Dawson & Ors v Fitch & Ors No. Scciv-00-43

DAWSON & ORS V FITCH & ORS
[2001] SASC 188

JUDGE BURLEY. Frank Thomas Fitch died on 14 March 1998 leaving a Will dated 20 June 1996. Probate was granted in respect of the estate of the deceased on 17 September 1998 to the first and second defendants and to Mr IA McFarlane. Mr McFarlane retired as a trustee on 12 February 1999 and on 16 February 1999 the first and second defendants appointed the third defendant as a co-trustee of the Will of the deceased. The first defendant is the widow of the deceased and is a beneficiary under the Will. The plaintiffs are children of the deceased. The fourth and fifth defendants are also children of the deceased and are beneficiaries named in his Will.
The plaintiffs allege that the net value of the deceased’s estate at the date of his death was approximately $1.8 million. No provision was made in the Will for the plaintiffs.
It is convenient to refer to the deceased, the plaintiffs, the first defendant, the fourth defendant and the fifth defendant by their first names.
Mary (the fourth defendant) is the child of Frank’s first marriage. Leneve is the child of the marriage between Frank and Coral (the widow). Kristina, Ryan and Clint (the plaintiffs) are children of the de facto relationship between Frank and Shelley Margaret Micklesson. The plaintiffs, by this action, have made a claim pursuant to the provisions of the Inheritance (Family Provision) Act 1972 (the Act). By an amended application, the plaintiffs seek a summary determination of the question of whether or not certain property in the estate of the deceased has been distributed within the meaning of Section 8(5) of the Act. Being a summary proceeding, the application has proceeded on affidavit. All parties agree that there are no material disputes of fact. The affidavits admitted on the application are as follows:
·The affidavit of the second defendant sworn on 6 April 2000.
·The affidavit of Robert Francis Holland, the solicitor for Mary, sworn on 2 May 2001.
·The affidavit of Alfio Macolino, the solicitor for the first, second and third defendants in their capacity as executors, and for the sixth defendant, Public Trustee, in her capacity as trustee, sworn on 14 December 2000.
·The affidavit of Mr Macolino sworn on 2 March 2001.
·The affidavit of Mr Macolino sworn on 3 April 2001.
·The affidavit of Mr Holland sworn on 2 May 2001 was received into evidence by me after submissions had been completed, apparently with the consent of all of the other parties.
By the amended application of the plaintiffs the following declaration has been sought:
“1.That there was no distribution of the following assets out of the estate of Frank Thomas Fitch deceased (‘the deceased’) for the purposes of Section 8 of the Inheritance (Family Provision) Act before the summons in this action was served upon the executors of the will of the deceased on the 14th day of January 2000 (‘the said date’).
1.1    The shares referred to in paragraph 10 of the affidavit of Alfio Macolino sworn on the 2nd day of March 2001 (or the shares and other investments representing the same on the said date) and all dividends which had accrued thereon on the said date but which had not been paid to any beneficiaries.
1.2    The deposited amount of $150,000.00 held pursuant to clause 4(ii)(b) of the will of the deceased in respect of Mary Louise Fitch at Adelaide Bank Limited and all interest which had accrued thereon on the said date.
1.3    The deposited amount of $250,000.00 held pursuant to clause 5(ii)(a) and (b) of the will of the deceased in respect of Leneve Ann Fitch at Adelaide Bank Limited and all income which had accrued thereon on the said date.
1.4    The debt of $38,453.03 owed by Coral Maude Fitch and paid by her into the estate of the deceased on the 9th February 2000.
1.5    All moneys held by Lynch & Meyer in their solicitors Trust Account and at Tower Trust on the said date.”
The application has arisen because the parties are not in agreement as to what remains in the estate. This is a crucial question because the plaintiffs did not commence these proceedings within the six month time limit provided by Section 8(1) of the Act. They have subsequently obtained an extension of time pursuant to Section 8(3) of the Act. That application was not opposed by the defendants. However, unlike an action brought within the six month period, if there has been a distribution of some or all of the estate of the deceased before the application for an extension of time was made, that property is not available in relation to any order for provision out of the deceased’s estate sought by the plaintiffs (s 8(5) of the Act).
At the hearing, Mr Milazzo appeared for the plaintiffs, Mr JS Roder for Coral and Leneve, Mr Magarey for Mary, and Mr Macolino for the trustees. By the time submissions were completed at the hearing, it became apparent that none of the defendants opposed declarations in respect of the property referred to in paragraphs 1.4 and 1.5 of the application. Although the monies referred to in 1.4 are included within the monies in 1.5, I think it appropriate to make a declaration in relation to each for the sake of clarity.
The shares referred to in paragraph 1.1 of the amended application formed part of the residuary estate. Clause 6 of the Will dealt with this part of the deceased’s property as follows:
“6.AS to the rest and residue of my real and personal estate of whatsoever nature and wheresoever situate to my executors upon trust to pay therefrom my funeral and testamentary expenses and lawful debts (including any capital gains tax payable in my estate) and to divide the balance then remaining into two equal parts and stand possessed of such parts as follows:
(i) As to one such part for my wife the said CORAL MAUDE FITCH absolutely.
(ii) As to the remaining such part I appoint my said wife CORAL MAUDE FITCH and PUBLIC TRUSTEE to be the trustees thereof and I direct them to stand possessed of such equal part during the lifetime of my said wife to pay the income therefrom to her during her lifetime and upon her death to stand possessed of such part for such of them my daughters the said MARY LOUSE FITCH and LENEVE ANN FITCH as survive me and if more than one in equal shares.”
Paragraphs 1.2 and 1.3 of the amended application refer respectively to Clauses 4 and 5 of the Will. Those clauses are as follows:
“4.I DIRECT my executors to set aside the sum of $250,000.00 to be held upon the following terms and conditions namely:
(i)     I APPOINT my executors to be the trustees of such fund.
(ii)    I DIRECT my trustees to stand possessed of such sum;
(a)as to the sum of One hundred thousand dollars ($100,000.00) for my daughter MARY LOUSE FITCH subject to her attaining the age of twenty five years.
(b)as to the balance of One hundred and fifty thousand dollars ($150,000.00) in trust for my said daughter MARY LOUISE FITCH subject to her attaining the age of thirty five years.
5.I DIRECT my executors to set aside the sum of $250,000.00 to be held upon the following terms and conditions namely:
(i)     I APPOINT my executors to be the trustees of such fund.
(ii)    I DIRECT my trustees to stand possessed of such sum;
(a)as to the sum of One hundred thousand dollars ($100,000.00) for my daughter LENEVE ANN FITCH subject to her attaining the age of twenty five years.
(b)as to the balance of One hundred and fifty thousand dollars ($150,000.00) in trust for my said daughter LENEVE ANN FITCH subject to her attaining the age of thirty five years.”
Mr Macolino’s affidavit of 2 March 2001 deals with the shares, commencing at paragraph 5 of his affidavit. The Will provides for the division of the shares into two equal parts, one of which was to be distributed to Coral and the other of which was to be held on trust by Coral and Public Trustee. The income was to be paid to Coral during her lifetime. Upon her death that half of the residuary estate was to be transferred to Mary and Leneve in equal shares.
It is common ground that half of the residuary estate has been distributed to Coral pursuant to Clause 6(i) of the Will. The declaration sought in paragraph 1.1 of the amended application relates only to the half of the residuary estate dealt within Clause 6(ii) of the Will. Prior to the commencement of these proceedings in January 2000, the executors transferred half of the shares, pursuant to Clause 6(ii) of the Will, to Coral and Public Trustee. Coral, Mary and Leneve have argued that upon the transfer by the executors of the shares to the trustees, Coral and Public Trustee, a distribution took place within the meaning of Section 8(5) of the Act. The plaintiffs argue to the contrary. Essentially, what has to be decided is whether or not the trustees have lost control of certain property in the estate. Any order for provision takes effect as a codicil made immediately prior to the death of the deceased (s 10(a) of the Act). To give effect to a codicil the executors/trustees must have control of the property. If they do not, the Court cannot make an order for provision: Schaefer v Schuhmann and Ors [1972] AC 572 at 585E.
The plaintiffs rely upon the decision of the High Court in Easterbrook v Young (1977) 136 CLR 308 and the decision of Lander J in Young v IOOF Australia Trustees Limited and Peterson and Young (1995) 180 LSJS 302. Mr Roder contended that Easterbrook v Young should not be followed but accepted that the decision was binding upon me. Presumably this submission was raised in order to preserve the point should this matter go further. Mr Magarey accepted that Easterbrook v Young was binding but said it could be distinguished.
In Easterbrook v Young the High Court dealt with an appeal from the Supreme Court of New South Wales relating to a claim made by a widow pursuant to the Testator’s Family Maintenance and Guardianship of Infants Act 1916 (NSW). The deceased died intestate. The major asset of the estate was a house which had been used as the matrimonial home. Under the intestacy laws then applicable in New South Wales, the widow and her two sons were each entitled to one-third of the estate. One of the sons of the deceased applied for and obtained a grant of letters of administration and the property was transmitted into his name. Under the relevant legislation he held the property on trust for himself, his mother and his brother. The widow continued to live in the property apparently with the consent of her sons. None of the beneficiaries sought a transfer into their names of a share in the property.
The letters of administration were granted in 1959. The widow commenced proceedings in July 1973. The New South Wales Act contained similar provisions relating to the effect of distributions of estate property as those contained in the South Australian Act. In particular, if estate property had been distributed prior to the proceedings which were commenced out of time, that property was not available to be the subject of an order for further provision out of the estate.
The trial Judge dismissed the widow’s application for an extension of time because he held that the estate of the deceased had been distributed and there was consequently no jurisdiction to either extend the time or make an order for provision. In the reasons for judgment of the High Court (Barwick CJ, Mason and Murphy JJ) their Honours said in relation to the trial judge’s decision:
“In so deciding, the Supreme Court followed decisions of the New Zealand, Victorian and Queensland courts which held that upon the completion of administrative duties by the payment of debts, duties and costs of administration, and, in the case of an executor, upon his assent to the gifts of the will, there remained no estate of the deceased out of which an order could be made.”
On appeal, the widow argued that the decisions followed by the trial Judge should not be followed. The High Court therefore had to construe the meaning of the words “final distribution of the estate” in Section 5(2A) of the New South Wales Act. Having referred to the relevant sections in the New South Wales Act, the Court said (at 316):
“Bearing in mind the nature and purposes of such legislation, it is our opinion that the disabling circumstance in s 5(2A) is the actual distribution of the estate, its removal from the hands or name of the personal representative and its placement in the hands or name of the testamentary or statutory beneficiary. There is nothing in the language or policy of the Act to suggest that the change in the capacity in which the personal representative holds assets he has received on the grant of probate or letters of administration constitutes either a removal of those assets from the power of the court under s 3 or a relevant distribution of the estate.”
Their Honours later said (at 317):
“It is, in our opinion, only when the personal representative has parted with all the assets which came to his hands by the grant of probate or letters of administration that there has been a final distribution of the estate of the testator or intestate. The consequences of the contrary view - the view taken in the decided cases - seem to us to illustrate its unacceptability.”
Their Honours then dealt with the law relating to administration of estates and the meaning of “distribution” of estate assets within that context. They accepted that for those purposes, the law was that once the executorial duties of the personal representatives were completed and they commenced to hold property as trustees, a distribution had taken place for the purposes of the administration of the estate. In relation to these principles, their Honours said (at 320):
“But, in our opinion, the Act in using the expression ‘out of the estate of the testator’ is not concerned with these settled doctrines. The words are used to indicate both the financial limits to which the court may go in making provision for those having unsatisfied claims on the testator and the source from which any provision so made shall be satisfied. It is, as we have said, that which the testator had to dispose of which is relevantly his estate. The court’s power to make an order operative as a codicil extends to all that property, notwithstanding that in the case of an application made within the statutory twelvemonth it has been physically handed over or transferred to the intended beneficiary or beneficiaries. Of course, whether a court should disturb a distribution rests in the court’s discretion, influenced no doubt by all the circumstances of the particular case. As indicated, the situation is different in the case of an application made out of time.”
The Court then reviewed a number of cases and said (at 324):
“It seems to us that in all the cases, except Keys’ Case [an unreported decision of the Supreme Court of New South Wales delivered on 6 June 1974], insufficient attention has been given to the basic question of the construction of the words of the statute in the context in which they appear, including the evident purpose and policy of the statute. What is more, the cases do not contain any examination of the consequences which flow from an adoption of the views there expressed. We agree with the passage from Keys’ Case to which we have referred. It is, in our opinion, incongruous to deny jurisdiction so soon as executorial duties are complete. To import into the construction of this legislation the technical considerations applicable to the determination of a personal representative’s powers is, in our opinion, an unwarranted development because it involves a failure to give due weight to the purpose of the legislation and it results in a frustration, rather than a facilitation, of that purpose.”
In Young v IOOF, Lander J had to consider whether property had been distributed within the meaning of Section 8(5) of the Act. Having considered a number of cases, his Honour said (at 323):
“It seems to me that whether distribution has or has not occurred is simply a matter of fact (In Re Anderson deceased, Anderson v Williams [1957] NZLR 401 at p402) and the facts that have to be determined are whether there has been a removal from the hands of the personal representatives and a placement in the hands of the beneficiary [pp 316-317].”
Mr Milazzo argued that the transfer of the shares by the executors to Coral and Public Trustee to hold the same on the trust created in Clause 6(ii) of the Will did not constitute a distribution. He said that the property, the subject of the trust constituted by Clause 6(ii), did not pass to the beneficiaries. It was argued that under Easterbrook v Young and Young v IOOF, the legal and beneficial interests in the property had to pass to the beneficiaries before a distribution for the purposes of the Act took place. I do not think that this contention is correct.
It is to be noted that neither Easterbrook v Young nor Young v IOOF dealt with a case where the Will created a trust, the trustees of which were not the personal representatives of the testator. It is true that Coral is both an executrix and a trustee, but none of the defendants has sought to argue that the fact that Coral was both an executrix and a trustee of the trust constituted by Clause 6(ii) had any bearing upon the question of whether or not there had been a distribution. Nor, in my view, could they do so. The question must be determined, not by reference to one of the parties involved having a dual capacity, but rather by reference to the nature of the transaction whereby executors dispose of property in accordance with the terms of the Will to trustees of trusts created under the Will.
In my opinion, where, as was held by Lander J, the question of distribution is one of fact, the fact to be established is whether or not there has been a removal of the property from the hands of the personal representatives and a placement of it in the hands of the beneficiary. The question that must be answered on the facts of this case, in relation to the shares, is whether a transfer by executors, who hold on trust on behalf of the testator, when they transfer to trustees in order to implement a trust created under the Will, have distributed the property within the meaning of Section 8(5) of the Act. Lander J referred to the property as being placed “in the hands of the beneficiary”. But his Honour was not there dealing with a case where an additional trust was created under the Will. In my opinion, in such a case, the principles enunciated by the High Court in Easterbrook v Young require the conclusion that the property transferred to the trustees of the new trust constitutes a distribution for the purposes of the Act. It seems to me that the appropriate test to be applied in such circumstances is to ask whether the executors could regain control of the property without the co-operation of the trustees. Clearly, they could not. Nor could the co-operation of the trustees, Coral and Public Trustee, be sought to regain control of the trust property by the executors because those trustees must hold the property on the trust created in Clause 6(ii) of the Will. They have no authority to retransfer the property to the executors. They would be in breach of their obligations as trustees if they did so.
The legal interest in the shares is now held by Coral and Public Trustee. The plaintiffs’ claim has been made outside the relevant six month time limit and, consequently, none of the provisions of the Act enable the executors to regain the trust property. As such, the property is clearly out of their hands and it is not open to the Court to make an order for provision out of the estate in respect of that property. As was contended by Mr Roder, the present trustees could not give effect to the codicil created by the Court’s order because they do not control the property.

For the above reasons I would refuse to make the declaration sought by the plaintiffs in relation to the property referred to in paragraph 1.1 of the amended application.
I turn to a consideration of the monies referred to in paragraphs 1.2 and 1.3 of the amended application. These sums are dealt with by Mr Macolino in his affidavit of 2 March 2001 from paragraph 15 onwards. The sum of $150,000.00 in respect of Mary’s entitlement under Clause 4(ii)(b) of the Will and $250,000.00 in respect of Leneve pursuant to Clause 5 of the Will were paid to the Adelaide Bank Limited in its money market facility. The two accounts were entitled:
Estate of the late FT Fitch A/C Mary L Fitch
Estate of the late FT Fitch A/C Leneve A Fitch.
The sum of $150,000.00 represents the balance of the legacy to Mary provided for in Clause 4 of the Will. The total legacy was $250,000.00. $100,000.00 has previously been paid to Mary pursuant to Clause 4(ii)(a) of the Will. The plaintiffs accept that this legacy has been distributed to Mary.
The sum of $150,000.00 is to be paid to Mary when she attains the age of 35 years. In the meantime, the executors of the Will are to hold that sum as trustees.
The same provision has been made for Leneve by Clause 5 of the Will. No monies have been paid to Leneve because she has not yet attained the age of 25 years as provided for in Clause 5(ii)(a) of the Will.
It is clear that the second, third and fourth defendants hold the respective sums of $150,000.00 and $250,000.00 on behalf of Mary and Leneve respectively.
In my opinion, the principles enunciated by the High Court in Easterbrook v Young apply directly to these monies. They are to be treated no differently from the house property which formed the estate of the deceased in that case. The trustees of the Will hold the property on trust for the beneficiaries and as such they are able to give effect to any order for provision out of the estate that the plaintiffs may obtain because the order of the Court takes effect as a codicil made immediately prior to the testator’s death and, as such, alters the terms of the Will. Contrary to Mr Roder’s submission, I do not consider the fact that Mr McFarlane retired as a trustee and Mr Kennedy was appointed in his place makes any difference or is a valid point of distinction. All the trustees have done is replaced a retired trustee with a new trustee in respect of a primary trust set up under the Will. It is not a case, as with the shares, where a secondary trust was set up in the Will with the accompanying transfer of the property the subject of the trust from the trustees under the Will to the trustees appointed by Clause 6(ii) of the Will. It is not a matter of the original trustees regaining control of the property the subject of the trust. They have never lost control of it.
The above conclusions relate to both sums of money. Accordingly, contrary to the submissions put by Mr Roder and Mr Magarey, I am of the view that the declaration as sought should be made in respect of the property referred to in paragraphs 1.2 and 1.3 of the amended application.
I have not as yet dealt with the question of interest which has accrued on those sums but which, it is common ground, has not been paid to either Mary or Leneve. The Will makes no provision for the payment of interest in respect of those funds.
By Deed dated 15 December 1999 between Mary and Coral and the trustees (including Coral), the parties agreed “that all interest accrued on the investment of the said sum of $150,000.00 held by them for Mary, after payment of any expenses associated with that particular investment, shall be paid to Mary as and when it accrues” (Clause 4). Shortly after the execution of that Deed, the trustees received notice from the plaintiffs’ solicitors that a claim was to be made under the Act and that no further distributions should be made pending that claim. The trustees, correctly in my view, have acceded to that request. Consequently, no interest has been paid to Mary in respect of the $150,000.00 invested with the Adelaide Bank Limited. It was submitted by Mr Magarey that effect should be given to the Deed on the basis that equity regards as done that which ought to be done. However, I do not think that that maxim applies to the facts of this case. The gift of $150,000.00 to Mary is a contingent gift. It does not vest until she attains the age of 35 years. Any interest which accrues by way of investment of that sum held on trust by the trustees does not vest until she reaches that age. Although there may have been an agreement by way of Deed (with appropriate indemnities to the trustees) for payment of interest, that Deed does not affect the nature and extent of the disposition made by the deceased in Clause 4 of his Will. Consequently, I am of the view that the interest remains with the trustees and, on the question of whether or not there has been a distribution, it falls within the same category as the principal sum. As such, there has been no distribution of interest and, accordingly, to the extent that a declaration is sought that interest has not been distributed, such a declaration will be granted.
For the above reasons there will be a declaration as sought in respect of the property referred to in paragraphs 1.2 to 1.5 of the amended application.

[2001] SASC 188

7 June 2001