JUDGE:	Derham AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	1 June 2021
DATE OF JUDGMENT:	16 June 2021
CASE MAY BE CITED AS:	Craven v Bradley
MEDIUM NEUTRAL CITATION:	[2021] VSC 344

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WILLS – Construction and interpretation – Preliminary questions ordered by consent to determine method and time of valuation of properties – Properties specifically devised to beneficiaries with equalisation clauses – One property subject to unrealised capital gain – Equalisation clause requiring determination and deduction of embedded capital gains tax liability – Whether CGT calculated according to level of estate income or deceased income at time of death – Second property valued by executor at time of death of deceased – Whether date for valuation should have been date of equalisation payment or date of distribution – Wills Act 1997 (Vic), s 49; Re Hillas-Drake Deceased; National Financial Bank v Liddell (1944) 1 Ch 235; Otto v Redhead and Thompson & Anor [2007] QSC 278; Application by Paul Andrew Brown as executor to estate of the late Joseph Kostyorz (No 2) [2018] NSWSC 334 referred to.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr T Mah
For the Defendant	Mr JW McCoy	K&L Gates

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

Background......................................................................................................................................... 2

Plaintiff’s submissions..................................................................................................................... 9

First question................................................................................................................................. 9
Second question........................................................................................................................... 12

Defendant’s submissions............................................................................................................... 18

Introductory matters................................................................................................................... 18
First question............................................................................................................................... 19
Second question........................................................................................................................... 22

Consideration.................................................................................................................................... 25

Introductory matters................................................................................................................... 25
First question............................................................................................................................... 27
Second question........................................................................................................................... 32
Section 49 of the Wills Act................................................................................................ 32
Does a contrary intention appear in the Will?............................................................... 36
Does the Will provide a method of calculating the valuation?.................................. 40
Does the law of Victoria provide a method of calculating the valuation?................ 41

Conclusion......................................................................................................................................... 43

HIS HONOUR:

Introduction

By originating motion filed on 2 April 2020, the plaintiff, Ian Kenneth Craven, issued this proceeding against the defendant, William Alfred Bradley, as the executor of the Estate of his mother, Phyllis Margaret Craven (‘deceased’ or ‘Phyllis’),[1] pursuant to r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’) seeking various relief. The relief included directions with respect to the administration and distribution of the Estate, and an order for equitable compensation from the defendant personally in the event that the Court’s directions lead to an outcome whereby the plaintiff is owed entitlements from the Estate and the Estate has insufficient funds to meet those entitlements.
[1]Because all participants other than the defendant are members of the Craven family, I have used first names where appropriate. No disrespect is intended.

Under the deceased’s Will dated 12 November 2013 (‘Will’) (the details of which are discussed below) she gave her residuary estate to her three sons in equal shares but subject to two real properties being…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Craven v Bradley

Details

AGLC: Craven v Bradley [2021] VSC 344
Case: [2021] VSC 344
Decision Date: 16 June 2021

CaseChat Overview and Summary

The case of Craven v Bradley involved the executor of the estate of the late Joseph Kostyorz and the beneficiary of his will, Ms Craven. The central dispute revolved around the valuation of properties bequeathed under the will, specifically how certain equalisation clauses should be interpreted and applied. The matter was heard in the Supreme Court of Victoria.

The primary legal issues before the court concerned the calculation of capital gains tax (CGT) liabilities for properties that were devised to beneficiaries with equalisation clauses. The will included a clause that required the executor to determine and deduct any embedded CGT liability from the property's value. The court had to decide whether the CGT should be calculated based on the level of estate income or the deceased's income at the time of death. Additionally, the court needed to determine the appropriate date for valuing a property that was subject to an equalisation payment, specifically whether it should be the date of the equalisation payment or the date of distribution to the beneficiary.

In its reasoning, the court referred to statutory provisions under the Wills Act 1997 (Vic), case law precedents, and other judicial decisions. The court found that the CGT should be calculated based on the level of estate income at the time of death, aligning with the statutory requirements and the equitable principles governing the interpretation of wills. Regarding the valuation date, the court held that the date for valuation should be the date of the equalisation payment, as this reflected the point at which the beneficiary effectively took control of the asset, thereby resolving any ambiguity in the will's language.

The court's final orders were issued in accordance with its findings, providing clarity on the interpretation and application of the equalisation clauses in the will. The executor was directed to recalculate the CGT liabilities and adjust the valuations of the properties accordingly, ensuring that the distribution to the beneficiaries complied with the terms of the will and the relevant statutory provisions.

Orders