Langusch v Public Trustee

[2009] NSWSC 1251

CITATION:	Langusch v Public Trustee [2009] NSWSC 1251 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	08/10/2009
JUDGMENT DATE :	19 November 2009
JURISDICTION:	Equity Division
JUDGMENT OF:	Macready AsJ at 1
CATCHWORDS:	Procedure. Claim for delay of 19 years in finalising estate and therefore preventing an application to Crown for payment out from moneys passing to Crown as bona vacantia. - Consideration of duty to distribute. Claim dismissed as it was before any application for payment and therefore premature.
PARTIES:	William Samuel Langusch v Public Trustee of New South Wales
FILE NUMBER(S):	SC 1541/2008
SOLICITORS:	Mr Gordon A Salier for Public Trustee

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

ASSOCIATE JUSTICE MACREADY

Thursday 19 November 2009

1541/08 WILLIAM SAMUEL LANGUSCH v PUBLIC TRUSTEE
OF NSW

JUDGMENT

1 HIS HONOUR: This is the hearing of a notice of motion filed 23 March 2009 by the Public Trustee of New South Wales seeking that the proceedings be struck out pursuant to Part 13, Rule 4 of the Uniform Civil Procedure Rules (‘UCPR’). In the alternative, the motion seeks an order that the plaintiff give security, as he is resident outside the State. However, as evidence in respect of the second matter was not before the Court, the Court will only deal with the application for dismissal of the proceedings.

2 The proceeding is one which now has a statement of claim. The statement of claim was filed on 28 April 2009, following orders I made on 10 July 2008.

Background

3 The proceedings are brought by the plaintiff, Mr William Langusch, in respect of the estate of the late Hilma Langusch, who died on 19 November 1987. Letters of administration of her estate were granted to the Public Trustee New South Wales on 22 March 1988.

4 The grant of administration annexes a will made by the deceased, but in fact it is not a grant of administration cum testamento annexo.

5 In her will dated 11 March 1968, Hilma Langusch, the deceased, gave her estate to her husband, William David Langusch. In the event that he failed to survive her, the deceased gave her estate to her husband’s nephew, Theo Langusch. Hilma’s husband and Theo Langusch predeceased her and it is clear that there was intestacy.

6 William Langusch is Theo Langusch’s son. He is therefore a great nephew, by marriage of Hilma Langusch. He does not take on intestacy but he brings these proceedings because he alleges that there has been substantial delay by the Public Trustee of New South Wales in finalising the necessary next of kin enquiries before deciding that the estate passed to the Crown as bona vacantia.

7 In 1994 the Public Trustee of NSW decided to take no further action in respect of the next of kin enquiries, which it had been undertaking at that stage for some six years. Between 2000 and 2003 without having finally determined the entitlements as to intestacy, the Public Trustee paid various sums to the Commissioner of Unclaimed Money, Office of State Revenue. The total sum paid was $87,701.59. The monies remained in the Office of State Revenue until the Public Trustee decided to proceed further with their investigations and they in fact completed those next of kin investigations. On 2 April 2009 the Public Trustee certified the following:

“I, Michelle Maynard, Legal Manager for the Public Trustee, certify that:

1. HILDA [ sic ] LANGUSCH late of Gorokan in the state of New South Wales died intestate on the 19 ^th day of November 1987 and Letters of Administration of her estate were granted to the Public Trustee on the 22 ^nd March 1988.

2. The Public Trustee has satisfied himself from investigation of proofs of kinship that the residuary estate of the said HILDA [ sic ] LANGUSCH passes to the Crown pursuant to Section 61 B(7) of the Wills Probate and Administration Act 1898 as the said deceased left no surviving next-of-kin closer than cousins.
DATED at Sydney the 2 ^nd day of April 2009.”

8 After this declaration was made, the Public Trustee sought a return of the unclaimed money from the Office of State Revenue for the sums paid some years previously. The Office of State Revenue paid the sum of $87,701.59, excluding interest, to the Public Trustee who has in turn paid it to the Crown as bona vacantia.

9 In respect of this estate the relevant section dealing with succession to real and personal property on intestacy is section 61B of the Wills, Probate and Administration Act 1898 (‘the Act’) as it then was. The relevant sub-sections are as follows:

(1) Where a person dies wholly intestate, the real and personal estate of that person shall, subject to the payment of all such funeral and administration expenses, debts and other liabilities as are properly payable out of the estate, be distributed or held in trust in the manner specified in this section, and the real estate of that person shall be held as if it had been devised to the persons for whom it is held in trust under this section.
…

(7) In default of any person taking an interest under subsections (2) to (6), the estate shall belong to the Crown as bona vacantia, and in place of any right to escheat.

(8) The Crown, without prejudice to any other powers, may, out of the whole or any part of the property devolving on it as bona vacantia, provide for dependants, whether kindred or not, or the intestate and any other persons for whom the intestate might reasonably have been expected to make provision.

10 As can be seen from the declaration, the estate now passes to the Crown as bona vacantia. Since the determination has been made, it has been and is possible for William Langusch, the plaintiff in these proceedings, to have made an application for the Crown to provide for him as a dependant of the deceased, under subsection 8 of the Act.

11 In my judgment of 10 July 2008, I indicated that William Langusch might have had a right to pursue such an application to the Crown but he has been delayed in being able to make that application while the next of kin was being ascertained. Since the date of death there was a period of approximately 21 years over which the next of kin enquiries took place before a decision was made on whether there were any next of kin.

12 The claim which the plaintiff might propound in this matter, if he has now received some grant pursuant to sub section 8, might be for damages suffered as a result of the delay by the Public Trustee in finalising the next of kin enquiries so that he could make his application to the Crown. Alternatively, the claim he might make if his application to the Crown has been refused may be one as a result of some factors connected with the delay on the part of the Public Trustee in determining the next of kin.

13 Any such possible claims would only be available if there had been some inexcusable delay and breach of any relevant duty on the part of the Public Trustee in conducting those next of kin enquiries.

Procedural history

14 This is briefly included so that the Court’s present task in this matter can be appreciated.

15 The summons in this matter was filed on 19 February 2008. The proceedings were commenced in the name of William Samuel Langusch but the signature to the summons was that of Grant MacDonald who held a power of attorney for William Langusch. It is clear that Grant MacDonald has been given a power of attorney by William Langusch to commence and conduct these proceedings on his behalf. The power of attorney has been tendered before me in a number of interlocutory hearings.

16 The statement of claim with which I am now concerned and which followed my earlier judgment, was also signed by Grant MacDonald on behalf of William Langusch. Mr McDonald is not a legal practitioner.

17 When I fixed the present hearing before me I became concerned about William Langusch’s representation by Grant MacDonald in a matter as serious as an application for summary judgment and accordingly, I raised the matter with the parties at a hearing of a motion brought by the Court on 14 August 2009. In judgment on that day, for the reasons that I set out therein, I refused to allow Grant MacDonald to appear before me on the hearing of the summary judgment motion.

18 Notice of these orders was given to William Langusch with a view to him obtaining some other representation and appearing at the hearing of the summary dismissal application.

19 When the matter was called there was no appearance by William Langusch, although Grant MacDonald was in court. Given my earlier ruling I refused to allow Grant MacDonald to participate in the hearing although he remained in court. Therefore, the Court did not have the benefit of any opponent to the strike out motion. At no stage during the hearing of the interlocutory steps in this matter has William Langusch appeared himself in person. Given no opponent in this matter I reserved my judgment for further consideration.

Form of statement of claim

20 Although it appears that a legally trained person has not drafted the statement of claim filed 28 April 2009, it is possible to understand the nature the claim. The prayers for relief claim a breach of statutory duty against the Public Trustee under s 61B(7) of the Act, a declaration of negligence and delay in finalising the estate, a claim for damages for equitable compensation and interest on damages. One component of the damages is a liability for $26,000 to a Queensland legal firm, Quinn & Scattini, from whom earlier advice was sought. That firm has given notice of its claim for fees in respect of any payment that might be made by the Crown as bona vacantia.

21 The substantive pleading in the statement of claim sets out the relevant events which I have recounted earlier and the fact that there has been delay in making the bona vacantia determination. In respect of that delay there are a number of allegations about the conduct of the next of kin enquiries including the failure to apply to the court for a next of kin enquiry. The statement of claim makes the point that as at 28 April 2009 the Public Trustee had not certified that the property passed to the Crown as bona vacantia. William Langusch and Grant MacDonald were probably unaware of the certification made on 2 April 2009.

22 The statement of claim does not refer to an actual application having been made to the Crown by William Langusch for a payment under sub-section 8. The court has no information as to whether or not a claim has been made or is likely to be made.

Possible causes of action

23 Has there been some inexcusable delay or breach of relevant duty by the Public Trustee? This question requires an examination of the Public Trustee’s power to administer the deceased’s estate and the requisite duties that power creates.

24 Section 5 of the Trustee Act 1925 includes the NSW trustee within its definitions and the scope of the Public Trustee’s authority is set out in section 11 of the current NSW Trustee and Guardian Act 2009, or in sections 12 and 13 of the Public Trustee Act 1913 as it then was. Section 12(2) of the Public Trustee Act provides that,

(2) The Public Trustee shall have all the same powers, duties, and liabilities, and be entitled to the same rights and immunities, and be subject to the control and orders of any court as a private person acting in the same capacity.

25 Thus, the Public Trustee’s fiduciary obligations arise out of the estate entrusted to it and the Public Trustee is ultimately answerable to the Court for neglect of that estate. There does not appear to be a specific statutory provision regarding what might be an appropriate time limit within which the Public Trustee should conduct its duties or administer an estate. Therefore it is relevant to examine the equitable principles that underlie a trustee’s duty to exercise its powers and obligations.

26 Heydon and Leeming in Jacobs Law of Trusts in Australia 7^th edition (2006) examined the difference between an imperative duty to perform an act and a mere discretionary power to perform,

“[1606]… trustees commit a breach of trust if they fail to do or refrain from doing the thing prescribed; in the case of powers, they commit a breach of trust if they fail honestly to exercise their judgment as to whether they should do the particular act or not: Klug v Klug [1918] 2 Ch 67 at 71; National Trustees Executors and Agency Co of Australiasia Ltd v Federal Commissioner of Taxation (1923) 33 CLR 491 at 504; Partridge v Equity Trustees Executors and Agency Co Ltd (1947) 75 CLR 149; [1947] ALR 552)… The essential difference between powers or discretions and duties properly so-called, lies not in the nature of the trustee’s obligation but in the nature of the act the trustee is obliged to do. … Trustee’s commit a breach of trust if they neglect to give any consideration to the question whether they should make a payment to A (See National Trustees v Federal Commissioner of Taxation at 504; Re Smith [1971] 1 OR 584; aff’d [1971] 2 OR 541; Re Hay’s Settlement Trusts [1981] 3 All ER 786; [1982] 1 WLR 202) … or if they make a payment to A as of course, without considering whether they should do so or not ( Wilson v Turner (1883) 22 Ch D 521). The law as stated in this paragraph was approved an applied by the New South Wales Court of Appeal in Parkes Management Ltd v Perpetual Trustee Co Ltd [1977] ACLC 29, 545 and by McGarvie J in Karger v Paul [1984] VR 161 (A useful summary appears in AG (Cth) v Breckler (1999) 197 CLR 83 at [7]; 163 ALR 576).
[1607] It follows from what has been said, and from the very fact that trustees are fiduciaries, that all the powers of a trustee are fiduciary. Two consequences of importance flow from this. The first is that although a power is a ‘mere power’, if it is vested in trustees, those trustees have a duty to consider whether it should be exercised or not and to put themselves in a position where they can make a rational judgment on the matter, whereas a non-fiduciary repository of a ‘mere power’ is under no such duty: Re Gulbenkian’s Settlement Trusts [1970] AC 508 at 518; [1968] 3 All ER 785 at 787; Re Hay’s Settlement Trusts [1981] 3 All ER 786 at 792; [1982] 1 WLR 202 at 208. …
…
[1616] Sometimes an imperative duty is coupled with a discretionary power. Usually the discretionary power in such a case is limited to the time or manner of doing an act which the trustee has an imperative duty to do at some time or in some manner. … But if the trustees are willing to perform the duty the court will not interfere with their decision as to how the power coupled with it is executed: Tempest v Lord Camoys (1882) 21 Ch D 571; Re Burrage (1890) 62 LT 752; Re Blake (1885) 29 Ch D 913; Re Knolly’s Trusts [1912] 2 Ch 357.”

27 In Neill v Public Trustee [1978] 2 NSWLR 65, a testator who died in 1942 provided in his will that his trustees might appoint certain property to any or all of his sons and grandsons and in default of appointment the property should pass to a particular son. The property was appointed in 1975 to two grandsons and the trustees obtained a declaration that the appointment was valid. The administrator of the estate of the residuary beneficiary argued that the appointment was bad because it was not made within a reasonable time of the death of the testator.

28 In that case, Hope JA (with Mahoney JA in agreement) drew the necessary distinction between the imperative ‘machinery’ powers of the trustees, such as the power of sale of property, with provisions authorizing trustees to create beneficial interests. His Honour held that in the former case, it is necessary to consider the purpose of the power and stated that it will be implied that there is a requirement that the power be exercised within a reasonable time. The latter was in effect a discretionary power and therefore the question of what is a reasonable time is irrelevant. His Honour decided that in that particular case there was nothing in the terms of the will, or in general law, to require the power to appoint to be exercised at any particular time, except that if no appointment were made before the death of the survivor of the possible appointees, no appointment would be made and the power would lapse.

29 His Honour stated at 68:

“It is agreed by all parties that there is no reported decision which
decides within what time a power of appointment such as the present must be exercised. In particular, there is no reported decision that such a power must be exercised within a reasonable time after the death of the testator, or after the time for the performance of trusts or powers, such as those to be found in cl 4 (a) or (b) of the testator's will, has elapsed. There are decisions as to the time within which administrative powers such as powers of sale, and trusts for sale, must or should be exercised. But there are no such decisions in relation to the exercise of special powers of appointment under which beneficial interests in property can be created.

It would be somewhat astonishing if the law be that provisions creating these powers should be subject to the same principles in relation to the time of their exercise as those applicable to powers of sale or trusts for sale, and it has not thus far occurred to anybody to say so. However it is said now, and the question must be resolved.”

30 Glass JA was in agreement and drew his conclusion on the construction of the will, which did not imply any restriction in time in the exercise of the power. His Honour held there was no implication that the trustees should within a reasonable time determine once and for all the ownership of the trust property. However, his reasoning was made on the basis that there was no hiatus in the performance of the ‘machinery powers’, that is ownership of the property in question, because the property had already been vested to the residuary beneficiary.

31 In effect, the decision implies a duty that the ‘machinery’ or imperative powers held by a trustee must be performed within a reasonable time. There is no such requirement implied into mere discretionary powers.

32 Until such a time as the Public Trustee has completed its investigations of proof of kinship, the Public Trustee remains under an equitable obligation to hold or deal with the trust property as if it had been devised to the persons for whom it is held in trust. This is reflected in s 61B(1) of the Act. This is not a discretionary obligation. The Public Trustee is under an obligation to adhere to and carry out the terms of the trust. The terms of this trust require the trustee to distribute the estate to those entitled.

33 The normal remedy for a breach of that duty would be an administration suit or an application under UCPR 54.3 for the removal of the trustee and appointment of a new trustee. It is clearly arguable that the Public Trustee has a duty to pass the property to any next of kin within a reasonable time. It follows that relevant searches that must be conducted should be performed within a reasonable time. As was said in Wroe v Seed (1863) 4 Giff 425 at 430; 66 ER 773 at 775:

It is highly culpable and gross misconduct for any executor who has a legacy immediately payable to take into his house money for the purpose of paying it, and to keep it for five years, there being no difficulty in ascertaining who the legatee is, and producing it only in consequence of a decree made against him by this court.”

34 See also Hawkesely v May (1956) 1 QB 304 at 323-4.

35 If it were established that the Public Trustee negligently performed its duty to conduct its next of kin searches within a reasonable time, the question in this matter is to whom is the duty owed?

36 In Talbot and Olivier (A Firm) v Glenys June Witcombe and Anor [2006] WASCA 87, Steytler P, with Pullin and Buss JA in agreement stated,

“ [31] An estate is merely the property which, on a grant of probate, will vest in the executor of the will. It is not a legal person: Pritchard v Racecage Pty Ltd (1997) 72 FCR 203 at 218. No duty of care could consequently be owed to it…”

37 The Crown has discretion under subsection 8 to make provision out of the property it receives as bona vacantia for dependants of a deceased person. It is at least an arguable proposition that a duty is owed to those who may have a right to make an application under section 8.

38 The Law Reform Commission’s Report 116 (2007) - Uniform Succession Laws: Intestacy, at 9.50 to 9.52, estimated that in NSW there are no more than 30 bona vacantia cases established in any one year, half of which have benefited from the Act’s discretionary provisions that allow distribution of property. There is an established practice for considering such claims with guidelines produced by the Crown Solicitor.

39 It is not possible for the plaintiff to make such an application until the estate passes to the Crown. Therefore, time should not run against his application until the estate has passed to the Crown as bona vacantia. See generally Armitage v Nurse [1998] Ch 241 at 260-1.

40 The difficulty Mr Langusch may face in his application to the Crown is showing that he is a person who is a dependant person or a person for whom the deceased might reasonably have been expected to provide.

41 The Public Trustee has sought that the proceedings be struck out pursuant to Part 13, Rule 4 of the Uniform Civil Procedure Rules (‘UCPR’) which states:

“13.4 Frivolous and vexatious proceedings
(1) If in any proceedings it appears to the court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings:
(a) the proceedings are frivolous or vexatious, or
(b) no reasonable cause of action is disclosed, or
(c) the proceedings are an abuse of the process of the court, the court may order that the proceedings be dismissed generally or in relation to that claim.
(2) The court may receive evidence on the hearing of an application for an order under subrule (1).”

42 There is always a need for exceptional caution when exercising the power whether it is inherent or under statutory rules to either summarily dismiss proceedings or strike out parts of a statement of claim. Dixon J (as he then was) sums up a number of authorities in Dey v Victorian Railways Commissioners (1949) 78 CLR 62 where he says at page 91:

"A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process."

43 In General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 130 after referring to this quote, Barwick J said:

"Although I can agree with Latham CJ in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings (1949) 78 CLR, at p 84, in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed."

44 Earlier at p129 his Honour had said:

“It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action - if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; "so obviously untenable that it cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "discloses a case which the Court is satisfied cannot succeed"; "under no possibility can there be a good cause of action"; "be manifest that to allow them" (the pleadings) "to stand would involve useless expense".

45 Assuming that there may be a cause of action for delay in determining the next of kin there are some other problems facing the plaintiff. The first is that on the evidence before me there has been no application to the Crown for an ex gratia payment. If such an application had been made and refused there would be no apparent basis for the claim against the Public Trustee based upon delay.

46 In the absence of any pleading that the claim had been granted it may be suggested that the plaintiff is a person who would be entitled to make such a claim. Without going into the ramifications of such a claim the short answer is that there is no pleading of such an entitlement.

47 In these circumstances it seems to me that the present proceedings appear to be premature. The plaintiff has disclosed no cause of action and I should dismiss the proceedings. It is always open to the plaintiff to make an application to the Crown and following upon the grant of an application he can bring fresh proceedings.

48 I dismiss the proceedings with costs.

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20/11/2009 - Correction to spelling of solicitors' name - Paragraph(s) not applicable