Gibb v Gibb
[2015] VSC 35
•23 February 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
S CI 2013 5133
IN THE MATTER OF PART IV OF THE ADMINISTRATION AND PROBATE ACT 1958
and
IN THE MATTER OF THE WILL AND ESTATE OF CHRISTOPHER FRANCIS GIBB, DECEASED
BETWEEN
| DARCY RYDER GIBB and STELLA ROSE GIBB (minors who bring this proceeding by their litigation guardian, MEGAN JANE MCAULIFFE) | Plaintiffs |
| v | |
| DAVID SETH HAZELWOOD GIBB and VALERIE ISABEL GIBB (as executors of the will of Christopher Francis Gibb, deceased) | Defendants |
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JUDGE: | McDONALD J |
WHERE HELD: | MELBOURNE |
DATE OF HEARING: | 29 October 2014 |
DATE OF JUDGMENT: | 23 February 2015 |
CASE MAY BE CITED AS: | Gibb v Gibb |
MEDIUM NEUTRAL CITATION: | [2015] VSC 35 |
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TESTATOR’S FAMILY MAINTENANCE — Application under Part IV of the Administration and Probate Act 1958 — Deceased appointed his parents as trustees and administrators of his Estate — Litigation guardian concerned that trustees would not make distributions from the Estate — No evidentiary basis for litigation guardian’s concern.
LEGAL PRACTITIONERS — Whether plaintiffs’ solicitors should be liable for costs of proceeding — No proper legal or factual basis for commencing proceedings — Administration and Probate Act 1958 s 91 — Trustee Act 1958 ss 41, 48 — Overarching obligations of practitioners — Duties of legal practitioners to court — Civil Procedure Act 2010 ss 18, 24, 29.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Ms C R McOmish | Michael Faltermaier Lawyers |
| For the Defendants | Mr S P Newton | Brendan H Hardiman & Associates |
HIS HONOUR:
Christopher Francis Gibb (‘Christopher’) was born on 15 September 1967 and died on 13 January 2013. He left an estate valued for probate at $151,941.26 (‘Estate’). He is survived by his two children, Darcy Ryder Gibb and Stella Rose Gibb, twins born on 9 June 2010 (‘the children’). The children are the plaintiffs in this proceeding. The children’s mother, Megan Jane McAuliffe (‘Megan’), is the litigation guardian of the children and has brought this proceeding on their behalf.
Megan met Christopher in or around May 2009. In September 2009, Megan became pregnant. In March 2010, Christopher and Megan entered into a de facto relationship, residing at Christopher’s residence in Ringwood. The relationship ended in March 2011 when Megan left the Ringwood residence and went to live with her mother in Williamstown.
Christopher was diagnosed with stomach cancer on 20 January 2012. Thereafter, he went to live with his parents, David and Valerie Gibb (‘David and Valerie’). On 7 March 2012, he ceased employment and commenced receipt of a disability support pension. On the same day he executed a will (‘Will’). Under the terms of that Will, he appointed David and Valerie as executors and trustees of the Will. In the event that either Valerie or David were unable to act in that capacity, he appointed his sister, Davina Halls, to be executrix and trustee of the Will.
Clause 5 of the Will is as follows:
I GIVE DEVISE AND BEQUEATH to my Trustee UPON TRUST the whole of my real Estate and the remainder of my personal to sell call in and convert the same into money with discretionary power to postpone such selling calling in and conversion for such time as my Trustee thinks fit and from the proceeds thereof to pay thereout all my debts funeral and testamentary expenses and the whole of the duties of whatever kind payable which for the purposes of assessing such duties shall be deemed to form part of my Estate and SUBJECT THERETO to hold the net proceeds thereof and any part of my Estate at the time being unconverted (hereinafter called “my residuary Estate”) for such of them my children DARCY RYDER GIBB and STELLA ROSE GIBB of 100 Victoria Street, Williamstown in the said State as shall survive me and attain the age of twenty-five (25) years and if more than one as tenants in common in equal shares PROVIDED THAT if neither of my said child or children survive me and attain the age of twenty-five (25) years or surviving me and fail to attain the age of twenty-five (25) years then I GIVE AND BEQUEATH the whole of my residuary Estate to such of them my said mother VALERIE ISABEL GIBB, my said father DAVID SETH-HAZELWOOD GIBB and my said sister DAVINA HAZELWOOD GIBB as shall survive me and if more than one as tenants in common in equal shares PROVIDED FURTHER if neither my said mother nor my said father nor my said sister should survive me and attain a vested interest herein I GIVE AND BEQUEATH the whole of my residuary Estate to THE ROYAL CHILDREN’S HOSPITAL FOUNDATION LIMITED (ABN 75 761 829 818) of 50 Flemington Road, Parkville in the said State free of all claims in aid of its general purposes and I direct that the receipt of the proper officer of The Royal Children’s Hospital Foundation Limited shall be sufficient discharge to my executors for my bequest.[1]
[1]Emphasis in original.
Clause 6(b) of the Will is as follows:
In the absolute discretion of my Trustees to raise and pay or apply the whole or any part of the share of my residuary Estate whether expectant or contingent or whether income or capital of any beneficiary hereunder to or for the maintenance education or advancement or otherwise for the benefit of such beneficiary in such manner as my Trustees shall think fit with power during the minority of an infant beneficiary to pay the same to the parent or guardian of such beneficiary for the said purposes without being concerned to see to the application thereof and my Trustee shall for the purpose of this sub-clause have the power to determine the value of the assets of my Estate.
By an originating motion dated 2 October 2013, the plaintiffs, by their litigation guardian, sought the following relief:
Pursuant to Part IV of the Administration and Probate Act 1958,[2] and specifically under s 91 of that Act, that provision be made out of the Estate of Christopher Francis Gibb deceased for the proper maintenance and support of the plaintiffs, persons for whom the deceased had responsibility to make provision, and that Megan Jane McAuliffe be appointed trustee of the Estate of the deceased.
[2]The proceeding was heard on 29 October 2014. This was prior to the amendments to Part IV of the Administration and Probate Act 1958 pursuant to Part 2 of the Justice Legislation Amendment (Succession and Surrogacy) Act 2014, which became operative as at 1 January 2015. The reference to the Act in this judgment is a reference to the form in which the Act was operative as at the time of the commencement of the proceeding on 2 October 2013.
On 29 October 2014, the plaintiffs were granted leave to file an amended originating motion. This amended originating motion was filed on 30 October 2014 and sought the following relief in lieu of that which had been sought in the motion as originally filed:
Pursuant to Part IV of the Administration and Probate Act 1958, and specifically under s 91 of that Act, that provision be made out of the Estate of Christopher Francis Gibb deceased for the proper maintenance of the support of the plaintiffs, persons for whom the deceased had responsibility to make provision, as follows:
(a)by payment of the Estate funds to their litigation guardian to hold and invest on behalf of the plaintiffs and to pay and apply income and or capital to the proper maintenance and support of the plaintiffs, or, alternatively,
(b)by payment of the Estate funds to the Senior Master to hold and invest on behalf of the plaintiffs and to pay and apply income and/or capital to the proper maintenance and support of the plaintiffs.
Under the terms of the Will Christopher left his entire Estate to his children. Therefore, in terms of the proportion of the Estate which was left to the plaintiffs, Christopher could have done no more. As the plaintiffs are infants, it was necessary that the money be held on trust. It is the appointment of Valerie and David as trustees which underpins the contention that the Will did not make provision for the proper maintenance and support of the children. The plaintiffs contend that Christopher left them without adequate provision for their proper maintenance and support by appointing David and Valerie to manage the affairs of the Estate. The plaintiffs submit that there is no relationship between Megan, on the one hand, and David and Valerie on the other. They submit that the appointment of David and Valerie has created an unworkable situation. Megan’s evidence is to the effect that she cannot afford to pay for private health insurance for the children. Nor can she afford to pay for swimming, dancing and ballet lessons for the children. Megan wishes to access the funds in the Estate to pay for these things. However, she has no confidence that David and Valerie will respond favourably to any request for financial assistance.
The plaintiffs further submit that Christopher’s Will fails to make adequate provision for their proper maintenance and support because cl 6(b) of the Will confers a power on David and Valerie to make a distribution out of the Estate to themselves and/or their daughter prior to the children turning 25 years of age.
The basis upon which the plaintiffs seek to enliven the court’s jurisdiction under Part IV of the Administration and Probate Act 1958 (‘the Act’) is unusual. The plaintiffs make no complaint as to the proportion of the Estate bequeathed to them under Christopher’s will. Plainly they could not do so. Subject to the possibility of distributions being made pursuant to cl 6(b) of the Will — a matter to which I shall return later in this judgment — Christopher left the entirety of his Estate to his children. Accordingly, authorities which have considered the phrase ‘adequate provision for the proper maintenance and support’ in the context of a justiciable controversy concerning the quantum of money which has or has not been bequeathed to an applicant under Part IV of the Act, are of little or no relevance to the present proceedings. [3]
[3]See, eg, Baxter v Baxter [2014] VSC 377 [107] (McMillan J); Boyer v Wood (2007) 99 SASR 190 [39]-[42] (Debelle J).
The plaintiffs seek to enliven the court’s jurisdiction to make orders under Part IV of the Act, not by reference to the alleged inadequacy of the provision which Christopher made for them, but rather by reference to his appointment of David and Valerie to administer the Estate.
I asked counsel during the proceedings before me if they were aware of any authority in which a court had concluded that a will had failed to make adequate provision by reason of the particular trustees appointed by the deceased. I was not referred to any authority where a court had concluded that a testator had made inadequate provision for the proper support and maintenance of an applicant by reason of the identity of a trustee appointed to administer an estate.
Following the conclusion of the hearing, counsel for the plaintiffs drew my attention to authorities which support the proposition that provision for eligible persons may be inadequate in form as well as, or as distinct from, in quantum. In Shepherd v Shepherd,[4] McDougall J held that a will had made inadequate provision for an adult beneficiary who had no vested entitlement to income and who was entirely dependent upon the trustees (his brother and sister) exercising their discretion in his favour from time to time.[5] In Taylor v Farrugia,[6] Brereton J stated:
Provision which is dependent upon the exercise of a discretion by the trustee of a discretionary trust will often, though not invariably, be inadequate or improper.
[4][2010] NSWSC 167.
[5]Ibid [55].
[6][2009] NSWSC 801 [62] (citations omitted).
The authorities referred to above are readily distinguishable. The provision for the children made by Christopher’s Will is not dependent upon the exercise of a discretion by David and Valerie. Upon turning 25 years of age the children have an unqualified entitlement to receive all of the Estate. The authorities relied upon by the plaintiffs’ counsel do not address the basis upon which the plaintiffs’ contend that the appointment of David and Valerie constitutes inadequate provision for their welfare and maintenance; ie, Megan’s stated concern and that they will be reluctant to make distributions from the Estate prior to the children turning 25 years of age.
Counsel for the defendants submitted that if there was any substance in the plaintiffs' concerns regarding the appointment of David and Valerie as trustees, they should have applied to have them removed pursuant to s 48 of the Trustee Act 1958 (‘Trustee Act’).[7]Counsel submitted, however, that such an application would fail because there is no evidence that David and Valerie are acting mala fides. This submission is plainly correct.
[7]Defendants’ written submissions dated 28 October 2014 [10].
In Caruana v Caruana,[8] McMillan J comprehensively reviewed the principles governing the removal of a trustee pursuant to the power conferred on the Supreme Court by s 48 of the Trustee Act at paras 22 to 26:
[8][2013] VSC 643.
In exercising the jurisdiction to remove executors or trustees, the general rule and guiding principle is the welfare of the beneficiaries and the welfare of the trust estate as a whole. This depends on the facts of each case and such a judgment is largely discretionary. In Miller v Cameron, Dixon J stated:
The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred on the trustee. In deciding whether to remove a trustee the Court forms a judgment based on considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary. A trustee is not to be removed unless circumstances exist which afford ground upon which the jurisdiction may be exercised. But in a case where enough appears to authorize the Court to act, the delicate question whether it should act and proceed to remove the trustee is one upon which the decision of a primary judge is entitled to special weight.[9]
[9](1936) 54 CLR 572, 580-1. See also Passingham v Sherborne (1846) 9 Beav 42450 ER 407; Letterstedt v Broers (1884) 9 App Cas 371, 385-6; Monty Financial Services Ltd v Delmo [1996] 1 VR 65, 82; Manocchio v Wilson [2012] VSC 76 (8 March 2012).
The authorities also demonstrate that a trustee will not necessarily be removed because of a position of conflict between duty and interest; but in some cases it may be sufficient. In Monty Financial Services Ltd v Delmo, Ashley J concluded that proof of actual misconduct is not necessarily required for the removal of a trustee and that a conflict of duty and interest may suffice.[10]
[10][1996] 1 VR 65, 82.
In Manocchio v Wilson, Habersberger J dealt with an application to remove a co-executor on the ground of unfitness to act, owing to a conflict of interest and duty. He said:
Unfitness to act can be constituted not only by ‘matters such as unwarranted delay in administration of the estate, failure to communicate with beneficiaries, failure to account, and unreasonable delay in paying beneficiaries their entitlement’ but also by ‘a situation in which an executor has a conflict of duty and interest in carrying out his executorial duties’. Not every conflict of duty and interest should result in removal of an executor. An executor’s conflict of duty and interest of a kind likely ‘to affect the efficient and satisfactory administration of the estate is a proper basis for removing an executor’.[11]
[11][2012] VSC 76 (8 March 2012) [38] (citations omitted).
In Fysh v Coote, which concerned the removal of an executor, Ormiston JA (with Batt and Chernov JJA agreeing) relied on the statements of principle of Ashley J in Monty Financial Services Ltd v Delmo, the Privy Council in Letterstedt v Broers and Dixon J in Miller v Cameron.[12] In particular, His Honour noted Ashley J’s comment that unfitness to be an executor could be constituted:
by matters such as unwarranted delay in administration of the estate, failure to communicate with beneficiaries, failure to account, and unreasonable delay in paying beneficiaries their entitlement
and that unfitness comprehends a situation in which an executor has a conflict of duty and interest in carrying out his executorial duties.[13]
In addition, friction or hostility between trustees and the immediate possessor of the trust estate is not of itself a reason for the removal of trustees. But where the hostility is grounded on the mode in which the trust has been administered, where it has been caused wholly or partially by substantial overcharges against the trust estate, it is certainly not to be disregarded.[14]
[12]Fysh v Coote [2000] VSCA 150 (21 August 2000) [20].
[13]Monty Financial Services Ltd v Delmo [1996] 1 VR 65, 73, 82.
[14]Letterstedt v Broers (1884) 9 App Cas 371, 389. See also Wales v Wales [2013] VSC 569 [37]-[44] (McMillan J); Deutsch v Deutsch [2011] VSC 345 [10]-[13]; Mansour v Mansour (2009) 24 VR 498 [47]-[52].
Applying the principles referred to above, there is no legal or factual basis upon which an order could be made pursuant to s 48 of the Trustee Act for the removal of David and Valerie as trustees of the Estate. Any friction or hostility which exists between them and Megan is not a consequence of any misconduct on their part in the administration of the Estate. In considering an application to remove a trustee, the dominant considerations are the preservation of the trust property and the welfare of the beneficiaries. It is a most unfortunate irony that the primary threat to the preservation of trust property and the welfare of the children arises not from any conduct of David and Valerie, but from the costs of the current litigation.
The evidence in support of the application consists of two affidavits sworn by Megan on 11 September 2013 and 26 October 2014. In Megan’s first affidavit sworn on 11 November 2013, she deposed:
I am concerned that the executors will not make proper provision for the maintenance of the plaintiffs. Clause 6(b) gives them an absolute discretion to apply the Estate for the maintenance, education and advancement of the beneficiaries under the will.[15]
…
I do not have any confidence that the executors or Davina Hazelwood Halls (should she become trustee of the deceased’s Estate) will make decisions which will result in the Estate being applied for the benefit and maintenance of the plaintiffs.[16]
[15]Exhibit P1: Affidavit of Megan McAuliffe sworn 11 November 2013 [34].
[16]Ibid [36].
At the heart of the plaintiffs’ claim is Megan’s stated concern that David and Valerie will not make proper provision for the maintenance of the plaintiffs. A significant difficulty for the plaintiffs is the absence of evidence substantiating this concern. Probate was granted on 4 April 2013. Between that date and the commencement of proceedings on 2 October 2013, no request was made by Megan to David and/or Valerie for money to be paid out of the Estate for the maintenance of the children. The first time such a request was made was by way of a letter from Megan to David and Valerie dated 1 September 2014. The terms of this letter are as follows:
Dear David and Valerie,
I am writing today to request a regular financial contribution from the Estate of Christopher Gibb to assist with the ongoing education and maintenance of Chris’ children Stella and Darcy Gibb.
I enclose a fee statement from childcare/kindergarten fees. While a portion of the childcare fees are paid by the government my remaining out of pocket costs are approximately $230 per week or $920 per month which covers both children. As you will note from the statement these costs fluctuate so I’ve provided an overall average amount.
I also enclose the fee schedule for swimming lessons which the children will be beginning in mid-October. Swimming lessons at their local swimming pool are $80 per month per child — $160 in total.
As total costs for childcare and swimming lessons equate to approximately $1080 per month I am requesting a regular contribution for these costs from the Estate. I believe it’s reasonable to request a contribution of at least half of these costs — $500 after tax per month.
Would you kindly be able to respond to my request within 7 days of receiving this letter.
I’d also like to inform you that the children and I will be moving house on 13 September. Our new address is 63 Rifle Range Drive Williamstown. [17]
[17]Exhibit MJM 4 to the affidavit of Megan McAuliffe sworn 26 October 2014.
It was not in issue that David and Valerie had not replied to the request contained in the letter of 1 September 2014 for a monthly contribution of $500 out of Christopher’s Estate. They both gave evidence for their reason of not responding to the letter. This evidence was to the effect that they had not responded because of the pending hearing in this court, which they anticipated would deal, at least in part, with the issues raised by the letter.[18] No adverse finding can be made against David and Valerie for their failure to have responded to the letter of 1 September 2014. That letter was a belated attempt on the part of the plaintiffs to provide an evidentiary foundation for the concerns expressed in Megan’s affidavit of 11 November 2013. It was reasonable for David and Valerie to decline to respond to the letter in circumstances where the very same issues were to be the subject of the proceedings heard by me on 29 October 2014.
[18]Transcript of Proceedings, Darcy Ryder Gibb & Anor v David Seth Hazelwood Gibb & Anor (Supreme Court of Victoria, S CI 2013 5133, McDonald J, 29 October 2014) T24 LL14-16, T50 LL10-14.
David and Valerie gave unchallenged evidence that save for the letter dated 1 September 2014, no request had ever been received from Megan for financial assistance. David gave evidence that any requests from Megan for the payment of money out of the Estate would be considered on their merits: in appropriate circumstances, he would be prepared to make payments if they were considered necessary.[19] Valerie gave evidence that it had always been both her and David’s intention to help the children if a situation arose. That intention had never changed and would not change.[20]
[19]Ibid T24, LL22-9.
[20]Ibid T50, LL3-5.
Both David and Valerie were cross-examined by counsel for the plaintiffs. I was impressed by their evidence. I found them to be forthright and honest. Plainly, the relationship between David and Valerie, on the one hand, and Megan, on the other, is strained. This is understandable given the unfortunate circumstance of the breakdown in the relationship between Christopher and Megan, and Christopher’s death at the age of 46 years. I formed the clear view that David and Valerie have the best interests of the children at heart. They gave evidence that since Christopher’s death they have maintained an ongoing relationship with the children. On the first Saturday of each month they meet with the children for four hours.
David gave evidence regarding the Gibb Family Trust (‘Trust’). On 29 May 2010, Christopher sold his property in Ringwood. An amount of $300,000 from the sale proceeds was paid to BBIG Premium Trading Pty Ltd, as trustee for the Trust. David and Valerie are the sole beneficiaries of this Trust.[21] Prior to 15 November 2013, Christopher was a beneficiary of the Trust.[22] David gave evidence that he and his wife intend to transfer all of the funds held in the Trust to the children upon them turning 25 years of age.[23] He gave evidence that both his and Valerie’s wills stipulate that in the event of their death prior to the children turning 25 years, the funds in the Trust are to be transferred to the children once they attain 25 years of age. I have placed considerable weight upon this evidence. It reinforces my conclusion that David and Valerie have the best interests of the children at heart. Based on the evidence before me, I have no hesitation in concluding that David and Valerie shall give careful consideration to any request for funds to be advanced from the Estate to meet the children’s needs going forward.
[21]Ibid T35, L30.
[22]Ibid T39, LL12-15.
[23]Ibid T43 L24, T24 L18.
No criticism of David and Valerie can be sustained by reason of their failure to have advanced funds out of the Estate between the grant of probate on 4 April 2013 and 1 September 2014 when the request was made for payment of $500 a month. Absent a request, Valerie and David were entitled to assume that Megan was able to adequately and properly provide for the children’s upbringing from her own financial resources. It is noteworthy that Megan’s letter of 1 September 2014 does not contend that she was unable to pay for childcare and swimming lessons from her own financial resources. Rather, the letter simply states that a contribution of $500 per month is ‘reasonable’.
Counsel for the plaintiffs submitted that notwithstanding the absence of any direct evidence, I should make a finding that there was a need for financial assistance. Counsel also submitted that I should make a finding that the failure of Valerie and David to take the initiative and inquire as to whether Megan was in need of financial assistance supported the conclusion that the appointment of Valerie and David as trustees ‘was not a workable situation.’[24]
[24]Ibid T67 L10–T68 L15.
Megan’s affidavit contains no explanation as to why no request for financial assistance was made. Plainly, Megan could have led direct evidence as to why no request had been made. The plaintiffs’ counsel submitted that I should make a finding that there was both a need for financial assistance and that the reason why no assistance was forthcoming was because of the absence of any relationship between David and Valerie on the one hand, and Megan on the other. In circumstances where Megan has failed to lead direct evidence on a matter which was squarely within her own knowledge — being the reason why she made no request for financial assistance — no inference should be drawn in her favour.[25]
[25]See AusNet Electricity Services Pty Ltd v Liesfields [2014] VSC 474 [125]-[129].
I accept Megan’s evidence that she currently has disposable income of approximately $955 per month. I also accept that she wishes to provide her children with access to a range of activities such as dancing and ballet lessons but is not in a position to do so. However, as a result of the failure of Megan to make any request for financial assistance prior to 1 September 2014, no occasion arises for the court to express any conclusion as to whether a failure by David and Valerie to accede to a request for assistance in the terms of the request of 1 September 2014, would support a conclusion that the Will does not make adequate provision for the proper maintenance and support of the children.[26] Nevertheless, I make three observations. First, putting to one side the potential impact of the costs of these proceedings on the value of the Estate (a matter which is considered below), the Estate is small. The trustees are entitled to take this into account when considering requests for financial assistance. Second, the children are only four years of age. Inevitably, there will be costs associated with their education which could become the subject of requests for financial assistance. It is legitimate for the trustees to weigh the relative importance of requests for assistance made now in the light of the likelihood of further requests related to educational expenses. Third, it is legitimate for the trustees to seek to preserve at least a proportion of the Estate to be available for distribution to the children upon them attaining 25 years of age.
[26]Cf Baxter v Baxter [2014] VSC 377 [107] (McMillan J).
The second limb of the plaintiffs’ submission is that Christopher’s Will does not make adequate provision for their proper maintenance and support because of a ‘loophole’ in the Will. The plaintiffs’ counsel submitted that pursuant to cl 6(b) of the Will, Valerie and David have power to make a distribution to themselves and their daughter, as contingent beneficiaries under the Will. The interest of David, Valerie and Davina only crystallises if the children die before reaching the age of 25 years. Counsel submitted that ‘in theory’ cl 6(b) of the Will permits David and Valerie to make a distribution to any beneficiary, including a contingent beneficiary, prior to the children turning 25 years of age. Counsel submitted that by reason of cl 6(b), the Will did not make proper provision because the Estate should have been left exclusively to the plaintiffs.
I reject the submission set out above for the following reasons. First, there is no evidence to suggest — and it was not contended on behalf of the plaintiffs — that there is any prospect that David and Valerie would make any distribution from the Estate to any beneficiary other than the children prior to the children reaching 25 years of age. The defendants have never at any stage contended that cl 6(b) of the Will confers a right to make a distribution to a contingent beneficiary prior to the children reaching 25 years of age. It was not put to them in cross-examination that they believe that cl 6(b) conferred such a power upon them and/or that they intended to exercise it in favour of themselves or their daughter.
The plaintiffs’ counsel submitted that cl 6(b) of the Will ‘is a standard clause that one sees in wills,’[27] and accepted that clause 6(b) is a ‘very common form of drafting.’[28] Counsel submitted that the plaintiffs were not seeking a finding that clause 6(b) does allow David and Valerie to distribute capital and income to themselves or their daughter, ‘but there is that possibility and until the court adjudicates on that there is that possibility’.[29]
[27]Transcript of Proceedings, Darcy Ryder Gibb & Anor v David Seth Hazelwood Gibb & Anor (Supreme Court of Victoria, S CI 2013 5133, McDonald J, 29 October 2014) T82 L31.
[28]Ibid T85 LL7-10.
[29]Ibid T82 LL10–11.
I provided the plaintiffs’ counsel with an opportunity to refer me to any Australian authority where the existence of a clause in the terms of cl 6(b) of the Will had been held to enliven the jurisdiction under Part IV of the Act or corresponding legislation elsewhere in Australia.[30] No relevant authority was drawn to my attention.
[30]Ibid T85 LL17-25.
I do not accept that the mere possibility that David and Valerie could make a distribution to themselves or their daughter prior to the children reaching 25 years of age supports the conclusion that Christopher’s Will did not make adequate provision for the children’s maintenance and support. The plaintiffs’ counsel did not even faintly suggest that there was any prospect of the power being so exercised.
There are two jurisdictional pre-conditions to the making of an order under s 91 of the Act. First, it must be established that the deceased had responsibility to make provision for the proper maintenance and support of the applicant for the order: s 91(1). Second, if such responsibility is established, the court must be of the opinion that the will of the deceased does not make adequate provision for the proper maintenance and support of the applicant for the order: s 91(3). Section 91(4) stipulates matters which the court must have regard to in determining the two jurisdictional preconditions referred to above, and also in determining the amount of any provision or further provision to be ordered if the two jurisdictional requirements are met. The relevant matters are those prescribed in s 91(4)(e)-(o) of the Act and, under s 91(4)(q), to have regard to ‘any other matter the court considers relevant.’
I shall consider in turn each of the criteria in the Act relevant to the plaintiffs’ claim:
Any family or other relationship between the deceased person and the applicant, including the nature of the relationship and where relevant the length of the relationship
The plaintiffs are the children of the deceased.
Any obligations or responsibilities of the deceased person to the applicant, and any other applicant and the beneficiaries of the Estate
It is not in dispute that infant children are, prima facie, dependent on their father and have a claim to be maintained and supported.[31] Christopher had no obligation to make provision in his Will for anyone else.
[31]See Re Sinnott (deceased) [1948] VLR 279, 280.
The size and nature of the Estate of the deceased person and any charges and liabilities to which the Estate is subject
The value of the Estate and the inventory of assets and liabilities filed by the defendants in support of their application for a grant of probate was $151,984.26. As at 16 October 2014, the Estate consisted of funds of $107,954.60, a motor vehicle worth $8,000 and had a tax liability of $4,379.60 due on 22 March 2016.[32]
[32]Exhibit D1: Exhibit VIG-2 to the affidavit of Valerie Gibb sworn 21 October 2014.
The financial resources (including earning capacity) and the financial needs of the applicant, of any other applicant and of any beneficiary of the Estate at the time of the hearing and the foreseeable future
The plaintiffs are dependent on their mother for their financial support. Megan is employed as a marketing specialist and earns approximately $48,000 per annum. The family tax benefit adds approximately $6,900 to her annual income. Her recurring expenses total approximately $32,000 per annum. Megan’s evidence is that she is left with disposable income of approximately $955 per month, which she spends on clothing for herself and the plaintiffs, outgoings and toys for the children and household expenses as and when they arise. Megan’s evidence is that she owns a property in Williamstown to the value of approximately $700,000 which is subject to a mortgage of $80,000, the monthly mortgage repayments being $426.47.[33] When the children start school there will be the expense of uniforms, school camps, laptops and the like and Megan will have to work full-time in order to pay for these things. Her preference is to work only four days a week and be involved in their activities and to be able to drop them off and pick them up from school at least once a week and spend quality time with them.[34]
[33]Exhibit P2: Affidavit of Megan McAuliffe in Reply sworn 26 October 2014 [2 ]-[5].
[34]Ibid [10].
Any physical, mental or intellectual disability of any applicant or any beneficiary of the Estate
Darcy Gibbs suffers from asthma and requires ongoing medical treatment and medication.
The age of the applicant
The plaintiffs’ were born on 9 June 2010 and are four years old.
Whether the applicant was being maintained by the deceased’s person before that person’s death either wholly or partly and, where the court considers it relevant, the extent to which and the basis upon which the deceased had assumed that responsibility
The deceased made child support payments to the plaintiffs.
The liability of any other person to maintain the applicant
The plaintiffs’ mother has a liability to maintain the plaintiffs.
The character and conduct of the applicant or any other person
Counsel for the plaintiffs submitted that the failure of Valerie and David to distribute funds from the Trust created by the Will for the plaintiffs’ benefit, despite a written request from Megan dated 1 September 2014, reflected poorly upon David and Valerie. For the reasons set out above, I reject this submission.
Any other matter the court considers relevant
Counsel for the plaintiffs submitted that the terms of cl 6(b) of the Will were relevant considerations under s 91(4)(q) of the Act. For the reasons set out above, I reject this submission.
Plainly, Christopher, as the father of the children, had a responsibility to make provision for their proper maintenance and support. As such, the first of the jurisdictional preconditions to the making of an order under s 91 of the Act is satisfied. As to the second jurisdictional precondition, I am firmly of the opinion that Christopher’s Will does make adequate provision for the proper maintenance and support of the children. I reject the plaintiffs’ submission that the Will does not make adequate provision by reason of the appointment of David and Valerie as trustees and the theoretical possibility that pursuant to cl 6(b) of the Will they could make a distribution to themselves and/or their daughter prior to the children turning 25 years of age.
For the reasons set out above, the plaintiffs’ claim for relief as set out in the amended originating motion dated 30 October 2014, is dismissed. It is therefore necessary to consider what orders as to costs should be made.
Where a Part IV claim under the Act fails, it is common for there to be no order as to costs, the effect of which is that the unsuccessful plaintiff bears their own costs and the defendant executor receives their costs out of the estate.[35]
[35]See Briggs v Mantz [No 2] [2014] VSC 487 [25] (McMillan J), Re Bull, deceased (No.2) [2006] VSC 226 [3]-[4] (Byrne J).
For the reasons set out below, I do not consider that it is appropriate, absent further inquiry, to make an order that the plaintiffs bear their own costs and that the defendants be indemnified for their costs out of the Estate.
At the time of the grant of probate on 4 April 2013, the Estate was valued at $151,948.26. By the time the application was heard by me on 29 October 2014, the value of the Estate had been reduced to $107,758.60. This reduction is explained by two factors: funeral expenses of $12,300 and legal costs of $4,742 associated with the winding up of the Estate, and a further $26,203 in legal expenses incurred by the trustees in defending the current proceedings.[36]
[36]Exhibit D3.
The plaintiffs filed a memorandum of costs and disbursements in the sum of $57,394.30,[37] consisting of professional costs of $35,703.04, counsel’s fees of $17,700, court fees of $2,483.90 and transcripts fees of $1,437.36. These costs are more than double those of the defendants. Plainly, a question arises as to how this discrepancy can be justified in accordance with s 24 of the Civil Procedure Act 2010 (‘CP Act’).
[37]Exhibit P3.
An order that these costs be paid out of the Estate would have a devastating effect on the value of the Estate. It would produce an outcome which would undermine Christopher’s testamentary intention that funds be available for the maintenance and advancement of the children. Equally, an order that Megan pay the defendant’s costs as well as paying her own costs would significantly disadvantage the children. The evidence of Megan’s financial circumstances satisfies me that if required to pay an amount of approximately $83,000, this would cause her great financial stress. Inevitably, this would prejudice the interests of the children.
When these proceedings were commenced in October 2013, the very modest size of the Estate was a matter known to the plaintiffs’ legal advisors. The inference is irresistible that those advising the plaintiffs, both solicitors and counsel, must have been aware of the potentially devastating impact upon the Estate if the costs of the litigation were to be met by the Estate. Given the very modest size of the Estate, those advising the plaintiff should have been acutely aware of their overarching obligations under s 18(d) of the CP Act that the application should not have been commenced unless, as at 2 October 2013, the claim had a proper basis on the factual and legal material available.
I have come to the conclusion that there are prima facie grounds in this proceeding on which the court might be satisfied that the plaintiffs’ solicitors have contravened an overarching obligation under ss 18 and 24 of the CP Act. If advice was sought from counsel prior to commencing the proceeding in October 2013, it is possible that counsel may also have breached an overarching obligation under these sections of the Act. My reasons for forming this conclusion are as follows. First, the relief sought in the originating motion was misconceived. In substance, that relief sought an order that Megan be appointed trustee of the Estate in lieu of David and Valerie. Such relief, if available, should have been sought under the Trustee Act rather than Part IV of the Act. Second, as at October 2013, there was no legal or factual material which would justify an order appointing Megan as trustee either in addition to or in lieu of Valerie and David. There was no evidence which could support a finding that David and Valerie had acted in bad faith in the discharge of their duties as trustees. Third, between the time of the grant of probate on 4 April 2013 and the commencement of proceedings in October 2013, no request for financial assistance was ever made. Such a request was belatedly made in September 2014. However, even that request did not contend that Megan could not afford to pay for the childcare and swimming lessons referred to therein.
At the time of commencement of proceedings there was no evidence to support Megan’s stated concern that David and Valerie would not make proper provision for the maintenance of the children. Megan’s concerns, however genuinely held, did not constitute a proper basis for commencing the proceedings. Neither did the plaintiffs’ concerns regarding the so-called ‘loophole’ in cl 6(b) of the Will. The theoretical possibility that David and Valerie could make a distribution of funds to themselves and their daughter prior to the children reaching 25 years of age did not on any view support the conclusion that the Will did not make adequate provision for the proper maintenance and support of the children. I have considered the potential application of the CP Act by reference to whether there was a proper legal and factual basis for the originating motion when proceedings were commenced on 3 October 2013. For the sake of completeness, I record my conclusion that I would have come to the same opinion if the originating motion had sought the relief claimed in the amended originating motion dated 30 October 2014.
The court has broad powers under s 29(1) of the CP Act to make any orders it considers appropriate in the interests of justice.[38] This includes the power to order a legal practitioner to pay some or all of the legal costs arising from the contravention of an overarching obligation. Pursuant to s 29(2)(b) of the CP Act and r 63.23 of the Supreme Court (General Civil Procedure) Rules 2005 (‘the Rules’), the court proposes of its own motion to consider whether a costs order should be made against the plaintiffs’ solicitors in the interests of justice. On the material presently before the court, it is not possible to form a view as to whether or not a prima facie case exists for an order to also be made against counsel who have advised the plaintiffs. If material is placed before the court which indicates that counsel advised that proceedings be commenced — and depending upon the instructions provided to counsel — there may be grounds for an order to also be made against counsel. If the defendants wish to make an application under s 29(2)(a)(i) of the CP Act for an order under s 29(1) in their favour, they are to make, file and serve an application and affidavit in support by 4:00pm on 16 March 2015. The proceeding will be adjourned to a directions hearing for the determination of the court’s own motion that an order under s 29(1) of the CP Act be made against the plaintiffs’ solicitors, together with any application which may be filed by the defendants.
[38]Yara Australia Pty Ltd v Oswal [2013] VSC 337.
The orders of the court will be as follows:
1. The application by the amended originating motion dated 30 October 2014 is dismissed.
2. Costs are reserved pending the completion of an inquiry by the court on its own motion as to whether a costs order should be made against the plaintiffs’ solicitors in the interests of justice.
3. Pursuant to r 63.23(3) of the Rules 2005, the solicitors on the record for the plaintiffs appear before the court on 24 March 2015 at 9:30am for directions to be given for the hearing and determination of the court’s own motion that an order under s 29(1) of the CP Act be made against them.
4. By 4:00pm on 10 March 2015, the solicitors on the record for the plaintiffs file an affidavit:
(a) exhibiting copies of accounts rendered to the plaintiffs for professional costs of the proceeding;
(b) setting out the dates of any payment of those accounts; and
(c) setting out the details of any unpaid professional costs of the plaintiffs.
5. If the defendants wish to make an application under s 29(2)(a)(i) of the CP Act for an order under s 29(1) of the CP Act in their favour, they are to make, file and serve any application and affidavit in support by 4:00pm on 16 March 2015.
6. The proceeding is adjourned to 24 March 2015 at 9:30am.
7. The plaintiffs and the defendants are excused from attending any further directions in this matter unless otherwise notified by the court.
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