Large v Higham [No 3]
[2010] NSWSC 681
•25 June 2010
NEW SOUTH WALES SUPREME COURT
CITATION:
Large v Higham [No 3] [2010] NSWSC 681
JURISDICTION:
Equity
FILE NUMBER(S):
4997/07
HEARING DATE(S):
24/08/09, 25/08/09, 26/08/09, 27/08/09, 17/12/09, 23/02/10, 09/04/10, 28/05/10
JUDGMENT DATE:
25 June 2010
PARTIES:
Plaintiff: John Stewart Large
First Defendant: Christopher Higham (as Executor for the Estate of the late John Michael Large)
Second Defendant: Maria Bernadette Large
Third Defendant: Lausanne Pty Ltd (as Trustee for the JML Superannuation Fund)
JUDGMENT OF:
Slattery J
LOWER COURT JURISDICTION:
Not Applicable
LOWER COURT FILE NUMBER(S):
Not Applicable
LOWER COURT JUDICIAL OFFICER:
Not Applicable
COUNSEL:
Plaintiff: Ms E Cohen
First & Third Defendants: Mr D Liebhold
Second Defendant: Mr N Confos
SOLICITORS:
Plaintiff: Dakin Law Solicitors
First & Third Defendants: HWL Ebsworth
Second Defendant: Bray Jackson & Co
CATCHWORDS:
SUCCESSION
family provision and maintenance
order for provision made out of notional estate
interest claimed on order for provision
interest awarded under Family Provision Act s 11(1)(d) on order for provision
LEGISLATION CITED:
Civil Procedure Act 2005 (NSW) ss 100, 101, Sch 5
Family Provision Act 1982 (NSW) ss 11(1)(d), 15(3)
Probate and Administration Act 1898 (NSW) s 84A
CATEGORY:
Consequential orders
CASES CITED:
Bennett v Jones & Anor (1977) 2 NSWLR 355
Fiorentini v O’Neill [1998] NSWCA 79
Large v Higham & Ors [2010] NSWSC 104
Large v Higham [No 2] [2010] NSWSC 560
Singer v Berghouse (No 2) (1994) 181 CLR 201
Re Raine (1929) 1 Ch 716
Walford v Walford [1912] AC 658
TEXTS CITED:
DECISION:
Order that interest on the plaintiff's order for provision from the estate of the testator in the sum of $400,000 acccrue from 2 years after the death of the testator at the prescribed rate under Civil Procedure Act Schedule 5.
JUDGMENT:
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
SLATTERY J
FRIDAY, 25 JUNE 2010
4997/07JOHN STEWART LARGE v CHRISTOPHER HIGHAM (AS EXECUTOR FOR THE ESTATE OF THE LATE JOHN MICHAEL LARGE); MARIA BERNADETTE LARGE; AND LAUSANNE P/L (AS TRUSTEE FOR THE JML SUPERANNUATION FUND) [No 3]
JUDGMENT
HIS HONOUR: I gave my principal judgment in this matter on 23 February 2010: Large v Higham & Ors [2010] NSWSC 104. My second judgment was handed down on 28 May 2010: Large v Higham [No 2] [2010] NSWSC 560. This third judgment deals with the question of interest on the legacy granted to the plaintiff. This judgment should be read with my previous judgments in the proceedings. The parties and the various assets of the parties are referred to in this judgment the same way they are in my second judgment.
At the time of giving my second judgment I invited the parties to advance such further written submissions as they were advised on the issue of whether or not an order for interest should be made in relation to my order for provision in the sum of $400,000 out of the estate. The plaintiff, the estate and Maria Large all advanced submissions on this issue.
The issues for determination raised by the contentions in relation to interest are:
(a) whether an order for interest should be made at all;
(b)if an order for interest is made from what fund should the interest be ordered;
(c) from what date should interest accrue;
(d) at what rate should interest accrue?
The submissions put by the parties on these issues are set out below.
The Parties’ Submissions
Plaintiff’s submissions
The plaintiff submits that an order for interest should be made on the order for provision from the estate. The plaintiff further submits that the appropriate rate of interest is prescribed by statute: Probate and Administration Act 1898 (NSW) s 84A. The plaintiff also points to the general power conferred on the Court by Family Provision Act 1982 (NSW) s 11(1)(d) that the Court may specify “that the whole or any part of the sum shall bear interest at such rate as the Court thinks fit for such period as the Court thinks fit”.
The plaintiff submits that Maria Large has had the use of the Sylvania Waters Property from the time of death of the testator. She says that the property has been in Maria Large’s possession since that time and the Sylvania Waters Fund has been in the hands of Maria Large since 25 June 2007. The plaintiff says that the usual “executor’s year” should be allowed before payment of interest is required. Interest on a general legacy is payable at the expiration of one year from the date of death of the testator, unless the time for payment is accelerated or postponed by the will: Walford v Walford [1912] AC 658. The interest on a general legacy is payable only as from the date when the legacy is payable: Re Raine (1929) 1 Ch 716. The plaintiff submits that the general law would support an order that interest be paid on the legacy from one year after the death of the testator.
The plaintiff’s next submission is that as the order for provision is in lieu of maintenance payments, the legacy should at least bear interest, if not from the date of death, from the end of the executor’s year. The plaintiff points out that the will contemplated that the plaintiff would have income from the estate from the time of the testator’s death. Payments have been sought from the estate for his support, maintenance and education, pending the outcome of the proceedings, but no payment has been received.
The plaintiff’s alternative submission is that if interest is not payable from one year after the death of the testator, namely on 25 April 2007, that it should be payable from the date that the proceeds of sale from the Sylvania Waters property came into Maria Large’s hands, namely 27 June 2007. It is said Maria Large would have been receiving interest on that amount deposited in her bank account from then. Further and alternatively the plaintiff suggests the date of commencement of these proceedings, 15 July 2007, as the as the time from which interest should accrue. Further in the alternative, the plaintiff submits that interest should be payable at the very least from the date of conclusion of the hearing. If that occurs the plaintiff says that interest should be payable at the rate provided for not under Probate and Administration Act s 84A(3) but at the higher rate provided for under Civil Procedure Act 2005 (NSW) s 100 and Schedule 5.
Finally the plaintiff makes two general submissions in support of his claim for interest. The plaintiff points to the complexity of these proceedings in which a Family Provision Act case has involved three separate hearings or sets of submissions and the necessity to join third parties. This complexity was not caused by the plaintiff. He says that he should not be penalised by these circumstances. Moreover the plaintiff’s says that he wanted to use the order for provision from the estate to purchase a property in Tasmania and that “the Court should take judicial notice of the fact that there has been a general increase of property prices in Australia since the date of the hearing and that the plaintiff has had to pay rent for accommodation since the date of the hearing”.
The Executor’s submissions
The executor did not put submissions that interest should not be paid. Rather, he directed the Court’s attention to the powers that the Court had to award interest under Family Provision Act s 11(1)(d) and s 15(3) and made submissions about the period for which interest should be payable and the rate at which it should be payable.
On these matters the executor submitted that:
(a)the period for which interest should run should commence a reasonable time after the date of the judgment for provision (say 28 days thereafter);
(b)interest should be paid by Maria Large out of the Sylvania Waters Fund designated as notional estate because it is appropriate that interest be paid out of the fund that has been charged with the order for provision in the circumstances in which Maria Large has had the benefit of the judgment sum during the relevant period; and
(c)the interest rate may either be the Court rate (9%) or the rate applicable to legacies, namely 2% above the Reserve Bank rate last published before 1 January 2010 that is, 5.5%: Probate and Administration Act 1898, s84A(3). The executor points out that orders to this effect are consistent with the decision of the Court of Appeal in Fiorentini v O’Neill [1998] NSWCA 79 in which interest was ordered under Family Provision Act s 11(1)(d).
Maria Large’s submissions
Maria Large resisted the making of any order for payment of interest in favour of the plaintiff. She made various alternative submissions as to the date from which interest should be payable if it were to be ordered. Maria Large submitted that the appropriate rate of interest, if any order for interest was to be made, was the rate prescribed from time to time under Probate and Administration Act 1898, s84A. The “relevant rate” defined in Probate and Administration Act s84A(3) she said is “2% above the cash rate last published by the Reserve Bank of Australia before 1 January in the calendar year in which interest begins to accrue”. The cash rate as at 1 January 2010 was 3.75% (up from 3.25% in January 2009). Accordingly, Maria Large submits, the appropriate rate at which the Court should order interest is 5.75%. She submits that there are no extenuating circumstances justifying awarding the applicant any higher rate and the Court should not order any higher rate.
Maria Large’s principal submission is that the Court has already exercised relevant statutory power under the Family Provision Act and ordered an amount of provision to meet the plaintiff’s needs by looking at the plaintiff’s circumstances as at the date of hearing. To award interest in the past, she says, would give the applicant a double benefit. Maria Large relies upon a passage at Singer v Berghouse(No 2) (1994) 181 CLR 201 at 209-211 to support this contention.
Finally, Maria Large submits that interest should not run from any date before the date of hearing and that even to make an order that the applicant receive interest from the date of hearing would be “unconscionable”. The contention of unconscionability seems to be based upon the observation that the time lapse between hearing and judgment is part of the normal process of litigation and should not be the basis to penalise the party ordered to make the payment. Maria Large says she did not know the amount of provision that would be made by the Court as at the date of the hearing, so she was not in a position to pay it. Furthermore, she says that interest should not run from the date of the first judgment, 23 February 2010, because as at that date Maria Large was not aware whether she herself had the obligation to make the payment. Her contention is that a reasonable period of time should now be granted to her to make the payment. It is appropriate, she says, that interest should run on the legacy 28 days from the date that the Court ordered her to pay it. She says that is 28 days from 28 May 2010. Maria Large alternatively submits that interest could be payable “a reasonable time after judgment” which she submits would be about 3 months after 23 February 2010.
Before analysing the merits of these submissions it is useful to identify the various sources of power to award interest in the present circumstances.
The Power to Order Interest
In this case the Court has made an order for provision out of the notional estate of the deceased by way of a sum of money. Family Provision Act s 11(1)(d) therefore has application. It allows the Court to make an order for provision by a sum of money to bear interest:
“11 Orders for provision
(1) An order for provision out of the estate or notional estate of a deceased person (whether or not an order made in favour of an eligible person) may:
…
(d) where provision is required to be made by way of a sum of money, specify that the whole or any part of the sum shall bear interest at such rate as the Court thinks fit for such period as the Court thinks fit,”
There is a further source of power to award interest in Family Provision Act, s15(3). Family Provision Act, s15(3) is strictly ancillary to the principal powers of the Court to make orders for provision: Family Provision Act s 11. Section 15 eliminates debate about the scope of ancillary monetary orders and provides that they do not carry interest unless the payment of interest is specified. Family Provision Act, s 15(3) provides as follows:
“15 Consequential and ancillary order
(1) To enable effect to be given to an order for provision out of the estate or notional estate of a deceased person (whether or not an order made in favour of an eligible person), the Court may:
(a) make orders for or with respect to all or any of the following matters:
(i) the transferring of property in the estate or notional estate directly to the person in whose favour the order for provision is made or to any other person as trustee for that person,
(ii) the constituting of a person by whom property in the estate or notional estate is held as a trustee of that property,
(iii) the appointing of a trustee of property in the estate or notional estate,
(iv) the powers and duties of any trustee of property in the estate or notional estate,
(v) the vesting in any person of property in the estate or notional estate,
(vi) the exercising of a right or power to obtain property for the estate or notional estate,
(vii) the selling of, or other dealing with, property in the estate or notional estate,
(viii) the disposing of the proceeds of any sale or other realising of property in the estate or notional estate,
(ix) the securing, either wholly or partially, of the due performance of an order under this section,
(x) the managing of property in the estate or notional estate,
(xi) the executing of any necessary conveyance, document or instrument, the producing of such documents of title or the doing of such other things as the Court thinks necessary in relation to the performance of an order, and
(b) make such other orders with respect to such other matters as the Court thinks necessary.
…
(3) Where an order under subsection (1) provides for the payment of money, interest is not payable unless the Court specifically provides that the money shall bear interest.”
The other potential source of power to pay interest identified in the submissions is Probate and Administration Act s 84A which provides as follows:
“84A Interest on legacies and annuities
(1) Subject to subsection (2), where interest is payable on any legacy or on any arrears of an annuity in accordance with the will or instrument pursuant to which the legacy or annuity is payable or with any enactment or rule of law, that interest shall, unless the will or instrument otherwise provides, or the Court otherwise orders, be payable at the relevant rate or such other rate as may be prescribed in a regulation made under section 153.
(2) Where an executor or administrator, in accordance with any power conferred on the executor or administrator in that behalf, appropriates any property in or towards satisfaction of any legacy (other than an annuity), the legatee shall be entitled to the income from the property so appropriated, and interest shall not be payable out of any other part of the estate on so much of the legacy as has been satisfied by the appropriation.
(3) In this section, relevant rate of interest means the rate that lies 2% above the cash rate last published by the Reserve Bank of Australia before 1 January in the calendar year in which interest begins to accrue.”
Another potential source of power to award interest in the present circumstances is Civil Procedure Act, ss 100 and 101. Authority has displaced those Civil Procedure Act provisions as a source of power to award interest in favour or Family Provision Act, ss 11(1)(d) and 15(3).
The Court of Appeal has described the interrelationship between Family Provision Act s 11(1)(d) and s 15(3) and Probate and Administration Act s 84A in the following passage from Fiorentini v O’Neill [1998] NSWCA 79:
“Where provision is ordered out of an estate, the Act provides that the Court may specify that the whole or any part of a sum shall bear interest at such rate as the Court thinks fit for such period as the Court thinks, fit (s11(l)(d); see also s15(3)). To avoid confusion, and preclude debate about the status of a lump sum provision as a legacy, it is advisable that the Court should address the question of interest expressly. Cf Davern Wright, Testator's Family Maintenance 3rded, 1974, p162-p164.
It was submitted in argument, very much en passant, that s95 of the Supreme Court Act might apply to certain orders for provision under the Act. Without expressing a definitive view, we are inclined to reject this proposition. S95(1) provides that where judgment is given or an order is made for the payment of money, interest shall, unless the Court otherwise orders, be payable at the prescribed rate from the date when the order takes effect on so much of the money as is from time to time unpaid. S14 of the Act provides that an order for provision out of the estate of a deceased person shall, except in so far as the Court otherwise directs, take effect as if the provision has been made:
(a) where the deceased died leaving a will - in a codicil to the will; or
(b) where the deceased died intestate - in a will of the deceased person.
Nevertheless, an order for family provision remains in essence a court order. This said, we incline to the view that the mandatory terms in which s95 of the Supreme Court Act is expressed are displaced by the discretions to order interest under the Act. The discretion under s11(1)(d) requires the taking of a positive step by the Court. Indeed, s15(3) goes further in relation to what its side note describes as consequential and ancillary orders by stipulating that interest is not payable unless the Court specifically provides that the money shall bear interest. In these circumstances it is difficult to see that there is any room for s95 to operate.
Until 1 September 1998 the prescribed rate of interest on a legacy was 8% per annum (Wills Probate and Administration Regulation 1993, reg7). Since then it has been 6% (Wills Probate and Administration Act Regulation 1998, reg7). There is of course no reason why the Court is restricted to ordering interest at the rate applicable to legacies. The discretions under s11(1)(d) and s15(3) are not so confined. There is no reason why a Court in the exercise of its discretion to award interest under the Act could not choose the prescribed rate appropriate to a judgment or order as applicable under s95 from time to time.
In a situation where the “executor's year” has long passed and where the appellant has had the benefit of the distributed estate, interest payable at least prospectively from a date shortly after the date on which a proper order should have been made below is appropriate. This should be at the rate applicable to legacies from time to time as distinct from any higher rate, having regard to the fact that the appellant has put some of the money received from the estate back into the failed company.”
Should there be an Order for Interest?
An order for interest should be made in this case for the following reasons. First, Maria Large has had the benefit of the Sylvania Waters Fund for approximately three years and has been in a position to earn interest on it. Maria Large has also had the use of and the right to derive profits from the Sylvania Waters Property before that since the testator’s death, now over 4 years ago.
Secondly, the provision in the will which the order for provision of a legacy of $400,000 replaces, was designed to provide maintenance to the plaintiff from the time of the testator’s death. The plaintiff has not had the benefit of that maintenance for any of the 4 year period since the testator’s death. He will soon have a capital sum. But it can be anticipated merely from the course of these proceedings that he would have incurred liabilities both personally and connected with these proceedings which would bear interest. Something should be done to adjust for the delay that has occurred since the deceased’s death in providing a lump sum for him.
Thirdly, the plaintiff has been without the capacity to purchase a property since the testator’s death. The plaintiff says it is appropriate that he now be compensated for any unexpected increase in property prices that has occurred during that period. It is doubtful that the Court can take judicial notice of such matters. Nevertheless, the evidence in these proceedings makes clear that the plaintiff is presently has no resources of any kind to protect himself against adverse market forces.
Finally, I do not accept Maria Large’s submission that the Court has already exercised statutory power and ordered an amount of provision to meet the plaintiff’s needs by looking at the plaintiff’s circumstances as at the date of hearing so that now to award interest to the plaintiff would give him a double benefit. Nothing in Singer v Berghouse (1994) 181 CLR 201 at 209-221 precluded the Court from making an order for interest and legacy under Family Provision Act s 11(1)(d). The structure of these proceedings resulted in the Court not considering a number of consequential issues at the time of my first judgment, 23 February 2010: Large v Higham & Ors [2010] NSWSC 104. Those consequential matters were dealt with in the second judgment excluding issues relating to interest: Large v Higham [No 2] [2010] NSWSC 560.
From What Fund Should Interest be Ordered?
Any interest awarded should come out of the Sylvania Waters Fund. There is no principled basis for awarding interest out of the estate when the principal sum is awarded out of notional estate. As Maria Large has had the benefit of the Sylvania Waters Fund she should bear the associated liability for interest.
From What Date Should Interest Accrue?
First there is the question of whether the Court should look to Probate and Administration Act s 84A or to Family Provision Act, s 11(1)(d) and s 15(3) as the source of power to award interest. The Court of Appeal’s reasoning in Fiorentini v O’Neill [1998] NSWCA 79 pp 23-26 makes clear that in Family Provision Act proceedings the Court is not restricted to ordering interest at the rate applicable to legacies. Whether it is setting an appropriate interest rate or setting the period during which interest will accrue, there is no good reason to prefer Probate and Administration Act, s 84A as a source of power to award interest over Family Provision Act, ss 11(1)(d) and 15(3). Indeed the unconfined discretion in Family Provision Act, s 11(1)(d) is a reason to prefer it in these circumstances. The unconfined discretion is the appropriate vehicle to assist in moulding just and fair relief under the Family Provision Act. Probate and Administration Act s 84A does not serve this purpose. I will apply Family Provision Act, s 11(1)(d) in this case. It is not necessary even to make use of Family Provision Act s 15(3).
The parties have advanced a range of competing views about the date when interest should first accrue. The earliest, as the plaintiff suggests, is one year after the death of the testator. The latest is 28 days after the orders I made on 28 May 2010, as Maria Large suggests.
Although Fiorentini v O’Neill [1998] NSWCA 79 makes clear that the Supreme Court Act interest provisions (now Civil Procedure Act ss 100 and 101) do not apply to orders for provision under the Family Provision Act, there are some common features between the powers under Civil Procedure Act, s 100 and under Family Provision Act, s 11(1)(d). The power to award interest in both is unconfined. The Court should be cautious in simply applying cases that relate to interest up to judgment under Civil Procedure Act, s 100 to an award of discretionary interest under Family Provision Act, s 11(1)(d). But Maria Large puts an argument that is often deployed in relation to Civil Procedure Act, s 100. Her submission is that she did not know that she had to pay the plaintiff, nor what sum she had to pay, until 28 May this year. She says therefore that interest should not be awarded against her. As an unconfined discretion to award interest is being exercised under Family Provision Act, s 11(1)(d) the analogy with the case law under Civil Procedure Act, s 100 is useful. Cases on the discretion to order interest up to judgment such as Bennett v Jones & Anor (1977) 2 NSWLR 355 emphasise the inappropriateness, in exercise of the discretion, of trying to ascertain the date by which a defendant “ought to have paid” a sum of money to a plaintiff, in a manner appropriate to the computation of interest on a debt because until a trial there is no ascertainable sum which “ought to have been paid”. Cases such as Bennett v Jones & Anor (1977) 2 NSWLR 355 makes clear that notwithstanding the fact that the defendant’s liability is not quantified until the trial, that is not basis not to award interest on the sum determined at trial. This in my view is the answer to Maria Large’s argument that interest should not be allowed until a time after trial.
What then is the appropriate date for which interest should accrue? Here Fiorentini v O’Neill [1998] NSWCA 79 provides some guidance. In the situation where the executor’s year has long passed, as is the case here, and where Maria Large has had the benefit of the notional estate interest should be payable “at least prospectively from a date shortly after the date on which a proper order should have been made below is appropriate”: Fiorentini v O’Neill [1998] NSWCA 79 at p 25. The complexity of these proceedings, the joinder of the second defendant and the splitting of the trial have all occasioned extra delay in the making of an order for provision in the plaintiff’s favour. It would be reasonable to compensate the plaintiff on the basis that an order in his favour should have been made and the result enjoyed by him approximately two years after the death of the testator on 25 April 2006, namely on 25 April 2008. I will order interest to accrue from this date.
At What Rate Should Interest Accrue?
The reasoning in Fiorentini v O’Neill [1998] NSWCA 79 at p 25, makes clear that the unconfined discretion in Family Provision Act, ss 11 (1)(d) does not restrict the Court to ordering interest at a rate applicable to legacies. The reasons that prompt the Court to make an order for interest in this case also compel a conclusion that the prescribed rate under Civil Procedure Act, Schedule 5 should be applied.
Conclusions and Orders
In the result I have found that an order for interest should be made upon the plaintiff’s legacy and that the appropriate power to exercise for this purpose is the unconfined discretion in Family Provision Act, s 11(1)(d). It is not necessary to exercise any discretion under Family Provision Act, s 15(3). I order that interest on the plaintiff’s order for provision in the sum of $400,000 accrue from 2 years after the death of the testator at the prescribed rate under Civil Procedure Act, Schedule 5.
I direct the parties to undertake a calculation of this interest and bring in short minutes of order to give effect to these reasons.
LAST UPDATED:
25 June 2010
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