Lilly v West Australian Trustee Executor and Agency Co Ltd

The case of Lilly v West Australian Trustee Executor and Agency Co Ltd concerned appeals from orders made by Rooth J. in the Supreme Court of Western Australia. The primary dispute revolved around the apportionment of probate duty payable under the *Administration Act 1903* (W.A.) and the *Duties on Deceased Persons' Estates Act 1895* (W.A.) as between beneficiaries with successive interests in deceased estates. In Mrs. Lilly's case, the testator had established trusts for his wife for life, with remainders to his children, and also provided for an annuity. In Lady Steere's case, the testator had devised property to his wife for life, with remainders to his daughters, and also created life interests for his sons and daughters, with further provisions for their issue and the residue of the estate.

The legal issues before the court were whether the duty payable under the relevant Acts constituted a testamentary expense, and if not, how such duty was to be apportioned amongst the various beneficiaries, particularly those with life interests, remainders, and annuities. Specifically, the court had to determine if beneficiaries were required to reimburse the estate for the duty paid on their respective interests, or if their interests were to be considered as already diminished by the duty at the time of distribution. The court also considered the effect of any "special provision" made by a testator for the payment of duty.

The court reasoned that the duty imposed by the Acts was not a testamentary expense, and therefore, a general direction in a will to pay testamentary expenses did not encompass the probate duty. The court distinguished *In re Clemow* and noted that section 87 of the *Administration Act 1903* clearly distinguished duty from testamentary expenses. The court further held that section 111 of the *Administration Act 1903* required executors and administrators to deduct from each devise, bequest, or legacy an amount equal to the duty payable on that specific interest. However, the court clarified that beneficiaries did not have to refund duty already paid by the executor; rather, their interests were to be considered as already reduced by the duty. The court also indicated that section 112 of the Act provided express directions for the apportionment of duty in cases of successive interests.

The court found that the orders made by Rooth J., which declared that each interest should be charged with a portion of the duty and that the trustee should deduct an amount equal to the duty from each interest, were potentially misleading. The court clarified that beneficiaries took their interests already diminished by the duty and could not be called upon to refund amounts they had not received. The appeals were allowed to the extent that the orders were interpreted to mean that the beneficiaries' interests were to be treated as already reduced by the duty, rather than requiring them to make a cash payment to recoup the estate.