Logan v Gardiner

[2006] NSWSC 1069

CITATION:	Logan v Gardiner [2006] NSWSC 1069
HEARING DATE(S):	11 August 2006
JUDGMENT DATE :	12 October 2006
JURISDICTION:	Equity Division
JUDGMENT OF:	Young CJ in Eq
DECISION:	First defendant held to be trustee of fund.
CATCHWORDS:	TRUSTS [92]- Express trusts created by will- Gift by mother to daughter of interest in joint account- Note attached to will instructing daughter as to distribution of funds in joint account- Note communicated to daughter and acquiesced in by her before mother's death- Instructions partly fulfilled- Beneficial gift or creation of trust- Whether "precatory trust"- Held daughter holds balance of account on trust as per note.
CASES CITED:	Bird v Perpetual Executors & Trustees Association of Australia Ltd (1946) 73 CLR 140 Blackett v Darcy (2005) 62 NSWLR 392 Haythorpe v Rae [1972] VR 633 McEvoy v The Belfast Banking Co Ltd [1935] AC 24 Russell v Scott (1936) 55 CLR 440 Standing v Bowring (1885) 31 Ch D 282
PARTIES:	Hedley David Logan (P) Jennifer Christine Gardiner (D1) Terry John Gardiner (D2)
FILE NUMBER(S):	SC 1720/05
COUNSEL:	G R Waugh (P) P R Glissan (D)
SOLICITORS:	Ferns Aubrey Mitchell (P) Beswick Solicitors (D)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

YOUNG CJ in EQ

Thursday 12 October 2006

1720/05 - LOGAN v GARDINER

JUDGMENT

1 HIS HONOUR: This is a suit brought by a brother against his sister and his brother-in-law for alleged maladministration of their mother's estate.

2 The mother, the late Nerida Ruth Miller, died on 7 May 2003. Probate of Mrs Miller's will, bearing date 13 March 2003, was granted to the defendants by this Court on 7 July 2003.

3 The will was a simple one. The testatrix had four persons who might have expected to benefit from her estate, namely, her second husband Ronald Howells, her son Peter, and the plaintiff and the first defendant. The will noted that the former two had each already had control of his share of the testatrix's assets and the will gave the testatrix's estate to the plaintiff and the first defendant equally. Prior to February 2002, the testatrix had about $122,000 in a credit union. She arranged to transfer that money to a joint account with the first defendant.

4 The first defendant said that on her way to hospital in March 2002, the testatrix said to the first defendant, "There is some paperwork in the car I want you to have. I want you to sign them and send them to the Teachers Credit Union before I go into surgery. I have $45,000 in the account set aside for the grandchildren and I want you to administer it as discussed at $5,000 for each grandchild." She says that she retrieved a box of documents from her mother's car and looked through the documents when she got home on the evening of 6 March 2002. There was a Teachers Credit Union membership application form which had been partially completed and signed by the testatrix. The first defendant says she then filled out the section headed "Second applicant's details" and posted the document to the Teachers Credit Union.

5 The first defendant then says that in about February 2003, the testatrix rang her and asked whether she thought it would be appropriate to give "Darlene and Kath" some money because Eric (the testatrix's first husband) had benefited the testatrix and she thought she should do something in return. The first defendant says she told her mother to write down on paper "Darl and Kath's address" and pin it to the will and she would do it for her. This paragraph of the affidavit was a bit confused because there was no such person as "Darlene" and the person apparently referred to was a male person called "Dale". However, counsel for the plaintiff did not make anything of this.

6 On Good Friday, that was 18 April 2003, the testatrix said to the first defendant, "My will is in the dressing table drawer in the spare room where Terry and you are staying. Would you get it and hang on to it." The first defendant found the will in a plastic folder inside a brown cardboard folder. She put that in her travel bag and saw that it read "My Last Will and Testament".

7 On 22 April the first defendant arranged to stay at her mother's home and the testatrix said, "I wish you didn't have to but it would be nice to have you here. I want you to use the money out of our account to pay your business bills and credit card so you have no debts to worry about." The first defendant said that she replied, "I will try to use my own money but if I'm desperate I will have to use the TCU money." The first defendant stayed with her mother until she died on 7 May 2003 and during this period, on several occasions, drew money from the Teachers Credit Union account to pay bills and obtain services.

8 On 22 April the first defendant opened the packet containing the will and noticed at the bottom was a piece of folded paper attached to the will with a paper clip with "Chris" written on it in the testatrix's handwriting. There were also two pieces of paper stapled to the will, which it later appeared were bank slips relating to money transferred out to the testatrix's son Peter. The other piece of paper marked "Chris" read as follows:

"If you don't want my lovely Scots skirt. Try Irene or Phyllis Rowett.
CHRIS
A. House 75 Chris 75 David
Investment 25 Chris 25 David
100 100
A. In our account & investments. $75,000
Terry $20,000
Grandchildren $45,000 Brian has his.
Only if they use it properly (education
(house deposit
Dale Erics nephew $2,000
Kathleen Erics niece $2,000
Doctor Geary $1,000
ADRA Helen Hall $5,000
1,000 each year
C. 4 40,000 from Vincent (Solicitor)
Booth, - took Money
15,000 Chris
15,000 Ronald
5,000 David
5,000 Adra – So much per year
Kathleen Ryan Dale Cowell
40 Hill St. 12 Hodges St.
PARKES 2870 PARKES 2870 (?)"

9 On the testatrix's death there was $122,486.78 in the joint account with the Teachers Credit Union. There was originally $241,650.37 deposited into the account by the testatrix in February 2003. The testatrix obtained this money as a result of a claim for personal injury. No money at all was deposited into the account by the first defendant.

10 The plaintiff was not at all happy with the way in which his sister and her husband administered the estate. On 30 May 2005, he issued a statement of claim seeking an order that the defendants as executors duly file and verify and pass their accounts and for a declaration that the money from the Teachers Credit Union was held on trust as to 25/125ths for the first defendant, 25/125ths to the plaintiff, 20/125ths to the second defendant and 5/125ths for each of the grandchildren with the balance to Mr Cowell, Ms Ryan, Dr Geary and ADRA.

11 A defence was filed on 4 August 2005 which claimed that the defendants had completed the administration, distributed all the assets and provided the plaintiff with an accounting and denying that there was any trust with respect to the monies in the former joint account claiming it all beneficially for the first defendant. In August 2006, accounts of a sort were presented by the defendants. They were not in the form that would be tolerated by the Registrar in Probate when considering commission. They did not distinguish between capital and income expenses or even between personal expenses of Mrs Gardiner and proper expenses of the executors. However, there was some form of accounting and it is probably best, at least for the present, to let specific queries be made as to the accounts and to have those tried in the proper manner if it is worthwhile doing so. Thus, I will confine this judgment to dealing with the vital question that is pending between the parties and that is whether the proceeds from the Teachers Credit Union are owned by the first defendant beneficially or whether they are held on some sort of trust.

12 The plaintiff administered interrogatories. The interrogatories were perhaps not in the form found in precedent books. The answers were in form evasive but it is clear that the first defendant paid $5,000 to each of Michael Gardiner, Peter Gardiner and Helen Hall (the representative of ADRA) and also paid $2,000 to each of Kathleen Ryan and Dale Cowell, all these monies all coming from the Teachers Credit Union joint account. Michael and Peter Gardiner were children of the defendants. They were the only grandchildren to receive any monies out of the Teachers Credit Union account.

13 Terry Gardiner received $20,000 from that account and ADRA received an additional $4,187.50 though from another account in 2004. This was explained by Mrs Gardiner by saying this gift came under "C" of the "Chris note" (monies were received from Mr Booth, solicitor), but there was a shortfall. The funds that were available after expenses were paid were not $40,000 and so instead of ADRA receiving $5,000 it received a proportionate amount. The plaintiff also received the same amount on 11 December 2003 in lieu of his $5,000 under section C of the note.

14 The inventory of property attached to the probate showed that the only property owned by the estate was the testatrix's three-quarter interest in her former matrimonial home at Corowa worth approximately $150,000 and the debt owed by Mr Booth, solicitor. However, the defendants said, "A debt due to the deceased by Vincent Booth solicitor may not be recoverable but, if recovered, is subject to the disposition specified in the note headed Chris referred to in the affidavit by the first deponent filed herein." The joint account in the Teachers Credit Union was noted under "Property owned by deceased as joint tenant with another".

15 It occurred to me that one way in which it could be said that there is a trust in respect of the joint account money is if the Chris note is more than a precatory trust or that there is a secret trust. The pleadings are sufficient to rely on either. The possibility of there being a secret trust only arose at the hearing. In case anyone was taken by surprise, I gave the opportunity to both counsel to make further written submissions on the matter if they so wished by 4 September. Neither counsel took advantage of that opportunity.

16 Mrs Gardiner was extensively cross-examined. She was not completely consistent in her testimony. Her basal position was that the money in the joint account was hers beneficially. However, she administered the monies recovered from Mr Booth (though in a rather cheese paring way), not in accordance with the will (and the Booth money was clearly an asset of the estate), but in accordance with the Chris note. It is quite clear that the monies recovered from Mr Booth were to go to the plaintiff and the first defendant in equal shares. The first defendant, however, behaved as if the Chris note was a codicil. She seems to have acknowledged some sort of trust arose out of the Chris note in respect of these monies.

17 Furthermore, with respect to the Teachers Credit Union funds, she administered them by paying her husband $20,000 as per the Chris note, and some of the grandchildren (being her own children), again in accordance with the Chris note. She says that she paid these monies out of her own funds. She said that she would have paid the monies to the other grandchildren had she been satisfied that they were mature enough not to waste the monies and she said this was the attitude that her mother took, and that is why the monies were put into the defendants' custody rather than being paid to the grandchildren directly.

18 In cross-examination, Mrs Gardiner said that she administered the Booth monies under the Chris note and not the will by mistake. Mrs Gardiner was the only witness cross-examined. I did not think that she made a particularly good showing in the witness box. She has suffered some serious illnesses in the past year or so and that may have affected her presentation.

19 The clear impression she gave was that she was not on good terms with her brother or his children and was not prepared to give them a penny more than she had to give them, but that she would otherwise carry out her mother's wishes in the Chris note. This was not because she was compelled by law to do so, but because she was able to pay for what her mother wanted out of Mrs Gardiner's own money (being what had passed by operation of law to her from the joint account). I do not believe that I should make any adverse finding as to Mrs Gardiner's credit. However, the way she administered the estate may well be significant when one is considering the issues of precatory trusts or real trusts including secret trusts.

20 At the hearing on 11 August, Mr G R Waugh appeared for the plaintiff and Mr P R Glissan appeared for the defendants. The hearing concluded that day subject to counsel having the right to furnish written submissions if they wished to do so on the issue of secret trusts, an invitation which as I have said was not taken up. There was other evidence given in the case, but none of it bears on the questions I have to decide.

21 Mr Waugh put his case in a variety of ways, but these can be summarised under two heads: (1) that although at law Mrs Gardiner took the amount in the joint account as survivor, in equity there was a resulting trust of the beneficial interest in the monies to the estate so that the money should be administered in accordance with the will; and (2) that a trust was imposed on the money by Mrs Gardiner's acceptance of the terms of her mother's instructions.

22 Mr Waugh made written submissions. He submitted, from standard texts, that whilst on the death of a party who has a joint account the legal interest in the account passes to the survivor, the ownership of the equitable interest depends on the intention of the deceased but there is a rebuttable presumption that it vests in the survivors. He points out that Weaver and Craigie in their Law Relating To Banker and Customer in Australia 3rd ed (Law Book Co, Sydney, 2003) [4.5010] say that where monies are provided by one only of the joint account holders, there may be a presumption of resulting trust in favour of that person.

23 Mr Waugh cited three cases, McEvoy v The Belfast Banking Co Ltd [1935] AC 24; Russell v Scott (1936) 55 CLR 440 and Haythorpe v Rae [1972] VR 633. The first was a case where a father deposited £10,000.0.0. with a bank in the name of himself and his infant son. However, the evidence clearly showed that that was done for the purpose of evading death duties and that the father at no time had any intention to benefit the son. The House of Lords held that the presumption of advancement was rebutted and the money was the father's.

24 In Haythorpe v Rae [1972] VR 633, the deceased opened a savings bank account in the name of herself and her niece. The deceased made all the deposits, but never handed the passbook to the niece. Crockett J held that there had been no completed gift of the monies in the joint account to the niece. The case is, accordingly, completely distinguishable from the present where, if there was a gift, there was a completed gift.

25 Both counsel referred to the High Court's decision in Russell v Scott (1936) 55 CLR 440. At the date of her death the testatrix, whom I will call "the aunt" had a joint account with her nephew. It would seem that the aunt was rather forgetful and the bank manager suggested that, to save everyone trouble, the joint account should be opened. All the monies in the account were put in by the aunt. The aunt told her solicitor's clerk that the nephew would look after her and pay her accounts and any money remaining in the account would be the nephew's. The High Court held that in the circumstances there was no resulting trust. Dixon and Evatt JJ asked the question at 451, "As a legal right exists in him [the nephew] to this sum of money, what equity is there defeating her intention that he should enjoy the legal right beneficially?" They answered the question "None".

26 I should digress slightly at this point. During the hearing the question was raised as to whether there was a trust to take effect only after the death of the first defendant's mother in the case before me, and if so, whether such a trust was invalidated because of the principle that a trust to take effect after a person's death must be testamentary in form; see Bird v Perpetual Executors & Trustees Association of Australia Ltd (1946) 73 CLR 140. However, that contention is answered in Russell v Scott by Starke J who said at 448, omitting reference to authority:

"A testamentary disposition can only be made by will. But a disposition which does not require the death of the donor for its consummation is not testamentary. Thus a voluntary settlement vesting property in trustees for the benefit of the donor for his life, and after his decease for the benefit of other persons, with a power of revocation, is not testamentary: it takes effect immediately upon its execution, and is not postponed until after the donor's death. A person who deposits money in a bank on a joint account vests the right to the debt or the chose in action in the persons in whose names it is deposited, and it carries with it the legal right to title by survivorship. The vesting of the right and title to the debt or chose in action takes effect immediately, and is not dependent upon the death of either of the persons in whose names the money has been deposited. In short it is not a testamentary disposition. There is nothing in the law to forbid a person depositing moneys in the joint names of himself and his family, or strangers: it is a form of gift, the effect of which has been already stated. But 'the rule is well settled that where there is a transfer by a person into his own name jointly with that of a person who is not his child … then there is prima facie a resulting trust for the transferor.' "

The quote is from Standing v Bowring (1885) 31 Ch D 282, 287.

27 There is no problem in the present case about passbooks etc. The first defendant was able to obtain the legal title to the money without having to make any application to a court; see Blackett v Darcy (2005) 62 NSWLR 392.

28 I must now deal with the argument as to whether there is some sort of secret trust. The most common form of secret trust is where there is an absolute gift to a legatee in the will, but the testator has communicated to the legatee a trust on which that benefaction is to be held. With a half secret trust the will actually uses the words "on trust".

29 The present is not a typical case of a secret trust because this case involves the fund, not any gift by will. However, the principle must be the same, that is, that a vesting of the legal title of property occurs because the donee has accepted the benefaction subject to the equitable obligations suggested by the donor.

30 Thus, there are four possibilities as to the beneficial ownership of the monies constituting the fund.

31 First, there is the possibility of resulting trust. This does not appear to be a realistic possibility because the first defendant is the daughter of the testatrix so that it would be the presumption of advancement rather than resulting trust which would apply. The second possibility is that the presumption of advancement applies. The third possibility is that the actions of the mother show a mere desire that her daughter should distribute the funds in accordance with the Chris note. The fourth possibility is that the Chris note constitutes a binding trust.

32 Accordingly, the essential question in the case boils down to whether, on the evidence, the Chris note and its acceptance by the first defendant imposes a trust upon her.

33 In my view the whole of the circumstances show that a trust was intended and accepted by the first defendant.

34 It seems to me that a key point is that the mother deliberately set out a scheme for the administration of her property. The evidence shows that of the monies she received the mother paid $100,000 to her son Peter. This enabled her to say in her will "My dear son Peter Anton Logan already has control of his share of my assets". This gives a firm clue that there are to be shares of the assets. Moreover, the fact that $100,000 was given to Peter Logan during the testatrix's life fits in with the beginning of the Chris note which gives $100,000 to both the plaintiff and the first defendant, $75,000 from the house (the testatrix's view of the value of the house was fairly close to what it realised) and $25,000 each from the investment.

35 The conduct of the first defendant is more consistent with there being a trust than the other way. It is true that she only paid out in respect of herself, her husband and her own children, but her recognition of the "entitlements" of ADRA, Ms Ryan and Mr Cowell tend in that direction.

36 The only oral evidence that goes to the heart of the matter was that of the first defendant. I basically accept it: I do not think that there was any stage where the first defendant showed herself completely unreliable. However, I do consider that her evidence is not completely reliable. First, the reference in her affidavit to Darlene, a woman, when she now says she meant Dale a man and that the error came about because of her illness, I find hard to accept. Secondly, the evidence given by the first defendant in the box that her mother gave her discretions seemed to grow as the case went on.

37 However, apart from that, accepting the first defendant as basically correct, it seems to me that the mother intended that the first defendant would carry out her wish, and the first defendant accepted that trust. In particular, para 11 of the first defendant's affidavit of 2 February 2006 accepted that her mother said, "I have $45,000 in the account set aside for the grandchildren and I want you to administer it as discussed at $5,000 for each grandchild." Now it is true that in the Chris note the words "only if they use it properly - education and house deposit" occur, but it does seem that the words used by the mother are far stronger than "You can give the grandchildren $5,000 each in your discretion if you think they deserve it". Then in February 2003 the first defendant said she told her mother to write down on paper " … anything you want me to do for you in any way after you die and pin it to the will and I will do it for you." Again, this seems to me to be a full acceptance of an obligation to do as the mother had asked.

38 In my view, although on the death of her mother the first defendant became entitled at law to the money in the joint account, she held it on the trusts set out in the Chris note.

39 Accordingly, the plaintiff is entitled to succeed.

40 The exact form of order may need some thought. Accordingly I will merely publish these reasons and stand the matter over for say three weeks for the parties to bring in short minutes. The plaintiff shall have the carriage of that. Unless counsel arrange with my associate a week before the designated date, I will list the matter at 9.30 am on Tuesday 24 October 2006 for the purpose of making formal orders.

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