Pozzebon v Pozzebon
[2024] VSC 205
•29 April 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2023 04095
| MARGARET DANIELLA POZZEBON | First Plaintiff |
| and | |
| LUISA MARGERITA RIGONI | Second Plaintiff |
| v | |
| ORLANDO POZZEBON (in his capacity as executor and trustee of the Will and Estate of MARIA POZZEBON, deceased, and personally) | Defendant |
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JUDGE: | Harris J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 26 April 2024 |
DATE OF JUDGMENT: | 29 April 2024 |
CASE MAY BE CITED AS: | Pozzebon v Pozzebon |
MEDIUM NEUTRAL CITATION: | [2024] VSC 205 |
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WILLS — Construction of will — Bequest of real property sold by attorney using powers under enduring power of attorney prior to testator’s death — Whether principles of ademption apply to sale — Specific Gift — Principles of ademption — Powers of Attorney Act 2014 (Vic), s 83A.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr N J Baum | A.B. Natoli Lawyers |
| For the Defendant | Mr John Di Santo |
HER HONOUR:
Introduction
This proceeding concerns the interpretation of the will of Maria Pozzebon,[1] who died on 23 June 2021 aged 89. The plaintiffs are two of Maria’s children, Margaret Pozzebon and Luisa Rigoni. Maria’s son Orlando Pozzebon, who is the executor and trustee of her will and estate, is the defendant. Maria also had a daughter, Susan, who died in 2022.[2] In particular, the issue is whether the Will dated 28 November 2012 made a specific gift of a property at 307, Station Street Fairfield, where she had lived until 2018. Unit 1/307 on that site (the Fairfield property) was, under clause 8 of the Will, the subject of a bequest to her four children. Maria had moved out of the Fairfield property in 2018 when she had developed Alzheimer’s dementia and it had become necessary for her to move into an aged care home. The Fairfield property was sold in 2019 by her son Orlando, who was her attorney under a financial power of attorney, to finance the cost of the aged care accommodation.
[1]For clarity, I refer to the family members by their first names, and I do not mean any disrespect in doing so.
[2]The estate of Susan Zarb (née Pozzebon) was not a party to the proceeding. Judicial Registrar Keith made orders on 2 November 2023, requiring the defendant to serve on the legal personal representative of Susan’s estate the Originating Motion and affidavits in the proceeding, and giving an opportunity for the representative of the estate to apply to be added as a defendant to the proceedings. The documents were served on 10 November 2023: see affidavit of John Di Santo sworn 7 March 2024, at [5]-[6]. The representative of Susan’s estate elected not to join the proceeding.
The question for the Court is whether s 83A of the Powers of Attorney Act 2014 (Vic) applies to the Fairfield property, with the effect that Maria’s four children have the same interest in the proceeds of sale of the Fairfield property as they would have had such sale not been made. Authority on the application of s 83A is that it will only apply to property the subject of a will if it was a specific gift. For that reason it is necessary to consider whether the Will makes a specific gift of the Fairfield property to Maria’s four children.
Margaret and Luisa commenced this proceeding seeking judicial advice and declarations to the effect that, pursuant to s 83A of the Powers of Attorney Act, Maria’s estate should be distributed on the basis that the beneficiaries are entitled to receive equal shares of any proceeds of the sale of the Fairfield property. Probate of Maria’s will having been granted on 10 March 2022, the plaintiffs also now seek directions to Orlando requiring him to call in and administer Maria’s estate. The application was made pursuant to the summary procedure in r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 by which the Court can resolve questions arising in the administration of an estate or the execution of a trust. In the course of the hearing of the application, the solicitor appearing for Orlando submitted that the procedure had been used by informal agreement between the parties in order to obtain some clarity about the interpretation and application of the Will and was essentially made by agreement between the parties.[3]
[3]Transcript 26/04/24 T58.21-.29.
The history relevant to the Will and the treatment of the Fairfield property
It was submitted by the plaintiffs that certain circumstances leading to the making of the Will in 2012 were relevant in interpreting the terms of the Will. First, the plaintiffs pointed to the history of the Fairfield property in demonstrating its significance to Maria and her children. Secondly, the plaintiffs submitted that the previous treatment of that property in three wills that Maria had made prior to the 2012 Will aided in construing her intentions in bequeathing the property in that last Will. The circumstances of its disposal were also relevant to the application of s 83A of the Powers of Attorney Act.
The Fairfield property
Maria was married to Sergio Pozzebon in about 1953. They acquired a property at 307 Station Street Fairfield in July 1957,[4] the year in which Orlando was born, and they raised their children in the house.[5] Maria and Sergio separated in the mid 1970s and Sergio transferred the Fairfield property into Maria’s sole name on 4 October 1977[6] for the consideration of $12,500. The children lived with Maria at 307 Station Street. Sergio died in an industrial accident in 1983, and left his whole estate to Susan, who was a minor and was living with chronic health conditions.[7] Funds from Sergio’s estate which had been left to Susan, and some additional finance through mortgages obtained by Susan and Orlando, were used to fund a development of the land at 307 Station Street to build three residences.[8] Orlando, then a registered domestic builder, oversaw the construction of the units, without payment.[9] In the context of the development, the title to 307 Station Street was cancelled and subdivided into three titles, with Orlando and his wife jointly the proprietors of one title, Susan the sole proprietor of another, and Maria the proprietor of Unit 1 (being the Fairfield property).[10]
[4]Affidavit of Thomas Owen Natoli affirmed 15 March 2024 (Natoli Affidavit) [4]; Exhibit TON-1, 001-006.
[5]Affidavit of Margaret Pozzebon sworn 9 August 2023 (Margaret Affidavit), [4]-[5].
[6]Natoli Affidavit, Exhibit TON-1, 007. The property consisted of two titles, described in certificates of title Volume 5170 Folio 955 and Volume 6274 Folio 710, both of which were transferred to Maria. The two titles were later consolidated into a single title, Volume 9922, Folio 737, in December 1989, held by Maria: Natoli Affidavit Exhibit TON-01, 003 and 006.
[7]Margaret Affidavit, [6]-[7]; Affidavit of Orlando Pozzebon sworn 12 December 2023 (Orlando Affidavit), [11]-[13].
[8]Margaret Affidavit, [13]; Orlando Affidavit, [15], [19].
[9]Margaret Affidavit, [11]; Orlando Affidavit, [15], [19].
[10]Described in certificate of title volume 10071 folio 893.
Maria lived in the Fairfield property until April 2018, when she was admitted into Aurrum Aged Care. Maria had executed an enduring power of attorney for financial matters on 28 November 2012 at the same time as making her last will, which appointed Orlando and Susan as her joint and several attorneys. The enduring power of attorney was expressed to commence only upon Maria ‘becoming incapacitated and unable to manage my own affairs’.[11] Maria, described by all parties as a capable and independent woman,[12] began to show difficulties with her capacity to manage her own affairs from about 2015. By January 2016, she was under the care of a consultant geriatrician, having been diagnosed with Alzheimer’s disease. In June 2016, the geriatrician gave the opinion that Maria lacked the capacity to make financial decisions.[13]
[11]Margaret Affidavit, [15]; Exhibit MDP-1, 41-43.
[12]Orlando Affidavit, [33]; Margaret Affidavit, [16].
[13]Margaret Affidavit, Exhibit MDP-1, 49.
Orlando put the Fairfield property on the market and in July 2019, the Fairfield property was sold for $870,000.[14] The capital proceeds identified as $872,060.91 and the Settlement costs identified as $26,996.74 in a Profit and Loss Statement of Maria’s affairs prepared in 2021.[15] Margaret expressed the view (which Orlando did not deny) that Maria would not have been able to understand that the Fairfield property had been sold.[16]
[14]Margaret Affidavit [34]; Orlando Affidavit [30].
[15]Margaret Affidavit, [30]-[31]; Exhibit MDP-1, 135.
[16]Margaret Affidavit, [35]; Orlando Affidavit, [31].
The proceeds of sale of the Fairfield property were used to fund the refundable accommodation deposit (RAD) of $400,000 paid to Aurrum Pty Ltd, for Maria’s aged care. The evidence was insufficient to show exactly how the balance of the proceeds of sale were applied, as the plaintiffs did not have all relevant financial records of Maria. The documentary records tendered by Margaret in her affidavit showed that a Commonwealth Bank Account numbered BSB 063-130 account 10439532 (CBA Account 9532) had increased in balance between the end of the 2019 financial year to the end of the 2020 financial year by a sum of approximately $432,000.[17] This was not contradicted by Orlando. I am satisfied that the increase in the balance in CBA Account 9532 was primarily or wholly referable to the balance of the proceeds of the Fairfield property. The defendant’s legal representative submitted at the hearing that he had access to bank statements which were relevant to the use of the deposit.[18] These statements were not in evidence.
[17]The relevant documents were primarily the financial statements prepared in respect of Maria’s affairs in the financial years 2019 and 2020. The 2019 profit and loss statement showed the Fairfield property as an asset worth $870,000 and a balance of the Pensioner Security account 10439532 as $44,912.44: Margaret Affidavit, Exhibit MDP-1, 114-115. The 2020 profit and loss statement recorded ‘Capital proceeds – Fairfield property’ as $872,060.91; and assets including a balance of $477,441.40 in the Pensioner Security account 10439532 and a ‘Nursing Home Accommodation Bond’ of $400,000: Exhibit MDP-1, 134 -135. There was also evidence as to the sale of the property with settlement and a transfer of land in September 2019: Margaret Affidavit, [34], [42], and Exhibit MDP-1, 108.
[18]Transcript 26/04/2024, T70.17-.28.
Maria’s previous wills
Maria had made three wills prior to her last Will in 2012:
(a) A will dated 7 April 1992 in which she had appointed Orlando as executor, left her furniture and household effects to Susan, and the residue of her estate equally between her four children. That will also stipulated that Susan had a right to reside in ‘my property situate at Unit 1, 307 Station Street, Fairfield’.[19]
(b) A will dated 13 September 2002, which appointed Orlando and Luisa as joint executors, and left the whole of her estate equally to her four children. The will gave Orlando a right to buy or appropriate to himself the Fairfield property, at a price to be set by Luisa, and on arms-length terms.[20]
(c) A will dated 6 December 2007, which appointed Susan as executor, and Orlando as substitute executor. It gave some gifts of personal property to Susan and a gift of 20% of the net value of her estate to Orlando, with the remainder to be divided between the four children in equal parts. That will expressly stated that the greater provision to Orlando was in recognition of the considerable assistance provided by him to Maria during her lifetime including financial assistance in assisting with payment of money in her matrimonial settlement, and financial assistance and physical exertion provided during the course of the redevelopment of the property at 307 Station Street Fairfield.[21]
[19]Orlando Affidavit, Exhibit OP-9, 121-122.
[20]Orlando Affidavit, Exhibit OP-9, 130-132.
[21]Orlando Affidavit, Exhibit OP-9, 143-146.
Maria’s last will dated 28 November 2012 was drawn for her by Mr John Di Santo, the solicitor acting for Orlando in this proceeding.[22] By this Will, Maria:
[22]Margaret Affidavit, Exhibit MDP-1, 39.
(a) appointed Orlando and Susan as executors;
(b) gave to Susan gifts of her tapestries;
(c) gave to Susan all of her personal effects to be distributed as Susan thought fit, with Susan having the first choice of those gifts and personal effects; and
(d) by clause 7 bequeathed ‘moneys standing to the credit of any bank account or term deposit or other investments held by me as at the date of my death to my son Orlando Pozzebon and daughter Susan Pozzebon in equal shares’.
(e) Bequeathed the residue of her estate in clause 8. Clause 8 provides:
I GIVE DEVISE AND BEQUEATH the rest and residue of my estate both real and personal of whatsoever nature or wheresoever situate or over which I may have any disposing power as at the date of my death to my children [Orlando], [Susan], [Luisa] and [Margaret] as tenants in common in equal shares absolutely. However I desire that should either or both of my children [Orlando] and [Susan] wish to purchase the share of [Luisa] or [Margaret] or both in my property known as 1/307 Station Street, Fairfield that all my children engage a valuer to value the property and that whoever of my children purchases the equal undivided quarter part or share of each of [Luisa] or [Margaret] or both pay such one quarter of the property as valued by the valuer to such seller and failing agreement by the parties as to a valuer then each party may appoint his or her own valuer and then all valuers appoint one Independent valuer who shall be the final arbiter of the valuation of the property. The expenses referred to in 3 above are to be apportioned and paid for equally by my children from each of their share in 1/307 Station Street, Fairfield.
The evidence, primarily consisting of the inventory of assets and liabilities sworn by Orlando and Susan in the context of the grant of probate of Maria’s will in 2022, was that at the time of Maria’s death, she had three bank accounts with the Commonwealth Bank:[23]
[23]Margaret Affidavit, [44]-[46]; Exhibit MDP-1, 138.
(a) CBA Account 9532, being a ‘Pensioner security account’ with a balance of $471,345.97;
(b) an account BSB 763-130 account number 5005976 with a balance of $1,266.81;
(c) an account BSB 763-417 account number 5000504 with a balance of $1,012.21.
The other major asset in Maria’s estate was the RAD of $400,000 held by Aurrum Pty Ltd.
The application
The plaintiffs seek three declarations, in the following terms:
Clause 8 of the last will of Maria Pozzebon, deceased (the deceased), dated 28 November 2012 (the deceased’s last will), included a specific gift of the deceased’s former property at 1/307 Station Street, Fairfield, more particularly described in certificate of title volume 10071 folio 893 (the Fairfield property).
The effect of the sale of the Fairfield property by the defendant, in his capacity as the deceased’s attorney, on 12 September 2019 (the sale), is that part of the gift in clause 8 of the deceased’s will has been adeemed.
Pursuant to ss 83A(1) of the Powers of Attorney Act 2014, the beneficiaries of the deceased’s last will have the same interest in any money or other property arising from or received in respect of the sale of the Fairfield property as they would have if no sale had been made.
The plaintiffs have brought the application pursuant to the summary procedure provided for by Order 54.02 of the rules, which states, relevantly:
Order 54.02 Relief without general administration
(1)A proceeding may be brought for any relief which could be granted in an administration proceeding and a claim need not be made for the administration or execution under the direction of the Court of the estate or trust in respect of which the relief is sought.
(2) Without limiting paragraph (1), a proceeding may be brought for—
(a)the determination of any question which could be determined in an administration proceeding, including any question—
(i)arising in the administration of an estate or in the execution of a trust;
(ii)as to the composition of any class of persons having a claim against an estate or a beneficial interest in an estate or in property subject to a trust; or
(iii)as to the rights or interests of a person claiming to be a creditor of an estate or to be entitled under the will or on the intestacy of a deceased person or to be beneficially entitled under a trust;
(b) an order directing an executor, administrator or trustee to—
(i) furnish and, if necessary, verify accounts;
(ii) pay funds of the estate or trust into court; or
(iii) do or abstain from doing any act…
The principles applicable to an application for judicial advice or directions under order 54.02 were summarized by Derham AsJ in Re The Macedonian Orthodox Church Community ‘Saint Dimitrij Solunski’ Springvale Inc[24] as follows (citations omitted, emphasis added):
[24][2020] VSC 274, [33].
(a)rule 54.02 is the only statutory basis in Victoria for a personal representative of a deceased estate or a trustee of a trust to seek the advice and directions of the court. The Trustee Acts in other States and Territories generally make express provision for such applications to be made;
(b)the procedure is a summary procedure, intended to enable questions arising in the administration of an estate or a trust to be resolved cheaply and simply and operate as an exception to the court’s ordinary function of deciding disputes between competing litigants;
(c)the summary nature of the procedure is important to an understanding of the evidence the court is entitled to rely upon in giving its advice. That evidence is ordinarily untested. The extent of the information available to the court and its apparent reliability are factors going to the exercise of the discretion to give advice. That is,
…while the time and cost involved in giving judicial advice at an early stage of litigation, when the issues involved in disputes about rights may not be fully sharpened and it may not be possible for the factual position to be as efficiently exposed as in a trial, may be factors relevant to a decision not to grant judicial advice but to let the matter be examined in conventional litigation, they are not factors which either automatically bar judicial advice or are so weighty as generally to compel the court not to grant the advice.
(d)the purpose of the procedure is to enable a trustee or executor to obtain the direction or opinion of the court on a matter of administration or management, or as to the construction of the will or trust instrument, without the need to commence an administration suit with all its attendant delay and cost;
(e)it affords a facility of giving “private advice” because its function is to give personal protection to the trustee. The obtaining of judicial advice resolves doubts about whether it is proper for a trustee to incur the costs and expenses of prosecuting or defending litigation. Resolving these doubts means that the interests of the trust will not be subordinated to the trustee’s fear of personal liability for costs; and
(f)there is but one jurisdictional bar to relief: the applicant must point to the existence of a question respecting the management or administration of the trust property or a question respecting the interpretation of the trust instrument.
I am satisfied that the condition for the exercise of powers under r 54.02, that there is a question regarding the administration of the Will or regarding its interpretation, is satisfied. The question involves the proper interpretation of clause 8 of the Will and the application to the Will of s 83A of the Powers of Attorney Act, which will be relevant to its administration.
The application proceeded on the basis of affidavits filed by the parties, without cross-examination. There was in any case little disagreement about the facts and no material disagreement about any of the facts relevant to the making of the declarations sought.
In addition to the declarations, the plaintiffs also sought a number of directions as to the administration of the property, relating to the calling in of the estate, the payment of funeral and testamentary expenses and debts, provision of an account of the administration of the estate, and various directions as to the distribution of the property. It was submitted by counsel for the plaintiffs that these directions were necessary on the basis of the lack of any progress made by Orlando as executor in administering the estate. The evidence was that no distributions of the estate had been made and that despite queries and requests for a report of progress having been made on the plaintiffs’ behalf to Orlando’s solicitor on numerous occasions from June 2021 to May 2022, no response had been given save for the provision of copies of the probate application provided in May 2022.[25] As noted above, in the course of the hearing Mr Di Santo submitted on behalf of Orlando that the application was in effect a joint application to obtain guidance on the interpretation of the will.[26]
[25]Margaret Affidavit [49]-[51]. This was not disputed by Orlando, but reference was made to the ‘coronavirus restrictions … affecting [us] all’; see Orlando Affidavit [32].
[26]Transcript 26/04/2024, T58.21-.29.
In the course of the hearing, it was accepted on behalf of the plaintiffs that it would be premature to make directions as to the distribution of the property prior to the accounting having been completed, and only orders for calling in of assets and payment of funeral and testamentary debts were sought.
The legal principles relating to the application of s 83A of the Powers of Attorney Act
Section 83A of the Powers of Attorney Act states, relevantly:
Interest of principal in property not to be altered by sale or other disposition of property
(1)A principal and a beneficiary of a principal have the same interest in any money or other property arising from or received in respect of any sale, mortgage, exchange, partition or other disposition under the powers given to an attorney under an enduring power of attorney which have not been applied under those powers that the principal or beneficiary would have had in the property the subject of the sale, mortgage, exchange, partition or disposition if no sale, mortgage, exchange, partition or disposition had been made.
…
(3)An attorney under an enduring power of attorney is not required to keep the proceeds of the sale or other disposition of property under this section separate from the principal’s other assets.
…
(5) In this section, beneficiary of a principal means—
(a) a beneficiary of a principal under a will; or
(b) a principal’s executor; or
(c)a principal’s administrator under the Administration and Probate Act 1958.
It can first be observed that Maria, having executed an enduring power of attorney in favour of Orlando, was, applying the definitions in s 83A(5), a principal for the purposes of s 83A; and that Orlando as her executor and her four children as her beneficiaries under her will are beneficiaries of a principal for the purposes of s 83A.
It is also clear that there was a disposition of the Fairfield property using the powers given to Orlando as attorney under the enduring power of attorney. It remains to consider whether the section applies to preserve the interests of the beneficiaries in the money or other property arising from the sale of the Fairfield property notwithstanding its sale.
Section 83B, by its heading, identifies s 83A as an ‘exception to ademption’. Section 83B states:
Exception to ademption applies regardless of testamentary capacity
Section 83A applies whether or not the principal has testamentary capacity.
‘Ademption’ is not defined in the Powers of Attorney Act. It describes the common law principles that arise where property is ‘taken away’ from the property the subject of a will by some means, resulting in failure of the gift.[27] Justice McMillan in Re Foord described the application of ademption to specific gifts of property by will, in the context of a question similar to the one arising in this case as to the application of s 83A to certain real property identified in a will which had been sold prior to the testator’s death.[28] Her Honour observed:[29]
While ademption can arise in a number of circumstances, of relevance here is its application to specific gifts of property by will where at the time of the testator’s death the property is no longer her or his to dispose.[30] Subject to certain exceptions, the specific gift fails as there is no property that meets the description of the subject matter of the gift amongst the testator’s property at the time of her or his death.[31] An obvious case of ademption is where the testator divests her or himself of the property in her or his lifetime.[32]
[27]In RL vNSW Trustee and Guardian (2012) 84 NSWLR 263, Campbell JA describes the operation of ademption in some detail in Appendix B to his Honour’s judgment at 292-293.
[28]Re Foord [2019] VSC 444.
[29]Re Foord [2019] VSC 444, [16].
[30]Citing Brown v Heffer (1967) 116 CLR 344, 348 (Barwick CJ, McTiernan, Kitto & Owen JJ).
[31]Citing RL v NSW Trustee and Guardian (2012) 84 NSWLR 263, 292-3 (Campbell JA).
[32]Citing Brown v Heffer (1967) 116 CLR 344, 348.
The common law exceptions to the principles of ademption include the case where there is a specific gift of property in the will of an incapable person. In RL v NSW Trustee and Guardian,[33] the Court referred to a line of cases, starting with the Queensland Supreme Court case of Re Viertel[34] to the effect that if the property of an incapable person was disposed of pursuant to an enduring power of attorney, the disposition would not effect an ademption of a specific gift of that property in the will of the incapable person. The cases were to the effect that this was the case even if there is no ground for challenging the disposition as having been carried out dishonestly or in some other fashion wrongfully.[35] Campbell JA disagreed with the interpretation of the common law in Re Viertel, but relevantly observed that no question arose as to whether it should be followed in New South Wales as the principle as described there was embodied in s 22 of the Powers of Attorney Act 2003 (NSW). Section 22(1) is in similar terms to s 83A(1) of the Victorian Powers of Attorney Act:
Any person who is named as a beneficiary (a named beneficiary) under the will of a deceased principal who executed an enduring power of attorney has the same interest in any surplus money or other property arising from any sale, mortgage, charge or disposition of any property or other dealing with property by the attorney under the power of attorney as the named beneficiary would have had in the property the subject of the sale, mortgage, charge, disposition or dealing, if no sale, mortgage, charge, disposition or dealing had been made.
[33](2012) 84 NSWLR 263.
[34][1997] 1 Qd R 110.
[35]RL vNSW Trustee and Guardian (2012) 84 NSWLR 263, 283 [91] and elaborated in Appendix B from 297-306 (Campbell JA).
His Honour observed that at the time, Victoria did not have an analogue to s 22 of the New South Wales Powers of Attorney Act, although it had a provision dealing with this situation in the case of dispositions by guardians.[36]
[36]RL vNSW Trustee and Guardian (2012) 84 NSWLR 263, 306 [187].
Section 83A was introduced into the Powers of Attorney Act in 2017 by the Administration and Probate and Other Acts Amendment (Succession and Related Matters) Act 2017 (Vic). It followed the report of the Victorian Law Reform Commission Succession Laws Report, which observed with respect to the principles of ademption as applicable to specific gifts, an additional statutory exception was necessary, but no change to the common law rule was required.[37]
[37]See Re Foord [2019] VSC 444, [25], [27], referring to Victorian Law Reform Commission Succession Laws (Report, August 2013).
Being described in the heading to s 83B of the Powers of Attorney Act as an ‘[e]xception to ademption’, it is apparent that Campbell JA’s observation as to the common law exception relating to specific gifts identified in Re Viertel equating to s 22(1) of the Powers of Attorney Act 2003 (NSW) referred to above can also be made of s 83A.
In Re Foord, McMillan J held that the nature of s 83A as being an exception to ademption, with ademption referring to the common law principles of ademption, had the consequence that the exception should be construed as applying to a specific gift only, even in the context of s 83A.[38]
[38]Re Foord [2019] VSC 444, [27].
I therefore approach the consideration of whether s 83A applies to the disposition of the Fairfield property, with the result that the four beneficiaries Orlando, Susan, Margaret and Luisa have an interest in the proceeds of the sale of the Fairfield property, on the basis that it is first necessary to determine whether the bequest of the interest in the Fairfield property was a specific gift.
The law as to specific gifts
Gifts under a will may be specific, ‘demonstrative’ (being unconditional gifts of a specific amount, accompanied by reference to a particular source of payment thereof),[39] or general, meaning that it is to be satisfied out of the general assets of the estate without regard to any particular thing or fund.[40] A gift should be construed as general rather than specific unless the terms of the will indicate that the gift is specific.[41] A gift under a will is specific gift when:
… its subject-matter is designated as something that does at the time of the will, or shall at the time of the death of the testator, form an identifiable part of his property and is, so to speak, distinguished by the intention of the testator as ascertained from his will to separate it in his disposition from the rest of his property for the purpose of bequeathing it as the distinct subject of a testamentary disposition.[42]
[39]Re Foord [2019] VSC 444, [18] (McMillan J) and the authorities there cited.
[40]Re Foord [2019] VSC 444, [18]; McBride v Hudson (1962) 107 CLR 604, 617 (Dixon CJ).
[41]Re Plowright [1971] VR 128, 132 (Newton J).
[42]McBride v Hudson (1962) 107 CLR 604, 617 (Dixon CJ); see also Re Foord [2019] VSC 444, [18] (McMillan J).
The bequest will be a specific gift if it is ‘described in a sufficiently explicit manner in the will as to enable it to be identified as separated from the mass of a testator’s estate inclusive of other things of the same kind, if any’.[43]
[43] Moylan v Rickard [2010] QSC 327, [41].
In interpreting the terms of the will to determine whether the bequest of the Fairfield property was a specific gift, the Court’s task is, as in all questions of construction of a will, to give effect to the testator’s intention, having regard to the words used, in the context of the will as a whole, aided if necessary by admissible extrinsic evidence.[44]
[44]Fell v Fell (1922) 31 CLR 268, 273-4 (Isaacs J); Re De Bruyn [2016] VSC 6, [11]-[13] (McMillan J); Re Foord [2019] VSC 444. As to extrinsic evidence, see Wills Act 1997 (Vic), s 36.
The parties’ submissions
Margaret and Luisa submit that the Fairfield property was a specific gift for the following reasons:
(a) The words of clause 8, despite first referring to the residue of the estate, go on to make specific reference to the Fairfield property, identified in a sufficiently explicit way to separate it from the rest of the estate.[45]
[45]Plaintiff’s Outline of Submissions dated 15 March 2024, [42].
(b) The scheme of the Will confirms that the Fairfield property was being disposed of as a distinct and specific gift.[46]
[46]Plaintiff’s Outline of Submissions dated 15 March 2024, [41].
(c) The extrinsic circumstances confirmed Maria’s intention to dispose of the Fairfield property separately from the rest of the property the subject of the will. In particular:
(i) The history of Maria’s wills was such that it confirmed that she had always intended to deal with the Fairfield property separately from the rest of her estate.[47]
(ii) The history of the Fairfield property as the family home, for Maria and her four children, and her significant emotional connection to it.[48]
[47]Plaintiff’s Outline of Submissions dated 15 March 2024, [40].
[48]Plaintiff’s Outline of Submissions dated 15 March 2024, [39].
The plaintiffs referred to cases which involved identifying whether a bequest involved a specific gift, and which like the present case involved a gift of real property which had been sold before the testator’s death.
In Armstrong v Childrens Hospital at Westmead[49] the testatrix gave various gifts including the bequest of a house together with its contents as well as a fixed sum of money to the plaintiff, legacies to charities, and a gift to her niece and husband of real property. This last gift was expressed in similar terms to clause 8 in this case, referring first to the residue of the estate, in cl 34 of the will, as follows:
Subject to the payment thereout of all my just debts funeral and testamentary expenses and all probate estate and other duties payable in respect of my estate or as a consequence of my death I GIVE DEVISE AND BEQUEATH the rest and residue of my estate both real and personal of wheresoever situate, including but without limiting the generality of the foregoing, my home at 25 Wallace Street Concord … or such other home as I reside in at the date of my death …
[49][2008] NSWSC 1315.
There were inadequate funds at the date of the Ms Hayward’s death to pay all of the legacies. A question arose as to whether the legacies could only be paid to the extent possible from the bank accounts, or whether the Concord property, expressed as part of the residue, was to be sold to enable payment of the legacies, leaving the niece and her husband with the balance of the funds.[50] In construing the will, Bryson AJ first observed that:
A reference in a will to ‘the rest and residue of my estate’ indicates in its ordinary and natural meaning that other dispositions in the will are to be satisfied before the rest and residue of the estate is to be ascertained … Clause 34 does not conform with the ordinary pattern, or with any provision which I have ever encountered, in that it specifies and describes a particular property as part of the residuary gift.[51]
[50][2008] NSWSC 1315, [12].
[51][2008] NSWSC 1315, [16] (Bryson AJ); referred to in Re Foord [2019] VSC 444, [15] (McMillan J).
Despite the unusual nature of the clause’s structure, Bryson AJ concluded that the terms of cl 34 ‘give special force to the testator’s indication of her intention that the house and contents should pass to Mr and Mrs Campbell’ and that although it was clear that the bequest was subject to payment of the liabilities referred to, it was also correct that the testatrix intended the house and contents specifically to pass to the niece and husband, ‘and that this expression of intention would be defeated by applying to that gift a qualification which reduced its beneficial effect, except as to the liabilities referred to’.[52] Her Honour made a declaration that cl 34 of the will was to be construed as creating a specific devise to the niece and husband of the Concord property and its contents.[53]
[52]Armstrong, [19] (Bryson AJ).
[53]Armstrong, [44].
The plaintiff also referred to Catholic Parish of St Brigid Marrickville v Habib[54] in which the testatrix gave to the plaintiff ‘my principal place of residence and all furnishings but subject to any mortgage which may be registered against the said property at the date of my death’. When the testatrix had made her will she lived in a property in Marrickville, but prior to her death, her affairs had been managed by a trustee and guardian who had sold her property and held the proceeds in trust for her when she had moved into an aged care facility. The question was whether the gift of the Marrickville property had been adeemed or was valid by reason of the operation of the Trustee and Guardian Act 2009 (NSW) which contains a provision, in terms similar to s 83A, but applicable to transactions made by trustees or guardians.[55] In construing the clause by which the property was devised involved a specific gift, Slattery J considered the history of the Marrickville property and the relationship with the plaintiff parish.[56] Justice Slattery concluded that the clause by which the gift was given, properly construed by reference to the terms of the will[57] was that the testatrix intended to give a specific gift referable to her home, the only real estate that she owned and in which she was then living, to the plaintiff.[58] The language of ‘my principal place of residence’ was sufficient to describe real property that the testatrix owned at the time of the will, and the words ‘at the date of my death’ acknowledged the possibility of a change in the property.[59] The known surrounding circumstances and the structure of the will supported the construction. They demonstrated that at the time of her will her intention was that she would not sell the property, and that she intended to separate it or any subsequent residence from other property to give a gift to benefit her local church.[60]
[54][2022] NSWSC 1139.
[55][2022] NSWSC 1139, [1]-[3].
[56][2022] NSWSC 1139, [10]-[13].
[57][2022] NSWSC 1139, [59]-[81].
[58][2022] NSWSC 1139, [81].
[59][2022] NSWSC 1139, [87]-[90].
[60][2022] NSWSC 1139, [91]-[95].
Finally the plaintiff submitted that given the evidence that the proceeds of the sale of the Fairfield property were now held in the RAD and in CBA Account 9532, the effect of s 83A was that all four of Maria’s children had an interest in the RAD and in that account insofar as it represented the proceeds of sale. The plaintiffs acknowledged that:
(a) by the terms of clause 3 and 8 of the Will all expenses were to be paid equally by the children from the proceeds of the Fairfield property; and
(b) the balance of the remaining two CBA bank accounts was, pursuant to clause 7, bequeathed to Orlando and Susan (now her estate) alone.
Written submissions were filed on behalf of Orlando and submissions were also made by his solicitor at the hearing. He made no submissions directed specifically to the application of s 83A of the Act, other than to note that Maria ‘did not know of s 83A of the Powers Attorney Act 2014 but others may have known from sometime in 2015.’ Instead submissions for Orlando focussed on a submission that the Court should interpret the will to arrive at ‘just and equitable distributions to the beneficiaries of all the assets specified in the Inventory’.[61] He relied on observations of Dixon CJ in Pontifical Society for the Propagation of the Faith v Scales (1962) 107 CLR 9, to the effect that ‘the question is basically … what did the testator intend?’.[62] He referred in particular to his Honour’s observations to the effect that ‘the Court itself can never be certain that it knows all the circumstances…’.[63] It was also submitted that Maria ‘would not have wanted Margaret nor Luisa to be totally omitted from inheritance’.[64]
[61]Defendant’s Outline of Submissions dated 5 April 2024, [17].
[62]Transcript 26/04/24, T61.23-.28; T79.2-.26.
[63]Defendant’s Outline of Submissions dated 5 April 2024, [8]; Transcript 26/04/24, T61.23-.28, T79.2-.26.
[64]Defendant’s Outline of Submissions dated 5 April 2024, [16].
In response to questions as to whether Orlando had a specific position as to the interpretation of the Will and how the principal assets of the RAD and the balance in the Commonwealth Bank Account were to be applied, Mr Di Santo accepted on behalf of Orlando that the RAD should be distributed equally between the four beneficiaries. He submitted that the position was difficult with the balance of the proceeds of the sale of the house, as those funds had been mixed with other funds in the CBA Account 9532.[65] It was submitted that a fair and equitable outcome would be to give Orlando 20% of the total of the bank account and then distribute the remainder to the four beneficiaries in equal shares.[66] This was consistent with the way in which the 2007 will had allocated Maria’s assets other than her personal assets.
[65]Transcript 26/04/24, T71.09-.17.
[66]Transcript 26/04/24 T62.7-63.6.
Analysis: was the bequest of the Fairfield property a specific gift?
As it is appropriate to commence with the text of clause 8 of the Will, I repeat it here for convenience:
I GIVE DEVISE AND BEQUEATH the rest and residue of my estate both real and personal of whatsoever nature or wheresoever situate or over which I may have any disposing power as at the date of my death to my children [Orlando], [Susan], [Luisa] and [Margaret] as tenants in common in equal shares absolutely. However I desire that should either or both of my children [Orlando] and [Susan] wish to purchase the share of [Luisa] or [Margaret] or both in my property known as 1/307 Station Street, Fairfield that all my children engage a valuer to value the property and that whoever of my children purchases the equal undivided quarter part or share of each of [Luisa] or [Margaret] or both pay such one quarter of the property as valued by the valuer to such seller and failing agreement by the parties as to a valuer then each party may appoint his or her own valuer and then all valuers appoint one independent valuers who shall be the final arbiter of the valuation of the property. The expenses referred to in 3 above are to be apportioned and paid for equally by my children from each of their share in 1/307 Station Street, Fairfield.
The clause commences with a bequest of the ‘rest and residue’ of Maria’s estate to her four children in equal shares as tenants in common. That gift in general terms clearly includes the Fairfield property, in that it is expressed to encompass her estate ‘both real and personal of whatsoever nature or wheresoever situate’, and it goes on to refer in that same clause to her specific desire as to ‘my property known as 1/307 Station Street, Fairfield’. The general bequest of the rest and residue of her real and personal property, which follows the specific bequests of some personal property and of money standing to the credit of any bank account or term deposit or other investments, is apt to encompass her interest in the real property constituted by the Fairfield property. The structure of the clause reinforces that the Fairfield property is encompassed in the opening reference to her ‘estate both real and personal’, in that the phrase commencing ‘However’ does not exclude any property from the preceding sentence, but identifies a manner in which the property is to be dealt with.
The identification of the Fairfield property by address describes it in a sufficiently explicit manner as to enable it to be identified as separated from the rest of Maria’s estate.[67] Notwithstanding that it was referred to in a clause dealing with the rest and residue of Maria’s estate,[68] it is clear that she intended the Fairfield property to be the distinct subject of a testamentary disposition, which, as with the residue of her estate, was to be given to her children in equal shares.
[67]Cf Moylan v Rickard [2010] QSC 327, [41].
[68]As was the case in Armstrong, [19].
Clause 8 did acknowledge a special interest of Orlando and Susan in being able to purchase the Fairfield property. It provided for each of Orlando and Susan to purchase Luisa and Margaret’s quarter shares. The Fairfield property having been sold, that was plainly no longer possible. Importantly, however, clause 8 had provided that any such purchase of Luisa or Margaret’s share was to be for a price set by a valuation process directed to either an agreed valuation, or a valuation arrived at by an independent valuer. The intention was clearly to ensure that Luisa and Margaret each received the value of a quarter share in the Fairfield property, even if Orlando or Susan exercised the right to purchase their shares.
The structure of the will reinforces the conclusion that the bequest of the Fairfield property was a specific gift. By clauses 5, 6 and 7 Maria devises her tapestries, personal effects and money. There was no devise that would encompass real estate other than clause 8, which then expressly referred to real property, and specifically to ‘my property known as 1/307 Station Street, Fairfield’.
Given the strong textual indications supporting the conclusion that the Fairfield property was a specific gift, it is not necessary in my view to rely on extrinsic circumstances to interpret the Will. However, to the extent that there is any ambiguity in the language of clause 8 the external circumstances support the conclusion that the Fairfield property was a specific gift. Maria was living in the Fairfield property at the date she made the Will, and she had lived at a property on the site of 307 Station Street from 1957 until her health made it necessary for her to leave it in 2018. She had raised her children in a home on the site and after re-development of that land she continued to live there. This is all consistent with Maria having had an intention that her family home was property that she specifically wished to give to her four children equally, while recognising that if either Orlando or Susan wished to purchase the share of one or both of their sisters, they could do so in circumstances which ensured that the sisters benefitted in equal value from the property.
The content of each of Maria’s prior wills is also consistent with the conclusion that the bequest of the Fairfield property in clause 8 of the Will was a specific gift. The wills show that Maria had always dealt with the Fairfield property specifically, in a way that separated it from the balance of her estate.
There are no strong textual or structural indications in the Will that the Fairfield property was not intended to be a specific gift. The submissions for Orlando did not identify any contrary interpretation of the Will. The submission that the outcome should be a fair and just distribution, which could be given effect by a distribution of 20% of the value of the Fairfield property prior to distributing the balance in equal shares, had no foundation in the terms of the Will. To the extent that it relied on Maria’s wishes as expressed in the 2007 will, there was no basis on which intentions discernible from that will could be used to construe the terms of the 2012 Will, it being clear (and not contested between the parties) that the 2012 Will had revoked all prior wills.[69]
[69]Clause 1 of the Will provided expressed ‘I HEREBY REVOKE all Wills, Codicils and Testamentary Dispositions heretofore made by me’.
It was apparent from Orlando’s reliance on the Pontifical Society case, which dealt with an application under the Testator’s Family Maintenance Acts 1914-1952 (Qld), that what he was seeking was a departure from the terms of the Will. There was no such application arising in this case and no basis on which I should depart from the express terms of Maria’s Will.
Conclusion: the Fairfield property was a specific gift and s 83A of the Powers of Attorney Act applies
I conclude for the above reasons that the bequest of the Fairfield property in clause 8 of the Will was a specific gift. By the terms of clause 8 it was a specific gift in equal shares to the four children. That property having been sold pursuant to powers under an enduring power of attorney, s 83A of the Powers of Attorney Act applies to the effect that their interest in the property remains, as if no sale had been made. This means that the proceeds properly referable to the sale of the property remaining in the RAD, and in CBA Account 9532 will be the subject of the bequest of the Fairfield property in clause 8, subject to the payment of expenses pursuant to clause 3.
Alternative argument: the RAD was not an ‘investment’
It was also argued in the alternative, if the plaintiffs’ argument as to the application of s 83A was not accepted, that the RAD was not an ‘investment’ and did not, therefore, fall within the scope of clause 7 of the Will, [70] with the result that it would form part of the residue of the estate and fall to be distributed under clause 8. Given that the argument was put in the alternative, my conclusion above makes it unnecessary to address this issue.
[70]Originating Motion par 4(d); Submissions in Plaintiff’s Reply Submissions dated 19 April 2024.
Further, there appeared to be agreement between the parties that the RAD should be shared equally between the four children. The plaintiffs submitted that the RAD should be divided equally between the four children.[71] It was also submitted for Orlando that the RAD should be split equally amongst all of them.[72] It was not identified for Orlando whether this was on the basis of a specific interpretation of the will (for example whether it was through the application of s 83A, or because it was not an investment and so formed part of the residue), but it was at least clear that the outcome was common ground.
[71]Transcript 26/04/24 T48.15-.21.
[72]Transcript 26/04/24 T69.20-.30.
In the circumstances there does not appear to be any utility in addressing the arguments of the plaintiff on this issue.
The appropriate relief
The plaintiffs provided, shortly in advance of the hearing, a draft set of orders which set out the specific declarations and orders sought. These were limited to the first three declarations referred to in the originating motion,[73] but sought additional, or more specific, directions for the administration of the estate.
[73]One of the further proposed declarations sought in the Originating Motion, in par 4(d), related to the alternative argument and was in the alternative to the second and third declarations sought. The final declaration sought was a declaration that ‘[I]n the circumstances, the deceased’s estate should be distributed on the basis that the beneficiaries of clause 8 of the last will of the deceased are entitled to receive, as tenants in common in equal shares absolutely, any money or other property arising from or received in respect of the sale of the deceased’s property known as 1/307 Station Street, Fairfield’.
Given my conclusion above, it is appropriate that I make declarations that:
(a) Clause 8 of the last will of Maria Pozzebon, deceased, (the deceased) dated 28 November 2012 (the Will), included a specific gift of the deceased’s former property at 1/307 Station Street, Fairfield, more particularly described in certificate of title volume 10071 folio 893 (the Fairfield property).
(b) Pursuant to s 83A of the Powers of Attorney Act 2014 (Vic), the beneficiaries of clause 8 of the Will have the same interest in any money or other property arising from or received in respect of the sale of the Fairfield property as they would have if no sale had been made.
I will not make the other declaration sought in the proposed orders, which was in terms that the effect of the sale of the Fairfield property during Maria’s lifetime ‘is that part of the gift in clause 8 of the last will of Maria Pozzebon, deceased, has been adeemed by reason of the sale of the deceased’s property known as 1/307 Station Street, Fairfield’. This declaration did not appear to be necessary in order to apply the terms of s 83A of the Powers of Attorney Act, given the first declaration that the Fairfield property is a specific gift, and noting the terms of the second declaration which reflects the application of s 83A of the Powers of Attorney Act. The declaration also risks being insufficiently specific, in referring to ‘part of the gift in clause 8’.
I also consider it appropriate to make directions for the administration of the estate, given the passage of time since the grant of probate during which there has been limited progress on the part of Orlando as executor and trustee in administering the estate.[74] As noted above at [19], during the course of the hearing the plaintiffs limited the directions sought to a direction to call in assets of the estate, paying unpaid funeral and testamentary debts and expenses, and filing with the office of the Registrar of Probates and serving on the plaintiff a proper account of the administration of the estate.
[74]See paragraph [18] above.
As to the making of directions extending to the distribution of the balances of the bank accounts or the RAD, it was appropriate that the plaintiffs no longer sought those orders and left that issue to be addressed after the account was made. During the course of the hearing submissions were made as to the current balances of the Commonwealth Bank accounts that were described above at [11], which varied from the amounts as at the inventory, and Mr Di Santo on behalf of Orlando also identified that the RAD, had increased in value because of the interest paid on it while in the hands of Aurrum Pty Ltd. It is desirable that orders for distribution not be made until there is a clear statement of the assets of the estate following an account. The account and potentially other inquiries as to the exact allocation of the proceeds of sale of the Fairfield property will assist in the identification of the amounts ultimately to be distributed pursuant to clause 8 of the Will, as construed by reference to these reasons and the declarations I will make.
I will hear the parties as to costs and the form of directions for the administration of the estate.
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