Re Evans; Marks v Evans
[2023] VSC 4
•12 January 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2021 03577
IN THE MATTER of the will and estate of JOYCE OLGA EVANS, deceased
and
IN THE MATTER of the EVANS FAMILY TRUST
and
IN THE MATTER of an application pursuant to r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic)
| BERNARD MARKS (as one of the joint and several executors of the will and estate of JOYCE OLGA EVANS, deceased) | First Plaintiff |
| and | |
| R.J.A NOMINEES PTY LTD ACN 005 095 885 (in its capacity as trustee of the EVANS FAMILY TRUST) | Second Plaintiff |
| v | |
| BRADLEY GRAYSON EVANS (and others according to the schedule attached) | Defendants |
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JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 3 August 2022 |
DATE OF JUDGMENT: | 12 January 2023 |
CASE MAY BE CITED AS: | Re Evans; Marks v Evans |
MEDIUM NEUTRAL CITATION: | [2023] VSC 4 |
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ADMINISTRATION AND PROBATE – Discharge of executor and trustee – Inability to act due to ill health – Application not opposed by remaining executor or beneficiaries of estate – Vesting orders made – Administration and Probate Act 1958 (Vic) s 34(1)(b) – Trustee Act 1958 (Vic) s 48.
PRACTICE AND PROCEDURE – Executor’s application for judicial advice in respect of compromise of family provision proceeding – Where all affected beneficiaries sui juris and consent to compromise – Whether application necessary – Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 54.02.
SUCCESSION – Wills – Validity of clauses of will – Bequest to charitable and unnamed beneficiaries – Whether validity of clauses of will still in issue in light of compromise – Compromise a replacement of relevant clauses in their entirety – Construction of will – Principles of construction – Meaning of ‘family income fund’.
TRUSTS – Entry into deed of compromise by trustee – Where deed provides for the vesting of a discretionary family trust – Where trust deed gives trustee absolute discretion as to vesting date – Where all living beneficiaries consent to the vesting of trust – Where potential unborn beneficiaries – Whether entry into deed amounts to a fetter of trustee’s discretion.
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APPEARANCES: | Counsel | Solicitors |
| For the First Plaintiff | Mr C Shaw QC and Mr J Kohn | Romer & Co |
| For the First and Second Defendants | Ms U Stanisich | McCullough Robertson Lawyers |
| For the Third and Sixth Defendants | Mr J Korfiatis, solicitor | Webb Korfiatis Family Law |
| For the Fourth and Fifth Defendants | Mr J McCoy | Mitry Lawyers |
| For the Seventh Defendant | Mr S Gannon | Nicholas O’Donohue & Co Lawyers |
| For the Eighth Defendant | Dr P Bender | Victorian Government Solicitor’s Office |
| For the Ninth Defendant |
HER HONOUR:
Introduction
Joyce Olga Evans (‘the deceased’) died on 20 April 2019. Prior to her death, the deceased was an eminent Australian photographer and art historian, a gallery director, and an art curator and a collector.
The deceased was survived by her two adult children, Bradley Evans (‘Bradley’) and Deborah Vanderhoek (‘Deborah’), and her four adult grandchildren, Rebecca Vanderhoek (‘Rebecca’), Jacobus Vanderhoek (‘Jacobus’), Emelia Evans (‘Emelia’) and Tomas Vanderhoek (‘Tomas’) (collectively, ‘the residuary beneficiaries’). The deceased’s fifth grandchild, Stephanie Evans (‘Stephanie’), died in March 2017. Bradley, Deborah, Tomas, Jacobus, Rebecca and Emelia are, respectively, the first, second, third, fourth, fifth and sixth defendants in this proceeding.
The deceased left a will dated 15 April 2017 (‘the will’) and a codicil dated 31 December 2018 (‘the codicil’). By the will and the codicil, the deceased names the first plaintiff, Bernard Marks (‘Mr Marks’) and the ninth defendant, Tom Lowenstein (‘Mr Lowenstein’), as executors and trustees of her estate (collectively, ‘the executors’). Probate of the will and the codicil was granted to the executors on 26 September 2019.
In broad terms, the will and the codicil make several specific gifts and bequests, including two gifts to charitable beneficiaries, and the residue of the estate is to be divided and distributed between the residuary beneficiaries in particular shares.
Berry Street Victoria Incorporated (‘Berry Street’) is one of the charitable objects named in the will and is the seventh defendant. As there are charitable gifts under the will, the Attorney-General for the State of Victoria (‘the Attorney-General’) has been joined as the eighth defendant, in her capacity as the guardian of charities in Victoria (collectively with the residuary beneficiaries and Berry Street, ‘the defendants’).
The will and the codicil also contain specifications in respect of the Evans Family Trust (‘the family trust’). R.J.A Nominees Pty Ltd (‘RJA Nominees’) is the trustee of the family trust and is the second plaintiff (collectively with Mr Marks, ‘the plaintiffs’). As at the date of her death, the deceased was the appointor of the family trust, as well as a director and the sole shareholder of RJA Nominees.
In broad terms, Mr Marks seeks, inter alia, orders for the removal of Mr Lowenstein as an executor of the estate of the deceased and judicial advice pursuant to r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘the Rules’) in respect of a proposed deed that purports to give effect to an agreement reached between Deborah, Bradley, Rebecca, Jacobus, Emelia, Tomas and Berry Street in relation to the distribution of the estate of the deceased and the vesting of the family trust. RJA Nominees seeks judicial advice as to the construction and validity of several clauses of the will, as well as the performance of certain gifts made under the will.
Background
The family trust
The family trust was established by deed of settlement dated 6 August 1975 (‘the trust deed’). The schedule to the trust deed names Guoda Johanna Linden-Roberts as settlor, RJA Nominees as trustee and the deceased as appointor.
Under cl 1(1) of the trust deed, the primary beneficiaries of the family trust are identified as the persons described in the fourth item of the schedule, and cl 1(2) defines the general beneficiaries as the primary beneficiaries and their children, spouses, widows and widowers and the children, spouses, widows and widowers of the children of the primary beneficiaries, as well as such additional persons as are named in the fifth item of the schedule. The fourth item of the schedule identifies Deborah and Bradley as the primary beneficiaries of the family trust. The deceased is nominated as an additional general beneficiary in the fifth item of the schedule.
Under cl 1(5) of the trust deed, ‘vesting day’ is defined as ‘the date specified in the seventh part of the schedule or such earlier date as the trustee may in its absolute discretion in writing appoint’. The schedule to the trust deed identifies the vesting day of the family trust as 80 years from the date of settlement, being 6 August 2055, and the perpetuity period is defined in the same manner.
The trust deed provides the trustee with an ‘absolute and uncontrolled’ discretion to deal with assets of the family trust. Clause 14 provides the trustee with a broad discretion to revoke, add to or vary any provisions of the trust deed with the consent of the appointor. Such alterations or variations may relate to the management and control of the assets of the trust or the powers and discretions of the trustee.
Pursuant to the power in cl 14, a deed of variation of trust was executed on 16 September 1998 (‘the deed of variation’). Clause 2(a) of the deed of variation amends the definition of appointor under the trust deed to ‘entitl[e] but not oblig[e]’ the deceased to appoint a person to succeed or replace her in the office of appointor. Failing such an appointment, cl 2(b) of the deed of variation provides that upon the death of the deceased, her legal personal representative will succeed her as appointor.
At the time of her death, the deceased was appointor of the family trust, as well as a director and the sole shareholder of RJA Nominees. Mr Lowenstein was also a director of RJA Nominees, having been appointed as such on 17 September 1998. He retains his directorship at present. A company extract for RJA Nominees exhibited to an affidavit sworn by Bradley on 15 December 2021 shows that Mr Marks was also appointed as its director on 25 March 2020, and that as at 30 September 2021, both of the shares in RJA Nominees were beneficially held by Mr Lowenstein.
Bradley deposes that RJA Nominees is the registered proprietor of a property located in Paddington, Sydney (‘the Paddington property’). In his affidavit affirmed 4 October 2021, Mr Marks deposes that he is satisfied that RJA Nominees holds the Paddington property in its capacity as trustee of the family trust.
The will
By the will, the deceased revokes all previous testamentary dispositions and makes the following relevant directions in relation to the distribution of her estate:
(a) Under cl 4, the executors are directed to arrange for the erecting of an installation in a public place, ‘such as a public park or the grounds of a university, public library or museum or gallery’ (‘the installation’). Clause 4 directs that the installation is to incorporate a water fountain previously installed in the garden of the deceased’s home, and must bear a plaque in commemoration of the deceased. The executors are authorised to expend the sum of $25,000 on the installation, including landscaping costs, and directed to set aside a further amount for the maintenance and running costs of the installation. Within cl 4, the deceased notes that she has discussed the installation with Stonnington City Council, who have ‘agreed in principle’ to make an area available for the installation in Prahran, Victoria.
(b) Under cl 5, various pecuniary legacies are to be paid, the details of which are not relevant to the issues arising in the proceeding. It is further specified that, should any of the recipients of such legacies fail to survive the deceased by a period of 60 days, the recipient’s entitlement is not to be paid to their estate but instead ‘shall form part of the Family Income Fund’.
(c) Clause 7 provides for a gift of $500,000 to Berry Street, which is to be applied for ‘the political advocacy and support of children’s rights, in particular, political change and law reform to improve the Victorian and Federal foster care system’.
(d) Under cl 8, a further gift is made to Berry Street in the sum of $200,000 on condition that the funds are used to assist families with children who have been the victims of sexual or physical abuse, as well as families with children who have committed acts of abuse against others. A further condition attached to the bequest is that Berry Street work in conjunction with Emelia to carry out this project. The deceased states that she does not request that Berry Street employ Emelia, but that she does ‘expect that they earnestly seek her out and do everything necessary to allow her to work on this project’. Clause 8 further provides that, if Emelia is ‘able to make a proper long-term (but part-time) commitment… say, involvement on average two times a week’ to the project, she will be entitled to an allowance of up to $80,000 over two years.
(e) In cl 9, the deceased classifies her photographs, negatives, slides, books and manuscripts into four categories, described in sub-cls (a)–(d). The items described in cl 9(a) are dealt with under cl 13, discussed below. Sub-cls (b)–(d) are dealt with under cls 10, 14 and 15, but it is unnecessary to set out any detail in this regard.
(f) Clause 11 directs the executors to arrange for the preparation of a ‘high quality publishable manuscript’ on the deceased’s photographic works and career. The executors are directed to ‘do all things necessary to complete… publication and distribution’ of this manuscript as a book or books, ‘including the expenditure of all funds necessary’ for such. The executors are stated to have absolute discretion in respect of the sum of money required for the completion of the manuscript and publication and distribution of the book or books.
(g) Clause 13 contains a gift of the items falling within the category described in cl 9(a) of the will, in addition to the sum of $1,500,000 to one of three institutions specified in cl 20, or ‘any other public library or educational institutions that in the opinion of [the executors] has a robust interest in the history, research and teaching of photography’. The gift is made on several conditions, including that the funds be applied ‘for the purpose of creating and maintaining a permanent facility which will include its own library and research space for the study of photography’, which is to house the items described in cl 9(a) of the will within a permanent collection. The institution is also required to apply part of the income from the fund to create a fellowship for a person undertaking research or study in photography.
(h) By cl 16, the residue of the deceased’s estate is to be divided and distributed between her children and grandchildren, with Deborah and Bradley each entitled to a 20 per cent share of the residue of the estate and Rebecca, Jacobus, Emelia and Tomas to each receive 15 per cent of the residue of the estate. This distribution is to occur 24 months after probate of the will is granted.
(i) Clause 18 provides that, if the deceased holds any office in relation to the family trust at the time of her death, that office will form part of her estate.
(j) By cl 19, the executors are endowed with various powers, including to pay and receive executors’ and trustees’ commission. It is further specified that the costs of probate, accounting and legal fees and executors’ commissions ‘shall be payable from the Family Income Fund’.
The codicil
By the codicil, the deceased directs that all provisions and clauses of the will remain in effect, subject to the following relevant modifications and revocations:
(a) Clause 11 of the will is amended to require the creation of two manuscripts about the deceased’s photographic works and career. In the time between the creation of the will and the signing of the codicil, the deceased is said to have entered into two agreements for the publication and distribution of manuscripts relating to her photographic work and career:
(i) An agreement with the National Library of Australia dated 26 September 2017 (‘the NLA agreement’). Mr Marks deposes that a digital copy of the manuscript the subject of the NLA agreement is in the possession of the executors. There is evidence of ongoing correspondence between the executors and the National Library of Australia in respect of progress of the publication, but the final manuscript is yet to be approved. On 21 June 2022, a representative of the National Library of Australia contacted the executors by e-mail and provided an estimated budget of $42,500 for the finalisation of the publication. In addition to this sum, Mr Marks deposes that the author of the manuscript the subject of the NLA agreement has provided the executors with an invoice in the sum of $5,000.
(ii) An agreement with Australian Scholarly Publishing Pty Ltd dated 18 December 2018 (‘the ASP agreement’). Mr Marks deposes that the book the subject of the ASP agreement has been completed and is currently stored in a secure facility, but no further arrangements for its distribution have been made.
(b) Clause 18, relating to the family trust, is amended to include a direction that if the family trust is the owner of the Paddington property at the time of the deceased’s death, the trustee is to ‘do everything in its power to… provide a life interest in [the Paddington property] to … Tomas for his exclusive use’, on condition that he pay all rates, taxes and levies associated with the Paddington property. The deceased further directs that:
On Tomas’ death, or if he does not wish to or is unable to pay the municipal and council rates and levies associated with [the Paddington property], the land tax, and body corporate or company title charges, the [Paddington] property shall be sold by the trustee and the net profits (after the payment of taxes and other charges), together with the remaining corpus of [the family trust], shall be divided equally between those of Deborah, Bradley, Emelia, Rebecca, Jacobus and Tomas then living and [the family trust] shall then be vested.
The family provision proceeding and the mediation
Following the death of the deceased, Deborah and Bradley commenced proceeding no. S ECI 2020 01539 on 27 March 2020, by which they sought further provision from the deceased’s estate (‘the family provision proceeding’). In their submissions in this proceeding, the plaintiffs claim that in light of the family provision proceeding, the executors have not yet dealt with or distributed certain assets of the estate, including specifically the bequest under cl 13 of the will and the residue of the estate.
A mediation of the family provision proceeding held on 27 October 2020 (‘the mediation’) was attended by the residuary beneficiaries and Mr Marks, all of whom were legally represented, as well as legal representatives for Berry Street and for the Attorney-General.
Prior to the mediation, Deborah and Bradley circulated a ‘without prejudice’ position paper to all attending parties, which set out the basis upon which the family provision proceeding was brought. By letter dated 5 October 2020, the executors advised the parties attending the mediation that they did not propose to submit a position paper and intended to abide by any unanimous decision reached by the beneficiaries. In this letter, the executors also expressed a ‘fervent hope’ that the beneficiaries could reach a unanimous agreement so as to avoid litigation.
Agreement was reached between the residuary beneficiaries as to the distribution of the deceased’s estate during the mediation. This agreement was set out in a heads of agreement dated 27 October 2020 and signed by each of the residuary beneficiaries and the legal representative of Berry Street (‘the heads of agreement’). Consent to the compromise set out under the heads of agreement was provided by the Attorney-General in a letter dated 30 March 2021.
Clause 1 of the heads of agreement provides that the parties to the agreement intend that it be legally binding, and agree to use their best endeavours to negotiate in good faith in respect of any outstanding matters concerning the administration of the deceased’s estate. Clause 1 also provides that, upon the resolution of these outstanding matters, the parties will enter into binding terms of agreement containing the subject matter of their concluded agreement, in particular, the terms of the compromise of the family provision proceeding.
Under cl 2 of the heads of agreement, the parties agree that, subject to the approval of the Attorney-General, they will seek the agreement of the executors to administer the estate of the deceased in the following manner:
(a) In lieu of the gifts to Berry Street under cls 7 and 8 of the will, a gift in the sum of $350,000 on the condition that at least $200,000 be applied for the purposes provided for within cl 8 of the will;
(b) A gift in the sum of $80,000 to Emelia, to be made in two instalments of $40,000, in consideration of her complying with cl 8 of the will;
(c) In lieu of the gift to an inchoate charity beneficiary under cl 13 of the will, a bequest in the sum of $200,000; and
(d) The distribution of the net residuary estate of the deceased between the residuary beneficiaries, with Deborah and Bradley each entitled to a 25 per cent share and Rebecca, Jacobus, Emelia and Tomas each entitled to a 12.5 per cent share.
By cl 2.3, the parties undertake to seek the agreement of RJA Nominees to make all such decisions and do all such things as are required, in the exercise of its discretion, to determine to vest the family trust, including to call in or otherwise realise the trust assets and pay all debts and liabilities. If such agreement can be obtained, the trust fund is to be distributed in the same manner as the residuary estate, that is, with Deborah and Bradley each to receive a 25 per cent share, and Rebecca, Jacobus, Emelia and Tomas each entitled to a 12.5 per cent share.
Beyond this, the heads of agreement does not disturb the beneficial entitlements of any other individual named in the will or the codicil.
The proposed deed
Following this, the residuary beneficiaries sought to formalise the contents of the heads of agreement, and a draft deed of release and indemnity, dated 25 August 2021, was prepared by Deborah and Bradley’s solicitors (‘the proposed deed’). In addition to embodying the compromises set out in the heads of agreement, the proposed deed provides the executors with a full indemnity and release from and against all claims in respect of the administration and distribution of the estate of the deceased.
Clause 2 of the proposed deed requires the executors seek an order from the Court approving the agreement contained within its terms as follows:
The Executors shall seek an order from the Supreme Court of Victoria pursuant to r 54.02(2)(c)(i) of [the Rules] approving the agreement contained in the terms of this Deed, no later than 30 days from this Deed being executed by the Parties.
The manner in which the estate of the deceased is to be administered is set out in cl 3.1 of the proposed deed. In substance, it provides that within 14 days of the execution of the deed, the executors are to give effect to cls 5, 6, 10 and 12 of the will and make an interim distribution to the residuary beneficiaries. The proposed deed also sets out a scheme by which the balance of the deceased’s chattels are to be distributed and dealt with, as agreed upon by the residuary beneficiaries.
Clause 3.1(c) requires that, following the Court’s approval of the proposed deed, the executors make a further interim distribution to the residuary beneficiaries and give effect to the gifts to Berry Street, Emelia and the inchoate charitable beneficiary on the following terms:
(c)Within 14 days of the Court’s approval of the terms of this Deed, the Executors shall:
…
(ii)pay the sum of $350,000 to Berry Street in lieu of its entitlements under clauses 7 and 8 of the Will, on the condition that at least $200,000 be applied to the purposes provided for in clause 8 of the Will;
(iii)pay the sum of $80,000 to Emelia in satisfaction of her entitlements under clause 8 of the Will on the basis that Emelia warrants that she shall make a proper long-term (but part-time) commitment of, say, involvement on average two times a week over a two year period commencing on the date of this Deed to support Berry Street to carry out its purpose and values;
(iv)pay the sum of $200,000, in lieu of any provision made in clause 13 of the Will, to the inchoate charity beneficiary in accordance, to the extent necessary, with a scheme approved by the Attorney-General of Victoria, whether pursuant to section 4 of the Chanties Act 1978 (Vic) or otherwise; …
In addition, cl 3.1(c)(i) requires the executors to arrange for the erecting of the installation described in cl 4 of the will. However, instead of the location contemplated in the will, cl 3.1(c)(i) of the proposed deed provides that the installation be installed and maintained at Montsalvat, an artists’ community located in Eltham, Victoria, at which the deceased frequently attended events, and to which the deceased often donated money. Clause 3.1(c)(i) provides that the installation is to be installed and maintained at Montsalvat’s own expense.
The catalyst for this change is explained by Emelia in her affidavit sworn 23 December 2021 as reflective of a desire she deposes was expressed frequently by the deceased following the death of Stephanie in 2017. Stephanie’s funeral was held at Montsalvat, and Emelia deposes that Montsalvat became a special place for her family following Stephanie’s death. She states that after Stephanie’s death, the deceased ‘voiced often’ her desire to change cl 4 of the will to provide that the installation be erected at Montsalvat, and regularly instructed Emelia to remind her to contact Mr Marks and arrange for the will to be changed to reflect this desire. Emelia further deposes that:
[A]ll family members unanimously agree that [the deceased] was vocal and expressed her desire to leave her memorial fountain to Montsalvat. All family members after [the deceased’s] passing agreed as per the [proposed] deed that they also personally would find great comfort to their grief if [the installation] be placed at Montsalvat.
Montsalvat has agreed to accept [the installation] with a plaque inscribed with [the deceased]’s name, birth and death dates and her children and grandchildren, past and present.
Under cl 3.1(d), final distribution of the residue of the estate is to occur by a specified date and in the following order:
(a) The legal costs of each of the residuary beneficiaries in respect of this proceeding and the family provision proceeding are to be paid from the estate;
(b) The legal costs of the executors in respect of this proceeding and the family provision proceeding are to be paid from the estate, fixed in the sum of $75,000;
(c) The executors are to receive their executors’ and trustees’ charges and commissions from the estate, fixed in the total sum of $25,000, in full and final satisfaction of all professional fees, charges and commissions to which they are entitled; and
(d) The balance of the residue of the estate is to be distributed to the residuary beneficiaries in their agreed shares, that is, with Deborah and Bradley each to receive a 25 per cent share, and Rebecca, Jacobus, Emelia and Tomas each entitled to a 12.5 per cent share.
Clause 3.2, which relates to the family trust, provides that RJA Nominees shall, by a specified date:
(a) Call in, sell or otherwise convert into cash all assets of the family trust;
(b) Pay all liabilities, expenses, outgoings and taxes; and
(c) Do all such things as are required to determine to vest the family trust by nominating a particular vesting day and distributing the trust fund no later than one week after this date in the same manner as the residuary estate, that is, with Deborah and Bradley each receiving a 25 per cent share, and Rebecca, Jacobus, Emelia and Tomas each entitled to a 12.5 per cent share.
Finally, by the proposed deed, Deborah and Bradley agree to settle the family provision proceeding in consideration of the proposed deed, and each of the residuary beneficiaries jointly and severally releases and discharges the executors and one another from and against all claims against the estate of the deceased. Each of the beneficiaries further agrees to release and discharge the deceased, the estate of the deceased, the executors and RJA Nominees from and against all claims arising from the administration and distribution of the estate, and to indemnify the executors and RJA Nominees from and against all such claims.
A copy of the proposed deed, signed by each of the residuary beneficiaries, was provided to the plaintiffs’ solicitors by letter from the solicitors for Deborah and Bradley dated 1 September 2021. The plaintiffs have not yet executed the proposed deed.
Health of Mr Lowenstein
Since at least early 2021, Mr Lowenstein has suffered from several medical conditions. Exhibited to an affidavit of Mr Marks are medical reports from Associate Professor Michael Rose of Malvern Memory and Geriatrics and Dr Robert Lefkovits of Cabrini Medical Centre dated 6 May 2021 and 11 May 2021, respectively. In his report, Associate Professor Rose notes his impression of Alzheimer’s disease and expresses the view that Mr Lowenstein ‘should withdraw from his role as director/executor due to ill health’. Similarly, Dr Lefkovits states that Mr Lowenstein ‘continues to suffer from various medical conditions’ and ‘is not fit to undertake any activities of a particularly taxing or stressful nature for the foreseeable future’.
On 4 October 2021, Mr Lowenstein sent a letter to the plaintiffs’ solicitors in which he advised that he was in receipt of the originating motion for this proceeding, but due to deteriorating health, would not be participating in the proceeding.
Plaintiffs’ application
By originating motion dated 27 September 2021, the plaintiffs set out 18 paragraphs of the relief or remedies sought by them, although some of the claims relate only to one or other of the plaintiffs, rather than both. The relief or remedies sought include:
(a) An order pursuant to s 34(1)(c) of the Administration and Probate Act 1958 (Vic) (‘the Administration and Probate Act’) for the removal of Mr Lowenstein as executor of the will and the estate of the deceased;
(b) If necessary, an order pursuant to s 48(1) of the Trustee Act 1958 (Vic) (‘the Trustee Act’) for the removal of Mr Lowenstein as trustee of the estate of the deceased;
(c) An order for the appointment of Mr Marks as sole administrator of the will and the estate of the deceased and sole trustee of the estate of the deceased;
(d) Any such orders as may be necessary for the vesting of the estate of the deceased in Mr Marks;
(e) A direction that the executors are justified in entering into a deed or agreement with Deborah, Bradley, Rebecca, Jacobus, Emelia, Tomas and Berry Street to compromise the family provision proceeding which includes terms to the effect of those contained within cl 3.1 of the proposed deed;
(f) Further or alternatively, a direction that the executors are justified in entering into a deed or agreement with Deborah, Bradley, Rebecca, Jacobus, Emelia, Tomas and Berry Street to vary the terms of the will and the codicil which includes terms to the effect of those contained within cl 3.1 of the proposed deed;
(g) A direction that RJA Nominees is justified in entering into a deed or agreement with Deborah, Bradley, Rebecca, Jacobus, Emelia and Tomas which includes terms to the effect of those contained within cl 3.2 of the proposed deed;
(h) Alternatively, a direction that RJA Nominees is justified in giving effect to the direction contained in cl 18 of the will, as amended by the codicil;
(i) A direction that the executors are justified in carrying out the requirements of cl 4 of the will by gifting the property which is to form part of the installation to Stonnington City Council and setting aside an amount of $50,000 to be paid to or applied for the benefit of Stonnington City Council;
(j) A declaration that cl 8 of the will is valid and effective, or alternatively that it is void;
(k) A direction that the executors are justified in spending an amount of up to $50,000, or such other sum as the Court determines, in carrying out their duties under cl 11 of the will;
(l) A declaration that cl 13 of the will is valid and effective, or alternatively that it is void.
(m) A direction that the executors are justified in treating various references to the ‘family income fund’ in the will as references to the residuary estate of the deceased;
(n) A declaration that cl 19 of the will, as amended by the codicil, is valid and effective, or alternatively that it is void;
(o) A direction that the executors are justified in paying themselves at particular hourly rates to be determined by the Court, in accordance with cl 19 of the will;
(p) Alternatively, an order that the executors be paid commission to be determined by the Court; and
(q) An order that the plaintiffs’ costs be paid from the estate of the deceased on an indemnity basis.
The plaintiffs’ written submissions make clear that the relief described in paras (o) and (p) above, that is, the direction and order relating to payment at an hourly rate or executors’ commission, are no longer pressed.[1] In addition, no submissions are made by the plaintiffs in respect of the relief described at para (n) above, that is, the declaration in respect of the validity of cl 19, and thus it appears that such relief is likewise no longer pressed.
[1]Pursuant to ord 10 of the Supreme Court (Administration and Probate) Rules 2014 (Vic), a claim for executor’s commission must be made by summons filed in the probate proceeding and requires the filing of an administration account by an applicant. Executor’s commission is not assessed on hourly rates.
Accordingly, the remaining issues for determination are as follows:
(a) Question 1: Should Mr Lowenstein be removed as executor and trustee of the estate of the deceased, and Mr Marks appointed as sole executor and trustee?
(b) Question 2: Are the executors justified in entering into the proposed deed, or a deed or an agreement which includes terms of a similar effect to cl 3.1 of the proposed deed?
(c) Question 3: Is RJA Nominees justified in entering into the proposed deed, or a deed or an agreement which includes terms of a similar effect to cl 3.2 of the proposed deed?
(d) Question 4: Alternatively, is RJA Nominees justified in giving effect to the direction contained in cl 18 of the will, as amended by the codicil?
(e) Question 5: Are the executors justified in carrying out the requirements of cl 4 of the will by gifting the installation to Stonnington City Council and setting aside a sum of $50,000 to give effect to such a gift?
(f) Question 6: Are cls 8 and 13 of the will valid and effective, or are they void?
(g) Question 7: Are the executors justified in spending an amount of up to $50,000 in performing their duties under cl 11 of the will, as amended by the codicil?
(h) Question 8: Are the executors justified in treating the references to the ‘family income fund’ in the will as references to the residuary estate of the deceased?
Question 1: Should Mr Lowenstein be removed as executor and trustee of the estate of the deceased, and Mr Marks appointed as sole executor and trustee?
Applicable principles
Pursuant to s 34 of the Administration and Probate Act, the Court may make orders for the removal of an executor to whom probate or administration has been granted at its discretion. Pursuant to s 34, the grounds for removal include where an executor remains out of Victoria for more than two years,[2] desires to be discharged from his or her office,[3] or is unfit to act or incapable of acting.[4] Physical or mental illness is a recognised basis upon which an executor may be deemed incapable of acting.[5] Where such an order is made, the Court may appoint a proper person or trustee company in place of the executor who has been discharged or removed, if it thinks fit to do so.[6]
[2]Administration and Probate Act 1958 (Vic) s 34(1)(a).
[3]Ibid s 34(1)(b).
[4]Ibid s 34(1)(c).
[5]Estate of Shaw [1905] P 92; Re Campbell [1961] QWN 45; Estate of Mack [1962] NSWR 1029.
[6]Ibid s 34(1).
Even if a ground for removal under s 34 is proved, the Court retains the discretion as to whether or not to remove an executor. As noted by the Court of Appeal in Dimos v Skaftouros,[7] it is unnecessary and unhelpful to seek to exhaustively state the limits of the Court’s discretionary power to remove an executor.[8]
[7](2004) 9 VR 584.
[8]Ibid 593 [13] (Winneke P, with whom Batt JA agreed).
The Court also has an inherent jurisdiction and a statutory power to make orders for the removal of a trustee. In relation to the former, the inherent power of a court of equity to remove a trustee is well established,[9] and is to be exercised with the welfare of the beneficiaries kept paramount.[10] As to the latter of these sources of power, s 48 of the Trustee Act provides that the Court may, whenever it is expedient to do so, make an order appointing a new trustee either in substitution for or in addition to any existing trustee.
[9]See, eg, Monty Financial Services Ltd v Delmo [1996] 1 VR 65, 76 (Ashley J).
[10]Miller v Cameron (1936) 54 CLR 572, 580–1 (Dixon J).
On any removal application, the Court should have regard to a testator’s wishes as to the identity of an executor or trustee. Ultimately, the decision to remove an executor or trustee depends on all the facts of the particular case. It is a determination to be made at the discretion of the Court after consideration of the interests of the beneficiaries, the security of estate property, the efficient and satisfactory exercise of the trusts, and the faithful and sound exercise of the powers conferred upon an executor or trustee.[11]
[11]Dimos v Skaftouros (2004) 9 VR 584, 593 [13] (Winneke P, with whom Batt JA agreed); Guirina v Guirina [2018] VSC 599, [16] (McMillan J), citing ibid.
Section 34(1) of the Administration and Probate Act and s 51 of the Trustee Act also empowers the Court to make orders for the vesting of property forming part of an estate or a trust, respectively. This includes circumstances under which an executor and trustee is removed, is discharged or retires and consequential orders for the vesting of the assets of the estate in the continuing executor may be necessary.[12]
Plaintiffs’ submissions
[12]See, eg, Mann v Grantham [2004] VSC 156, [21] (Byrne J).
The plaintiffs submit that due to the ill health of Mr Lowenstein, he is incapable of acting as executor or trustee of the estate of the deceased and that it is, therefore, appropriate that orders be made for his removal. The plaintiffs submit that Mr Marks should be given leave to continue as the sole executor to finalise the administration of the estate of the deceased, given his involvement in the administration of the estate since the death of the deceased. They further submit that if Mr Marks is empowered to act as sole executor, consequential vesting orders ought to be made to enable him to finalise the administration of the estate.
Defendants’ submissions
Deborah, Bradley, Rebecca, Jacobus, Emelia and Tomas do not oppose the removal of Mr Lowenstein as executor and trustee of the deceased’s estate and the appointment of Mr Marks as sole executor.[13] Berry Street and the Attorney-General did not make submissions in relation to this ground of relief.
Consideration
[13]Submissions of the first and second defendants dated 20 July 2022, [3]; Submissions of the fourth and fifth defendants dated 29 July 2022, [19]; Email from Jim Korfiatis on behalf of the third and sixth defendants dated 3 August 2022.
On 4 October 2021, the plaintiffs’ solicitor, Mr Andrew Romer, affirmed that on 30 September 2021 he served a copy of the originating motion on Mr Lowenstein. On 4 October 2021, Mr Lowenstein informed Mr Romer that he was in receipt of the document and advised that ‘due to deteriorating health, I shall not be participating in the proceedings’. Mr Lowenstein does not oppose the making of a removal order, as is evident from the provision of his medical certificates to Mr Marks, as well as his election not to take part in the proceeding. Equivalent considerations underpin an order in regard to the removal of Mr Lowenstein as trustee of the estate of the deceased.
Given Mr Lowenstein’s position regarding his health, it is more appropriate that an order be made that he be discharged as an executor, rather than being removed, with the latter order sometimes having negative connotations. The residuary beneficiaries do not oppose Mr Lowenstein’s removal, and it follows that they would not oppose his discharge.
There is also no opposition from the residuary beneficiaries to Mr Marks continuing as the sole executor and trustee of the estate of the deceased.
It is unnecessary to appoint Mr Marks as sole executor and trustee of the estate of the deceased, as sought by the plaintiffs, as with the orders for the discharge of Mr Lowenstein, Mr Marks remains as the continuing executor and trustee of the estate of the deceased.
Accordingly, orders will be made for the discharge of Mr Lowenstein as executor and trustee of the estate of the deceased and for the vesting of the estate of the deceased in Mr Marks as the continuing executor and trustee of the estate of the deceased.
Question 2: Are the executors justified in entering into the proposed deed, or a deed or an agreement which includes terms of a similar effect to cl 3.1 of the proposed deed?
The fifth and sixth prayers for relief in the plaintiffs’ originating motion will be considered together. Collectively, the relief sought is a direction as to whether the executors are justified in entering into the proposed deed, or a deed or agreement which contains terms of similar effect to cls 3.1(a), 3.1(b), 3.1(c), 3.1(d)(i) and 3.1(d)(iv) of the proposed deed, to compromise the family provision proceeding and vary certain terms of the will and the codicil.
Rather than seeking an order for approval of a compromise pursuant to r 54.02(2)(c)(i) of the Rules, as is foreshadowed in cl 2 of the proposed deed, the plaintiffs seek judicial advice, pursuant to r 54.02(2)(a) of the Rules.
Applicable principles
Rule 54.02 of the Rules enables the personal representative of a deceased estate or trustee of a trust to seek the advice and direction of the Court.[14] Relevantly, it provides:
[14]Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 54.02.
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; …
…
(c)an order—
(i) approving any sale, purchase, compromise or other transaction by an executor, administrator or trustee; …
The function of this provision, as is evident from the language of r 54.02 itself, is:
[t]o 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.[15]
As such, it has been recognised that the Court ought to adopt a ‘wide and facilitative, rather than a narrow or strict’ approach to applications under r 54.02, to promote the intent and function of the rule.[16]
[15]Morris v Smoel [2013] VSCA 11, [22] (Maxwell P and Whelan JA).
[16]Re Fast [2015] VSC 780, [14] (Digby J).
In Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand,[17] a majority of the High Court held that there are no implied limitations on the Court’s power to give advice of this nature, and further stated that the only jurisdictional bar to relief in judicial advice applications is that an executor or trustee 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’.[18]
[17](2008) 237 CLR 66 (‘Macedonian Church’).
[18]Ibid 89–90 [58] (Gummow A-CJ, Kirby, Hayne and Heydon JJ, with whom Kiefel J agreed). Although Macedonian Church concerned an application for advice under s 63 of the Trustee Act 1925 (NSW), it has been held that the principles enumerated by the High Court apply equally to applications made under functionally equivalent rules of court, including r 54.02. See Re Centro Retail Australia Ltd (2012) 35 VR 512, 51–6 [13] (Almond J); Re Perenna Nominees Pty Ltd (2022) 66 VR 246, 254 [34] (McMillan J).
The advice sought in the present circumstances relates to, in essence, the power of an executor or a trustee to compromise a claim against an estate under s 19(1)(f) of the Trustee Act, which provides:
19 Power to compound liabilities
(1) A personal representative, or two or more trustees acting together, or, subject to the restrictions imposed in regard to receipts by a sole trustee, not being a trustee company, a sole acting trustee where by the instrument (if any) creating the trust, or by statute a sole trustee is authorized to execute the trusts and powers reposed in him [or her], may, if and as he [or she] or they think fit—
…
(f)compromise, compound, abandon, submit to arbitration, or otherwise settle any debt, account, claim, or thing whatever relating to the testator’s or intestate’s estate or to the trust; …
Relevantly, as recognised by this Court in Hodge v De Pasquale:
Section 19 is expressed in the broadest possible terms, allowing trustees to compromise any claim, and for the purpose of doing so, enter into any arrangement that they think expedient. Critically, however, it does not confer power on a trustee to alter the terms of the trust to give effect to an agreement under s 19 [of the Trustee Act]. In other words, the trustee may settle a claim under Part IV [of the Administration and Probate Act], but they must then seek orders of the Court giving effect to that settlement under the relevant provision. Of course, if all of the beneficiaries consent to the terms of settlement, then they may vary the trust without Court order, because they retain that power. Without their consent, a trustee does not have that power, and cannot give effect to an agreement to do so.[19]
[19][2014] VSC 413, [77] (McMillan J) (emphasis added).
In circumstances where consent to a compromise is not or cannot be provided by all affected parties, a trustee or executor can seek the Court’s approval of the compromise sought under r 54.02(2)(c)(i) of the Rules. Applications for the Court’s approval of a compromise are generally supported by an advice as to the reasons for the compromise and why it is in the best interests of the parties, particularly where there are minors, persons under a disability or representatives of a class of beneficiaries. This is because the Court must be satisfied that the compromise is in the best interests of persons falling within one or more of these categories. It is assumed that persons outside of those categories are sufficiently capable of representing their own interests, such that the Court can rely on their consent to a compromise in approving the terms of that compromise. As such, the Court’s approval is unnecessary in circumstances where all affected beneficiaries are sui juris and consent to a proposed compromise.[20]
[20]Ibid; Tritt v Hoskins [2016] VSC 589, [17] (McMillan J).
Finally, several duties of executors and trustees are relevant to the issues raised in this question. An executor has a duty to either seek to uphold a will or to compromise claims on the estate.[21] Relevant considerations in determining whether to compromise a claim include whether there would be a commercial benefit in upholding a will, and the extent to which upholding a will would benefit the beneficiaries.[22] An executor is also required to act in good faith, which falls within the core duty of loyalty toward the beneficiaries. Where a claim is brought against an estate, an executor is bound by the obligations imposed on parties to a proceeding under the Civil Procedure Act 2010 (Vic), particularly the overarching obligation to use reasonable endeavours to resolve disputes.[23]
Plaintiffs’ submissions
[21]Re Lanfear (1940) 57 WN (NSW) 181, 183 (Williams J); Re Winter-Cooke [2020] VSC 588, [100] (McMillan J).
[22]Morrison v Abbott [2012] NSWSC 320, [75] (Hallen AsJ); Seng Hpa v Walker [2017] VSC 320, [103] (McMillan J).
[23]Civil Procedure Act 2010 (Vic) s 22.
The plaintiffs accept that as all beneficiaries consent and are sui juris, there is no need to obtain the Court’s approval of the compromise embodied in the proposed deed. However, they submit that it is incorrect to characterise their application as one for approval of a compromise, and that the purpose of their application is instead to seek the advice of the Court as to whether it is appropriate for the executors to enter into the proposed deed. The plaintiffs submit that they are entitled as of right to seek such advice, and that an application for judicial advice is warranted and necessary in the circumstances for several reasons, including that:
(a) The executors have a duty to uphold the will, and several of the terms within the proposed deed appear to be contrary to the express terms of the will and the codicil;
(b) The executors have been provided with insufficient supporting material to assess the claims made by Deborah and Bradley in the family provision proceeding and are therefore unable to form a view about the appropriateness or merits of the compromise embodied in the proposed deed; and
(c) Clause 2 of the proposed deed expressly contemplates that the executors will seek an order for its approval pursuant to r 54.02, and therefore all parties had ‘envisaged and, indeed, included as a term in the [proposed] deed that [the plaintiffs] would seek advice from the Court in respect of it’.
The plaintiffs emphasise that they do not oppose entering into the proposed deed, nor do they intend to ‘stand in the way of the settlement’ of the family provision proceeding. Instead, they simply seek ‘the Court’s advice as to whether [the plaintiffs] should exercise the powers that [they] undoubtedly have to agree with [the proposed] deed in circumstances where [they] both have a duty to uphold the will, as well as a duty to compromise claims’.
Defendants’ submissions
Deborah and Bradley submit that as consent to the compromise embodied in the proposed deed has been provided by all affected beneficiaries, there are ‘no real issues in dispute’ and as such, it is ‘really not the role of the Court’ to provide approval for the executors to enter into it. They further submit that, in any event, the Court can be satisfied of the propriety of the executors compromising the family provision proceeding by entering into the proposed deed or a deed or agreement of similar effect because:
(a) The executors have the power to compromise the family provision proceeding by virtue of s 19(1)(f) of the Trustee Act;
(b) There would be no impropriety in the executors entering into such a deed or agreement;
(c) The executors would be acting in good faith; and
(d) The executors would be capable of giving fair consideration to the relevant issues, in the sense that they were provided with a position paper setting out the basis of the claim in the family provision proceeding, attended the mediation, were legally represented, and were satisfied that the interests of the affected beneficiaries were properly represented.
In respect of the final point, Deborah and Bradley dispute the plaintiffs’ submission that the executors were not provided with sufficient supporting material to assess the claims made in family provision proceeding or execute the proposed deed. They also refer to the duty of the executors to either compromise or oppose claims on an estate, as well as their overarching obligations to use reasonable endeavours to resolve disputes.[24] Deborah and Bradley contend that there will be no commercial benefit for any party if the executors continue litigating to uphold the will, and indeed, that efforts to continue the litigation where the affected parties have agreed to a compromise will only incur unnecessary ongoing costs.
[24]Under the Civil Procedure Act 2010 (Vic) s 22.
Emelia and Tomas adopt the submissions of Deborah and Bradley, adding that, as all the residuary beneficiaries are sui juris and Berry Street and the Attorney-General have consented to the compromise, there is no real issue which requires the direction or ruling of the Court. As such, they submit that this proceeding, which has resulted in significant additional costs to each of the defendants, should not have been commenced.
Likewise, Rebecca and Jacobus submit that the executors are presently justified in giving effect to the compromise set out in the proposed deed without approval or authorisation from the Court. They submit that the authority of the executors to do so derives from s 19(1)(f) of the Trustee Act and the consent of all interested parties, and that the relief sought in the plaintiffs’ originating motion is therefore strictly unnecessary.
Berry Street consents to the reduction in its entitlements under the proposed deed, and submits that ‘orders should be made to give substantive effect to the agreement reached between the beneficiaries of the estate, all of whom are sui juris and consent to such settlement’. However, it reserves its rights under the will in the event that orders of this nature are not made.
The Attorney-General submits that as all affected beneficiaries have provided their consent, s 19(1)(f) of the Trustee Act empowers the executors to enter into the proposed deed without the Court’s approval. The Attorney-General’s consent to the compromise embodied in the proposed deed during and subsequent to the mediation is also reiterated.
Consideration
Plainly, and as is accepted by all parties, s 19(1)(f) of the Trustee Act empowers the executors to enter into the proposed deed. As the plaintiffs themselves acknowledge, given that consent to the proposed deed has been provided by each of the beneficiaries whose interest under the will would be affected, it is unnecessary for the Court to provide approval of the compromise embodied in the proposed deed. In circumstances where the executors have a statutory power to enter into the proposed deed and all affected parties consent, it is clear that the executors are entitled to enter into the proposed deed without the Court’s approval.
Although the plaintiffs ostensibly do not seek an order for the Court’s approval of the compromise contained in the proposed deed, and instead purport to seek judicial advice as to the appropriateness and prudency of entering into the proposed deed, what is in substance sought by their application would appear to be the Court’s approval of the relevant compromise. This is evident from the very language used in the plaintiffs’ originating motion: ‘a direction that the executors are justified in’ entering into the proposed deed or a deed or agreement of similar effect to compromise the family provision proceeding and varying certain terms of the will and the codicil is, ultimately, best understood as a request for the Court’s sanction of the compromise it embodies.
It is well established that an application which seeks the Court’s approval of a compromise is unnecessary and unwarranted in circumstances where all beneficiaries are sui juris and consent to the proposed compromise, as is the case in the present circumstances. The plaintiffs’ application for judicial advice, which is couched in different terms to an application for approval of a compromise and yet seeks substantially the same ends, is equally unnecessary.
As submitted by Deborah and Bradley, in circumstances where all affected beneficiaries are sui juris, have been legally represented and consent to the compromise contained in the proposed deed, and there is no identifiable commercial or other benefit to be obtained by seeking to uphold the will, the executors have a duty to use reasonable endeavours to resolve the dispute by entering into the proposed deed and compromising the claims made against the estate within the family provision proceeding. By failing to do so, and instead electing to continue this litigation and incur unnecessary costs, the plaintiffs have acted in a manner that is contrary to these duties.
This is particularly so in light of the fact that the plaintiffs’ main justification as to the necessity of the advice sought is an allegation that the executors have been provided with insufficient supporting material to assess the claims made by Deborah and Bradley in the family provision proceeding and are therefore unable to form a view about the appropriateness or merits of the compromise embodied in the proposed deed. Not only does the evidence establish such a claim as being made without a proper basis, but this allegation does very little to justify the course of conduct adopted by the plaintiffs in electing to bring and pursue this application rather than compromise the claims made in the family provision proceeding. A detailed position paper was circulated by Deborah and Bradley prior to the mediation of the family provision proceeding, and the executors attended and were involved in the mediation, with the benefit of legal representation and advice. In contrast, the details of the claims made by Deborah and Bradley in the family provision proceeding were not in evidence for this proceeding. Further, it is not the role of the Court to make any assessment of the merits of any such claims for the purposes of providing the plaintiffs with judicial advice.
While the plaintiffs may be directed that they are justified in entering into the proposed deed, or a deed or instrument of similar effect, their application for such a direction is not only wholly unnecessary, but also contrary to their duties as executors and trustees of the estate of the deceased to compromise reasonable claims and their overarching obligation to use reasonable endeavours to resolve the dispute.
Question 3: Is RJA Nominees justified in entering into the proposed deed, or a deed or an agreement which includes terms of a similar effect to cl 3.2 of the proposed deed?
By their seventh prayer for relief, the plaintiffs seek a direction that RJA Nominees, in its capacity as trustee of the family trust, is justified in entering into the proposed deed or a deed or agreement which provides for the vesting and distribution of the family trust in a similar manner to cl 3.2 of the proposed deed.
Applicable principles
Evidently, there is significant overlap between the issues raised by this question and those discussed within the previous question, and many of the principles outlined above are again relevant. However, there are several other considerations which are specific to entry into the proposed deed (or similar deed or agreement) by RJA Nominees in its capacity as trustee of the family trust.
As cl 3.2 of the proposed deed requires RJA Nominees to determine to vest the family trust and distribute its assets to the residuary beneficiaries in specified proportions, the principles which underpin an exercise of discretion by a trustee are relevant. In exercising a discretionary power, a trustee must act honestly and ‘in good faith, upon real and genuine consideration and in accordance with the purposes for which the discretion was conferred’.[25] As the office of trustee is of a fiduciary nature, a trustee must exercise his or her powers in the best interests of the beneficiaries.
[25]Karger v Paul [1984] VR 161, 164 (McGarvie J).
As a general principle, a trustee must not fetter its discretion by permitting others, especially the beneficiaries of the relevant trust, to dictate the manner in which a power or discretion ought be exercised.[26] For this reason, a trustee must not bind himself or herself to a future exercise of a trust power or discretion in a prescribed manner which is determined by considerations other than his or her own conscientious judgment at that future time regarding what is in the best interests of the beneficiaries of the trust.[27]
[26]Re Brockbank; Ward v Bates [1948] Ch 206, 208–9 (Vaisey J); Quinton v Proctor [1998] 4 VR 469, 471 (Kellam J); Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566, 600 [121] (Finkelstein J).
[27]Dunstan v Houison (1901) 1 SR NSW Eq 212, 215 (Simpson CJ); Watson’s Bay and South Shore Ferry Company Ltd v Whitfeld (1919) 27 CLR 268, 277 (Isaacs, Gavan Duffy and Rich JJ); Re Hirst; Hirst v Wilson [1954] St R Qd 344; Queensland Local Government Superannuation Board v Superannuation Complaints Tribunal [2014] FCCA 2473, [39] (Judge Burnett) (‘Queensland Local Government Superannuation Board’).
However, the rule against fetters in a fiduciary situation is not absolute, and regard must be had to the practicalities of the particular context in which a decision is made. In this sense, at its core, the rule against fetters can also be understood as a requirement that the relevant power or discretion be exercised by the ‘right’ person at the ‘right’ time, in light of the facts and circumstances relevant at that time.
Plaintiffs’ submissions
The plaintiffs submit that, just because the affected beneficiaries have agreed upon a particular arrangement for the vesting and distribution of the assets of the family trust, it does not necessarily follow that RJA Nominees ought to agree to the proposed deed. They further submit that the effect of the proposed deed is, in essence, to require RJA Nominees ‘to simply completely sacrifice its own discretion’ as trustee of the family trust and allow the beneficiaries to direct how the family trust is to be vested and distributed, which ‘in the ordinary course’ would not occur.
While emphasising that they do not oppose RJA Nominees entering into the proposed deed, in the plaintiffs’ submission, it is for these reasons appropriate that prior advice from the Court be sought. This is said to be particularly so in circumstances where the definition of ‘general beneficiaries’ under the trust deed may include potential unborn beneficiaries.
Defendants’ submissions
Deborah and Bradley submit that as each of the primary beneficiaries and general beneficiaries of the family trust has expressed a desire for the family trust to be wound up, and RJA Nominees in its capacity as trustee of the family trust is expressly empowered under the trust deed to vest the estate and distribute the estate, RJA Nominees does not require the approval of the Court to enter into the proposed deed or a deed or instrument containing terms of a similar effect. Emelia and Tomas also adopt these submissions.
Rebecca and Jacobus contend that as RJA Nominees has the power to enter into the proposed deed under s 19(1)(f) of the Trustee Act, the relief sought within the present application is strictly unnecessary. During the hearing, counsel for Rebecca and Jacobus also referred to cl 6 of the proposed deed, wherein RJA Nominees is indemnified against any claims which might be brought by the beneficiaries of the family trust and their lineal descendants in respect of the vesting of the family trust. In their submission, the inclusion of such a clause should satisfy any concern RJA Nominees may have about potential risks in vesting and distributing the family trust in accordance with cl 3.2 of the proposed deed.
Beyond generally submitting that it is appropriate for the proposed deed to be entered into, neither Berry Street nor the Attorney-General make submissions specifically in respect of this issue.
Consideration
A decision to enter into the proposed deed, or a deed or agreement that provides for the vesting and distribution of the family trust in a similar manner to cl 3.2 of the proposed deed, is clearly within the power of RJA Nominees. In its capacity as trustee of the family trust, RJA Nominees is empowered to enter into the proposed deed by s 19(1)(f) of the Trustee Act. In addition, under cl 1(5) of the trust deed, RJA Nominees is provided with an ‘absolute discretion’ to appoint a vesting date for the family trust which is earlier than that provided in the schedule to the trust deed.
As to whether entering into the proposed deed would amount to an impermissible fetter of RJA Nominees’ discretion to bring forward the vesting date of the family trust under cl 1(5) of the trust deed, the present situation can be distinguished from other cases in which a trustee has been found to have impermissibly fettered a discretion afforded to it. By entering into the proposed deed and resolving to vest the family trust in accordance with its terms, RJA Nominees is not ‘binding itself as to how the power will be exercised at some future time, regardless of the circumstances which may exist at that future time’.[28] Instead, it is presently agreeing to exercise a discretion it is expressly endowed with under cl 1(5) of the trust deed within a specified timeframe, in light of the relevant facts and circumstances. In this way, entry into the proposed deed by RJA Nominees does not necessarily constitute a fetter on its discretion under cl 1(5) of the trust deed. Provided that this exercise of discretion is informed by a conscientious judgment as to what is in the best interests of the beneficiaries of the family trust, it is entirely within power.
[28]Queensland Local Government Superannuation Board (n 27).
The fact that the class of general beneficiaries described under the trust deed may include potential unborn beneficiaries is but one of many relevant considerations in an exercise of this discretion. Indeed, there are several reasons that RJA Nominees may be inclined to enter into the proposed deed and agree to exercise its discretion to bring forward the vesting date of the family trust in the circumstances, including that:
(a) Each of the living primary and general beneficiaries of the family trust (that is, the residuary beneficiaries) have expressed a desire for, and provided their consent to, the vesting of the family trust on the terms set out in cl 3.2 of the proposed deed; and
(b) As is evident from cl 18 of the will, as amended by the codicil, the deceased — who, at the time of her death, held the offices of appointor of the family trust and director and the sole shareholder of RJA Nominees — intended that the family trust vest upon the termination of Tomas’ life interest in the Paddington property. By e-mail to the Court dated 3 August 2022, Tomas’ solicitor confirmed that Tomas had surrendered his life interest in the Paddington property and agreed to the vesting of the family trust.
Ultimately, it is not the role of the Court on the present application to provide RJA Nominees in its capacity as trustee with advice as to whether, and how, its discretion to bring forward the vesting date of the family trust ought to be exercised. Instead, it is sufficient to direct that, if RJA Nominees were to enter into the proposed deed, or a deed or agreement which contains terms of similar effect to cl 3.2 of the proposed deed, it would be justified in doing so, by virtue of cl 1(5) of the trust deed.
Question 4: Is RJA Nominees justified in giving effect to the direction contained in cl 18 of the will, as amended by the codicil?
Based on the conclusion reached in respect of the third question, it is unnecessary to consider the alternative relief sought by the plaintiffs, namely a direction that RJA Nominees is justified in giving effect to the direction in cl 18 of the will, as amended by the codicil.
Question 5: Are the executors justified in carrying out the requirements of cl 4 of the will by gifting the installation to Stonnington City Council and setting aside a sum of $50,000 to give effect to such a gift?
By reason of the conclusion reached in the second question, it is unnecessary to consider the plaintiffs’ application for a direction that the executors are justified in gifting the installation to Stonnington City Council and setting aside an amount of up to $50,000 to be paid or applied for the benefit of Stonnington City Council. The Court has directed that the executors are justified in entering into the proposed deed, or a deed or agreement which contains a term of similar effect to cl 3.1(c)(i) of the proposed deed. Clause 3.1(c)(i) of the proposed deed provides that the installation be gifted to Montsalvat and the costs of installing and maintaining the installation be borne by Montsalvat. As such, the plaintiffs’ ninth prayer for relief falls away.
Although not strictly necessary in light of this conclusion, comment will be given as to the appropriateness of the changes made to the bequest in cl 4 of the will by the proposed deed. Emelia gave compelling evidence of the strong emotional connection that the deceased and her family felt to Montsalvat following Stephanie’s death, and the deceased’s wish to amend the will to reflect this emotional connection. Evidently, each of the residuary beneficiaries supports gifting the installation to Montsalvat rather than Stonnington City Council, and there is evidence that Montsalvat has agreed to accept the installation. In these circumstances it is appropriate that the installation be dealt with in accordance with cl 3.1(c)(i) of the proposed deed.
Question 6: Are cls 8 and 13 of the will valid and effective, or are they void?
Due to the similar issues that arise in (and conclusions to be reached in) considering the validity of the two clauses the subject of this question, it is convenient to address the plaintiffs’ tenth and twelfth prayers for relief together.
Submissions
In their written submissions, the plaintiffs raise various concerns in respect of cls 8 and 13 of the will, including that:
(a) The conditions precedent to the gift of $200,000 to Berry Street under cl 8 of the will raise questions as to its validity, and it would be impracticable for the executors to be required to ‘monitor’ whether Berry Street complies with these conditions in the performance of its obligations under cl 8;
(b) It is likewise impracticable for the executors to ‘monitor’ Emelia’s compliance with the obligations imposed under cl 8, and it is unclear how the allowance of up to $80,000 over two years is meant to operate and what is to occur if Emelia does not start or ceases to work with Berry Street; and
(c) Various uncertainties arise on the face of cl 13, including the intended recipient of the gift; the nature of the ‘research space’ contemplated within the clause and the sufficiency of the proposed sum for the establishment of a permanent physical space; the duration for which the proposed bequest of books, manuscripts and journals is to be retained by the recipient institution; and the sufficiency of the proposed sum for the establishment of an annual scholarship, as contemplated under cl 13.
However, following indications from the Court during the hearing that the executors would likely be directed to be justified in entering into the proposed deed, significant disagreement emerged between the parties as to whether the validity of cls 8 and 13 of the will would remain in issue if the Court were to make such a direction. While Berry Street and the Attorney-General submit that the direct references to cls 8 and 13 of the will in cls 3.1(c)(ii), (iii) and (iv) of the proposed deed render the validity and proper construction of cls 8 and 13 a relevant consideration in any event, the plaintiffs and the residuary beneficiaries submit that this consideration would fall away.
Consideration
Contrary to the submissions of Berry Street and the Attorney-General, questions as to the validity of cls 8 and 13 of the will no longer arise for the Court’s determination upon the executors entering into the proposed deed, for several reasons. Despite referring expressly to cls 8 and 13 of the will, cls 3.1(c)(ii), (iii) and (iv) of the proposed deed do not reiterate or modify the gifts made under cls 8 and 13. Instead, it provides for payments to Berry Street, Emelia and the inchoate charity beneficiary which replace those gifts contemplated under the will in their entirety.
This is evident from the object and purpose of the proposed deed. The proposed deed is described as a ‘deed of release and indemnity’, and provides, in its recitals, that it is to represent a formalisation of the agreement reached as to the manner of the administration of the deceased’s estate. By entering into the proposed deed, the executors agree to administer the estate in the manner described therein, Deborah and Bradley agree to settle the family provision proceeding, and each of the residuary beneficiaries and Berry Street release and indemnify the executors against any and all claims in respect of the administration and distribution of the estate. In this way, the effect of the proposed deed — much like any compromise of a similar nature — is to extinguish certain rights and interests arising under the will and in replacement, create new rights and interests between the affected parties.
It is also evident from the language adopted in each of the relevant subclauses of the proposed deed. Clause 3.1(c)(ii), for example, provides for the payment of $350,000 to Berry Street ‘in lieu of’ its entitlements under cls 7 and 8 of the will, while cl 3.1(c)(iii) provides for a payment of $80,000 to Emelia ‘in satisfaction of’ her entitlements under cl 8. Clause 3.1(c)(iv) likewise provides for a payment of $200,000 to the inchoate charity beneficiary ‘in lieu of any provision made in cl 13 of the [w]ill’.
Although an interpretation and application of cls 3.1(c)(ii), (iii) and (iv) of the proposed deed is to some extent necessarily informed by the content of cls 8 and 13 of the will, it does not follow, as the Attorney-General submits, that these terms of the proposed deed ‘depend’ on cls 8 and 13 of the will ‘for their operation’. The payments to be made under the proposed deed are entirely distinct from the gifts under the will. They are to be made on different terms and by different mechanisms, and create different rights and interests for the affected beneficiaries. For this reason, the validity (or invalidity) of cls 8 and 13 of the will has no direct bearing on the payments contemplated under cls 3.1(c)(ii), (iii) and (iv) of the proposed deed.
On an application for judicial advice under r 54.02 such as the present one, it is inappropriate for the Court to provide advice which extends beyond the scope of that initially sought by an executor or a trustee. No issue is raised in respect of the validity, interpretation or operation of cls 3.1(c)(ii), (iii) and (iv) of the proposed deed within the plaintiffs’ originating motion. Further, during the hearing, rather than seeking to raise any such issues for the Court’s consideration, counsel for the plaintiffs simply, and correctly, submitted that any questions as to the validity of clauses within the will would fall away entirely if the Court were to direct that the executors were justified in entering into the proposed deed. Where no advice was initially sought in respect of the validity of the payments to be made under cls 3.1(c)(ii), (iii) and (iv) of the proposed deed, and the plaintiffs do not press any issue in this regard, it is not a matter for the Court to consider on this application.
In any event, while noting that it is inappropriate to make any determination on the face of cl 3.1(c) of the proposed deed, the terms on which the payments contemplated at sub-cls (ii), (iii) and (iv) are to be made may overcome several of the concerns raised in relation to the validity of the gifts under cls 8 and 13 of the will, such that the Court’s advice or involvement in their interpretation and application may no longer be necessary or warranted. For example:
(a) In contrast to the gift under cls 7 and 8 of the will, the payment to Berry Street contemplated under cl 3.1(c)(ii) is not contingent on Berry Street’s ongoing compliance with the terms of the gift being monitored by the executors;
(b) The payment to Emelia under cl 3.1(c)(iii) likewise no longer requires any monitoring on the executors’ part, and instead is only contingent on Emelia warranting to make a ‘proper long-term’ commitment to support Berry Street to carry out its purposes; and
(c) The conditions and specifications imposed on the gift to an inchoate charity beneficiary under cl 13 are not replicated in cl 3.1(c)(iv) of the proposed deed, which instead simply contemplates a payment of $200,000 ‘in accordance … with a scheme approved by the Attorney-General’.
However, these matters fall outside the scope of this application. Ultimately, in light of the conclusion reached in respect of the second question, it is unnecessary for the Court to consider whether cls 8 and 13 of the will are valid and effective, or void.
Question 7: Are the executors justified in spending an amount of up to $50,000 in performing their duties under cl 11 of the will, as amended by the codicil?
By their eleventh prayer for relief, the plaintiffs seek advice as to whether the executors are justified in spending an amount of up to $50,000 in performing their duties under cl 11 of the will, as amended by the codicil.
Plaintiffs’ submissions
The plaintiffs observe that cl 11 of the will, as amended by the codicil, grants the executors an ‘absolute discretion’ in determining the sum of money that will be required for giving effect to the direction it contains. However, they submit that an application for judicial advice in respect of the appropriate sum to be put aside is warranted in circumstances where there has been a ‘rearrangement of the will’ by the residuary beneficiaries, ‘in order to protect [Mr Marks] from any criticism later about the spending of that money’.
Based on the figures provided within correspondence relating to the NLA agreement, the plaintiffs submit that the amount of $50,000 represents a ‘fair estimate’ of costs that may be incurred in carrying out the intentions of the deceased as they are set out in cl 11 of the will, as amended by the codicil, and that any funds remaining can be paid into the residuary estate.
Defendants’ submissions
In their written submissions, Deborah and Bradley contend that cl 11 appears to be no more than a direction that the executors carry out the terms of any such agreement entered into during the deceased’s lifetime. As there is no evidence of a fully executed or binding agreement with either Australian Scholarly Publishing Pty Ltd or the National Library of Australia, Deborah and Bradley submit that these agreements are not binding on the executors. However, during the hearing, counsel for Deborah and Bradley advised that these issues are no longer pressed.
Rebecca, Jacobus, Emelia and Tomas make no submissions in respect of this issue, and nor do Berry Street or the Attorney-General.
Consideration
On the evidence that is available as to the status of the works, the subject of the NLA agreement and the ASP agreement and the costs anticipated to finalise publication and distribution of each, and in light of the fact that there is no opposition from the residuary beneficiaries, the executors are justified in setting aside the sum of $50,000 to carry out the intentions of the deceased as they are set out in cl 11 of the will, as amended by the codicil, with any remaining funds to form part of the residuary estate.
Question 8: Are the executors justified in treating the references to the ‘family income fund’ in the will as references to the residuary estate of the deceased?
The plaintiffs seek a declaration that they are justified in treating the references to the ‘family income fund’ in cls 5 and 19 of the will as references to the residuary estate of the deceased.
As discussed above, under cl 5, certain pecuniary legacies are to form part of the ‘family income fund’ should they fail. Clause 19 provides that probate, accounting and legal costs and executors’ commissions are to be paid from the ‘family income fund’. The term is not adopted anywhere else in the will or the codicil and no further guidance as to its proper meaning is provided within the will.
Applicable principles
At common law, the task of the court when construing a will is to discover the testator’s intention by examining the words used, having regard to the document as a whole and in light of any admissible evidence.
In Fell v Fell, Isaacs J espoused 10 common law principles relating to the construction of wills that his Honour described as ‘incontestable’.[29] While unnecessary to detail all of these principles in the present circumstances, of particular relevance is the second principle:
The instrument … must receive a construction according to the plain meaning of the words and sentences therein contained. But … you must look at the whole instrument, and, inasmuch as there may be inaccuracy and inconsistency, you must, if you can, ascertain what is the meaning of the instrument taken as a whole in order to give effect, if it be possible to do so, to the intention of the framer of it.[30]
[29](1922) 31 CLR 268, 273–6.
[30]Ibid 273–4 (emphasis in original).
Prima facie, the words of a will must be given their ordinary meaning. If, in the context of a will read as a whole and the surrounding circumstances, the ordinary meaning of its words do not make sense, extrinsic evidence is admissible under the ‘armchair principle’.[31] In effect, the Court is able to consider evidence of the circumstances surrounding the testator at the time a will was executed, in effect to sit in the testator’s ‘armchair’ in order to understand the language used.[32]
Plaintiffs’ submissions
[31]Re De Bruyn [14] (McMillan J), citing Boyes v Cook (1880) 14 Ch D 53, 56 (James LJ).
[32]Perrin v Morgan [1943] AC 399, 420 (Romer LJ).
The plaintiffs submit that, as none of the clauses of the will in which the phrase ‘family income fund’ is adopted identify a specific beneficiary, and cl 16 of the will stipulates that the residuary estate is to be distributed to the residuary beneficiaries in specified shares, the Court ought be satisfied that the deceased intended ‘family income fund’ to describe the residuary estate.
Defendants’ submissions
Each of Deborah, Bradley, Rebecca, Jacobus, Emelia and Tomas submit that the references to the ‘family income fund’ in the will should be treated as references to the residuary estate of the deceased. Neither Berry Street nor the Attorney-General make submissions in relation to this ground of relief.
Consideration
In first considering the ordinary meaning of the words ‘family income fund’, some ambiguity arises. In the absence of any clear identification, description or definition of a fund in this manner within the will, it is difficult to conclude definitively and immediately that the construction contended for by the parties, that is, that the ‘family income fund’ is a reference to the residuary estate is correct.
However, when the words ‘family income fund’ are considered in the context of cls 5 and 19 and the will as a whole and in light of the surrounding circumstances, it becomes apparent that this construction is to be preferred. The residuary estate can sensibly be described in such a manner, given that under cl 16, the residue of the deceased’s estate is to be distributed between her family: that is, her children and grandchildren in particular shares. Clause 5 provides that failed pecuniary legacies ‘shall form part of’ the family income fund. Clause 19 provides that probate, accounting and legal fees, and executors’ commissions, ‘shall be payable from’ the family income fund. In their contexts, both such usages logically lend support to the conclusion that the deceased intended the term ‘family income fund’ to describe the residuary estate. Moreover, no other potential interpretation or construction of the term is immediately apparent on the face of the will.
As such, the executors are justified in treating the references to the ‘family income fund’ within the will as references to the residuary estate of the deceased.
Conclusion
The answers to the questions set out at para [39] above are as follows:
(a) Question 1 seeks orders that are inappropriate in the circumstances of the proceeding. The appropriate orders are that Mr Lowenstein be discharged rather than removed as an executor and trustee of the estate. For the reasons given it is unnecessary to appoint Mr Marks as the sole executor and trustee of the estate of the deceased;
(b) Questions 2, 3, 7 and 8 are answered in the affirmative; and
(c) Questions 4, 5 and 6 no longer arise for the Court’s determination based on the conclusions reached in respect of Questions 2 and 3.
Orders
The Court will make the following orders:
(a) Pursuant to r 36.01(1) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic), leave be granted to the first plaintiff, now for 3 August 2022, to amend the heading to the originating motion and summons filed 30 September 2021 to include that the proceeding is also brought pursuant to ss 34(1)(b) or (c) of the Administration and Probate Act 1958 (Vic) and ss 41(1) and 51 of the Trustee Act 1958 (Vic);
(b) Pursuant to s 34(1)(b) of the Administration and Probate Act 1958 (Vic), the ninth defendant, Tom Lowenstein, be discharged as an executor of the estate of Joyce Olga Evans, deceased, and pursuant to s 34(1) of the Administration and Probate Act 1958 (Vic), the assets of the estate be vested in the first plaintiff, Bernard Marks, as the continuing executor of the estate of the deceased;
(c) Pursuant to s 41(1) of the Trustee Act 1958 (Vic), the ninth defendant, Tom Lowenstein, be discharged as a trustee of the estate of the deceased;
(d) Pursuant to s 51 of the Trustee Act 1958 (Vic), the property and assets of the estate of the deceased be vested in the first plaintiff, Bernard Marks, as the continuing executor of the estate of the deceased;
(e) An authenticated copy of this order be annexed to the original grant of probate made 26 September 2019 of the will dated 15 April 2017 and codicil dated 31 December 2018 of the deceased and the original grant of probate be delivered up to the Registrar of Probates for this purpose within 14 days of the date of this order;
(f) The costs of the proceeding be reserved; and
(g) In the event that the parties are unable to agree on the costs of the proceeding, short written submissions be filed by 17 February 2023.
Directions
The Court will make the following directions:
(a) The first plaintiff, Bernard Marks, in his capacity as the executor and trustee of the estate of Joyce Olga Evans, deceased, is justified in entering into the deed or agreement with the residuary beneficiaries of the estate to compromise proceeding no. S ECI 2020 01539 which includes terms to the effect of those contained within cl 3.1(c) of the draft deed of release and indemnity dated 25 August 2021;
(b) The first plaintiff, Bernard Marks, in his capacity as the executor and trustee of the estate of Joyce Olga Evans, deceased, is justified in entering into a deed or agreement with the residuary beneficiaries of the estate to vary the terms of the will of Joyce Olga Evans, deceased, dated 15 April 2017, as amended by the codicil to the will dated 31 December 2018, which includes terms to the effect of those contained within cl 3.1(c) of the draft deed of release and indemnity dated 25 August 2021;
(c) The second plaintiff, R.J.A Nominees Pty Ltd, in its capacity as trustee of the Evans Family Trust, is justified in entering into a deed or agreement with the residuary beneficiaries of the estate which includes terms to the effect of those contained within cl 3.2 of the draft deed of release and indemnity dated 25 August 2021;
(d) The first plaintiff, Bernard Marks, in his capacity as the executor and trustee of the estate of Joyce Olga Evans, deceased, is justified in spending up to $50,000 in the performance of the duties set out in cl 11 of the will of Joyce Olga Evans, deceased, dated 15 April 2017, as amended by the codicil to the will dated 31 December 2018; and
(e) The first plaintiff, Bernard Marks, in his capacity as the executor and trustee of the estate of Joyce Olga Evans, deceased, is justified in treating the references to the ‘family income fund’ in cls 5 and 19 of the will of Joyce Olga Evans, deceased, dated 15 April 2017 as references to the residuary estate of Joyce Olga Evans, deceased.
SCHEDULE OF PARTIES
S ECI 2021 03577
| BERNARD MARKS (as one of the joint and several executors of the will and estate of JOYCE OLGA EVANS, deceased) | First Plaintiff |
| R.J.A NOMINEES PTY LTD ACN 005 095 885 (in its capacity as trustee of the EVANS FAMILY TRUST) | Second Plaintiff |
| - and - | |
| BRADLEY GRAYSON EVANS | First Defendant |
| DEBORAH LEIGH VANDERHOEK (formerly known as DEBORAH LEIGH EVANS) | Second Defendant |
| TOMAS VANDERHOEK | Third Defendant |
| JACOBUS VANDERHOEK | Fourth Defendant |
| REBECCA VANDERHOEK | Fifth Defendant |
| EMELIA EVANS | Sixth Defendant |
| BERRY STREET VICTORIA INC ABN 24 719 196 762 | Seventh Defendant |
| ATTORNEY-GENERAL FOR THE STATE OF VICTORIA | Eighth Defendant |
| TOM LOWENSTEIN (as one of the joint and several executors of the will and estate of JOYCE OLGA EVANS, deceased) | Ninth Defendant |
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