Proud v Proud & Proud
[2014] WASC 216
•19 JUNE 2014
PROUD -v- PROUD & PROUD [2014] WASC 216
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2014] WASC 216 | |
| 19/06/2014 | |||
| Case No: | CIV:3020/2012 | 8 MAY 2014 | |
| Coram: | MASTER SANDERSON | 8/05/14 | |
| 12 | Judgment Part: | 1 of 1 | |
| Result: | Interim award made | ||
| A | |||
| PDF Version |
| Parties: | JANE PROUD STEPHEN JAY PROUD & SIMON PROUD (as Executors of the Will of Collin Jay Proud) STEHEN JAY PROUD SIMON PROUD MICHAEL JAMES PROUD NEIL PROUD RUBEN JAY NKULULEKO PROUD LEWIS CHARLES PROUD NATASHA SUZANNA PROUD ALLEE PROUD CHRISTIAN PROUD JAKE CHRISTOPHER MICHAEL McARDLE |
Catchwords: | Family Provision Act 1972 (WA) Application for interim distribution from the estate Principles to be applied Basis for exercise of discretion to make interim award |
Legislation: | Family Provision Act 1972 (WA), s 7(1)(d)(i), s 7A, s 11 |
Case References: | MacEwan Shaw v Shaw (2003) 11 VR 95 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
The Will of COLLIN JAY PROUD late of 5 Collier Street, Wembley in the State of Western Australia (Dec)
- Plaintiff
AND
STEPHEN JAY PROUD & SIMON PROUD (as Executors of the Will of Collin Jay Proud)
First Defendants
STEHEN JAY PROUD
Second Defendant
SIMON PROUD
Third Defendant
MICHAEL JAMES PROUD
Fourth Defendant
NEIL PROUD
Fifth Defendant
RUBEN JAY NKULULEKO PROUD
Sixth Defendant
LEWIS CHARLES PROUD
Seventh Defendant
NATASHA SUZANNA PROUD
Eighth Defendant
ALLEE PROUD
Ninth Defendant
CHRISTIAN PROUD
Tenth Defendant
JAKE CHRISTOPHER MICHAEL McARDLE
Eleventh Defendant
Catchwords:
Family Provision Act 1972 (WA) - Application for interim distribution from the estate - Principles to be applied - Basis for exercise of discretion to make interim award
Legislation:
Family Provision Act 1972 (WA), s 7(1)(d)(i), s 7A, s 11
Result:
Interim award made
Category: A
Representation:
Counsel:
Plaintiff : Dr J J Hockley
First Defendants : Mr V J Pelligra
Second Defendant : Mr V J Pelligra
Third Defendant : Mr V J Pelligra
Fourth Defendant : Mr V J Pelligra
Fifth Defendant : No appearance
Sixth Defendant : No appearance
Seventh Defendant : No appearance
Eighth Defendant : No appearance
Ninth Defendant : No appearance
Tenth Defendant : No appearance
Eleventh Defendant : Mr P L Haynes
Solicitors:
Plaintiff : Macdonald Rudder
First Defendants : Slater & Gordon Lawyers
Second Defendant : Slater & Gordon Lawyers
Third Defendant : Slater & Gordon Lawyers
Fourth Defendant : Slater & Gordon Lawyers
Fifth Defendant : No appearance
Sixth Defendant : No appearance
Seventh Defendant : No appearance
Eighth Defendant : No appearance
Ninth Defendant : No appearance
Tenth Defendant : No appearance
Eleventh Defendant : Haynes Legal
Case(s) referred to in judgment(s):
MacEwan Shaw v Shaw (2003) 11 VR 95
1 MASTER SANDERSON: Collin Jay Proud died on 6 August 2011. He left an unexecuted draft of his will which was made sometime between 7 September 2010 and 31 January 2011. On 27 April 2012 this court ordered probate of that unexecuted draft be granted to the first defendants. Probate was granted on 15 June 2012.
2 The plaintiff is the daughter of the deceased. The first defendants are the brothers of the plaintiff and the sons of the deceased.
3 The deceased's estate breaks down into three component parts. The first and most valuable part is a share portfolio comprising just over 38,000 Commonwealth Bank shares and a number of other shares of nominal value. Second there is a bank account which as at the date of the grant of probate had a balance of just over $80,000. Finally, there is the deceased's property in Wembley which has an estimated value of $1 million. This is not an insignificant estate.
4 A copy of the deceased's will appears as attachment JP1 to the plaintiff's affidavit sworn 14 December 2012. For present purposes the significant clause is cl 3. It is in the following terms:
3. Executor to Hold on Trust
(a) My Executor shall hold all of my estate on trust and, subject to the powers set out in this will, after the selling, calling in or converting into money any part of my estate and the payment of all or any debts and testamentary expenses associated with my death or the administration of my estate, shall hold and dispose of my estate as provided in this will.
(b) After the payment of my just debts, funeral and testamentary expenses I direct that:
(i) My house situated at 5 Collier Street Wembley, Western Australia (or any other house in which I reside at the time of my death) shall be sold and my Trustees shall deal with the net proceeds of that sale as follows:
A. 1/5th to be applied by my Trustees firstly in reduction of my daughter Jane Proud's mortgage on her home. The balance of that l/5th interest to be given to Jane absolutely;
B. 4/5th to be divided between my children Stephen Jay Proud, Simon Proud, Michael Proud and Neil Proud in equal shares absolutely.
(ii) The residue of my estate shall be held upon trust in fund to be known as the 'CJ Proud Estate Trust' ('Trust') upon the following terms:
A. My preference is that the Trust holds the Commonwealth Bank shares that I own at the time of my death and invest the residue in acquiring additional Commonwealth Bank shares;
B. the Lease of Grave Number ER 1410 at Pinnaroo Valley memorial Park, Whitfords Avenue, Padbury, Western Australia shall be maintained and renewed during the lifetimes of my children, grandchildren and great grandchildren with all renewal and grave plaque maintenance costs to be met from the income of the Trust;
C. my Trustee shall be paid an annual payment equal to one half of one per centum (1/2%) of the annual income of the Trust which shall be paid from the dividend income of the Trust;
D. the annual net income of the Trust shall be paid every six months in equal amounts to each of the trusts established in this Will.
(d) Upon the death of each of my children ('Deceased') the Income that would have been distributed to the Deceased during the lifetime of the Deceased shall be distributed in equal shares amongst the biological children of the Deceased who survive me and live to attain the age of 18 years ('grandchildren').
(e) Upon the death of each of my grandchildren the Income that would have been distributed to a grandchild during the lifetime of the deceased grandchild (in accordance with the previous clause) shall be distributed in equal shares amongst the children, who live to attain the age of 18 years, of that deceased grandchild so that the grandchildren step into the shoes of their respective parents and share equally the benefits their parents would have enjoyed if they survived.
(f) Upon the death of my last grandchild the surplus Income (if any) and capital of the Trust ('Capital') shall be distributed in equal shares absolutely to my great grandchildren who survive my last surviving grandchild and who live to attain the age of 18 years.
(g) It is my desire that upon the vesting of the Trust my great grandchildren will each consider dealing with their share of my estate in a similar manner in their own will.
5 It was not an issue in these proceedings whether or not this provision of the deceased's will was a valid testamentary disposition. All parties assumed it was. I proceeded on that basis however it is not to be thought I have determined that issue one way or the other. It is a question which may arise in the context of these proceedings or elsewhere.
6 The fourth and fifth defendants are also children of the deceased. The sixth to eleventh defendants are grandchildren of the deceased. Although the grandchildren are presently contingent beneficiaries it is possible any order made in favour of the plaintiff would affect their interests in the future. Joining them as parties is consistent with Practice Direction 9.2.2(7). The eleventh defendant is in a slightly different position from the other grandchildren of the deceased. Through his guardian ad litem he claims to have been partially dependant upon his grandfather as at the date of his grandfather's death. If that is so he would be entitled to make a claim under s 7(1)(d)(i) of the Family Provision Act 1972 (WA) (the Act). There is nothing in the originating summons in its present form which suggests this action is being maintained by the plaintiff on her behalf and on behalf of her son. Perhaps the position will be clarified as the action progresses but at present it is by no means clear the parties have turned their mind to this issue.
7 By chamber summons filed 5 February 2014, the eleventh defendant, through his guardian ad litem, made an application for an interim distribution from the estate. This application was made under the provisions of s 7A of the Act. That section is in the following terms:
7A. Interim order, Court may make
(1) Before making an order under section 6(1), the Court may make an interim order if it is of the opinion that such an order is necessary for the purpose of providing those things immediately necessary for the maintenance, support or education (including past maintenance, support or education provided after the death of the deceased) of any person who was totally or partially dependent on the deceased immediately before the deceased's death.
(2) If the Court makes an interim order, the Court must proceed to determine an application under section 6(1) by confirming, revoking or altering the interim order.
8 The application was supported by the plaintiff and opposed by the first to fourth defendants. The fifth defendant is self-represented and did not appear at the hearing. None of the other defendants apart from the eleventh defendant took any part in the proceedings.
9 After hearing argument I ordered an amount of $40,000 be provided to the plaintiff from the corpus of the estate. I indicated I would provide reasons for that decision. These are those reasons.
10 Section 7A of the Act was inserted in 2011 and became operative on 16 January 2013. This appears to be the first case in this jurisdiction where the section has been considered. In other Australian States there has been some conjecture as to whether at common law it was possible to make an interim order. The section appears to resolve any doubt on that issue in this State. New South Wales is the only other State which directly addresses the issue. Section 62(1) of the New South Wales Act enables orders to be made where the court is of the opinion that no less provision than that proposed to be made by the interim order would be made in favour of the eligible person after full consideration of the application. It is worthy of note there is no such qualification in our Act.
11 There is power in s 11 of the Act for an executor to make a distribution from the estate to any person who was totally or partially dependant on the deceased immediately before his death. The executors in this case took the view the eleventh defendant was not partially dependant upon the deceased at the date of his death and declined to make a distribution. Prior to the enactment of s 7A that would have been the end of the matter. But now that is not the case.
12 Two points need to be made about s 7A. First it embodies a discretion. There is no indication as to how that discretion is to be exercised. Of course it is easy enough to say it must be exercised judicially and in the interests of justice but there is nothing similar to the provision in the New South Wales Act which requires at least a prima facie finding a party making an application will be successful. That leads on to the second point. The section does not limit the party or parties seeking a distribution to those claiming in the action. That in turn leads to the question of who might be entitled to make a claim for interim distribution pursuant to s 7A. It is possible to identify at least three classes of persons.
13 First and most obviously there are the beneficiaries named in the will. Once a claim is notified to the executors of an estate the proper course is for them not to distribute the estate or if the estate has been partially distributed not to make any further distribution. It is not difficult to see how this could create problems; a dependant spouse is an obvious example. It is always possible a final order made under the Act will mean a person or persons who were named as a beneficiary do not in fact receive anything from the estate. But given that to qualify for an interim provision under s 7A the applicant must be dependant wholly or partially on the deceased it would be a rare case where such a beneficiary would be excluded.
14 The second obvious class of person is an applicant seeking provision under the Act. In exercising the discretion contained in the section it is surely necessary to give some consideration to the merits of the claim. That is not to say a final determination is to be made. But there would seem to be a need to establish at least a prima facie case. That is to say the person claiming interim distribution would have to show more than the case was just arguable. Remembering the section is conditioned by a requirement the party making the application establish that they were wholly or partly dependant upon the deceased there would have to be a real possibility if the claim ultimately failed the claimant would not be able to repay the estate. That in itself might be a factor in exercising the discretion. But to my mind the prime consideration would have to be the strength or otherwise of the claimant's case.
15 The third category of person who might seek interim provision is a person in the position of the eleventh defendant. The person in the position of the eleventh defendant is the most unlikely of claimants. He has not brought an application in his own right and there is no mention of a claim by him in the originating summons. Once again before a distribution was made to such a claimant it seems to me it would be necessary to establish at least a prima facie case. When the claimant is an infant, recovery of any interim payment made to him would be unlikely. Great care would be needed before exercising a discretion in his favour. But it must be acknowledged the section anticipates a claim for interim distribution may be made by a party in the position of the eleventh defendant.
16 There is a further difficulty in relation to a party such as the eleventh defendant. His entitlement to make a claim under the Act requires he establish he was wholly or partly dependant upon the deceased at the date of the deceased's death. That is a finding of fact to be made on all the evidence in the context of the application as a whole. But s 7A requires such a finding before an interim order can be made. It is difficult to see how such a finding can be regarded as interlocutory or 'temporary' pending the hearing of the action. Once the issue is determined the finding stands. That places parties such as the second and third defendants who maintain the eleventh defendant was not dependant upon the deceased at a considerable disadvantage. They have to deal with this question without the benefit of all the facts being available and probably without the opportunity to cross-examine relevant persons. If the section had referred to persons who 'may' or 'in all likelihood are' dependant wholly or partially on the deceased the situation would have been different. But the conclusion that a final decision on this issue must be made in the context of an application for an interim award is inescapable.
17 The question then was whether the plaintiff and/or the eleventh defendant was wholly or partly dependent upon the deceased prior to the date of his death. I determined in this case the relevant dependence is that of the plaintiff. I made no determination in relation to the eleventh defendant. As I have indicated if it were the case the eleventh defendant was dependant upon the deceased independent of his parent different considerations would arise.
18 In support of the application reliance was placed on three affidavits. The first in time was an affidavit of Tammy Michelle Mogg who is the guardian ad litem of the eleventh defendant. Her affidavit was sworn 5 February 2014. It has only one paragraph (par 3) which deals with dependency. It is hearsay and it is directed at the dependency of the eleventh defendant. For the present that evidence can be put to one side.
19 The remainder of the affidavit deals with the position of the eleventh defendant. He was born on 18 December 2000. He has had a number of behavioural issues. These are set out in some detail in pars 75 - 89 of the plaintiff's first affidavit. I need not go into detail. Suffice it to say the eleventh defendant appears to have fallen in with the wrong crowd and to have been in trouble with the police. The plaintiff's first affidavit makes it plain she is very concerned about his behaviour and at somewhat of a loss to know how to tackle the problem. Ms Mogg's affidavit explains the eleventh defendant was enrolled in Bunbury Cathedral Grammar School as a boarder. It was hoped this course of action would turn around the eleventh defendant's attitude and improve his academic performance.
20 The strategy worked. In her affidavit of 15 April 2014 the plaintiff explains there has been a marked change in attitude and a lift in academic performance. The difficulty for the plaintiff is she could not meet the school fees. The school was prepared to await payment of its account for a period but indicated if the fees were not up to date by the end of April the eleventh defendant would have to leave the school. It was that prospect which motivated the application for the interim order.
21 The plaintiff's affidavit of 15 April 2014 provides little information about the plaintiff's dependency upon the deceased. What it does say is the deceased paid her $260 per fortnight and was doing so at the date of his death. She says because of her straightened financial circumstances she was partially dependant upon the deceased for her maintenance and for the maintenance of her son. It is clear then there is evidence the plaintiff was at least partially dependant upon the deceased.
22 The application was opposed by the second, third and fourth defendants. Counsel filed detailed submissions and, to be fair, those submissions responded to an application by the eleventh defendant. They were not strictly speaking directed at any dependency on the part of the plaintiff. For instance counsel addressed a good deal of attention to the decision of MacEwan Shaw v Shaw (2003) 11 VR 95. That case dealt with grandchildren who were totally or partially dependant upon the deceased. In that context counsel made the point a private education was a privilege not a necessity. Therefore in the context of a child in the position of the eleventh defendant it could not be said payment of private school fees could give rise to 'dependency' as that word is generally understood. Whatever the merits of that submission, it was irrelevant to my final decision.
23 In the end I took the view there was uncontradicted evidence to the effect the plaintiff was partially dependant upon the deceased. That took into account all of her circumstances - the fact she was of limited means and the fact she was caring for her son. As at the date of death of the deceased the eleventh defendant was not at a private school and indeed it may not have been in contemplation. What is important is that to survive on a day to day basis the plaintiff was dependant upon the largess of the deceased.
24 Once the jurisdiction was enlivened it seemed to me there was compelling reason to make an interim payment. The fact the eleventh defendant had made solid progress at a private school such to give rise to optimism about his future provided sufficient reason to make an interim award which would allow him to stay at the school. The power in the Act is to make an interim award. There appears to be no power to direct the funds provided pursuant to any order be used in a specific way; the discretion contained in the section is not a discretion to order how the funds should be used.
25 There is one further factor which I took into account when making this decision. Under the provisions of the deceased's will the plaintiff would receive at least a one-fifth interest in the income from the shares owned by the deceased. Dividends on those shares had been accruing since the date of death of the deceased. More than $40,000 - the amount the plaintiff sought by way of interim award - was held in the estate and would pass to her. If then her claim failed at trial the $40,000 I ordered to be paid to her could be recovered from the accrued dividends. Thus the integrity of the estate was not at issue.
26 As I have indicated above it seems to me when exercising the discretion conferred by s 7A at least two factors must be considered - the strength of the plaintiff's claim and the likelihood if the claim fails of repayment of any interim award. In this case the plaintiff is actually provided for in the will and there are accumulated dividends to which he will eventually be entitled. So there was no risk of diminishing the estate to the detriment of other beneficiaries. The situation would have been different had the will not made any provision at all for the plaintiff. Then an evaluation of the merits of her claim would have been necessary. But here the fact the estate is not at risk seemed to me to be an overwhelming factor such as to warrant the exercise of discretion.
27 Given there were these accumulated dividends it was the position of the second, third and fourth defendants I should order payment be made to the plaintiff from the dividend stream which was her entitlement. The difficulty with that course is the plaintiff is dependant on social security. Were she to receive $40,000 as a lump sum payment it would affect her entitlement to social security. When this matter reaches a conclusion it would appear on any outcome the plaintiff will be ineligible for any form of social security. She will have an income stream from the Commonwealth Bank shares. But until this matter is resolved the plaintiff should not be put in a position where an interim award will adversely affect her day to day financial position.
28 There is one further feature of s 7A which deserves comment. Section 7A(2) requires the court to proceed to determine an application under s 6(1). The section is mandatory. Quite what the subsection is directed at is unclear. It is the practice in this court for all settlements whether reached privately between the parties or at mediation or indeed settlements at the door of the court to be approved generally by the master. The reason for that is any order made under the Act is discretionary and, at least on one view, it can only be made if the court is satisfied the arrangements are altogether proper. This leaves aside cases where there is a person under a disability. Each and every matter that is settled is reviewed. It is very rare that I would decline to approve a settlement agreed between the parties but it has happened.
29 Thus it would seem to me if the parties were able to reach a settlement in this case or in any case where an interim award was made then a review of the file by the master before approving the order would satisfy the requirement of s 7A(2). So if the parties in this case wish to settle the action they should feel at liberty to do so.
30 It was for these reasons I made an order directing the executors to pay to the plaintiff the sum of $40,000. The costs of the application were reserved.
0
1
1