary is still to be regarded as having only a right, as against the executors, to the due administration of the estate and the situation where the executors hold a particular asset, having been appropriated by the assent of the executors, to the benefit of a particular beneficiary such that the beneficiary now has an interest in an identifiable asset with respect to which the executors have become trustee.
[23] [2016] SASC 178 at [158].
In this case Ms Capaldo, in her capacity as executor, is still administering the deceased’s estate. Mrs Gretsas as the residuary legatee has no interest in any specific part of that which subsequently becomes residue as a specific fund, but her right is, until that moment arrives, subject to any interim distribution, to have the estate administered in due course.[24]
[24] In the Estate of Just (No 2) (1974) 7 SASR 515 at 524.
Accordingly, Mrs Gretsas cannot establish a proprietary interest in the properties. It follows that she cannot maintain the caveat. In the circumstances, Ms Capaldo is entitled to an order pursuant to s 191(1)(d) of the RPA directing the Registrar-General to remove the caveat.
Costs
In this case the proceedings are a result of the terms of the will. The terms of the will gave rise to uncertainty as to whether the deceased had conferred a power of sale for the purposes of distribution on his executrix. The fault lies at the feet of the testator. In those circumstances, I consider the appropriate order is that the costs of this application be paid out of the estate.
Conclusion
Pursuant to s 69 of the APA I would give Ms Capaldo, in her capacity as executrix, advice and direction that it is within her power to sell and call in real property forming part of the estate being the property situated at 8 Frank Street, Para Hills SA 5096; the property situated at 38A Cowra Street, Mile End SA 5031; and the property situated at 25 Ebor Avenue, Mile End SA 5031.
In the circumstances it is unnecessary to make the declaration sought as to the construction of the deceased’s will.
I would make an order pursuant to s 191(1)(d) of the RPA directing the Registrar-General to remove caveat no. 13611220 registered over the above properties by Mrs Gretsas.
I would order that the costs of and incidental to this application be paid out of the estate.
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