Kelly v GLENNYS Margaret Kelly as Executrix of the Will of the late Garry Kenneth Kelly (Dec)
[2005] WASC 42
KELLY & ORS -v- GLENNYS MARGARET KELLY as Executrix of the Will of the late GARRY KENNETH KELLY (DEC) & ORS [2005] WASC 42
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2005] WASC 42 | |
| Case No: | CIV:1449/2003 | 11 & 14 MARCH 2005 | |
| Coram: | MURRAY J | 24/03/05 | |
| 23 | Judgment Part: | 1 of 1 | |
| Result: | Awards made in favour of all applicants | ||
| A | |||
| PDF Version |
| Parties: | MATTHEW RICHARD KELLY THOMAS JOSEPH KELLY by his next friend BRIAN KELLY SAMUEL JOHN KELLY by his next friend BRIAN KELLY GLENNYS MARGARET KELLY as Executrix of the Will of the late GARRY KENNETH KELLY (DEC) GLENNYS MARGARET KELLY TONI MAREE BLACKLEY BRENDON CRAIG BLACKLEY |
Catchwords: | Succession Application under Inheritance (Family and Dependants Provision) Act 1972 (WA), s 6(1) Applicants are sons of deceased testator in the course of their education and training No immediate provision for sons in will Sons residuary beneficiaries Will provides right to widow to reside in former matrimonial home, the principal asset of the estate, for life Case turns on exercise of discretion to make adequate provision for the proper maintenance, support, education and advancement in life of the applicants Consideration of form of orders to be made Consideration of nature of power to condition orders Extent of capacity to preserve disposition by will |
Legislation: | Inheritance (Family and Dependants Provision) Act 1972 (WA) NSW Trustee Act 1925 Parliamentary Superannuation Act 1970 (WA) Trustees Act 1962 (WA) |
Case References: | Perpetual Trustee Co Ltd v Godsall [1979] 2 NSWLR 785 Re Bowmil Nominees Pty Ltd [2004] NSWSC 161 Re Francis as trustee of the West Australian Shed Commercial Pty Ltd Creditors Trustee Deed and Anor [2003] WASC 39 Rowan v Roche [2005] WASCA 6 Singer v Burghouse (1994) 181 CLR 201 Vigolo v Bostin [2005] HCA 11 Coates v National Trustees Executors & Agency Co Ltd (1956) 95 CLR 494 Condon & Anor v The Public Trustee [2003] WASC 133 Goodman v Windeyer (1980) 144 CLR 490 Grainger v The Public Trustee, unreported; SCt (WA); Library No 950670; 6 December 1995 Hawkins v Prestage [1989] 1 WAR 37 Kitson v Franks [2001] WASCA 134 Ku-Ring-Gai Municipal Council v Attorney General (1954) 55 SR (NSW) 65 McCosker v McCosker (1957) 97 CLR 566 Re Beale's Settlement Trusts [1932] 2 Ch 15 Riddle v Riddle (1952) 85 CLR 202 Ryan v Public Trustee of Queensland [1998] 1 Qd R 679 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- First Plaintiff
THOMAS JOSEPH KELLY by his next friend BRIAN KELLY
Second Plaintiff
SAMUEL JOHN KELLY by his next friend BRIAN KELLY
Third Plaintiff
AND
GLENNYS MARGARET KELLY as Executrix of the Will of the late GARRY KENNETH KELLY (DEC)
First Defendant
GLENNYS MARGARET KELLY
Second Defendant
TONI MAREE BLACKLEY
Third Defendant
BRENDON CRAIG BLACKLEY
Fourth Defendant
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Catchwords:
Succession - Application under Inheritance (Family and Dependants Provision) Act 1972 (WA), s 6(1) - Applicants are sons of deceased testator in the course of their education and training - No immediate provision for sons in will - Sons residuary beneficiaries - Will provides right to widow to reside in former matrimonial home, the principal asset of the estate, for life - Case turns on exercise of discretion to make adequate provision for the proper maintenance, support, education and advancement in life of the applicants - Consideration of form of orders to be made - Consideration of nature of power to condition orders - Extent of capacity to preserve disposition by will
Legislation:
Inheritance (Family and Dependants Provision) Act 1972 (WA)
NSW Trustee Act 1925
Parliamentary Superannuation Act 1970 (WA)
Trustees Act 1962 (WA)
Result:
Awards made in favour of all applicants
Category: A
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Representation:
Counsel:
First Plaintiff : Mr P R MacMillan
Second Plaintiff : Mr P R MacMillan
Third Plaintiff : Mr P R MacMillan
First Defendant : Mr J G Young
Second Defendant : Mr J G Young
Third Defendant : No appearance
Fourth Defendant : No appearance
Solicitors:
First Plaintiff : S C Nigam & Co
Second Plaintiff : S C Nigam & Co
Third Plaintiff : S C Nigam & Co
First Defendant : Banaszak Legal
Second Defendant : Banaszak Legal
Third Defendant : Banaszak Legal
Fourth Defendant : Banaszak Legal
Case(s) referred to in judgment(s):
Perpetual Trustee Co Ltd v Godsall [1979] 2 NSWLR 785
Re Bowmil Nominees Pty Ltd [2004] NSWSC 161
Re Francis as trustee of the West Australian Shed Commercial Pty Ltd Creditors Trustee Deed and Anor [2003] WASC 39
Rowan v Roche [2005] WASCA 6
Singer v Burghouse (1994) 181 CLR 201
Vigolo v Bostin [2005] HCA 11
Case(s) also cited:
Coates v National Trustees Executors & Agency Co Ltd (1956) 95 CLR 494
Condon & Anor v The Public Trustee [2003] WASC 133
Goodman v Windeyer (1980) 144 CLR 490
(Page 4)
Grainger v The Public Trustee, unreported; SCt (WA); Library No 950670; 6 December 1995
Hawkins v Prestage [1989] 1 WAR 37
Kitson v Franks [2001] WASCA 134
Ku-Ring-Gai Municipal Council v Attorney General (1954) 55 SR (NSW) 65
McCosker v McCosker (1957) 97 CLR 566
Re Beale's Settlement Trusts [1932] 2 Ch 15
Riddle v Riddle (1952) 85 CLR 202
Ryan v Public Trustee of Queensland [1998] 1 Qd R 679
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1 MURRAY J: The applications before the Court are principally brought under the Inheritance (Family and Dependants Provision) Act 1972 (WA), s 6(1) for awards out of the estate of the deceased so as to make adequate provision for the proper maintenance, support, education and advancement in life of the three plaintiffs. The plaintiffs are sons of the deceased. He was a local member of parliament. He died on 11 July 2002. The plaintiff Matthew Kelly was born on 5 November 1983. He was, therefore, aged 18 when his father died. He is 21 now. The second and third plaintiffs, Thomas and Samuel Kelly, are twin brothers, born on 19 October 1987. They were therefore 14 years of age when their father died. They are 17 now.
2 Tragically, they lost their mother, the deceased's first wife, when she died on 18 April 1998. Following this death, the deceased met Mrs Glennys Kelly, who is the first defendant in her capacity as executrix of the will of the deceased and the second defendant in her capacity as a beneficiary under the will. The deceased was born on 26 May 1948. The defendant who became Mrs Kelly, his second wife, was born on 15 September 1955. She had been previously married, but was divorced on 15 July 2000.
3 She had two children of that marriage, a daughter and a son, respectively a little older and younger than Matthew. They were the third and fourth defendants, Toni and Brendon Blackley. They are also beneficiaries under the will which, by cl 5, provided each of them with a legacy of $10,000 upon their attaining the age of 25. An order was made earlier in these proceedings authorising the acceleration of that benefit, although neither Toni nor Brendon has attained the age of 25. Toni and Brendon were not represented before me. They took no part in the trial.
4 Some three years after the death of his first wife, the deceased and Mrs Kelly formed a relationship. She and her children moved into the family home of the deceased and his sons in Palmyra. Mrs Kelly and the deceased were married on 30 November 2001, but shortly thereafter the deceased became ill. His illness required periods of hospitalisation in the first half of 2002. As I have said, he died on 11 July 2002. Upon the evidence before me it appears clear that relations between the boys and Mrs Kelly were not happy. The affidavits seek to attribute blame for that state of affairs, but why it was so is immaterial to the present proceedings because it is not suggested that there was any conduct on the part of the plaintiffs which would disentitle them to awards under the Act. I have therefore paid no regard to this material. But it is relevant to note that shortly after the death of the deceased, in late August 2002, the boys
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- moved out of their home in Palmyra to live for a short time in a unit owned by their grandmother. That was soon sold and they moved, in September 2002, to live with their uncle, Brian Kelly, in whose care they remain.
5 The deceased made a will on 22 March 2002. He named Mrs Kelly as executrix. Probate was granted to her on 23 December 2002. The principal assets of the estate are the family home in Palmyra and a holiday home on Molloy Island on the Blackwood, near Augusta. The Palmyra home is free of any encumbrance. The house on Molloy Island was mortgaged, but that mortgage has been discharged by Mr Brian Kelly. He is a creditor of the estate, accordingly. I shall return to that in due course.
6 For the purposes of these proceedings, it was necessary that the two properties be valued. Mr Barnao was appointed by the plaintiffs. Mr Kavanagh was appointed by the defendants. At a directions hearing held as required by the Rules of the Supreme Court in relation to these proceedings, the valuers were ordered to confer. The process of conference was fruitful. The valuers, and therefore the parties, have agreed that the Palmyra property is valued at $587,500. The Molloy Island home is valued at $170,000. The current total value of the estate is therefore taken to be about $764,500, taking some minor assets into account.
7 By the will, cl 4, a life interest in the Palmyra property in the form of a right to occupy the property for her life was given to Mrs Kelly. She is to be liable for all the maintenance and other outgoings in relation to the property. On her death or earlier vacation of the property it was given to the deceased's sons equally. Thus was the remainder disposed of consistently with the residuary estate, which was otherwise by cl 6, given to the three boys equally.
8 Matthew, the first plaintiff, like his brothers, lives with his uncle Brian. There is no reason to suppose that he may not continue to do so, but he is now an adult and he might reasonably seek to establish an independent life of his own. At the end of 2004 he completed a four-year TAFE course, obtaining a diploma of information technology (systems administration). It seems to me that his qualification is a satisfactory one. He proposes to suspend his studies during 2005. He wishes to obtain experience in the computer industry. He has applied for various positions without success. In the meantime, he supports himself, to some degree, with a part-time job at Dewsons Bicton. He has held the position for some years and he seeks further shifts to maximise his income. He has
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- very few assets, mainly personal items, his computer and the like. He drives an elderly motor vehicle which was, at one time, his father's. It will soon need replacement. It is proposed that he should be able to purchase a modest small motor vehicle.
9 Matthew proposes this year that having had a year off, he will apply for admission to Edith Cowan University or another tertiary institution and, if successful, he will undertake a three-year degree course in information technology. It is proposed that he should be able to move out of his present home during that time into rented accommodation, and it is proposed that he should have available to him a fund which will effectively allow him to pay his own way in relation to the degree and his ordinary living expenses. If he completed that degree, at the end of 2008 he would be a man of 25 years of age, looking to establish himself in life, to build a career, to acquire his own accommodation. In the meantime, he wishes to live independently, but it seems to me, relatively frugally.
10 I will not, in these reasons, review the detailed evidence. I content myself with the observation that the final formulation of his claim seems to me to be entirely reasonable. I think he should have the opportunity to live independently while he studies. He should be able to live reasonably, but not extravagantly, equipping himself to pursue his tertiary studies and, at the end of those studies, establish himself in his own home and in a career. The proposal that he should be able to spend about $15,000 upon the acquisition of a modest motor vehicle is a reasonable one.
11 Thomas and Samuel completed their secondary schooling at Christian Brothers College, Fremantle at the end of 2004. As I have mentioned, they are now aged 17 years and they continue to live with their uncle Brian, who receives their parliamentary pension, orphan pension and family tax support to assist in their maintenance. Both Thomas and Samuel have plans for further education or to obtain further qualifications. Thomas has commenced a pre-apprenticeship course at TAFE. He wishes to pursue a career as a diesel mechanic. On completing his pre-apprenticeship course he will be required to undertake a four-year apprenticeship and so he will not be equipped fully to enter the workforce in his chosen field until 2010. Thomas's secondary schooling record would suggest to me that he will cope with his TAFE course and successfully complete his apprenticeship, but of course, by that time, he will be a young man of 22 years of age.
12 Like his brother Matthew, Thomas has no real assets. He has, or it is proposed that he should be able to acquire, the sort of basic personal items
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- of clothing, a computer, a music system, a modest small motor vehicle and that he should have funds to enable him to undertaken surgery on his nose where there is a particular medical problem requiring attention. It is proposed that he should be able to rent accommodation if he should so wish and that, at the end of his apprenticeship, he should have some capacity to establish himself independently in his own accommodation and pursuing his own career. His claim is limited to the period required to pursue his qualifications. Again, without in these reason descending to the particulars of that claim, it seems to me to be reasonably formulated and I see no need to adjust it by way of pruning any of the expenses presently encountered or anticipated.
13 Samuel's position is very similar to that of his twin. Samuel graduated well from his secondary studies. He wishes to become a geologist and he has been accepted and has enrolled in a degree course at Curtin University this year to fit him for practise in that profession. It is a three-year course and although he may well wish to continue to live with his uncle, it is reasonable that he wishes to have the capacity to live independently and have his own transport, a vehicle of the kind I think to be reasonable in the case of his brothers. Again, without descending to particularity, the evidence before me amply demonstrates that Samuel's claim in relation to his present and anticipated expenses, his need for a motor vehicle, his need to be able to live independently if he wishes, and his need to be able to establish himself independently at the completion of his degree are all reasonable. In addition, he requires orthodontic treatment and that should be provided for.
14 Mr Brian Kelly is a creditor of the estate. After the death of the deceased there was concern about the property on Molloy Island. It was mortgaged and there were, of course, ongoing expenses and outgoings to be met in respect of that property. The estate had no capacity to do so. If the property was to be retained it was thought that it had to be freed of debt. With the agreement of Mrs Kelly as the executrix, Mr Brian Kelly volunteered to raise funds to discharge the mortgage. He undertook to meet the ongoing expenses in relation to the Molloy Island property. In addition, he discharged a credit card debt to the Commonwealth Bank which was owed by the deceased and which was, of course, attracting interest at a daily rate. Mr Kelly has paid various other amounts in respect of debts of the estate. They are detailed in his affidavit sworn on 2 March 2005, exhibit 9. I need not set them out in detail here. It is agreed between the parties that Mr Kelly is owed the sum of $64,362 by the estate.
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15 I have said something about Mrs Kelly, but to complete this review of the evidence I should say a little more about her position, although she is not an applicant under the Inheritance Act and, as has been seen, her beneficial entitlement under the will was a right of occupancy of the Palmyra property for life or until she should vacate it, paying for that privilege under cl 4 of the will, "all taxes, rates, insurance premiums, maintenance and other outgoings in relation to thereto."
16 Mrs Kelly is now aged 49 years and, as I have mentioned, she has a daughter and son by a former marriage, young people aged 22 and 21 respectively and each the recipient of a legacy of $10,000 under the will, the payment of which has been accelerated by a consent order which makes the moneys payable within 42 days after the realisation of the estate upon the conclusion of these proceedings.
17 Mrs Kelly is a bank officer in permanent, full-time employment. Her relationship with the deceased was relatively short. They met in February 2000 and soon got to the point, as I have mentioned, where she and her children took up residence at the deceased's family home in Palmyra with him and his three sons. I have mentioned that about 7 months later the two were married, but after a period of ill health the deceased died about 7 months after that.
18 Since Mr Kelly's death I accept that Mrs Kelly has struggled to cope with his loss and has struggled to cope with financial responsibilities, both personal and as the executrix of the deceased's estate. It was made clear by her cross-examination that she has been confused about the extent to which expenses she has incurred, particularly in relation to the Palmyra property, are properly to be regarded as expenses of the estate or whether they were her personal responsibility under the terms of cl 4 of the will. I was not persuaded that Mrs Kelly was deliberately misconducting herself as executrix. I was not persuaded that she was deliberately attributing expenditure as a liability of the estate when she well knew that the expenditure was her personal responsibility. Nonetheless, as I say, it is clear that she has had difficulty in properly understanding and keeping separate, expenditures incurred as executrix from expenditures incurred in her own behalf.
19 She appears to be by no means a wealthy woman. She earns, gross per annum, as a bank officer, $36,339. Her principal asset is a property she owns in a suburb called Seville Grove. She has a market appraisal from her real estate agent which would value it at between $195,000 and $210,000. It is leased at a weekly rental of $170.00. She has personal
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- property and household property which she values at about $25,000. She values her motor vehicle, a 2002 Hyundai Accent, at $10,000. Although there is some confusion in the evidence she may well be owed just under $12,000 by the estate. I am unable, on the evidence, to make a definitive finding about that, particularly because it appears to be impossible, finally, to determine the extent to which sums paid for rates on the Palmyra property and insurance properly relate to the period prior to the death of the deceased and are therefore a liability of the estate, or relate to the period of Mrs Kelly's occupation of the Palmyra property, and so are her responsibility. As I say, in the circumstances of this case it is unnecessary that I reach a firm conclusion about such matters.
20 The Seville Grove property is mortgaged by what is described as an interest-only mortgage to secure the sum of $112,000. Mrs Kelly appears to have no savings. She owes about $7,500 on credit cards and has two small overdrafts and a debt of $1,400 on a shoppers' card. If she attains the age of 55 years and remains unmarried, she will have an entitlement to a pension under the Parliamentary Superannuation Act 1970 (WA), as the widow of the deceased. It is not a pension which may be commuted to a lump sum and the quantum will be two-thirds of that paid to Mr Kelly as at the date of his death, indexed for cost of living adjustments applicable after she commences to receive the pension. It is clear that that would provide an income of only modest proportions. Mr Kelly, during his life, found it necessary to supplement the income he received from the pension by part-time employment.
21 But nonetheless, the fact remains that Mrs Kelly is a mature woman in full-time employment who has the capacity to live in modest but not uncomfortable circumstances without depending upon the valuable contribution made by a right to live rent-free, but otherwise maintaining and supporting the property financially, in the Palmyra house. Her children are grown and live independently and it is clear that she accepts no obligation to maintain or provide for the children of the deceased. She has only herself to support.
22 Against that background I turn to consider the nature of the application which is made under the Inheritance (Family and Dependants Provision) Act1972 (WA), s 6(1), which provides:
"If any person (in this Act called "the deceased") dies, then, if the Court is of the opinion that the disposition of the deceased's estate effected by his will, or the law relating to intestacy, or the combination of his will and that law, is not such as to make
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- adequate provision from his estate for the proper maintenance, support, education or advancement in life of any of the persons mentioned in section 7 as being persons by whom or on whose behalf application may be made under this Act, the Court may, at its discretion, on application made by or on behalf of any such person, order that such provision as the Court thinks fit is made out of the estate of the deceased for that purpose."
23 In Rowan v Roche [2005] WASCA 6, in a judgment with which Steytler and Templeman JJ agreed, at [9], I said of this provision:
"The law is clear. It is trite law that on the face of the subsection there is a two-part process to be undertaken by the Court. The first question is whether the Court is to form the opinion mentioned in the section that the provision out of the estate is inadequate for the purpose mentioned. This is sometimes called the jurisdictional question: Bondelmonte v Blanckensee [1989] WAR 305. By the reference to the jurisdiction of the Court in this context is meant no more than that the Court forms the opinion as to the adequacy of the provision from the estate which will trigger the requirement to exercise the discretion whether or not to make provision out of the estate and, if so, how much and in what form. As is apparent from the way the section of the Act is worded, the threshold question requires consideration of the factual circumstances as at the date of death. Again, as is apparent from the way the section is worded, when the Court comes, if it does, to exercise its discretion, it is to consider the position as at the time when it is called upon to do so."
24 In this case it is conceded that the first or threshold question should be answered in the affirmative. The deceased made no provision at all for the three plaintiffs except as remaindermen in relation to the Palmyra property at the conclusion, whenever in the future that might be, of the right of occupancy to be enjoyed by Mrs Kelly, and as the beneficiaries of the residuary estate. No doubt he thought that he would, by then, have been able to assist them to establish themselves in careers and independently in life, but his untimely death meant that there was no provision for their immediate needs to achieve that situation, let alone adequate provision made for their proper maintenance, their support, their education or their advancement in life so vitally needed at their ages and stage of life. I am satisfied that the Court's power in the exercise of its discretion to make adequate provision for the proper maintenance,
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- support, education or advancement in life of each of the plaintiffs is fairly enlivened.
25 The questions which arise in this case are concerned with the exercise of that discretion, the second stage in the process of dealing with applications under the Act. Again, in Rowan v Roche, at [12] - [13], I said of that task:
"12A question of that kind is often in the decided cases described as involving consideration of the moral claim which may be advanced by the applicant, sometimes, although not, I think, in this case, in competition with the claims made by others interested in provision out of the estate of the deceased. But the courts have rightly warned against focusing attention upon such considerations. The courts have reminded litigants that to speak in such terms is to place a gloss, perhaps a convenient gloss, upon the words of the section.
13In the end it must be recalled that by the section the court is asked to exercise its discretion to make the provision it thinks fit out of the estate of the deceased for the proper maintenance, support, education or advancement in life of the applicant. That is the extent and limit of the court's power. It is not concerned otherwise, or indeed at all, with the fairness of the disposition by Will and it has no mandate under the section to rewrite the Will of the deceased. Indeed, the court's obligation is to preserve the disposition made by the deceased, except to the extent necessary to make the provision which in the exercise of its discretion the court thinks the justice of the case before it requires: Singer v Berghouse (1994) 181 CLR 201, 209 - 211; Vigolo v Bostin (2002) 27 WAR 121, 144 [101] - [103]."
26 Vigolo v Bostin went on appeal to the High Court. That decision is now available: Vigolo v Bostin [2005] HCA 11; 9 March 2005. The appeal was dismissed. There is debate in the judgments between the various members of the Court in relation to the utility, as informing the proper exercise of the discretion, of the consideration of a moral claim, indeed all the claims, so far as they compete with one another, which all interested persons might be considered to have for a provision of the kind recognised by the Act, out of the estate of the deceased. Gleeson CJ,
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- Callinan and Heydon JJ expressed the view that, provided consideration of the applicant's moral claim was not allowed to supplant the nature of the discretion to be exercised by the Court in the terms conferred upon it by the Act, it could, in a proper case, be a useful way of approaching the question. On the other hand, Gummow and Hayne JJ affirmed the view of the majority in Singer v Burghouse (1994) 181 CLR 201, that to employ such a gloss upon the language of the statute was of little assistance. In any event, there is no requirement, I think, to restate the law in the light of the decision of the High Court in Vigolo.
27 In this case, in my opinion, it is important to remember what was said by the majority, Mason CJ, Deane and McHugh JJ, in Singer at 209 - 210, where their Honours made it clear that at both stages of the two-stage process, what was called for was:
" … an assessment of whether the provision (if any) made was inadequate for what, in all the circumstances, was the proper level of maintenance, etc, appropriate for the applicant having regard amongst other things, to the applicant's financial position, the size and nature of the deceased's estate, the totality of the relationship between the applicant and the deceased, and the relationship between the deceased and other persons who have legitimate claims upon his or her bounty."
28 Their Honours made it clear that the second stage, the exercise of the discretion, would involve similar considerations. As will appear in this case, the crucial matter is the position of Mrs Kelly, the nature of the provision made for her in the will, and the nature of her legitimate claim as recognised by the will upon the estate of the deceased, bearing in mind that she is not an applicant under the Act for any further or different benefit out of the state.
29 I am satisfied that this is an appropriate case where, the capacity to exercise the jurisdiction upon these applications having arisen, I should embark upon that task. I accept the plaintiffs' case that what needs to be remedied is not that they were provided with residuary benefits generally under the will and as remaindermen under cl 4, but that there was no immediate provision for the purposes enumerated in s 6(1), all of which seem to me, in this case, to require attention. It is not an appropriate response to their situation to say that the plaintiffs may rely upon the support and assistance of their uncle. A wise and just testator would have ensured that they were provided with sufficient funds to support their daily living, without extravagance, to give the plaintiffs the ordinary
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- capacity to pursue their education to the extent that their talents allow, in the case of two of them by obtaining tertiary qualifications, and in the case of the third by pursuing his planned apprenticeship.
30 Only by that means would the testator discharge his duty to see his sons established in life with a capacity to earn a reasonable living by the pursuit of their careers. They are entitled, in my opinion, to be able to live independently as they grow in age, both while pursuing their tertiary studies and apprenticeship and thereafter. They are entitled to modest transportation and, in the case of two of them, to obtain necessary medical treatment. Those were needs within the framework of the purposes to be served by provision under s 6(1) which were, in the case of all the plaintiffs, more pressing and with a higher priority from the point of view of the deceased than was the claim of his widow to rent-free accommodation for life, given her circumstances and capacities as I have summarised them upon the evidence before me.
31 The plaintiffs sought to quantify this approach to the awards sought by instructing the witness Walewski. Mr Walewski is an accountant. He provided updated schedules of his calculations. Some of the primary information set out in the schedules such as rental and motor vehicle costs seem to be based on his general knowledge. He was queried about that by counsel for the defendants, but no objection was taken to the admission of that evidence through this witness and I have therefore not thought it appropriate to consider the strict admissibility of that evidence and I would certainly not discount Mr Walewski's calculations in relation to such items. Otherwise, Mr Walewski has relied upon material taken from the affidavits concerned with the activities and proposals of the three plaintiffs, having regard to such income as there may be and basing the calculations upon the costs referred to in the affidavits of Matthew and Mr Brian Kelly.
32 It seems to me, having perused this material closely, that the adjustments and allowances made for future expenses and the various items of expenditure provided for into the future are entirely reasonable. The calculations are made for the period of the tertiary education for each plaintiff and upon the basis that an indexed sum approximating a provision of $30,000 will be available to each plaintiff upon the completion of his tertiary studies or, in Thomas's case, his apprenticeship, to enable them to make a start on acquiring their own accommodation. That seems to me to be a reasonable approach.
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33 What is proposed therefore is the payment under the Act of a capital sum to each plaintiff now. So far as that sum was not immediately required in each case, it is assumed that it would be invested and an allowance is made for interest. Further, it is anticipated that the capital sum will be drawn upon in each of the years of tertiary study or apprenticeship to meet the various costs and expenses which I agree are reasonably to be provided for, to enable the plaintiffs to be supported in life while they complete their studies and the acquisition of qualifications so that they may establish their chosen careers.
34 The calculations proceed upon the basis that at the end of the period provided for in each case, the whole of the provision will have been consumed except for the sum approximating $30,000 to be then available for the purpose I have described. In the case of Matthew and Samuel, the period provided for is three years. In Thomas's case, to accommodate a pre-apprenticeship study year and a four-year apprenticeship, the period is five years. Each calculation proceeds on the basis that funds will be provided to meet the plaintiffs' educational requirements and future needs while that process continues. No provision is made for the past, nor for the reimbursement of the sums spent by Mr Brian Kelly on the maintenance and support of the boys. It follows that the provision for 2005 in each case is for nine months.
35 I am of the opinion that no further discounting would be appropriate in relation to the acceleration of the provision against the future costs and expenses inherent in the payment of the capital sum. It seems to me that the periods in each case which it is proposed should be provided for are too short to make that a sensible exercise. On the other hand, it does not seem to me that there is any need for an additional allowance to be made in respect of contingencies which might impose additional unexpected and unforeseeable expenditure during the periods in question. The calculations projected into the future include an upward cost of living adjustment each year of just under 3 per cent, a figure arrived at by taking the average for all groups within the Consumer Price Index for the 10 years to 31 December 2003.
36 There are, however, two further matters to which I should advert. In Matthew's case it will be recalled that he proposes, in 2005, to take a year off from studies and to commence his degree course next year. Mr Walewski has not reacted to that information, if he was aware of it. His calculations proceed upon the basis that Matthew will have started his tertiary education this year. On that basis Matthew would have been entitled, in my opinion, to a full first-year allowance. No allowance has
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- been made for his support for this year as a year in which he would plan to continue living with his uncle and in which he would hope to obtain employment to give him experience of his chosen profession. Failing that, the extent to which he makes a contribution to his living expenses will be dependent upon the extent to which he is able to expand his part-time employment with Dewsons. On the assumption that that will be possible, or at least that his modest income from that source will be maintained, I would only propose a very modest allowance for this "gap" year.
37 Finally, so far as Thomas is concerned, I note that although the period to be provided for is the greatest of the three plaintiffs, because the provision is made on the basis of an anticipated apprenticeship, an allowance for apprenticeship income has been factored into the calculations, reducing correspondingly the provision to be made under the Act.
38 In each case I would propose, apart from the modest additional allowance for Matthew, to round off the sums calculated now to be required by Mr Walewski. I would do that so that I may satisfy myself that, so far as can be done, the award to be made in each case will discharge the Court's obligation to exercise its discretion so as to make adequate provision from the estate for the proper maintenance, support, education and advancement in life of the plaintiffs.
39 I would award the sum of $110,000 to each of Matthew and Samuel, and the sum of $75,000 to Thomas. I would order those sums to be paid as a lump sum in each case. Under the Act, s 10, the provision made by those orders takes effect as if the orders were codicils to the will of the deceased. In relation to that I make the direction provided for in s 14(4) that a certified copy of the order in each case will be added to the probate of the will, which is to be produced by the first defendant accordingly.
40 Under s 14(1) I am to specify in relation to each order the part of the estate out of which the provision is to be raised and paid and, if necessary, I am to prescribe the manner of raising and paying the provision I make in each case. I turn to that task now.
41 The total provision that I would make out of the estate is $295,000. It could not be funded by the sale of the Molloy Island property. The only asset of the estate capable of bearing that provision is the Palmyra property in which, of course, Mrs Kelly has an equitable interest in the form of her right of occupancy and the three plaintiffs have equal legal
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- interests in the remainder upon their attaining the age of 25 years. Section 14(3) of the Act provides:
"The estates and interests of persons successively entitled to any property which is settled by the will of a testator shall not, for the purposes of this section, be separately valued, but the proportion of the provision to be borne by such property shall be raised or charged against the corpus of such property."
43 In my opinion, the making of those orders necessarily in this case destroys both Mrs Kelly's right of occupancy and the contingent interest of the plaintiffs in the remainder. However, I see no alternative and I think, having regard to the cases presented to me by the parties, they take the same view. The consequence will be that the net proceeds of sale would fall into residue.
44 I am told that the anticipated costs of sale, if both the Palmyra and Molloy Island properties were sold, are estimated by the parties at approximately $25,000. What proportion of that estimate would be attributable to the costs of sale of the Palmyra property I do not know, but out of the residue which would be created by the process I have described, there would be ample to defray the expenses incurred by Mr Brian Kelly, agreed at $64,362, the expenses incurred by the executrix which, on the best count, would appear to be $11,783, but might be a little different when the accounting is finally complete, and what I understand to be further amounts as yet unpaid but regarded as debts of the estate, school fees for the twins at CBC Fremantle for 2004 of $6,508.80, and unpaid rates on the Molloy Island property owed to the Augusta-Margaret River Shire in the sum of $217.55, a total of approximately $6,786.
45 The point is that upon the sale of the Palmyra property, a fund would be created out of which there could be paid the debts of the estate, the orders under the Act and there would be ample then to enable the consent order made in respect of the payment of the legacies to Mrs Kelly's children in the total sum of $20,000 to be paid.
46 Then there are the legal costs incurred in these proceedings and generally in the representation of the various interested parties. I may
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- make such order as to costs as I consider to be just: the Act, s 14(6). The discretion is a wide one and although costs may be ordered to follow the event, or no order for costs may be made at all in an appropriate case, it is common, as I apprehend it, in such cases as this, where there is no punitive consideration involved in the exercise of the discretion to make an order as to costs, that the costs of all parties are ordered to be paid out of the estate.
47 As at present advised, I am of the opinion that that is the appropriate order in this case. The plaintiffs have acted reasonably and pursued properly their justified claims. The third and fourth defendants took no part in the proceedings and so far as they might be compensated by a costs order, such an order was made by consent when orders were made for the payment of their legacies. It was entirely appropriate that in these proceedings the executrix should be represented and play an active role in the proceedings and their determination. Mrs Kelly, as a beneficiary, also had an interest to pursue in support of her right of occupancy under the will.
48 I will have more to say about that shortly, but in relation to costs, subject to any submissions to the contrary which may be made to me, I am of the view that the parties' reasonable costs, calculated on a solicitor/client basis, should be taxed and paid out of the estate. I am told that the plaintiffs' best estimate of their costs, including those of the proceedings before me and including counsel's fee, would amount to approximately $70,000. Thus far, it seems, the defendants have incurred costs of about $55,000. Of course, the extent to which any portion of those costs would be taxed off is unknown, but in the final outcome it is quite possible that the net proceeds of the sale of the Palmyra property would enable all of the outstanding liabilities of the estate to which I have referred, the legal expenses, the two legacies to Mrs Kelly's son and daughter, and the orders I have made in favour of the plaintiffs for provision out of the state, all to be satisfied out of the net proceeds of the sale of the Palmyra property, leaving a small amount, probably no more than about $50,000, in residue.
49 Particularly is that so when one has regard to the fact that Mrs Kelly values the contents of the Palmyra property at in the order of $6,000 and there is a small amount of just over $1,000 in a bank account. In addition, the residuary estate would still contain the Molloy Island property, or, if desired, the net proceeds of its sale. In any event, as the will is written, there could not be a final distribution of the residue until the children of the deceased, who are to share equally in it, all attain the age of 25 years.
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50 The loser in all of that is, of course, Mrs Kelly, the second defendant, whose right of occupancy of the Palmyra property will, by the orders I propose, be destroyed. She has no other interest in the estate and she proposes that she should be compensated for the loss of her rights. Initially it was put to me that that might be done by applying s 6(3) of the Act, which is in the following terms:
"The Court may attach such conditions to the order as it thinks fit, or may refuse to make an order in favour of any person on the ground that his character or conduct is such as in the opinion of the Court to disentitle him to the benefit of an order, or on any other ground which the Court thinks sufficient."
51 The condition sought to be applied to each of the orders under the Act was that each order should not be paid unless, at the same time, there was paid to Mrs Kelly what is calculated to be the present value of her right to live rent-free in the house for the rest of her life.
52 Evidence was put before me in the form of the reports of actuaries, Ms Nance for the plaintiffs, and Mr Barton for the defendant, together with medical reports giving opinions as to Mrs Kelly's state of health and her life expectancy. Those opinions were provided by Mrs Kelly's general practitioner, Dr Nyman, and by a specialist physician consulted by the defendant's solicitors, Dr Watson. In the light of the view to which I have come, I need not discuss this evidence. Suffice it to say that if I accepted the defendant's case I would consider that the present value of Mrs Kelly's interest in the property, on the basis that she has a present life expectancy of in the order of 37 years, would be somewhat over $300,000.
53 On the other hand, if it was necessary to arrive at a present value of Mrs Kelly's right of occupancy, for the plaintiff it was put to me that there ought to be some discounting of the result of the actuaries' work for contingencies, in another context described as the ordinary vicissitudes of life, which might reduce Mrs Kelly's capacity to exercise the right of occupancy to some point short of the age of about 85 years to which she might, having regard to her life expectancy, hope to survive.
54 I consider that s 6(3) would give me no power to make the order sought, which is an order for the payment to Mrs Kelly of a lump sum out of the estate. That is not a condition of the orders to make provision out of the estate for the plaintiffs. The order imposes no obligation upon the plaintiffs and they would have no power to see it satisfied. It would simply be a compensation order in favour of Mrs Kelly and it pays no
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- regard to the cost of occupancy which would accrue from time to time if the right of occupation was being exercised under cl 4 of the will. The actuarial calculation merely gives the value for the period in question of the annual rental value of the property per annum, derived from the work of Messrs Barnao and Kavanagh, discounted for conversion into a lump sum to be paid at the start of the period in question.
55 For Mrs Kelly it was then put to me that she would place reliance upon the provisions of s 89 of the Trustees Act 1962 (WA). Section 89(1) provides:
"Where in the opinion of the Court any sale, lease, mortgage, surrender, release or other disposition, or any purchase, investment, acquisition, retention, expenditure or other transaction is expedient in the management or administration of any property vested in a trustee, or would be in the best interests of the persons, or the majority of the persons, beneficially interested under the trust, but it is inexpedient or difficult or impracticable to effect the disposition or transaction without the assistance of the Court, or it or they cannot be effected by reason of the absence of any power for that purpose vested in the trustee by the trust instrument (if any) or by law, the Court may by order confer upon the trustee, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions (if any) as the Court may think fit, and may direct in what manner any money authorised to be expended, and the costs of any transaction, are to be paid or borne, and as to the incidence thereof between capital and income. "
56 There is no application before the Court by Mrs Kelly as trustee or by her as a person beneficially interested under the trust, but counsel puts to me that it would be desired to make such an application, if necessary, to secure the benefit sought by Mrs Kelly and to enable that to occur counsel asks that a conditional adjournment be granted to enable the application to be brought on before me and dealt with. I will not take that course because it seems to me that the order sought cannot be made under this provision.
57 Perpetual Trustee Co Ltd v Godsall [1979] 2 NSWLR 785 was a case which concerned an application to apply the NSW Trustee Act 1925, s 81(1), the NSW equivalent of s 89, although there are differences. However, the differences are not material for present purposes. Rath J, at
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- 79, held that the powers conferred by s 81 "are conferred upon trustees to facilitate and not to subvert the beneficial disposition in the trust instrument." His Honour held that there were no words in the section which "should be taken as authorising the Court to increase, or decrease, the interests of beneficiaries." His Honour said that if the power was exercised, "The beneficiaries' rights are to be accommodated to the new situation; but the court cannot create a new set of beneficial rights." In essence, that is precisely what the defendant would have me do in her favour in this case and, in my opinion, it is not open to the Court to take that course.
58 Section 89(1) is limited by its language. It talks of the Court forming the opinion that the transaction proposed "is expedient in the management or administration of any property vested in a trustee". Those words are not apt to cover a situation where, upon the termination otherwise of a trust, a disposition is proposed in favour of a person who was not a beneficiary who, consistently with the administration of the trust, could have received a benefit of the kind which the Court is asked to effect. Nor in those circumstances is it possible to describe a transaction of that kind as being "in the best interests of the persons, or the majority of the persons, beneficially interested under the trust". To put it shortly, the order proposed would materially reduce the corpus of the residuary estate. That could not be regarded as being in the interests of those beneficially entitled to that residue.
59 In short, the section envisages making convenient and useful orders in the interests of beneficiaries while leaving the essential nature of the trust unchanged. Rather than being a provision enabling the creation of a new set of substantive rights in respect of trust property, I see the provision as being essentially of a machinery or facilitative kind in the context of the continuation of the trust where a power is lacking or is for some reason difficult to exercise without the existence of a court order.
60 For the defendant, reliance was placed on two unreported decisions. The first is Re Francis as trustee of the West Australian Shed Commercial Pty Ltd Creditors Trustee Deed and Anor [2003] WASC 39. Two companies were placed under voluntary administration pursuant to a deed of company arrangement and a separate trust deed under which creditors of the companies were to receive a share of the profits of the companies under administration over a two-year period. The directors offered to pay out, in one lump sum to the creditors, an amount which it was estimated would equate with the benefit to be received under the trust deed. The creditors were prepared to accept that offer. The trustees
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- thought it to be reasonable and wished to give effect to it. The court made the necessary orders under s 89 of the Trustees Act. But it can be seen that all that was being done was to vary the time of receipt of what was judged to be the beneficial entitlement of the creditors who would, under the proposal, receive benefits of the same kind as under the trust deed, which would then be terminated. To my mind, the case is quite unlike this.
61 Then I was referred to Re Bowmil Nominees Pty Ltd [2004] NSWSC 161, a decision of the NSW Supreme Court, Hamilton J, concerned with the administration of a self-managed superannuation fund. One beneficiary of the fund wished to take her benefit in a lump sum. The others were content to remain in the fund and receive their benefit in the form of allocated pensions, a course which would produce certain taxation advantages for those beneficiaries. The power was lacking under the trust deed to take the course proposed and pay the lump sum. The decision of the court was to make the variation to the administration of the trust which was sought, relying on the power contained in s 81 of the NSW Act, but again, all that was being done was to vary the administration of the trust so as to make a provision in respect of the receipt of a beneficiary's entitlement which was convenient and desirable but, in respect of which, the power to approve what was proposed was lacking under the trust deed.
62 Reliance was placed upon the power in the Act to make orders "including adjustment of the respective rights of the beneficiaries". Those words are lacking in s 89 of our Act and it may be that they provide a more ample power in terms of the form of the order which may be made than s 89 affords. However, in essence, it seems to me, as I have said, that the circumstances in Bowmil are a far cry from those of this case. If required to visit the question of the exercise of the power under s 89 in the manner proposed, I would be of the view that it would not be open to me to accede to any such application and if I had the power to make the order sought, I would not be satisfied of the statutory circumstances which would make it appropriate to exercise the power.
63 Finally, I should observe that there is an application by the plaintiffs, pursuant to s 77 of the Trustees Act or the inherent power of the Court, but not calling in aid s 18 of the Inheritance Act, that I should remove Mrs Kelly as executor and trustee of the will and appoint Mr Brian Kelly in her place. As I understand it, the application is grounded upon what is asserted to be misconduct by Mrs Kelly in her management of the deceased estate. On the evidence before me, which I was informed was
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- all that would be led in support of the application, I would see no requirement or justification to make the order sought, but in the end I was not required to rule definitively upon the application which, it was agreed, should be adjourned pending my decision upon the applications under the Inheritance Act. Accordingly, I will hear the parties at the appropriate time in relation to the question whether it is desired to renew or pursue the application further, or whether this application should be dismissed.
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