Re Ballan
[2019] VSC 144
•8 March 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY & PROBATE LIST
S ECI 2018 01344
IN THE MATTER of the last will and testament of EMERENZIANA BALLAN
-and-
IN THE MATTER of an application by TIMOTHY ERNEST DAVID BALLAN under section 21 of the Wills Act 1997
| TIMOTHY ERNEST DAVID BALLAN (in his capacity as executor of the will and estate of LUIGINO BALLAN, deceased) | Plaintiff |
| -and- | |
| MARIO GIUSEPPE BALLAN | First Defendant |
| -and- | |
| CONSTANTINO BALLAN | Second Defendant |
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JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 1 November 2018 |
DATE OF JUDGMENT: | 8 March 2019 |
CASE MAY BE CITED AS: | Re Ballan |
MEDIUM NEUTRAL CITATION: | [2019] VSC 144 |
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WILLS AND ESTATES — Court authorisation for making statutory will — Propositus lacks testamentary capacity — Application by grandson of propositus — Where proposed statutory will seeks a gift over clause and provision for testamentary trusts — Wills Act 1997, ss 21, 21A, 21B —Supreme Court (Miscellaneous Civil Proceedings) Rules 2008, O 17 —Re Fenwick [2009] NSWSC 530— Saunders v Pedemont [2012] VSC 574 — Bailey v Richardson [2015] VSC 255.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D Sanders | KCL Law |
| For the First Defendant | MacPherson & Kelly | |
| For the Second Defendant | Mr R Boaden | SBA Law |
HER HONOUR:
Introduction
Emerenziana Ballan was born on 23 January 1923 and is aged 95 years. Mrs Ballan had five children as follows:
(a) Maria Martini (‘Maria’) born 23 December 1944;
(b) Constantino Ballan (‘the second defendant’) born 25 March 1946;
(c) Mario Ballan (‘the first defendant) born 10 March 1948;
(d) Gabrielle (‘Gabrielle’) Ballan born 26 February 1948; and
(e) Luigino (‘Lui’) Ballan born 15 June 1956 and who died on 9 March 2017. Lui was survived by his wife, Diane Ballan, and their two children, Timothy Ballan (‘the plaintiff’) born 11 October 1985 and Gemma Ballan (‘Gemma’) born 3 June 1990.
Probate of Lui’s will dated 7 March 2017 was granted to the plaintiff on 2 August 2017. Pursuant to Lui’s will, his residuary estate was left on a discretionary testamentary trust for the benefit of his wife and children and remoter relatives.
By amended originating motion filed 1 November 2018, the plaintiff, in his capacity as executor of Lui’s estate, seeks an order authorising a will be made for Mrs Ballan in specific terms approved by the Court, pursuant to s 21 of the Wills Act 1997.
It is common ground that Mrs Ballan does not possess testamentary capacity and will never recover testamentary capacity. Pursuant to enduring powers of attorney made before Mrs Ballan lost capacity, Maria and the defendants jointly manage her financial affairs as attorneys, and Maria manages decisions concerning her medical treatment as attorney.
Mrs Ballan’s assets were set out in the affidavits before the Court, however, the focus in this application is on her shares in a company, Fifteenth Chanla Pty Ltd (‘Fifteenth Chanla’). It is common ground that during the lifetime of Lui, Mrs Ballan held her shares in Fifteenth Chanla for the benefit of Lui, and that on her death the shares would be transferred to Lui pursuant to her will. Deeds of settlement entered into on 25 February 2016 by the defendants, Lui and Mrs Ballan by her attorney, in compromise of court proceedings between them and various related entities, record an acknowledgement of this arrangement concerning Mrs Ballan’s shares. Mrs Ballan continues to hold the shares in Fifteenth Chanla in her name.
Mrs Ballan’s last will dated 4 February 1993 appoints the defendants and Lui as her executors and trustees, provides for payment of her debts, funeral and testamentary expenses, leaves all her shares in Fifteenth Chanla to Lui absolutely and leaves her net residuary estate as follows:
(a) one quarter to Maria absolutely;
(b) one quarter to Gabriella absolutely; and
(c) one sixth each to the defendants and Lui absolutely.
Mrs Ballan made previous wills dated 24 December 1971, and 1977. The 1971 will contains no anti-lapse provisions and leaves Mrs Ballan’s estate in four equal shares to the first defendant, second defendant and Lui, with the fourth share collectively to Maria, Gabriella and the second defendant in various proportions. The 1977 will leaves Mrs Ballan’s estate in equal shares to her five children and contains no anti-lapse provision, but does provide that if any child predeceases Mrs Ballan and leaves children, then the entitlement under the will is to be held on trust for the child or children of the child who predeceased.
Procedural history
On 14 September 2018, the plaintiff, in his personal capacity, made an application by originating motion in Form 5D for an order that a will be made for Mrs Ballan in specific terms approved by the Court. No defendants were named in the proceeding and the defendant indicated some urgency in the application given the age of Mrs Ballan. The plaintiff filed an affidavit in his personal capacity sworn 20 July 2018 in support of the application. In that affidavit, the plaintiff’s position was that as Mrs Ballan’s last will does not contain a ‘gift over’ clause in the event of Lui predeceasing her, Lui’s estate will not receive her shares in Fifteenth Chanla and her four remaining children would receive an unintended windfall, unless they also predeceased her.
The proposed will at that time had the effect of amending Mrs Ballan’s last will to appoint the first and second defendants as executors and to add a new clause as follows:
4AIf any child of mine predeceases me or fails to survive me by 30 days then the gift or share that would have passed to that child will pass to his or her estate.
On the first return of the application on 21 September 2018, counsel for the then proposed second defendant submitted that the plaintiff’s premise that the gift to Lui would fail and the four remaining children of Mrs Ballan would receive a windfall was a misconception. It was the case that when the last will comes into operation, the gift to Lui lapses and s 31 of the Wills Act 1958 applies.[1] This means that on the death of Mrs Ballan under her current will, Lui’s children, that is, the plaintiff and Gemma, will take the shares in Fifteenth Chanla, valued at approximately $2 million, as tenants in common in equal shares.
[1]Section 45 of the Wills Act 1997 provides for dispositions to issue not to fail because the issue predeceased the testator. However, pursuant to s 52(1) this applies only to wills made on or after 20 July 1998. Thus, pursuant to s 52(2) of the Wills Act 1997, s 31 of the Wills Act 1958 applies to Mrs Ballan’s current will.
On 17 and 18 September 2018, the plaintiff sent copies of the originating motion and plaintiff’s affidavit in support to Mario, Constantino, Maria and Gabriella. By orders made 3 October 2018, Mario, Constantino and Maria were joined as defendants to the application and directions were made for the filing of affidavits within a short time frame. On 12 October 2018, Maria’s solicitors informed the plaintiff’s solicitors that she would no longer participate in the proceeding.
At the commencement of the trial on 1 November 2018, the plaintiff sought and was granted leave to amend his originating motion to reflect that the plaintiff brings the proceeding in his capacity as executor of Lui’s estate and that the third defendant be removed as a defendant in the proceeding. In an affidavit sworn 30 October 2018, the plaintiff’s solicitor deposed that, having considered the matters raised by counsel for the second defendant at the earlier directions hearing, the plaintiff now seeks ‘a slightly different form of the proposed clause 4A with the effect of the relevant distributions being clearly made to the relevant personal representative for the estate of any child that predeceased’ and counsel for the plaintiff handed the proposed will to the Court .
Clauses 4A and 4B of the proposed will read as follows:
4A.If any child of mine predeceases me or fails to survive me by 30 days (“the Predeceasing child”) then the gift or share that would have passed to that child will pass to the legal personal representative of his or her estate in their capacity as legal personal representative of the said estate.
4B.In the event that the gift or share in clause 4A fails for any reason whatsoever, my Trustee will, on the instruction of the first of any of:
(a)the legal personal representative of the estate of the Predeceasing child;
(b)any child of the Predeceasing child; or
(c)the guardian of any child of the Predeceasing child (as the case may be) (“the Responsible Person”) give that gift or share to a testamentary trust established as follows:
(i)the name of the trust will be determined by the Responsible Person;
(ii)the Appointor of the trust will be the Responsible Person or such other person nominated by the Responsible Person;
(iii)the Trustee of the trust will be the Responsible Person or such other person nominated by the Responsible Person;
(iv)the Beneficiaries of the trust will be:
A. the estate of the Predeceasing child;
B. the children of the Predeceasing child;
C. the grandparents, mother, father, brothers and sisters, spouses, children and grandchildren of those persons listed in Clauses (iv)B above;
D. Eligible Corporations as defined in the Annexure A in relation to any beneficiary set out in Clauses (iv)B. and (iv)C. above.
E. Eligible Trusts as defined in the Annexure A in relation to any beneficiary set out in Clauses (iv)B. and (iv)C. above.
F. Charities as defined in the Annexure A as determined by the Responsible Person.
(v)the terms of the trust are set out in Annexure A.
Annexure A to the proposed will is a 12-page, single-spaced document containing detailed provisions that apply ‘[i]n respect of the testamentary trusts created pursuant to this Will.’ These provisions include, amongst other things, defined terms, how the income and capital of the trust fund is to be administered, vesting of the trust and the powers of the trustee and appointor.
Applicable principles
Pursuant to s 21 of the Wills Act 1997 (‘the Act’), any person may make an application for an order authorising a will to be made in specific terms approved by the Court on behalf of a person who does not have testamentary capacity.
Section 21A of the Act provides a comprehensive list of the information that an applicant, if required by the Court, must provide in the affidavit. This information is also referred to in r 17.05(3) of the Supreme Court (Miscellaneous Civil Proceedings) Rules 2008 and includes matters such as the general nature of the application, a reasonable estimate of the size and character of the estate, a proposed will for which authorisation is sought and the available evidence to each of the matters set out in s 21A(d) to (k) of the Act and any other evidence relevant to the application.
Section 21B of the Act provides that, before making an order, the Court must be satisfied that:
(a) the person on whose behalf the will is to be made or revoked does not have testamentary capacity; and
(b) the proposed will or revocation reflects what the intentions of the person would be likely to be, or what the intentions of the person might reasonably be expected to be, if the person had testamentary capacity; and
(c) it is reasonable in all the circumstances for the Court, by order, to authorise the making of the will for the person.
Testamentary capacity – s 21B(a)
The first matter of which the Court must be satisfied is that the propositus does not have testamentary capacity. The test is uncontroversial and the principles have been applied by the High Court[2] and at intermediate appellate levels across Australia.[3] The classic statement as to the legal test for testamentary capacity is stated in Banks v Goodfellow:
It is essential to the exercise of [a testamentary] power that a testator shall understand the nature of the act and its effects; shall understand the extent of the property of which he is disposing; shall be able to comprehend and appreciate the claims to which he ought to give effect; and, with a view to the latter object, that no disorder of the mind shall poison his affections, pervert his sense of right, or prevent the exercise of his natural faculties – that no insane delusion shall influence his will in disposing of his property and bring about a disposal of it which, if the mind had been sound, would not have been made.[4]
[2]See, eg, Bailey v Bailey (1924) 34 CLR 558, 566 (Knox CJ and Starke J); Timbury v Coffee (1941) 66 CLR 277.
[3]See, eg, Kantor v Vosahlo [2004] VSCA 235; Zorbas v Sidiropoulous (No 2) [2009] NSWCA 197; Frizzo v Frizzo [2011] QCA 308, [24]; Tobin v Ezekiel (2012) 83 NSWLR 757.
[4](1870) LR 5 QB 549, 565.
Testamentary intentions of the person on whose behalf the will is to be made – s 21B(b)
The second matter of which the Court must be satisfied is that the proposed will reflects what the intentions of the person would be likely to be, or what the intentions of the person might reasonably be expected to be, if the person had testamentary capacity.
Before the amendments to the Wills Act 1997 made in 2007, the legislation required that the proposed will would accurately reflect the likely intentions of the person if she or he had testamentary capacity. This condition presented difficulties as these words were to be applied in widely different situations.
In State Trustees v Do, Bell J explained the effect of the legislative changes as follows:
The significance of the amendment is that the court is no longer required to be satisfied that the proposed will would ‘accurately’ reflect the person’s likely intentions. It is sufficient for the court to be satisfied that it would reflect their ‘likely’ or ‘reasonably ... expected’ intentions. In that regard, the nature of the specified information illuminates the scope of the court’s function. A broad-brush approach is required, for otherwise the beneficial purpose of the function might be defeated. [5]
[5][2011] VSC 45, [11].
First limb of s 21B(b)
The first limb of s 21B(b) focuses on whether the proposed will reflects what the intentions of the person would be likely to be, if he or she had testamentary capacity. If the person has never made a will, there is no yardstick as to what his or her testamentary intentions were when he or she had capacity. Where there is a paucity of evidence, the Court cannot be satisfied of what the intentions of the person would be likely to be if he or she had testamentary capacity.
Where previous wills are in existence and it is not disputed that the person had testamentary capacity when those wills were executed, those wills provide evidence of the person’s testamentary intentions prior to losing testamentary capacity. This assists a court to identify a mind with an intention, and that would usually assist the Court in determining what the person’s intentions would be likely to be, if he or she had testamentary capacity.[6]
[6]Ibid [12]; Re Gillam [2016] VSC 5, [25].
Second limb of s 21B(b)
Under this limb, the Court must be satisfied that the proposed will reflects what the intentions of the person might reasonably be expected to be if the person had testamentary capacity. The nature of this limb is that various forms of a proposed will may meet the test.
The second limb to s 21B(b) will be met if the Court is satisfied on the balance of probabilities that the proposed will reflects what the person’s intentions would be likely to be; or what his or her intentions might reasonably be expected to be; or that there was a fairly good chance that it reflected what his or her intentions might be; or that some reasonable people could think that it reflected what might be his or her intentions; or that some reasonable people could think that there was a fairly good chance that it reflected what might be his or her intentions, if he or she had testamentary capacity.[7]
[7]Saunders v Pedemont [2012] VSC 574, [97]; Bailey v Richardson [2015] VSC 255, [169] (McMillan J).
In Saunders v Pedemont, Habersberger J refused an application under s 21 of the Act. On the second limb to be considered under s 26,[8] his Honour quoted Bell J in State Trustees v Do and said:
Whilst the phrases now used in the Victorian Act require the proposed will to reflect “what the intentions of the person would be likely to be” or “what the intentions of the person might reasonably be expected to be”, and are therefore different to the “reasonably likely” wording of the New South Wales Act, I consider Palmer J’s analysis of that wording to be of assistance in construing the alternative phrase in s 26(b). To adopt his Honour’s language, the phrase can mean “a fairly good chance that the proposed will reflects what might be the testator’s intentions”, or “some reasonable people could think that the proposed will reflects what might be the testator’s intentions”, or “some reasonable people could think that there is a fairly good chance that the proposed will reflects what might be the testator’s intentions”.[9]
[8]At the time of these applications, the provisions of s 21B were contained in almost identical terms in s 26 of the Wills Act 1997 (Authorised Versions No 15 and 16), save that under s 26, the Court had to be satisfied of these provisions, prior to giving leave to make the application under s 21, rather than approving an application. This reflects changes made to s 21 of the Act, which no longer requires a person to be given leave prior to making an application.
[9]Saunders v Pedemont [2012] VSC 574, [97] quoting State Trustees v Do [2011] VSC 45.
Reasonable in all the circumstances – s 21B(c)
Under this heading, the Court must be satisfied it is reasonable in all the circumstances for the Court to authorise the making of the will for the person. Satisfaction of the first two conditions of s 21B does not necessarily mean that the Court will authorise the proposed will. The third condition invokes the Court’s discretion.[10] An instance where a court has elected not to proceed to authorise a statutory will was where the proposed will was drawn to defeat a creditor by substituting the wife of a beneficiary so that she could provide for the original beneficiary indirectly and prevent his creditors from being paid the debts due to them.[11] Another instance was where the proposed will sought to avoid the son’s inheritance pending his divorce proceeding.[12] In addition to these types of policy issues, the discretionary judgment of the Court will also be affected by the statutory factors listed in the relevant legislation.
[10] Boulton v Sanders (2004) 9 VR 495, 499 per Dodds Streeton JA; Re Will of Jane [2011] NSWSC 624 [85], [96] (Hallen AsJ); Secretary, Department of Family and Community Services v K [2014] NSWSC 1065 [14] (Lindsay J).
[11]Hausfield v Hausfield [2012] NSWSC 989, [13] (White J).
[12]ADT v LRT [2014] QSC 169 (Flanagan J).
Consideration
Does the propositus have testamentary capacity?
It is common ground that Mrs Ballan does not possess testamentary capacity and will never recover testamentary capacity. She is not able to express any relevant wishes.
Does the proposed will reflect what Mrs Ballan’s intentions would be likely to be, or might reasonably be expected to be, if she had testamentary capacity?
The proposed will adds considerable complexity to her existing will, which is simple and straightforward. In particular, it provides for the possible creation of testamentary trusts, which trusts would be governed by the extensive provisions contained in Annexure A to the proposed will.
It is clear from Mrs Ballan’s current will and her 1971 will, that she intended her children to benefit directly from her estate and, in the event of her children predeceasing her, for the predeceasing child’s children to receive that benefit directly. While less weight can be placed on the copy of the 1977 will as it is unexecuted, its provisions are broadly consistent with Mrs Ballan’s previous intentions in the 1971 will and her current intentions as recorded in the last will. While the plaintiff disputed the relevance of the 1971 will or copy of the unexecuted 1977 will, he conceded that the last will was drafted after the family’s various business interests grew, and Fifteenth Chanla had been incorporated.
The last will records Mrs Ballan’s testamentary intentions against the backdrop of the family business interests, and her holding of the Fifteenth Chanla shares beneficially for Lui for tax reasons. The defendant submitted, and the Court accepts, that in looking at Mrs Ballan’s previous wills, it should be inferred that there was a knowing reliance on the provisions of s 31 of the Wills Act 1958, particularly in circumstances where all of the wills were drafted by solicitors. However, as submitted by the plaintiff, this does not mean that Mrs Ballan’s testamentary intentions may not have changed since then, in light of other developments, such as the court proceedings, the deeds of settlement in 2016, Lui’s testamentary intentions and Lui’s death.
The plaintiff’s submissions concerning what Mrs Ballan’s current intentions were likely to be, or might reasonably be expected to be, were predicated on a range of issues concerning Lui and to a lesser extent, the plaintiff. These issues included Lui’s status as ‘the child [Mrs Ballan] said she trusted the most’, his central role in being responsible for ‘most of the administrative and financial matters regarding the various family interests’, his conduct in performing these duties unpaid on the basis of the understanding that Lui was an equal one-third owner of all Ballan Group assets, and Lui’s testamentary intentions. The plaintiff relied on the terms of the deeds of settlement as evidence not only of Lui’s intentions in this regard, but also that it was a common intention of the signatories of the deeds, including the first and second defendant and Mrs Ballan by her attorney, that Lui’s interest in the Fifteenth Chanla shares not be divided.
The plaintiff also submitted that he continued in his father’s stead of managing the assets of Fifteenth Chanla and was not paid for doing this on the understanding that the shares would pass to Lui’s estate on Mrs Ballan’s death. The plaintiff submitted that Lui intended for the Fifteenth Chanla shares to be held by his estate, so that his estate, his wife, the second defendant and his wife, would all have the same interest in shares in Fifteenth Chanla. The plaintiff relied on these facts to support an inference that Mrs Ballan would have wanted the gifts in her will to be distributed in such a way as to give effect to Lui’s testamentary intentions.
The second defendant submitted that the history of proceedings between the family members and the deeds of settlement have no bearing on the will, or the changes to the will the plaintiff now seeks. In particular, these circumstances do not elucidate what Mrs Ballan’s wishes might have been had she considered the possibility of Lui predeceasing her.
The plaintiff’s reliance on the terms of the deeds of settlement as reflecting Mrs Ballan’s intentions that the shares would pass to Lui’s estate, rather than to his children in equal shares, in the event he predeceased her, cannot be maintained. The terms were signed on Mrs Ballan’s behalf by her attorney. As such, without more, they do not reflect Mrs Ballan’s intentions, but her attorney’s acceptance of the terms as being in Mrs Ballan’s best interests. Further, the terms are silent as to the understanding of the parties of what would occur if one of Mrs Ballan’s children predeceased her and, despite referencing the effect of the last will, are predicated on the assumption that none of her children would predecease her.
The plaintiff also submitted that, given the complicated nature of Lui’s affairs and his testamentary intentions, it is ‘highly likely’ that Mrs Ballan would have changed her will to reflect the terms of the proposed will, either on Lui’s request, or based on advice concerning asset and tax protection for Lui’s family, ‘consistent with Lui’s own will.’ The relevant inquiry is what Mrs Ballan’s intentions are likely to be, or are reasonably expected to be, if she had testamentary capacity. The plaintiff provided no evidence to the Court that Mrs Ballan’s intentions would likely include, or might reasonably be expected to include, the creation of testamentary trusts so that the assets of her estate would pass to her children or grandchildren beneficially, rather than absolutely, or that she would have changed her will to give effect to Lui’s will.
The plaintiff made submissions concerning the consequences if the proposed will were not authorised by the Court, including that Lui’s testamentary intentions as to his assets would be ‘thwarted’, that Lui’s wife would receive no benefit from Mrs Ballan’s estate, that the plaintiff and his sister might come into future conflict with each other as shareholders in Fifteenth Chanla, and that he, his sister and Lui’s wife may be denied potential tax effectiveness of ‘devolving’ the shares into Lui’s testamentary trusts.
These issues may be dealt with in fairly short order. First, in the absence of sufficient evidence to support the contention that Mrs Ballan intended the shares in Fifteenth Chanla to pass to Lui’s estate, rather than to his children by way of a gift over pursuant to s 31 of the Wills Act 1958 in the event of him predeceasing her, these shares are not assets that Lui owns on his death. In any case, the plaintiff has not established that the ‘thwarting’ of Lui’s testamentary intentions was a factor that Mrs Ballan would take into account as a consideration relevant to her testamentary intentions. Secondly, none of Mrs Ballan’s wills confer any benefit on Lui’s wife and no evidence was provided to the Court that would support such an imputed intention. Thirdly, the possibility of any future conflict between the plaintiff and his sister over control of Fifteenth Chanla is hypothetical and has no apparent relevance to Mrs Ballan’s testamentary intentions. Fourthly, there is no evidence to support the contention that Mrs Ballan has turned, or would have turned, her mind to the tax effectiveness of her testamentary dispositions, let alone those of Lui’s, when forming her testamentary intentions.
The defendant submitted that it is possible the application was misconceived from the outset as the plaintiff’s application appears to have been initiated on the misunderstanding that, as a result of Lui predeceasing Mrs Ballan, the gift to him of the Fifteenth Chanla shares would lapse and not be received by his estate. In light of the amendments to the plaintiff’s application, the Court accepts this submission.
Is it reasonable in the circumstances for the Court to authorise the making of the proposed will for Mrs Ballan?
Given the findings that the proposed will does not reflect what Mrs Ballan’s intentions would be likely to be, or might reasonably be expected to be, if she had testamentary capacity, the Court is not satisfied that it is reasonable in the circumstances to authorise the making of the proposed will for Mrs Ballan.
Conclusions and orders
The plaintiff has not provided sufficient evidence to support a finding that the will, as proposed, reflects what Mrs Ballan’s intentions would be likely to be, or might reasonably be expected to be, if she had testamentary capacity.
The Court orders that the plaintiff’s application be dismissed.
If the parties are unable to agree on the costs of the proceeding, short written submissions are to be filed by 22 March 2019.
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