In the Estate of DAVID JOHN LOY (DECEASED) - [2012] SASC 140

SUPREME COURT OF SOUTH AUSTRALIA
(Testamentary Causes Jurisdiction: Civil)
In the Estate of DAVID JOHN LOY (DECEASED)
[2012] SASC 140
Judgment of The Honourable Justice Stanley
17 August 2012
SUCCESSION - EXECUTORS AND ADMINISTRATORS - OTHER MATTERS
Application pursuant to s 67 of the Administration and Probate Act 1919 (SA) by the administrator of a deceased's estate for an order dispensing with requirements to pay over money to the Public Trustee in accordance with s 67 of the Act - deceased died intestate - applicant obtained order for letters of administration of the estate of the deceased, the applicant's wife - surety required in accordance with s 31(1)(c) of the Act - surety's guarantee provided.
Held: Application granted. Beneficiaries of the estate properly protected - beneficial or expedient to make order dispensing with obligation on part of applicant to comply with requirements of s 65.
Application pursuant to s 67(5) discharging surety from further responsibilty in respect of the property to which the order made pursuant to s 67 relates.
Held: Surety to be discharged from further responsibility once Register of Probates is satisfied that the property the subject of the order has been transferred to a trust established for the benefit of the children and administered by the trustees.
Administration and Probate Act 1919 (SA) s 31, s 33, s 56. s 65, s 67, s 72F, s 72G, referred to.
IW v City of Perth (1997) 191 CLR 1; In the Estate of Freebairn (2005) 93 SASR 413; In the Estate of Richter (Deceased) [2011] SASC 124; The Estate of Sopru (Deceased) (1992) 165 LSJS 132, discussed.
In the Estate of Raymond Charles Estall (Deceased) [2011] SASC 188, considered.

In the Estate of DAVID JOHN LOY (DECEASED)
[2012] SASC 140
STANLEY J:
Introduction

This is an application pursuant to s 67 of the Administration and Probate Act 1919 (SA) (“the Act”) by the administrator of a deceased’s estate for an order dispensing with requirements to pay over money to the Public Trustee in accordance with s 65 of the Act. Section 65 requires an administrator to deliver property held on behalf of a beneficiary who is not sui juris to the Public Trustee. In addition, the administrator seeks a direction pursuant to s 67(5) discharging the surety, Rosa Caruso, from further responsibility in respect of the property to which the order made pursuant to s 67 relates.
David John Loy (“the deceased”) died on 26 October 2009. He was survived by his wife, the applicant in these proceedings, Maria Catherine Loy (“Maria”), and two infant children, Gabriella Rose Loy (“Gabriella”) and Georgia Kate Loy (“Georgia”).
The deceased died intestate.
On 23 March 2010 letters of administration of the deceased’s estate were granted to Maria.
The persons entitled to share in the estate of the deceased are Maria, Gabriella and Georgia. Gabriella was born on 20 November 2001. Georgia was born on 9 March 2006.
On obtaining letters of administration, Maria was required to provide a surety in accordance with the provisions of s 31(1)(c) of the Act because Gabriella and Georgia are not sui juris. A surety’s guarantee was provided by Rosa Caruso on 8 February 2010.
The estate of the deceased consists largely of real property and equities, principally a substantial parcel of shares in Woolworths Ltd. The net estate of the deceased disclosed in the statement of assets and liabilities records a value of nearly $2m. The real property consists of half interests in three properties at Somerton Park, Northgate and Seaford Meadows. The other half interest in the Northgate and Seaford Meadows properties is held by the deceased’s brother, Michael Loy. The other half interest in the Somerton Park property is held by Greycell Green Pty Ltd. Each of those properties is mortgaged. The loans secured by those mortgages will require servicing into the future.
The assets forming the deceased’s estate have produced income since his death. Income has been derived from dividends and rental income.
As the deceased is survived by a spouse and issue, the distribution of the deceased’s estate is governed by s 72G(1)(v) of the Act. Maria is entitled to the prescribed amount of $100,000 and to one half of the balance of the intestate estate. Gabriella and Georgia are entitled in equal shares to the remaining balance of the intestate estate.
The value of the intestate estate is to be calculated for this purpose in accordance with the provisions of s 72F:
72F—Value of intestate estate
For the purposes of this Part, the value of an intestate estate shall be ascertained by deducting from the gross value of the estate an amount equal to—
(a)     the—
(i)      debts and liabilities of the intestate; and
(ii)     funeral expenses; and
(iii)    testamentary expenses; and
(iv) costs of administering the estate, payable out of the intestate estate; and
(b) where the intestate is survived by a spouse or domestic partner, the value of the personal chattels of the intestate.
The value of property forming part of an intestate estate is to be assessed as at the date of the death of the deceased.[1]
[1] See definition of “value” in s 72B(1) of the Act.
By affidavits sworn by Maria on 19 July 2012 and by Rocco David Caruso on 20 July 2012 the facts giving rise to the within application are set out.
The precise entitlement of the beneficiaries in the deceased’s estate is yet to be finalised. The administration is not yet complete. The net income derived from the assets comprising the intestate estate and the liabilities, testamentary expenses and costs of administering the estate, are still to be finally determined. In addition, the value of the deceased’s personal chattels, to which Maria is entitled as the surviving spouse, must be determined and deducted in calculating the entitlement of the beneficiaries. However, the approximate entitlement of Gabriella and Georgia to share in the intestate estate is about $890,000.
It is Maria’s intention that Gabriella and Georgia’s entitlements as beneficiaries of the intestate estate should be satisfied by appropriating sufficient Woolworths shares as represent the dollar amount of their entitlement and that these shares be held in trust for the children pursuant to a deed of trust she proposes to execute pursuant to which she and her brother, Rocco David Caruso, a solicitor, will be appointed as trustees. It is proposed that the trustees will act gratuitously.
In addition, Maria proposes that the children’s equal share of net income derived from the deceased’s intestate estate since his date of death, presently held in an interest-bearing account in the name of the estate, will also be held on trust for the children. She considers it would be more advantageous that their share of the intestate estate be received in the Woolworths shares rather than in another manner, such as the sale of shares and conversion into cash or by transfer to them of title to the deceased’s half interest in the real property, as the shares are a solid, blue chip, readily tradable stock held in a large public company which pays regular dividends.
The estate currently holds 36,283 Woolworths shares. The closing trade price for Woolworths Ltd shares on the Australian Securities Exchange on 16 August 2012 was $28.60. Accordingly, the value of the shareholding currently exceeds $1m.
The legislative scheme
The applicants seek an order under s 67 of the Act that they not be bound by s 65 of the Act, which section relates to the duty of the administrator of the estate to pay over money and deliver property belonging to a person who is not sui juris to the Public Trustee after a certain period of time. Section 65 provides:
65—Administrator to pay over money and deliver property to Public Trustee
(1)Every administrator who is possessed of or entitled to any property within this State, whether personal or real, belonging to any person who—
(a) is not sui juris, or
(b) is not resident in this State, and has no duly authorised agent or attorney therein:
shall deliver, convey, or transfer such property to the Public Trustee immediately after the expiration of one year from the date of the death of the intestate or testator, or within six months after such sooner time as the same or such portion thereof as is available for that purpose, has been sold, realised, collected, or got in.
(2)The Public Trustee shall then administer such property according to law, and in accordance with any will affecting such property.
(2a)The Public Trustee may, in his discretion, (but subject to the provisions of any will or instrument of trust) realise, or postpone the realisation of, any real or personal property delivered, conveyed or transferred to him under subsection (1) of this section.
(3)This section shall not apply in any case where the administrator is a limited company incorporated or taken to be incorporated under the Corporations Act 2001 of the Commonwealth, and is acting as administrator in pursuance of any powers granted to it by any Act.
(4)This section shall not apply to an administrator acting under any probate or administration not granted by the Supreme Court but sealed with the seal of the Supreme Court in pursuance of the provisions of section 17 of this Act.
(5)Subject to the provisions of any will or instrument of trust, the Public Trustee may, if he is satisfied that it will be advantageous to the beneficiaries, authorise the sale of any trust property, not exceeding four thousand dollars in value, to the administrator, or to the administrator conjointly with any other person, notwithstanding that the property has not been offered for sale by public auction or otherwise.
Section 67(1) provides a dispensing power and is relevantly in the following terms:
67—Judge may dispense wholly or partially with compliance with section 65
(1)A Judge may, on being satisfied by affidavit that it is beneficial or expedient so to do, order—
(a) that any administrator, or proposed administrator, shall not be bound by section 65; or
(b) that any administrator, or proposed administrator, shall not be bound by the said section 65 until after a certain time to be mentioned in the order.
As is apparent, s 67 provides that a judge may, being satisfied that it is “beneficial and expedient so to do”, order that an administrator not be bound by s 65. The applicants contend that an order should be made that they not be bound by s 65 of the Act, as the protection afforded by s 65 to a beneficiary who is not sui juris requiring an administrator to pay the funds to the Public Trustee, is not required in the circumstances of this matter. That application is not opposed by the Public Trustee. Before returning to address this contention and the merits of the application, it is appropriate to say something about the legislative scheme concerning the relevant provisions of the Act.
Section 65 seeks to protect a person where an administrator, not an executor, has been appointed by the Court to administer an estate where a beneficiary is not sui juris. The protection is effected by obligating the administrator to convey the property due to such a beneficiary to the Public Trustee. In enacting s 67 of the Act, Parliament conferred on the Court the power to relieve the administrator from the obligation under s 65 when it is “beneficial and expedient so to do”.
It is clear that s 65 has, at least in part, a beneficial and remedial purpose. It is settled that beneficial and remedial legislation is to be interpreted as widely as its terms permit.
In IW v City of Perth,[2] Brennan CJ and McHugh J said in a joint judgment:[3]
[It is a] rule of construction that beneficial and remedial legislation … is to be given a liberal construction. It is to be given “a fair, large and liberal” interpretation rather than one which is “literal or technical”. Nevertheless, the task remains one of statutory construction. Although a provision of the Act must be given a liberal and beneficial construction, a court or tribunal is not at liberty to give it a construction that is unreasonable or unnatural.
(Footnotes omitted)
[2] (1997) 191 CLR 1.
[3] (1997) 191 CLR 1 at 12.
Section 65 has been considered in two decisions of this Court in In the Estate of Freebairn[4] and In the Estate of Richter (Deceased).[5]
[4] (2005) 93 SASR 415.
[5] [2011] SASC 124.
In Freebairn[6] and in Richter,[7] the Court considered the meaning of the phrase “beneficial or expedient”.
[6] (2005) 93 SASR 415.
[7] [2011] SASC 124.
In Freebairn, Besanko J concluded that the expression required a careful consideration of the facts of the particular case. The important consideration is the due and proper administration of the estate. That was in the context of an application pursuant to s 31(10) of the Act for an order dispensing with the requirement that an administrator provide a surety in accordance with the obligation under s 31(1) of the Act.
In Richter, Gray J, after analysing Freebairn, concluded that there are important differences between the use of the expression as it appears in different places in the Act. Accordingly, s 65 permitted the Court to contemplate considerations other than the due administration of the estate. His Honour concluded that on an application pursuant to s 65 the key consideration is whether a beneficiary who is not sui juris is properly protected. This Court has subsequently followed the same approach in In the Estate of Raymond Charles Estall (Deceased).[8]
[8] [2011] SASC 188.
Consideration
In determining whether the children will be properly protected by making an order pursuant to s 67(1), dispensing with the requirement to transfer the property of the estate being administered to the Public Trustee, I consider the following factors are relevant:
(1)   The period during which that part of the deceased’s estate will need to be administered before the children obtain their majority is lengthy, namely, eight and 12 years respectively;
(2)   Holding the assets on trust will adequately protect the interests of the children. I am satisfied both Maria and Rocco Caruso are responsible and mature individuals with the required financial experience to ensure that the value of the children’s interests in the assets of the intestate estate to which they are entitled will be preserved;
(3)   The nature of the asset, namely, shares in a substantial public company which are readily tradable, have an observable value and produce regular income, should protect the children’s interests.
(4) The appointment of Maria and Rocco Caruso as trustees, who will act without charge, means that they are in a good position to judge how the assets should be managed to provide such income as is necessary during the minority of the children for their maintenance, education, benefit or advancement in accordance with the requirements of s 33(1)(i) of the Trustee Act 1936 (SA).
(5)   If an order is not made and the property of the estate currently under administration is transferred to the Public Trustee for future management and administration, it will be subject to commission charged by the Public Trustee for the performance of this function together with the commission taken by the Public Trustee on the income received from the investment of funds comprising the estate.
(6)   I am satisfied that if an order is made as sought by Maria, the childrens’ interest in the assets of the deceased’s estate will be managed by Maria and Rocco Caruso in a competent manner without additional cost to the children.
I note that the application is not opposed by the Public Trustee.
In all of these circumstances, I am satisfied that by making the order sought, Gabriella and Georgia, as beneficiaries of the deceased’s estate, will be properly protected. It would be beneficial to their interests and expedient that the funds due to them be administered by Maria and Rocco Caruso as trustees of the trust proposed to be established for the purposes of holding the children’s entitlements as beneficiaries of the deceased’s estate until each obtains her majority.
Section 67(5) and the discharge of the surety
The applicant seeks an order pursuant to s 67(5) of the Act discharging Rosa Caruso as surety from further responsibility in respect of the property, the subject of the application for dispensation, from the requirement to transfer to the Public Trustee.
Where an administrator transfers property to the Public Trustee in accordance with the provisions of s 65 of the Act, s 66 operates to discharge the administrator and any surety from further responsibility in respect of the property. Section 67(5) performs the same function in circumstances where the Court makes an order dispensing with the requirement that the administrator transfer the property to the Public Trustee.
A question arises as to the construction of s 67(5). It provides:
(5) If the Court so directs, an order under this section has the effect of discharging the administrator and any surety from further responsibility in respect of the property to which the order relates.
The issue is whether the operation of the subsection requires the Court to give an express direction in terms of the subsection or whether the subsection operates of its own force once the Court has made an order in terms of s 67(1).
I have been unable to find any authority directly on point. However, in In The Estate of Sopru (Deceased)[9] Legoe J referred to the provision as follows:[10]
By subsection (5), if the Court so directs, the making of an order under this section shall have the effect of discharging from further responsibility all parties to the bond, if any, that has been given to the Public Trustee upon the granting of administration.
[9] (1992) 165 LSJS 132.
[10] (1992) 165 LSJS 132 at 145.
This passage suggests that a specific direction is required from the Court before the terms of s 67(5) operate. I intend to proceed on that basis.
Whether the Court should give such a direction depends upon whether the interests of the beneficiaries of the deceased’s estate who are not sui juris are adequately protected in the absence of the guarantee required of the surety pursuant to s 31(2) of the Act.
In this matter I am satisfied that the interests of the children will be adequately protected by their entitlement, as beneficiaries of the deceased’s estate, being held on trust, by the transfer of the requisite Woolworths shares to the trust established by Maria and administered by Maria and her brother, Rocco Caruso, as trustees during the beneficiaries’ minority.
Once that has occurred, it would be appropriate to discharge the surety from further responsibility in respect of the property. However, until that occurs, I do not consider that the surety should be discharged from the responsibility imposed by the guarantee given pursuant to s 31(2).
Accordingly, I direct that once the Registrar of Probates is satisfied that the requisite number of shares in Woolworths Ltd, whose value represents the entitlement of Gabriella and Georgia to share in the deceased’s estate, have been transferred to Maria and Rocco Caruso as trustees for Gabriella and Georgia, Rosa Caruso is to be discharged from any further responsibility under her surety’s guarantee given 8 February 2010 in relation to the property.
Conclusion
I make an order dispensing with the obligation on the part of the applicant to comply with the requirements of s 65 of the Act. I direct, that pursuant to s 67(5) of the Act, Rosa Caruso be discharged from any further responsibility under her surety’s guarantee given 8 February 2010 in relation to the property the subject of the order, once the Registrar of Probates is satisfied that the property the subject of the order has been transferred to a trust established for the benefit of the children and administered by the applicant and Rocco Caruso as trustees.