Gilchrist v Equity Trustees Limited
[2011] VSC 107
•28 March 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 2252 of 2010
PART IV OF THE ADMINISTRATION AND PROBATE ACT 1958
IN THE WILL AND ESTATE OF GEORGE ELIOT GILCHRIST (deceased)
| JOHN ELIOT GILCHRIST | Plaintiff |
| v | |
| EQUITY TRUSTEES LIMITED (which is sued as executor of the Will of the above named deceased) | Defendant |
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JUDGE: | ZAMMIT AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 22 November 2010 | |
DATE OF JUDGMENT: | 28 March 2011 | |
CASE MAY BE CITED AS: | Gilchrist v Equity Trustees Limited | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 107 | |
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ADMINISTRATION AND PROBATE ― TESTATOR’S FAMILY MAINTENANCE – Application for an extension of time within which to make a claim – Whether the estate has been distributed - Application dismissed – Administration and Probate Act 1958, s.99
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Wells | Maddens Solicitors |
| For the Defendant | Mr R Boaden | Hunt and Hunt |
HER HONOUR:
Introduction
The plaintiff, John Eliot Gilchrist, makes an application under s 99 of the Administration and Probate Act 1958 (Vic) (“the Act”) for an extension of time within which to make a claim under s 91 of the Act for further provisions out of the deceased estate of George Eliot Gilchrist, his father.
The hearing was confined to the plaintiff’s application for an extension of time under s 99 of the Act.
Background Facts
Mr George Eliot Gilchrist died on 10 August 1975. He was survived by two children, Muriel Nellie Gilchrist, born in 1933 and the plaintiff, born on 11 April 1934, now aged 76. Muriel Gilchrist was mentally disabled although still able to live an independent life with assistance. Muriel Gilchrist died on 22 March 2008 without leaving any children.
When the deceased made his will in 1964 he owned a property at 5 Winton Road, East Melbourne. He had disposed of that property and then bought vacant land in Oberwyl Road, Burwood upon which he constructed three residential units. Initially, he lived in one of the units. Although he was divorced at the time, he provided accommodation in the second unit in Oberwyl Road for his ex-wife (the plaintiff’s mother) and his daughter Muriel (the plaintiff’s sister).
The deceased died before the third unit at Oberwyl Road was completed. The plaintiff took up residence in the unit previously occupied by his father at Oberwyl Road to be on hand to complete the construction of the units and have them ready for sale.
Probate of the deceased’s last will dated 14 April 1964 was granted to Equity Trustees Ltd, his executor, on 12 March 1976.
The plaintiff has seven children: Guy Eliot Gilchrist born 8 March 1960, Hugh Eliot Gilchrist born 5 April 1963, Elisabeth Eliot Gilchrist born 22 November 1964, Jacqueline Emma Gilchrist born 20 July 1977, John Eliot Gilchrist born 7 November 1989, Gabriel Eliot Gilchrist born 5 February 1992 and Yasmin Eliot Gilchrist born 3 June 1994. The three youngest are the children from his current marriage.
The plaintiff and his wife run a small business retailing and wholesaling fundraising equipment. In his affidavit in support sworn 9 June 2010, the plaintiff deposes that the business has met significant opposition and trade “is quite slow”.[1] The plaintiff’s income is $750 per week which he draws from the business to sustain his wife and three children who are fully dependent.
[1]Affidavit of John Eliot Gilchrist sworn 9 June 2010 at [17].
Apart from the income stream from the business the only other source of income received by the plaintiff and his wife is the aged pension, totalling $105 per week. The plaintiff’s wife receives no other income. The plaintiff has no accrued superannuation and his wife has an accrued superannuation of approximately $2,000.[2]
[2]Ibid at [19].
The plaintiff’s evidence is that he suffers from Type 2 diabetes and that his condition has deteriorated in recent times. He is easily fatigued and he suffers from memory loss.
The plaintiff had a good relationship with his father. They had worked together in some property development and his father was supportive of him.
The Will
The will gave a life interest in the dwelling at 5 Winton Road, East Malvern to the deceased’s wife and daughter, with the remainder going to the Presbyterian Church. But, as I have said, the deceased sold that property before he died, and therefore the gift failed by redemption. The will gave the deceased’s personal chattels, including his car, to the plaintiff.
The residuary estate, effectively the entire estate other than personal chattels, was disposed by paragraph 5 of the will. It was given to Equity Trustees on trust to invest the capital and to:
(a)divide the income into five equal parts;
(b)to pay three parts of the income to his daughter during her lifetime;
(c)to pay two parts of the income to the plaintiff during his lifetime;
(d)on the death of his daughter [22 March 2008], to pay and/or appropriate three parts aforesaid of the capital of my residuary estate to any children of the daughter living at her death upon their reaching the age of 21 years;
(e)if the daughter left no children [and she did not], to pay or apply the income from three parts of the capital to the plaintiff’s children until his youngest child should attain the age of 21 [which will occur on 3 June 2015];
(f)and then to pay and/or transfer the capital of the three parts to the Royal Victorian Institute for the Blind (RVIB) for the exclusive benefit of the Blind Children’s School at Burwood;
(g)on the death of the plaintiff “to pay and/or appropriate two parts of the aforesaid capital of my residuary estate” to the children of the son living at his death upon their reaching the age of 21 years.
In effect, pursuant to paragraph 5 of the will, the plaintiff had a life interest to the two parts income derived from the invested capital.
The Estate
The assets of the estate were valued for probate purposes in 1975 at $78,405 and comprised:
(a)Units 1, 2 and 3, 15 Oberwyl Road, Burwood Victoria then valued at $60,000; and
(b)personal property then valued at $18,404.98.[3]
[3]Affidavit of Lachlan Darryl Wraith sworn 13 August 2010, Exhibit LDW2.
In January 1976 in connection with the administering of the estate, Equity Trustees established an account: George Eliot Gilchrist Estate – Account No. 3BG1040A.
During the year ended 30 June 1977, Units 1 and 2 at Oberwyl Road were sold for $84,000 and a mortgage debt of $11,157 was paid. The assets were collected, realised, converted to cash and the net proceeds of sale of the units were invested in one of the Equity Trustees’ funds. The estate then consisted of Unit 3/15 Oberwyl Road, (showing a book value of $20,000) and $65,662 cash invested in Common Fund No. 1, a total of $85,664.[4]
[4]Ibid, Exhibit LDW4.
Equity Trustees established separate accounts for Muriel’s trust (No. 03BG1040B) (“Muriel’s Settled Fund”) and the plaintiff’s trust (No. 03BG10406) (“the plaintiff’s Settled Fund”) established pursuant to clause 5 of the will.[5]
[5]Ibid at [11].
In 1977 the plaintiff’s aunty, Jessie Gilchrist, died. By her will, she left the plaintiff an absolute interest in a residential property at Unit 3, 147 Victoria Road, Hawthorn East (“Victoria Road”), where the plaintiff continues to live with his wife and three youngest children.
Exhibit LDW5 is the financial statements for 1978-1984 for the estate, the Muriel Gilchrist account and the plaintiff’s account. The statements demonstrate that the income was being distributed in accordance with the will in three‑fifths and two‑fifths shares to Muriel’s Settled Fund and the plaintiff’s Settled Fund.
After the plaintiff moved into the unit left to him by his aunty Jessie at Victoria Road, he approached Equity Trustees and asked whether they would purchase Victoria Road and hold it as an asset of his father’s estate.[6]
[6]Affidavit of John Eliot Gilchrist sworn 9 June 2010 at [14].
On 17 July 1984 the plaintiff wrote to Mr A. Gillespie, a trust officer employed by Equity Trustees saying:[7]
With reference to our recent conversation I now submit in writing my request that equity left me by my late father to be used to purchase property situated at Flat 3/147 Victoria Road, Hawthorn for my own personal use. Any particulars you wish to know regarding this property please phone Mr Ian Nisson on phone number 612521 c/o- Perpetual Trustees, Melbourne. Enclosed copy certificate (2) of Title.
[7]Affidavit of Lachlan Darryl Wraith, sworn 13 August 2010, Exhibit LDW6.
On 24 July 1984, Mr Gillespie instructed a property officer at Equity Trustees to obtain current valuation of the plaintiff’s property which he wanted Equity to purchase, and of Unit 3 at Oberwyl Road.
Two valuation reports were obtained from Thompson Maloney and Partners for Victoria Road and Unit 3, 15 Oberwyl Road. Victoria Road was valued at $58,000 [8] and the Oberwyl Road property at $77,500.[9]
[8]Ibid, Exhibit LDW8.
[9]Ibid, Exhibit LDW9.
In a letter dated 14 September 1984 to the manager of Equity Trustees, the plaintiff requested that Equity Trustees invest $54,500:[10]
. . . out of trust funds held by you [Equity Trustees] in my Settled Share in the above estate in the purchase of Unit 3, 147 Victoria Road, East Hawthorn, for my personal use and occupation.
I certify that I have inspected the said unit and consider it suitable for accommodation for myself.
[10]Ibid, Exhibit LDW10.
Statements were prepared for the estate, Muriel’s Settled Fund and the plaintiff’s Settled Fund for the period 1 July 1984 to 31 October 1984.[11] The financial position of the estate and the two settled funds was:
[11]Ibid, Exhibit LDW12.
Assets of the estate
Invested in common fund
$65,483
Unit 3, Oberwyl Road
$77,500
Total:
$142,983
Appropriated as to:
Muriel Settled Fund:
(three-fifths of the capital held pursuant to the trust in paragraphs 5(b) and (c) of the will).$85,790
Plaintiff’s Settled Fund:
(two-fifths of the capital held pursuant to the trust in paragraphs 5(b) and (d) of the will for the plaintiff for life).$57,193
Total:
$142,983
By 31 October 1984 the estate account had closed. No funds remained in the estate account, and the residual estate had been allocated and appropriated to the two settled funds.
In accordance with the plaintiff’s request, Equity Trustees purchased Victoria Road for $54,500 and became the registered proprietor. The plaintiff agreed to accept the cash on the understanding he would continue to live at Victoria Road for the “rest of his life”.
The capital statements for the plaintiff’s Settled Fund demonstrate that from 1 July 1984 to 31 October 1984 that:
(a)the plaintiff’s interest in the estate of $57,193.49 was credited to the plaintiff’s Settled Fund; and
(b)of that $57,193.49:
(i)$54,500 was applied to the acquisition of the Victoria Road;
(ii)$2,437.00 constituted an investment in Common Fund No 1; and
(iii)$256.00 was applied to paying the fee for the valuation.[12]
[12]Affidavit of Lachlan Daryl Wraith sworn 13 august 2010 at [28], Exhibit LDW12.
The valuation fee of Unit 3/15 Oberwyl Road was paid for from the Muriel Settled Fund.[13]
[13]Ibid, Exhibit LDW12.
In September 1987 the plaintiff consulted a solicitor about his entitlements. This led to a letter dated 8 September 1987, being sent to Equity Trustees from his solicitors.[14]
[14]Ibid, Exhibit LDW14.
The 8 September letter refers to the fact that: the plaintiff had a limited interest under his father’s will; he was entitled to the income from the relevant part of the estate; he did not have an absolute interest in the two parts of the residuary estate; and his interest in the Victoria Road property was limited for his life.
The plaintiff deposes that he did not receive any independent legal advice in relation to the transfer of Victoria Road to Equity Trustees.[15] I am satisfied that the plaintiff received legal advice in relation to the transfer.
[15]Affidavit of John Eliot Gilchrist sworn 9 June 2010 at [14].
By letter dated 23 September 1987, Equity Trustees replied and made it clear that the plaintiff only had a life interest and that since the estate had purchased the property in which he lived, that property would remain with the estate and on the death of the plaintiff, would benefit the remainder beneficiaries specified in the will. The letter concluded:
It has been indicated verbally to your client that the Trustees would be willing to sell the property and rearrange the funds assets in such a way that would continue to assist his requirements provided his request enabled the Trustees to adhere to the terms of the will of his late father.[16]
[16]Affidavit of Darryl Lachlan Wraith, sworn 13 August 2010, Exhibit LDW14.
Muriel Gilchrist died on 22 March 2008. As she had no children, under the provisions of the will, the income from Muriel’s Settled Fund is to be applied for the maintenance, education or advancement of the plaintiff’s children until the youngest attains 21 years of age. The youngest, Yasmin Eliot Gilchrist, will attain the age of 21 years on 3 June 2015.
When the plaintiff’s youngest child reaches age 21, the capital of Muriel’s Settled Fund will then be paid to the RVIB (now known as Vision Australia).
When the plaintiff dies, the capital of his Settled Fund (which includes Victoria Road) will be distributed to his children. The book value of the property is still the acquisition cost of $54,500. The plaintiff deposes that its current market value is $581,000. When the time comes, the property will then form a corpus to be distributed amongst all of the plaintiff’s children.
The Plaintiff’s Application – s.99 of the Act
An application for further provision from a will must be made within six months of the grant of probate. Section 99 of the Act provides:
Time within which application may be made
No application shall be heard by the Court at the instance of a party claiming the benefit of this Part unless the application is made within six months after the date of the grant of probate of the will or letters of administration (as the case may be):
Provided that the time for making an application may be extended for a further period by the Court after hearing such of the parties affected as the Court thinks necessary, and this power shall extend to cases where the time for applying has already expired but in all such cases the application for extension shall be made before the final distribution of the estate and no distribution of any part of the estate made prior to the application shall be disturbed by reason of the application or of any order made thereon.
On 28 April 2010, 33½ years after the time expired on 12 September 1976, the plaintiff issued proceedings seeking an extension of time under s 99 of the Act within which to make an application for family provision and principal relief.
The defendant opposes the application on the following grounds:
(a)The estate has been distributed, and for this there is no power to make any order under s 99 of the Administration and Probate Act extending the six month period.
(b)In 1984 the plaintiff requested that Equity Trustees use the “equity left to me by my late father” to purchase from him his home at Victoria Road. Equity Trustees acceded to this request. The plaintiff thereby affirmed both his knowledge of the extent of his entitlements in the estate, and his satisfaction with the provision made for him in his father’s will.
(c)The plaintiff had independent legal advice in 1987 about entitlements given to him under the will. The correspondence shows that he must have been fully aware that he had only a life interest in two‑fifths of his father’s estate. This was explained in clear terms, and the plaintiff elected not to pursue any further remedy in relation to the estate.
(d)The recognised ground for obtaining an extension of time – that the plaintiff was hitherto unaware of the extent of his interest in the estate – is therefore not available to him.
(e)The plaintiff cannot satisfy the Court that it would be unjust to prevent him from bringing a claim out of time.
(f)No reason has been advanced for delay in making the application.
(g)Allowing the extension will cause prejudice to the remaindermen.
A Court is not entitled to extend time for the bringing of an application unless the application for the extension of time is made before the final distribution of an estate.
A wide discretion is given to the Court, but the Act does not specify any criterion to be considered in the exercise of the discretion. The principles which guide the Court on an application such as the present have been discussed in a number of cases. If there has been a final distribution of the estate it cannot be disturbed. This is because the rights of the beneficiaries have become conclusive and indefeasible.[17] Therefore unless the plaintiff can demonstrate that the estate has not been finally distributed, the application must fail. If the estate has not been finally distributed I must determine whether to grant an extension of time having regard to the various discretionary matters.
[17]Groser v Equity Trustees Ltd [2007] VSC 27 at [27].
For the reasons set out below, I consider the estate has been finally distributed. In any event, having considered the discretionary matters, I am not satisfied that the Court should grant an extension of time.
Distribution of the estate
The law as to when an estate is finally distributed for the purposes of s 99 of the Act was set out by the High Court of Australia in Easterbrook v Young.[18] The High Court gave great weight to the policy and purpose of testator’s family maintenance legislation and said that it: [19]
Was 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 … beneficiary” which renders the estate finally distributed.”
[18](1977) 136 CLR 308.
[19]Ibid at 316-17.
The High Court went on to state:[20]
In our opinion, the expression “out of the estate of the testator” refers to the assets of which the testator might at his death dispose and which have come or could come to the hands of the personal representatives by reason of the grant of probate or letters of administration.
[20]Ibid at 318.
The High Court said that when an extension of time is sought:[21]
… only a complete removal of the whole of the assets of the deceased from the hands or name of the personal representative will prevent the Court extending the time for making an application for an order of maintenance.
[21]ibid
Easterbrook’s case was followed and applied in Re Lago deceased.[22] In that case, title to land had been transmitted into the hands of the executors. They had executed a registrable instrument of transfer of the farm property, from themselves (jointly) as executors to themselves (as tenants in common), and the dealing had been lodged at the Titles Office 17 days before an application of extension of time was made. Brooking J held this to amount to final distribution. His Honour went on to say:[23]
… the view prevailed that, having regard to the nature and purposes of the family provision legislation, the disabling circumstance was “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. (136 CLR at pp. 316-17). Elsewhere the Court referred to “a physical parting with the asset, i.e. by delivery or by transfer of title”, “a physical parting with that asset and its placing in the hands or name of an intended beneficiary”, “a complete removal of the whole of the assets of the deceased from the hands or name of the personal representative (the Court being at this point concerned with the final distribution) and to properties being “physically handed over or transferred to the intended beneficiaries”. (136 CLR pp. 317, 318 and 321.)
[22][1984] VR 706.
[23]Ibid at 708
His Honour went on to say:[24]
If the present transmission application and transfer had already been registered, a final distribution would clearly have taken place … The parties are, however, in the no man’s land of unregistered dealing. But the sign posts are clear enough, although the very question is not answered by the authorities.
To begin with, Easterbrook’s Case makes it plain that in ss 99 and 99A of the Administration and Probate Act “distribution” is an act of delivery or transfer, not something that may result from the transmogrification of the personal representative.
[24]Ibid at 709.
The question of distribution was next considered in Ashhurst v Moss.[25] In that case the will contained a number of provisions where sums were set aside to be held on trust for family members and organisations. The trustee had set aside the specified funds and constituted the trust as a separate, freestanding trust. Hansen J found that, in respect of these trusts, there had been a final distribution. The fact that the executors were the trustees of the freestanding trust, was only a factor to be considered in the overall question. Time was extended in that case as there were other estate assets which Hansen J had found had not been finally distributed. Hansen J found that this case was not simply a case of executors becoming trustees of relevant assets. Rather, it involved the constitution of an ongoing trust by the appropriation of relevant assets to the trustees who were, the same people as the original executors.
[25][2006] VSC 287.
In Ashhurst an extension was granted by Hansen J but not in relation to the RM Ansett Trust or the Ashhurst Settled Fund. His Honour found that these aspects of the estate had been finally distributed. The extension was allowed because there were still assets in, or yet to come in, to the residuary estate of the deceased. His Honour found that those assets had not been finally distributed. In relation to Ashhurst settled fund, and the RM Ansett Trust, Hansen J accepted the defendant’s submission that the estate had been finally distributed upon the setting up of separate freestanding trusts pursuant to the terms of the deceased’s will, following the death of Lady Ansett.
At paragraph 99, Hansen J stated (referring to the defendant’s counsel’s submissions that the estate had been finally distributed):[26]
Rather he made a general submission that the estate had been finally distributed upon the setting up of separate freestanding trusts pursuant to the terms of the deceased’s will, following the death of Lady Ansett. While that may be so in relation to the Ashhurst settled fund, and indeed the RM Ansett Trust, this said nothing as to the $150,000 retained in the estate as provision if required … Nor was there any explanation of the $300,000 in the residence fund … I am not satisfied that there has been final distribution of the estate (at least in so far as the above amounts are concerned) …
[26]Ibid t 312.
Hansen J also went on to determine that the land held in the name of executors, as legal representatives was not distributed.
Groser v Equity Trustees Ltd,[27] was a case of an estate where it was similarly asserted that the trust as required by the will had been established as a freestanding trust and there had been a final distribution. Gillard J held that there had not been a final distribution of the estate. His Honour said:[28]
It follows that although the administration of the estate has been completed, the fact that the personal representative holds any assets still in its hands on trust for a beneficiary or next of kin does not amount to a final distribution of the estate within the meaning of s 99…
As at today, Equity Trustees holds both real and personal property of the estate in trust for beneficiaries, which of course includes the next of kin, namely, the plaintiff and the two children of the marriage. Equity Trustees holds the following properties in trust:
(i)The legal estate of the Mt Isa property is vested in Equity Trustees, which holds it for the benefit of the plaintiff.
(ii)Equity Trustees holds personal estate for the benefit of the plaintiff, a separate fund for the daughter Christine, and a separate fund for the son Anthony.
(iii)Equity Trustees holds the legal estate of the Rosebud property, which it holds on trust for the benefit of the son Anthony.
[27][2007] VSC 27.
[28]Ibid at 20-21.
His Honour concluded:[29]
I am satisfied that there has not been final distribution of the estate of the deceased which would bar the application under s 99 for an extension of time.
[29]Ibid at 21.
Counsel for the plaintiff referred to and relied on the South Australian Full Court decision of Dawson v Fitch.[30]
[30][2002] SASC 12.
Frank Thomas Fitch died on 14 March 1998. His will made provision for his second wife, his two daughters from the second marriage and a child from his first marriage, but none for the three children of his de facto relationship, which preceded the marriage.
Under the provisions of the will, moneys were to be transferred to Mr Fitch’s daughters pending their turning 25 and 35 years of age, while the residue of the estate, comprising of shares, was transferred to Mr Fitch’s second wife. Under these terms, one of the daughters, who was 25 at the time of the execution of the will, received $100,000 instantly, with $250,000 placed in an Adelaide Bank money market facility until such time as she reached 35 years of age. The second daughter had not yet turned 25, hence all of her legacy was placed in a money market facility with the Adelaide Bank. The accounts bore the names of the daughters.
The children of the de facto marriage claimed benefits under the Inheritance (Family Provision) Act 1972 (SA) (“the Act”), s.6. They made an application for benefits on 14 January 2000, more than six months after the date of grant of probate. Pursuant to s.8 of the Act, the Court granted an extension for the bringing of an application.
However, the Act provided that the Court is not entitled to extend the time for the bringing of the application unless the application is made before the final distribution of the estate. Furthermore, where an extension of time has been granted, the Court cannot make orders in respect of that part of the estate which was distributed before the extension of time was granted.
In Fitch’s case, the defendants argued that there had been distribution of some of the assets, while the plaintiffs argued there had not been any distribution of the assets referred to in the application.
At the original hearing, it was determined that the shares transferred to the second wife had been distributed, while the moneys held in bank accounts for the two daughters of Mr Fitch, had not been distributed. The parties appealed each of these rulings according to their respective interests.
The key question to be decided by the Court was whether or not there had been a distribution of assets of Mr Fitch.
The plaintiffs argued that there had not been distribution of assets, while one of the defendants, Levene Ann Fitch, argued in a cross-appeal that the moneys held on trust for her had effectively been distributed.
The court was unanimous in its decision that there had been a distribution of the shares to Mr Fitch’s second wife. The court was also unanimous in interpreting the term “distribution”, which was held to constitute the passing of assets out of the hands of the executors, either to the beneficiary him/herself, or into a trust governed by independent trustees.
The will of Mr Fitch appointed executors as trustees of the trusts for the two daughters. One of those trustees retired in 1999, at which time he executed a Deed vesting the property in the “continuing trustees”. A new trustee, who was himself not an executor of the estate, was appointed via a deed and a memorandum of appointment. The appointment was not, however, attested in the manner prescribed by the Real Property Act 1886, as required by s.73 of the Trustee Act. Nor was the memorandum of appointment registered with the General Registry Office or the Lands Titles Registration Office. Much of the court’s decision-making process turned on these details, since the validity of appointment of the new trustee was determinative of whether distribution had occurred.
In setting out their reasons, only one of the justices (Williams J) held that the new trustee had been validly appointed, so that the moneys held on trust for the daughter had been distributed. The reasoning of Williams J differed from that of Lander J and Wicks J, in the way his Honour interpreted the Trustee Act. In particular, Williams J held that it was the intent of that Act to assist in the process of appointing trustees. This view coloured his Honour’s reasoning when determining whether the Trustee Act could be applied so as to vest the power over the moneys in question, in the new trustee. Deciding that the new trustee had the requisite power under the Act, enabled Williams J to reach the decision that the estate in question had passed from the hands of the executors and had been validly distributed.
As a result, the majority of the Court ruled to dismiss the appeal and cross-appeal, Williams J dissenting.
Given the bases of their Honours’ decisions in Dawson’s case, I do not consider the case assists the plaintiff’s case. The case turned on the appointment of the new trustee.
Has the estate been finally distributed?
Turning to this case, by 31 October 1984 the estate account had been closed. No funds remained in the estate account and the residuary estate was fully allocated and appropriated to the plaintiff’s Settled Fund and Muriel’s Settled Fund.
The administration of the plaintiff’s Settled Fund proceeded in accordance with his request. Equity Trustees purchased Victoria Road for $54,500; it paid $256 for a formal valuation and the remaining balance of $2,437 was invested in the common fund. The valuation was paid out of the plaintiff’s Settled Fund.
Equity Trustees submits that the treatment of the valuation fee is significant in that it illustrates that the deceased’s estate no longer existed as a single entity or at all. If it had and if Equity Trustees had purchased the Victoria Road property as an investment of the deceased’s estate, then the valuation and any ancillary costs would have been borne by the estate as a whole. This was not the case.
In order to satisfy the plaintiff’s request, Equity Trustees then broke the fund into two separate funds. It transferred 40% of the residuary estate out of the residue and into the plaintiff’s Settled Fund. It transferred 60% to Muriel’s Settled Fund. Having completed these steps, the defendant submits that it distributed the residuary estate.
The plaintiff submits that the evidence establishes that the funds held by the executor defendant upon the trust for the plaintiff established by the will, were used (at the request of Mr Gilchrist) to purchase real estate in which Mr Gilchrist could live. It is submitted, that such real estate is an asset of the estate, and is held pursuant to the provisions of the will of the deceased on trust for Mr Gilchrist.
The plaintiff argues that just because the property was not owned by the deceased and therefore could not have been the subject of the transmission application into the name of the executor, does not mean it is not an estate asset. The plaintiff submits that the executors have at the plaintiff’s request transposed cash into real estate, and given the plaintiff the use of the real estate in lieu of the income earned from the capital of the cash.
The evidence demonstrates that Equity Trustees became the registered proprietor of Victoria Road, not in its capacity as executor of the will of the deceased, but in its capacity as the trustee of the plaintiff’s Settled Fund.[31]
[31]Affidavit of Lachlan Darryl Wraith, Exhibit LDW11.
The plaintiff submits that Hansen J’s judgment in Ashhurst v Moss,[32] to the extent that the judgment might be read as contrary, was only obiter. and that Hansen J went on to determine the land held in the name of the executors, as legal representatives was clearly not distributed.
[32][2006] VSC 287.
I do not consider that his Honour’s comments were obiter. At paragraph 101 his Honour stated:
As to the remainder of the estate, and notwithstanding the submissions of counsel for the plaintiff, in my view it is established that there has been a final distribution thereof. This is so in respect of all the land held by the defendants (except that in the three titles mentioned above), the other assets comprising the RM Ansett Trust Fund, and the Ashhurst settled fund. The fact that the trustees are the same people as the executors is merely one fact to consider when deciding the factual question whether the estate assets have been put beyond recall. In my view, these assets have been put beyond recall as they are now held by the trustees to be dealt with only in accordance with the terms of the relevant trusts.
The plaintiff also relies upon the passage by the High Court in Easterbrook’s case:[33]
We do not understand why in Public Trustee v Kidd [1931] NZLR 1 the Court could not have made some provision out of the amount set aside to satisfy the annuity, if it thought that rather than an annuity a capital sum was presently required by the daughter’s situation. For reasons already given the fact that the money was technically held on trust on the terms of the will did not preclude the Court from altering those terms by an order operating as a codicil. The testator could by codicil have done so; and the order will operate as if he had done so.
[33](1977) 136 CLR 308, 321.
The plaintiff submits that the above passage indicates clearly that the setting aside of a separate fund as part of a trust contained under a will, whether to pay income by way of annuity or otherwise, does not constitute a distribution from the estate.
This very passage was considered by Hansen J in Ashhurst. His Honour in commenting on that passage said the following:[34]
Counsel emphasised the last paragraph quoted above, submitting that even if it were held that there had been a final distribution of the estate, provision could be made for the plaintiff out of the fund constituting the Ashhurst settled fund, if she was successful on a substantive application under Pt IV of the Act. But the present case is different from Kidd. While in both cases the money and settled fund is to revert to the residuary estate upon the death of the beneficiaries of the settled funds, the settled fund in Kidd was established for the plaintiff who was the only beneficiary under it, while in the present case the objects of the trust are the plaintiff, her children and ultimately the residual gift to charity. In other words, the income from the Ashhurst settled fund is not only for the plaintiff during her lifetime, but also then for her children and then to the residual gift. In my view, the assets of the Ashhurst settled fund have been distributed to the trustees who hold the assets on trust set up under the deceased’s will, for the benefit of the plaintiff and her issue and the charity in succession. The fund is thus not amenable to a Pt IV claim.
[34]At 315, [103].
In this case, the defendant does not just rely upon the fact of transmogrification from the executor to trustee. The defendant conceded that this alone would not amount to a distribution within the meaning of s 99. The defendant submits that, in this case there have been two freestanding trusts arising under the will which have been running for many years in favour of the plaintiff and his sister Muriel. The appropriation of the residuary estate to the settled funds meant that they would go forward and be administered by Equity Trustees. This was not simply a case of executors becoming trustees of relevant assets. Rather, this involves the constitution of ongoing trust by the appropriation of relevant trust assets to trustees who in this case were the same people as the original executors.
Hansen J considered the facts before him were sufficiently different to those in Public Trustee v Kidd, which were considered by the High Court in Easterbrook’s case.
In Kidd’s case, the settled fund was established for the plaintiff who was the only beneficiary under it. In Ashhurst’s case, His Honour noted that the objects of the Ashhurst Settled Fund were the plaintiff, her children and ultimately the residual gift to charity. That is, the income from the Ashhurst Settled Fund was not only for the plaintiff during her life, but then her children and then to the residual gifts. His Honour considered that the assets of the Ashhurst Settled Fund had been distributed to the trustees and that the trustees held the assets on the trust set up under the deceased’s will for the benefit of the plaintiff and her issue and the charity in succession.
His Honour concluded that the assets of the Ashhurst fund (and the RM Ansett Trust Fund) had been put beyond recall.
To my mind, the Muriel Settled Fund has been put beyond recall. The objects of the trust being Muriel, during her lifetime, the plaintiff’s children and ultimately the RVIB. The assets have been finally distributed, in that Muriel had the benefit of the income and, since her death, the plaintiff’s children enjoy the benefit of the income until the youngest reaches 21 years of age. To suggest that there has not been final distribution in regards to the Muriel Settled Fund ignores the period of time, the ongoing nature of the trust and its operation, which has been uninterrupted since the establishment of the Muriel Settled Fund.
In effect, the estate has been removed from the hands of the executor and placed with the beneficiaries who have enjoyed the benefit of the trust income.
The completing of executorial duties does not amount to a final distribution. In this case, the establishment of the two separate trust funds alone does not amount to final distribution. As stated by the High Court, its removal from the hands or name of the personal representative and its placement in the hands or name of the testamentary beneficiary.[35] In relation to the Muriel Settled Fund the assets are in the hands of the beneficiaries. Not only did Muriel enjoy the benefit of the income but now the plaintiff’s children enjoy the benefit of the income and will continue to do so until, 2015 when the youngest turns 21 years of age.
[35]Easterbrook v Young (1977) 136 CLR 308 at [316] – [317].
Turning to the plaintiff’s Settled Fund. In late 1984, the plaintiff asked the manager of Equity Trustees to use $54,500 out of his Settled Fund to purchase his home, Victoria Road, for $54,500. The request was met by Equity Trustees who became the registered proprietor of the unit. As such, the plaintiff’s Settled Fund now consisted of Victoria Road plus a small amount of cash.
The real estate did not belong to the deceased. All expenses incurred in the purchase of the property were paid for from the plaintiff’s Settled Fund. Equity Trustees became registered as proprietors of Victoria Road in its capacity as trustee, not as executor of the will of the deceased.[36] The administration of the estate and the estate account were completed by October 1984. This was not simply a case of executors becoming trustees of relevant assets. It involved the constitution of an ongoing trust by the appropriation of relevant assets to the trustees. The estate assets were delivered into the hands of the beneficiaries. If there was doubt as to whether the estate had been finally distributed, I consider the executor’s decision to acquiesce to the plaintiff’s wishes in 1984 and purchase Victoria Road removed any doubt as to the final distribution of the estate.
[36]Affidavit of Lachlan Daryl Wraith, sworn 13 August 2010, Exhibit LDW11.
The plaintiff submits that the decision of Gillard J in Groser’s case supports the proposition that the estate has not been finally distributed in this case.
The defendant submits that the decision of Gillard J is correct and can be distinguished from the present one on the basis that in Groser there had:
(a)no complete removal of the assets of the deceased from the name of the person representative (as personal representative); and therefore, no transfer of assets;
(b)no steps taken by Equity Trustees to do all that was necessary to become the owner of the funds in its capacity as trustee of any new or separate trust; and no transfer of assets from itself as executor to itself as trustee of a new or separate trust; and
(c)no “separate, freestanding trust established” pursuant to the will.
In the present case the defendant’s evidence is that as at 31 October 1984 the Estate’s capital and income accounts had zero balances. The administration of the Estate having been completed and the assets of the estate distributed to the Muriel Settled Fund and the plaintiff’s Settled Fund, the Estate account closed. By 31 October 1984, Account (number 3B G1040A) styled “George Eliot Gilchrist Estate” was closed.
The letter dated 23 September 1987 from the Equity Trustees to the plaintiff’s solicitors states:[37]
“Your Client had been in receipt of income from an unappropriated fund since his grandfather’s ( this should be father’s) date of death (10th August 1975) which at the time of appropriation had a value of $57,193.49”.
[37]Affidavit of Lachlan Daryl Wraith sworn 13 August 2010, Exhibit LDW15.
The reference to income from an unappropriated fund compared to the time of appropriation, is consistent with final distribution.
I am satisfied that the defendants have created two free standing trusts arising under the will which have been running since October 1984 and that there has been final distribution of the estate.
Discretionary Factors
Given my findings in relation to the final distribution of the estate it is not necessary for me to consider the other factors as to why an extension of time should or should not be granted to the plaintiff. However, for completeness and in the event that I am wrong about the final distribution of the estate, I will consider the other factors relating to granting the plaintiff an extension of time under s 99 of the Act.
In Corbett v State Trustees Limited,[38] Kyrou J summarised the discretionary matters that the Court must consider in deciding an application for an extension of time under s 99 of the Act as follows:
(a)The length of the plaintiff’s delay and whether the applicant has a satisfactory explanation for the delay;
(b)the prospects of success of a claim by the applicant for provision, or additional provision, out of the estate; and
(c)whether the granting of the application would cause any prejudice to the estate or to the beneficiaries.
[38][2010] VSC 481 at [58].
The plaintiff submits that the Court should have regard to the following:
(a)Prior ignorance of the right to make a TFM application is not necessarily an essential prerequisite to the granting of an extension of time pursuant to s 99;[39]
(b)the strength of an applicant’s claim is a relevant factor, but should not be used to determine the application unless the applicant’s case is hopeless, which test requires a high threshold to be met;[40]
(c)Gillard J’s statements in Groser’s case; that where there is a strong claim and the absence of prejudice, the period of delay and the reason for it are factors which would not normally carry much weight;[41]
(d)justice is the paramount consideration and to deny a person an extension of time in the face of a strong claim could amount to an injustice.[42]
[39]Ansett v Moss [2007] VSCA 161 at [7].
[40]Ibid at [11].
[41]Groser v Equity Trustees Ltd [2007] VSC 27 at [37].
[42]Groser’s case at [38].
Delay
In Ansett v Moss,[43] the Court of Appeal rejected an argument that an applicant could not succeed unless he or she established that there was a satisfactory explanation for the delay. The Court held that the absence of a satisfactory delay will be decisive in some circumstances, but not in others.[44]
[43][2007] VSCA 161 at [6] and [18].
[44]Ansett’s case at [18].
The plaintiff relies upon Gillard J’s statements in Groser’s case in relation to the delay and the weight that should be given to the delay. However, for completeness it is important to read his Honour’s comments in their full context. His Honour said:[45]
What I said was that given a situation where there is a strong claim and the absence of prejudice, the period of delay and the reason for it are factors which would not normally carry much weight. What I was stating was not a principle of law. It was an observation of a factual nature based upon the circumstances. It was not an observation which in any way fettered the discretion and was merely a guide as to the relevant weight to be attached to certain factors. As it was no more than a guideline, it must of course give way to the particular circumstances of the case.
[45]Ibid at [37].
The prospects of success
The determination of an applicant’s prospect of success in a claim under Part IV of the Act requires a consideration of factors which the Court must take into account pursuant to s 91 of the Act.
There was no argument that the deceased had a responsibility to make adequate provision for the plaintiff’s proper maintenance and support.[46] In determining whether proper maintenance and support was provided, the Court must have regard to the matters in s 91(4)(e)-(o) of the Act.
[46]Section 91(1) and (3)(a).
The strength of an applicant’s claim for relief under Part IV of the Act is a relevant factor to be considered in an application for extension of time.
Kyrou J in Corbett’s case,[47] considered that Mandie J’s comments in Re Petrucci v Fields,[48] summarised the Court’s approach to assessing the strength of any claim under s 92 of the Act. His Honour Mandie J said:
[47]Corbett v State Trustees Limited [2010] VSC 481 at [68].
[48][2004] VSC 425 (29 October 2004).
… a conclusion that the plaintiffs or any of them were persons for whom the deceased had, or did not have, responsibility to provide does not automatically flow from a consideration of the list’s criteria. It is not possible to say that the criteria ‘are satisfied’ or ‘are not satisfied’. Consideration of the evidence as whole in the light of the statutory criteria gives rise to the question whether the deceased had ‘moral’ responsibility to make any provision for the proper maintenance and support of any of the plaintiffs. In considering the question of moral responsibility, in the light of those criteria, the Court of necessity must have regard to the ordinary circumstances existing in a society or ‘prevailing community standards’ or make a value judgment in the light of current standards, arising as a matter of morality or humanity. … [T]he statutory provisions are designed to enforce the moral obligation of testators to use the testamentary powers for the purpose of making proper and adequate provision for the support of the person concerned, having regard to the means of that person, to the means and deserts of other and the relative urgency of the various moral claims upon their bounty – the provision which the Court may properly make in default of testamentary provision is that which a just and wise testator would have thought was their moral duty to make in the interests of the person concerned had they been fully aware of all the relevant circumstances.
The Court is not entitled to rewrite the will in accordance with its own ideas of fairness or justice. The Court must place itself in the position of the testator and consider what the testator ought to have done in all the circumstances of the case, treating him for that purpose as a wise and just, rather than a fond and foolish testator.[49]
[49]Re Petrucci; Petrucci v Fields [2004] VSC 425 (29 October 2004) [57]-[58] (citations omitted).
Prejudice to other beneficiaries
In Sheppard v Heathcote (No. 3), Robson J[50] considered that, if the plaintiff had a prima facie case for further maintenance and support, it was appropriate to consider whether the prejudice caused by the plaintiff’s delay and his or her other actions and omissions outweigh the prejudice in not being able to make a claim for further provision from the estate.
[50][2010 VSC 19 at [23].
Has Mr Gilchrist satisfactorily explained his delay?
The time allowed for the plaintiff to bring any claim for family provision expired on 12 September 1976.
The plaintiff submits that he did seek legal advice on some aspects of his entitlement in the estate in 1987 but, that there is no evidence that such advice related to any entitlement he had under Part VI of the Act. Further, the plaintiff submits that there was no attack on the plaintiff’s credibility when cross-examined about his oral evidence, that when swearing his affidavit in this application in June 2010, he had forgotten that he had obtained some legal advice in 1987.
The plaintiff wrote to Mr A. Gillespie, a trust officer, employed by Equity Trustees, in a letter dated 17 July 1984. Details of the letter are set out in paragraph 22 of my reasons.
Equity Trustee responded to the plaintiff’s request by organising an independent valuation of Victoria Road. By letter dated 14 September 1984 the plaintiff asked Equity Trustee to invest $54,500 out of Trust Funds held in his settled share to purchase Victoria Road.[51]
[51]Affidavit of Lachlan Daryl Wraith sworn 13 August 2010, Exhibit LDW10.
In the plaintiff’s affidavit sworn 9 June 2010, he deposes that he regarded a two‑fifths share of his father’s estate as being adequate and appropriate provision, however his understanding was that he had been left an absolute right to that share of the estate. Further, the plaintiff deposes that he did not obtain any independent legal advice in relation to the adequacy or otherwise of the provisions made for him in the will and that he has never sought legal advice about his father’s estate.[52]
[52]Affidavit of John Eliot Gilchrist sworn 9 June 2009 at paragraph 7.
The evidence before the Court is that in September 1987 the plaintiff consulted a solicitor about his entitlement. A letter dated 8 September 1987 was sent on the plaintiff’s behalf from his solicitors to Equity Trustee.[53]
[53]Affidavit of Lachlan Daryl Wraith sworn 13 August 2010, Exhibit LDW14.
The defendant submits that the letter is instructive as it demonstrates:
(a)The plaintiff obtained legal advice about the provisions of the will and the plaintiff was aware that he was entitled to the income from the sum of approximately $56,000;
(b)the plaintiff and/or his solicitors knew that the interest in remainder in respect of the $56,000 would on the plaintiff’s death pass to his children. That is, the plaintiff and/or his solicitors knew that he did not have an absolute interest in the two parts of the residuary estate;
(c)the plaintiff’s solicitors and/or the plaintiff knew he had a limited interest and there was an “interest in remainder” which would not belong to the plaintiff.
Equity Trustee responded to the plaintiff’s solicitors’ correspondence in a letter dated 25 September 1987.[54]
[54]Affidavit of Lachlan Daryl Wraith sworn 13 August 2010, Exhibit LDW15.
The plaintiff’s evidence about his knowledge of the letters and the contents was at best equivocal. In cross‑examination when asked if he recalled seeing solicitors in or about 1987 the plaintiff said he did not. The plaintiff agreed that he had seen the two letters and that he could not remember if the content of the letters was correct. In relation to the letter he signed dated 20 September 1984,[55] the plaintiff’s evidence was that he was not suggesting he did not write the letter, just that he could not recall the letter.
[55]Affidavit of Lachlan Daryl Wraith sworn 13 August 2010, Exhibit LDW10.
I am satisfied that the plaintiff was aware of his precise entitlements under the will by September 1987. The plaintiff waited 23 years before making an application to this Court. There has been no explanation as to why the plaintiff waited 23 years to bring the application.
It seems the real incentive which has led to the application is the change in the plaintiff’s circumstances brought about by his domestic situation since 1987, the recent decline in his health and his changed financial circumstances. While these are not trivial matters, they do not provide an adequate explanation for the delay in making a claim under Part IV of the Act.
The effect of the principles discussed in relation to delay, is that an applicant must meet a relatively low threshold in order to satisfy the requirements that he or she has a satisfactory explanation for the delay. In this case, not even after the deceased’s wife died in 1984 was there an application by the plaintiff. The recognised ground for obtaining an extension of time that the plaintiff was unaware of the extent of his interest, is not available to the plaintiff in this case. In short no reason has been advanced for the delay of at least 23 years in making the application.
Is Mr Gilchrist’s claim for further provision out of the estate hopeless?
The plaintiff relies on the following factors:
(a)the plaintiff’s age, 76 years;
(b)his limited current and future income earning ability;
(c)the plaintiff is the only surviving child of the deceased;
(d)the plaintiff does not have the security of owning his own home;
(e)the plaintiff has a wife and three children aged 16, 18 and 21. The plaintiff and his family live in a small residence which is adequate for their living needs;
(f)the will did not give the plaintiff any capital but only an income stream, which he has in effect converted to free rent;
(g)the plaintiff contributed to the building up of his father’s estate;
(h)the deceased owed no moral obligation to provide for any other person, other than Muriel, who is now deceased.
There was no dispute about the plaintiff’s current domestic situation, financial affairs and health.
The defendant submits: that the plaintiff has not made out any prima facie case for further provision. It was argued by the defendant that the will gave the plaintiff the use of 40% of the substantial estate. The only restriction on the gift was that he could not exercise the rights of ownership over his share in the estate. However, the events of October 1984 overcame even that limitation. The plaintiff was able to take, use and expend capital equal to the value of his own home for his own purposes. The defendant submits that the home is now worth approximately $581,000. If that is correct then it measures, in terms of the current value of money, the value of what the plaintiff received when Equity Trustee agreed to buy the plaintiff’s home from him at what was then its current market value. Not only has the plaintiff received from the estate a cash sum of $581,000 in today’s term, he has, in addition, the right to continue to live in that home for the rest of his life. The defendant submits that this cannot be said to be a failure by the plaintiff’s deceased father to make adequate provision for his maintenance and support.
On the one hand, the plaintiff’s age, contribution to building up the estate, health (Type 2 diabetes and memory loss), his financial resources and needs, the plaintiff’s relationship with the deceased and the deceased’s moral obligation, all support a prima facie case.
On the other hand, the plaintiff received 40% of the estate. He had access to the 40% in a lump sum when he converted his benefit under the estate in 1984. At that time the plaintiff did not give up a life interest in the property.
I am satisfied that there is at best a tenuous prima facie case. The plaintiff’s case could not be regarded as “hopeless”.
Is there any prejudice to the other beneficiaries
The plaintiff submits in this case there is no injustice to removing part or all of the future entitlement of the RVIB to receive the capital of Muriel’s Settled Fund and/or part or all the future entitlement of the plaintiff’s own children to receive the capital, held in the form of freehold title of Victoria Road, from the plaintiff’s Settled Fund.
The defendant submits:
(a)It would be severely prejudicial to the plaintiff’s own children and the RVIB if he were now given the right to pursue a claim for principal relief;
(b)debating the claim more than 30 years late is bound to be unfair if only because the jurisdiction has developed and awards have become more open-handed in that time. There is no reason why the remaindermen should have to submit to an award representing current approaches, simply because the plaintiff delayed for three decades;
(c)the difficulties of litigating any point, and testing the case with evidence that is 30 years’ old, speak for themselves. It is very difficult for the defendant to obtain evidence to contradict evidence that might be given by the plaintiff. For example it would be impossible, now, for the defendant to properly test the plaintiff’s allegation that he provided material assistance to his father in completing the construction of the Oberyl unit;
(d)the difficulties are significant for the Court itself. Making an award involves reaching a value judgment based on a proper understanding of all the relevant facts – as at the date of death of the testator. Asking a judge to do that now is unfair to the Court, as well as the remainder beneficiaries under the will.
The defendant’s submissions highlight the very difficulty of dealing with an application which is brought at a minimum of 23 years late. For the plaintiff’s children, the real prejudice will be the loss of the benefit they are currently receiving under Muriel’s Settled Fund.
There is force in the defendant’s submission about the difficulties of any litigation 30 years later. The plaintiff himself in evidence said he could not recall a number of significant matters, including whether he had received legal advice about his entitlements under the will. The plaintiff gave evidence that he now suffers from memory loss. There is an argument that there will be no person able to give accurate evidence about events which occurred in excess of 30 years ago.
Conclusion
In summary, I consider the estate has been finally distributed by the executors. In any event, I consider the plaintiff’s delay to be so inordinate that it outweighs the fact that the plaintiff may have a prima facie case. Further, I consider that there is prejudice to the remaindermen and that there will be prejudice of the sort which occurs in litigation which is brought long after the key events have occurred.
I therefore dismiss the plaintiff’s application for an extension of time under s 99 of the Act.
I will hear the parties on costs.
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