Re Thompson (dec'd); Lundstrom v Attorney-General for the State of Victoria
[2006] VSC 313
•30 August 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 7599 of 2003
IN THE MATTER of the Will and Estate of Edith Melva Thompson, deceased
| FLORENCE ENID LUNDSTROM & ORS | Plaintiffs |
| V | |
| THE ATTORNEY-GENERAL FOR THE STATE OF VICTORIA & ORS | Defendants |
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JUDGE: | HANSEN J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 8 August 2006 | |
DATE OF JUDGMENT: | 30 August 2006 | |
CASE MAY BE CITED AS: | Re Thompson, deceased | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 313 | |
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Will – Gift to Victorian State Opera – Ceased to exist prior to death of deceased – Lapse – General charitable intention – Application of gift cy près – Costs.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr R H Miller | Deacons |
| For the First Defendant | Ms C H Sparke | Victorian Government Solicitor |
| For the Fifth Defendant | Mr M J Colbran QC and Mr P R D Gray | ResourcesLaw International |
| For the Sixth Defendant | Mr R T A Waddell | William Murray |
| For the Seventh Defendant | Dr I J Hardingham QC | Dibbs Abbott Stillman |
| For Residuary Beneficiaries, by leave | Mr R A Brett QC | Harry Hearn |
| No appearance for the second to fourth and eighth to twenty fifth defendants |
HIS HONOUR:
This is an originating motion for the determination of questions concerning the fate of a gift of residue in the will of Edith Melva Thompson who died on 18 April 2002 aged 95 years possessed of an estate valued in the inventory of assets and liabilities lodged in connection with the application for probate at $7,914,322.94. Probate of the deceased’s last will dated 27 March 1991 was granted to the plaintiffs, being the appointed executors, on 6 September 2002.
By her will the deceased dealt with her assets as follows. By cl 3 she bequeathed certain personal chattels and legacies to ten named beneficiaries. By cl 4 she gave her sister the balance of her personal chattels. Then by cl 5 she left the residue of her estate on trust as follows:
“(a)to pay my funeral and testamentary expenses debts and all taxes, death, probate, estate, succession and other duties payable on my estate or payable in respect of property which is deemed to form part of or which is chargeable with duty as though part of my estate without apportioning those duties AND I DIRECT my Trustees not to seek to recover any part of those duties from any person;
(b)To distribute the balance of my estate in equal shares to the following:-
(a)VICTORIAN STATE OPERA of 77 South Bank Boulevard, South Melbourne or if that organisation is not an incorporated body at the date of my death to the Trustees thereof for the time being for the general purposes of that organisation.
(b)THE NATIONAL TRUST OF AUSTRALIA (VICTORIAN SECTION);
(c)THE PRESBYTERIAN CHURCH OF VICTORIA TRUSTS CORPORATION;
(d)THE WALTER AND ELIZA HALL INSTITUTE, and I express the wish and desire that such Institute should establish in the name of L.W. THOMPSON a Fund for research or scholarship purposes;
AND I DIRECT that the receipt of the Treasurer or other proper officer of any of the aforesaid institutions, societies or funds shall be a sufficient discharge to my Trustees.”
It is unnecessary to refer to the remaining provisions of the will.
Unfortunately, when the deceased died the Victorian State Opera (“VSO”) did not exist. It existed as an incorporated entity when the deceased made her will but it had been deregistered on 23 October 1999. Accordingly the gift to the VSO could not take effect. The question thus arose whether that gift of a one-quarter share of the residue lapsed and passed as on an intestacy or whether it may be applied under one of the exceptions to the lapse rule discussed in Re Tyrie, deceased[1]. It was for the determination of these questions that the present proceeding was commenced. In summary answers are sought as to whether, in the events which have happened:
[1][1972] VR 168 at 177-178.
(a)The gift to the VSO can take effect?
(b)If not, did the deceased manifest in cl 5(b)(a) a general charitable intention?
(c)If yes, should the trust relating to that share of residue be administered under a cy près scheme?
(d)Alternatively, has the gift to the VSO lapsed?
(e)If yes, does the one-quarter share of residue pass to –
(i)the next of kin as on an intestacy? or
(ii)the beneficiaries in cl 5(b), (b) (c) and (d)?
Counsel also raised for determination certain questions of costs.
The Defendants
Initially there were thirteen defendants, the first being the Attorney-General of the State of Victoria and the second to thirteenth being persons who were next of kin of the deceased. On it later transpiring that three of these persons (the fifth, sixth and seventh defendants) were not next of kin they were removed as parties to the proceeding.
Later, on 14 November 2003 Opera Australia (“OA”), Melbourne Opera Company Limited (“MO”) and Melbourne City Opera Limited (“MCO”) were, on their application, added as the fifth, sixth and seventh defendants.
Later again more persons, being additional next of kin of the deceased, were added as the fourteenth to twenty fifth defendants.
It is necessary to say something about the defendants. The joinder of the Attorney-General was understandable and correct in view of his role in relation to gifts to charity and consideration of a cy près scheme.
The next group of defendants was the next of kin. It is not altogether clear to me whether those joined as next of kin are the full complement of next of kin. In this regard I note that the originating motion seeks an order that the second defendant represent the next of kin of the deceased for the purpose of the proceeding. That order would only seem necessary if the named next of kin were only some of the deceased’s next of kin. But, if they were only some of the next of kin, why were they joined in addition to the proposed representative party? Counsel for the plaintiffs neither sought the representative order nor explained the position. Thus I am unclear whether a representative order is necessary and I will seek clarification from counsel.
OA, MO and MCO were joined because each put itself forward as the appropriate recipient of the whole or part of the VSO one-quarter share of residue under the principles in Re Tyrie, deceased whether in the case of OA because it carried on the work of the VSO in succession to it or in the case of them all under a cy près scheme. Each filed affidavits in support of its position dealing in particular with its role in relation to the performance of opera in Victoria. Each sought to identify its activities as being akin, or as near thereto as possible, to the role formerly undertaken by the VSO in Victoria.
The history of the VSO was deposed to in the affidavits. It is unnecessary to repeat that history beyond the following. The VSO was originally incorporated in Victoria in 1974 as the Victorian Opera Company Limited and was renamed the Victorian State Opera Company Limited in 1977. The objects of the VSO were, relevantly, to “produce and perform and join in promoting producing and performing presentations of opera, musical theatre drama repertory stage plays ballet and any other form of entertainment”. In the performance of those objects the VSO performed opera in Melbourne and regional centres in Victoria and undertook other activities intended to encourage a knowledge and love of opera in the wider community. These included for some years a free performance of an opera in the Sidney Myer Music Bowl, a Schools Opera program, a young artist program and other related operatic activities. However, in consequence of poor financial performance, the VSO could not continue. Following meetings between them in 1996 it was agreed that the VSO and The Australian Opera should merge[2]. This involved The Australian Opera changing its name to Opera Australia and taking over the assets and undertaking of the VSO and assuming its liabilities. The relevant events occurred as follows: the VSO ceased trading in December 1996, went into liquidation in 1997 and was deregistered on 23 October 1999.
[2]There was some contention in the evidence as to whether and to what extent it was correct to describe what happened as a merger of the two entities. In the circumstances it is not necessary to elaborate on the detail of how the “merger” was effected.
The evidence of OA in the proceeding deposed to its role in the performance of opera in Victoria before and after the merger with the VSO. The objects of OA are expressed similarly to those of the former VSO. It was contended that OA had succeeded to the work of the VSO and The Australian Opera in Melbourne and would not be replaced as the provider of professional high quality, mainstage opera productions in Melbourne. It was said that the future of professional opera in Melbourne and throughout Victoria lay with OA and OzOpera (conducted by OA) through its regional touring program.
MO was incorporated in Victoria on 20 February 2003. Its objects are similar to those of the VSO and include that it develop, promote, control, manage and encourage the performance and appreciation of opera, operetta and other performing art forms. Past and planned performances of opera in Melbourne and regional centres in Victoria, and the fostering of young Victorian performers and related activities, were referred to and it was contended that it ought be the beneficiary of a cy près scheme in respect of the VSO one-quarter share of residue. There was, it was deposed, a need for a well managed opera company devoted to the needs of the Victorian public and Victorian artists. In one affidavit it was even asserted that the deceased would regard the MO as successor in all but name to the VSO.
MCO was also incorporated in 2003. Its roots went back to the Globe Opera Co Pty Ltd incorporated in 1978 for the purpose of providing, to some extent, alternative seasons of opera and operetta drawn mainly from the standard repertoire of the seasons then being presented in Melbourne by The Australian Opera. From 1986, when the VSO moved into the State Theatre, the Globe Opera no longer competed with the VSO in the area of staged productions. From then until the demise of the VSO in 1996 Globe Opera performed only in concert. However its objects, and those of its successor Globe Opera Co Inc, were similar to those of the VSO, and it was decided to recommence staging opera to fill the gap left by the winding up of the VSO, the first opera being staged in 1997. Ultimately this led to the incorporation of MCO which has staged performances in Melbourne and regional Victoria.
What I have said concerning the VSO, OA, MO and MCO is a brief summary of the evidence in the numerous affidavits. To a limited extent some of the affidavits went to the issue of the deceased’s general charitable intention. To a major extent they went to the issue of whether and why the subject party was an appropriate recipient of the whole or part of the VSO one-quarter share.
Next of kin settle
In the usual course of things, at the hearing of the proceeding counsel for the next of kin would have presented argument for the conclusion that the gift lapsed and that the one-quarter share of residue passed as on an intestacy. In this instance however the next of kin did not appear at the hearing. Indeed, the solicitor for the plaintiffs informed the Court by affidavit that the next of kin had played no part in the proceeding. Furthermore, for reasons doubtless considered appropriate, the plaintiffs had settled the next of kin’s “claims” for $40,000 plus their solicitor/own client costs. The costs have been paid. The settlement sum of $40,000 has not yet been paid. Each sum will be a debt or expense incurred in the administration of the estate and be borne by the residuary estate pursuant to the direction in cl 5(a).
A scheme
It is apparent that during the pendency of the proceeding OA, MO and MCO gave consideration to the basis on which enjoyment might be had of the VSO gift. Indeed as early as 25 November 2003 a Master ordered by consent that the proceeding be referred to mediation. That process did not produce an agreed position. Then, in late 2004 following the commencement of the Victorian Government review referred to below, MO and MCO discussed a merger of those entities which would involve the establishment of a single locally based opera company called VicOpera which would increase the prospect of obtaining financial assistance from the State Government for the promotion of opera in Victoria. However, agreement could not be reached and in May 2005 MCO announced that the merger would not proceed.
In October 2004 the Victorian Government commenced a review of opera in Victoria. As a result, on 3 May 2005 the Minister for the Arts announced a grant of $7.6M over four years for “a new ‘boutique’ opera venture that would enhance Victoria’s reputation for leadership and innovation in the arts and foster new Australian work” and which “would secure Melbourne’s position as the home of innovative and accessible opera in Australia”. Subsequently, on 3 August 2005 the Minister announced that a new company would be established “to present opera on a small and medium scale across the State, with access to the existing talent, companies and support already operating in Victoria”. In accordance with this determination, on 6 October 2005 the Victorian Opera Company Limited (“VOCL”) was incorporated as a company limited by guarantee the members of which are the State of Victoria and The University of Melbourne. The objects of VOCL include the promotion of professional opera and music theatre presentations in Victoria. The objects are more fully set out in cl 2 of VOCL’s constitution[3]. In an affidavit sworn last October the chairperson of VOCL deposed that VOCL intended to present up to four high quality small and medium scale productions, in addition to a tour of regional Victoria, annually.
[3]Exhibit MJR3 to the affidavit of Michael John Roux sworn 21 October 2005.
Following the announcement of government funding in August 2005 discussions occurred between OA and VOCL as to ways in which they might act jointly to the benefit of operatic activity in Victoria. In affidavits sworn on behalf of OA and VOCL respectively on 21 and 24 October 2005 it was deposed that they had agreed in principle on the application of the VSO share of residue. A trust would be established for the management of the fund, there to be two trustees who must act jointly, one to be appointed by OA and the other by VOCL, with the net income to be applied towards the development and performance of opera in Victoria. It was believed that the application of the VSO gift to the proposed trust, and of the income arising therefrom to OA and VOCL as agreed, would best satisfy the wishes and intentions of the deceased. Accordingly, approval of the proposal was sought. This of course meant approval as a cy près scheme.
The originating motion had been fixed for hearing on 24 October 2005. However it was agreed in principle, subject to the approval of the Court, that the VSO share be dealt with as follows, namely MO and MCO each receive $100,000 and the balance be held by the trust agreed on by OA and VOCL, and that the costs of the parties as between solicitor and client be paid from the estate.
As VOCL was (and is) not a party to the proceeding it was left to OA to bring the agreed scheme before the Court for approval. For this purpose, on 28 February 2006 the parties sought and obtained from a judge in the Practice Court an order that OA file and serve a proposed cy près scheme including a trust deed on or before 28 March 2006.
Also on 28 February 2006 the Listing Master ordered that the issue of costs in respect of the proceeding be fixed for trial on 8 August 2006. It was on that fixture that the proceeding came on before me.
In these circumstances the hearing on 8 August had to deal with a series of issues: first, the appropriate answers to the questions in the originating motion; secondly, consideration of the proposed cy près scheme; thirdly, questions of costs. As it transpired, the substantial matter of difference on which I heard submissions was the matter of costs. On that matter, by leave I heard submissions from counsel for the beneficiaries named in cl 5(b), (b),(c), and (d) of the will. The range of the issues thus raised has affected the extent to which I have considered it necessary to refer to events to the present.
I now deal with each matter in turn.
Answers to the questions
All parties were agreed that the questions should be answered to the following effect namely that in the gift in cl 5(b)(a) the deceased had manifested a general charitable intention, that the gift had not lapsed, and that the gift should be administered in accordance with the cy près scheme brought in by OA. It was accordingly not necessary to answer the final question whether the share of residue went to the next of kin by way of an intestacy or to the other residuary beneficiaries. In my view the answers suggested are the correct answers and the questions will be answered accordingly. However it is necessary to say something about the proposed scheme.
The proposed scheme
The proposed scheme was first referred to in the affidavits sworn on behalf of OA and VOCL in October 2005 referred to above. Pursuant to the order made in February 2006 OA circulated the proposed scheme and a draft trust deed in March, followed in July by a later revision of the trust deed. The proposed scheme including the trust deed has not been produced as an exhibit to an affidavit. Rather, counsel for OA produced to me the proposed scheme for the administration cy près of the VSO share. The scheme contains two clauses, the first containing definitions and the second stating the allocation of the share of residue. The share is to be paid or applied as follows:
(a)To each of MO and MCO, the sum of $100,000, and
(b)As to the remainder thereof, to the Melva Thompson Bequest Fund Trust to be held and applied in accordance with the terms of the trust deed.
The scheme has two schedules. Schedule 1 provides for the insertion of the amount being the value of the VSO share as at 7 August 2006. Schedule 2 comprises the trust deed for the establishment of the Melva Thompson Bequest Fund which is to be executed by the executors and the trustees of the trust fund. The deed is in draft form. As presently drafted the scheme requires the value of the share available for distribution under cl 5(b)(a) as at a particular date to be inserted in Schedule 1. This requirement seems to be the consequence of the chosen drafting rather than a matter of principle. The actual dollar value of the gift under cl 5(b)(a) will not be known until the costs of the proceeding and all other expenses which the estate must bear have been quantified. That may take some time with the consequence that until then the schedule (if there is to be one) cannot be completed. It seems to me, subject to anything that counsel may say, that Schedule 1 and the drafting which requires it is not necessary. The scheme could be expressed to operate in relation to the amount distributed under cl 5(b)(a) after payment of the specified amounts to MO and MCO.
The definition of the trust deed in cl 1 of the scheme document requires the date of the trust deed to be inserted, and defines the trust deed as meaning the deed “in the terms of the draft” contained in Schedule 2 to the scheme. In my view the better approach is to identify the trust deed simply and directly as that contained in Schedule 2 and there should be an affidavit from OA and VOCL in which those bodies state their intention to execute that deed. I assume from the fact that the scheme was put forward by counsel for OA, and is supported by other counsel, that OA and VOCL have signified to each other (and to the executors) their agreement to execute the trust deed as produced to me, but neither has deposed to that in an affidavit. These matters should be attended to. An additional matter to be deposed to is to link the trust deed to the agreement between OA and VOCL referred to in their respective affidavits sworn in October 2005. It is preferable that all of these matters, including the agreement, be set out in an up to date affidavit of OA and VOCL.
Subject to these comments, I note the following concerning the trust deed. It commences with a section headed Background in which it is stated that to give effect to an order in this proceeding (which will be the order approving the cy près scheme) the executors “desire to establish a trust to assist in the charitable purpose of the development and performance of opera and music theatre in the State of Victoria”. This is called the Principal Purpose. Counsel for the Attorney-General expressed concern at the inclusion of the reference to music theatre in the sense that its meaning may be uncertain and possibly wider than is understood by opera. In my view the object so expressed fits within the objects of the VSO and its purposes, and is appropriately used in the expression of the purpose of the trust. It was also suggested by counsel for the Attorney-General that there might be included such words as “as carried out by the VSO” to ensure that future activities were tied as closely as possible to those formerly carried out by the VSO. I do not consider that necessary in light of the Principal Purpose, the objects of OA and VOCL and their agreement.
It is then stated in the Background that the executors have provided a sum – called the Original Contribution – pursuant to the order of the Court to be held by the trustees upon trust for the Principal Purpose, and that the trustees have agreed to act as trustees and perform and administer the trust. It is apparent from this that execution of the deed is to await the making of the cy près order and payment by the executors of the amount payable under cl 5(b)(a). It would nevertheless be possible for the plaintiffs to advance part of the fund, for the purpose of enabling the trust to commence, without waiting for final ascertainment and payment of all costs and expenses in the estate.
The deed contains definitions in cl 1.1 and then proceeds with appropriate provisions for the establishment of the trust and its management and application. The fund is held for the benefit of OA and VOCL. Importantly, the deed provides for the proportions in which OA and VOCL may enjoy the income and capital of the fund. OA is to be entitled to 36 percent and VOCL to 64 percent. It is not necessary to refer to any other provision in the deed.
Subject to the matters I have mentioned being attended to – for which purpose I will stand the matter over – I will approve the scheme. It provides a vehicle which as close as may be practicable will effectuate the deceased’s charitable intentions.
Costs
The different positions on costs may be summarised as follows, commencing with the plaintiffs. Doubtless because the executors had agreed to pay, and had paid, the costs of the next of kin, counsel for the plaintiffs did not seek an order for the payment of those costs, as I understood his position. Apart from seeking the usual order for the plaintiffs’ costs he left the matter of costs to the discretion of the Court.
Stated broadly, the substantive issue argued was whether costs should be paid out of the residuary estate in accordance with the direction in cl 5(a) or be borne by the VSO share under cl 5(b)(a). Counsel for OA pressed for the former and that the $40,000 payable by the plaintiffs to the next of kin be borne under cl 5(a). This would have the effect of reducing the residue distributable under cl 5(b), thereby reducing the amount to be received by the residuary beneficiaries under cl 5(b), (b), (c), and (d). In other words, those beneficiaries would bear three-quarters of the burden of the fight over the fate of the VSO gift. Counsel for those residuary beneficiaries opposed this approach. He did not argue against the costs of the plaintiffs and the Attorney-General, or the costs paid to the next of kin, being borne by the residuary estate under cl 5(a). He submitted however that the costs of OA, MO and MCO should be borne by the VSO share.
The reason for concern on the effect of orders for costs is apparent from two affidavits sworn on 7 August 2006, one by one of the plaintiffs and the other by the solicitor for The Walter and Eliza Hall Institute, one of the three residuary beneficiaries. The deponent of the former affidavit produced a statement of movements in the estate’s capital to 4 August 2006. In summary, the specific bequests and legacies have been dealt with and expenses (including the costs of the next of kin) have been paid leaving a residuary estate of $6,900,225 from which must be deducted the balance of the costs of the proceeding (as the Court may order). Subject to that, $4,275,000 has been paid to the three residuary beneficiaries, being $1,425,000 each. That leaves in hand as estate capital the sum of $2,625,000.
While these figures indicate a substantial amount receivable under the residuary gifts, the concern motivating the submissions on behalf of the three residuary beneficiaries is the apprehension that the costs of the parties, that of OA, MO and MCO in particular, will greatly reduce the distributable sum if they are borne by the residuary estate under cl 5(a). The factual basis for the apprehension is found in the latter affidavit which exhibits a letter from the plaintiffs’ solicitor dated 8 December 2005 which advised the costs of the parties as $883,615.58 made up as follows:
(a) Plaintiffs’ costs – bills between 6.8.2002 and 24.11.2005
$177,439.63
(b) Attorney-General $20,924.76 (c) OA $440,765.76 (d) MO
$99,207.11
(e) MCO
$145,278.32
The letter enclosed information supporting the estimated amounts. The supporting information was not provided to me. Indeed, I understand that the information was not included in the exhibit.
These estimated amounts for costs will doubtless have been increased by work undertaken since December which work has included appearances in Court and the recent hearing. I have no idea of the actual amount of such additional costs let alone what amount might be allowed on taxation.
To demonstrate the difference in result on the rival approach of OA and the residuary beneficiaries, counsel for OA provided an analysis of the amount that would be received under cl 5(b)(a), as follows:
(a) if the VSO share bears all costs plus the $40,000 payable to the next of kin
$385,000.00
(b) if such costs are borne by the residuary estate under cl 5(a)
$1,210,000.00
(c) if as to one half each the costs were borne under cl 5(a) and cl 5(b)(a)
$797,500.00
Counsel said that his calculations included an allowance for costs incurred since the estimations set out in the letter of the plaintiffs’ solicitor; that allowance increased the December estimate of costs to $1,100,000. On that basis the calculation in (a) above was produced as follows:
Residue
$6,900,000.00
A quarter share
$1,725,000.00
Less payable to MO, MCO and next of kin
$240,000.00
Less costs
$1,100,000.00
$385,000.00
In their helpful submissions counsel referred me to numerous authorities concerned with the correct manner of exercising the discretion on costs. (The written submissions have been placed on the file to enable reference to their full terms.) The issue commences with the direction to pay testamentary expenses and debts out of the residuary estate in cl 5(a), which would comprehend both costs and the amount payable to the next of kin. Further, the direction to pay testamentary expenses out of residue accords with the ordinary rule of practice that costs in a proceeding brought by trustees for the determination of questions concerning the operation of provisions in a will “should be paid out of the residuary estate, not out of some particular asset of the estate”, to quote Menzies J in Pohlner v Pfeiffer[4]. It is important to note that Menzies J, in whose judgment in this respect the other members of the majority agreed, held that the primary judge had erred in not applying the ordinary rule which in that case had been reinforced by the testatrix’s direction that testamentary expenses be paid out of residue. Menzies J said that the judge had “decided to depart from the ordinary rule but … without sufficient justification”. It is apparent from this, and the cases generally, that notwithstanding the ordinary rule and the deceased’s direction to pay testamentary expenses out of residue, the Court retains a discretion as to the person on whom, or the fund on which, costs should fall. But to depart from both would require “sufficient justification” in the circumstances.
[4](1964) 112 CLR 52 at 71.
Counsel for the residuary beneficiaries submitted that OA, MO and MCO incurred their costs on what was essentially an inter partes adversarial dispute between themselves to establish which of them was more like the VSO in aid of obtaining the fund. They engaged in the case at length and at great expense, with notice that the residuary beneficiaries objected to the costs of their dispute being borne effectively as to 75 percent by the residuary beneficiaries. It was thus an appropriate exercise of discretion to order that their costs be borne by the share over which they disputed[5].
[5]See Re Buckton [1907] 2 Ch 406 at 414-416; Murdocca v Murdocca(No 2) [2002] NSWSC 505 at [71]-[81]; Re Bianco, Supreme Court of Victoria, Gillard J, unreported, 23 September 1997; BC9704839.
Counsel for the residuary beneficiaries also relied on r 63.21 of the Supreme Court (General Civil Procedure) Rules 2005 which if applied meant that the subject costs would be paid out of the VSO share unless the Court otherwise ordered.
These submissions were made in light of the estimate of costs in the plaintiffs’ solicitor’s letter last December. In overall dollar terms the amounts seem large, and the apprehension that the costs may be taxed (as they must be) at such a level, led to the intervention of the residuary beneficiaries. Be that as it may, whatever apprehension the estimate might reasonably have induced in the residuary beneficiaries could only have been increased by the suggestion that costs were now in the order of $1,100,000. This, at least prima facie, seems high stakes indeed for what is, after all, a proceeding for the answer to certain questions concerning a testamentary gift that could not take effect and where it was not argued that the gift lapsed to pass on an intestacy, or that it passed to the other residuary beneficiaries, or that there was not a general charitable intention. The “contest” became one between OA, MO and MCO who vied to be a recipient to the greatest extent of the VSO share, and in this process costs have been incurred. The residuary beneficiaries have not been involved in this process yet, on OA’s submission, they should bear three-quarters of the costs occasioned thereby.
Counsel for OA submitted that there was no sufficient reason not to apply the ordinary rule on costs and the direction in cl 5(a) to pay testamentary expenses out of the residuary estate. Among the cases referred to, Re Stone[6] was particularly relied on. The proceeding was brought by the executors to determine how the VSO gift should be dealt with in due administration of the estate. It was said that the proceeding was complicated and lengthened by the presence of multiple parties and the complexity of some of the issues, the evolving position of the State government and the number of witnesses. Furthermore, OA had acted reasonably and carefully in appearing and contesting issues in the proceeding, as to which see Elders Trustee & Executor Company Limited v Eastoe[7]. It was also said that parties had reached a compromise in what would otherwise have a been a seven day hearing of the question of the cy près scheme.
[6](1936) 36 SR (NSW) 508.
[7][1963] WAR 36.
Counsel for MO and MCO were not concerned as their clients’ fixed benefit of $100,000 would be paid under the cy près scheme regardless of how the costs were borne.
Concern was however expressed by counsel for the Attorney-General. She first acknowledged, correctly in my view, that there were arguments both ways as to whether the costs incurred by the necessity to bring the proceeding should be borne by the residuary estate generally or the VSO share, and then submitted that the costs of all parties should be taxed. However, she submitted that the costs relating to the question of who was the appropriate entity to receive the benefit of a cy près scheme ought be borne by the lapsed share. In elaboration, she submitted that some costs would have been necessary to incur and ought properly be borne by residue under cl 5(a). More specifically, counsel submitted that the costs referable to questions one, two, four and five in the originating motion would properly be borne by residue under cl 5(a). However, while the affidavits filed by OA went in part to the issue of general charitable intention the evidence otherwise went to the cy près question. What had happened here was that OA, MO and MCO had come into the proceeding and taken an active role, and in doing so rather supplanted the role commonly undertaken by the Attorney-General of making inquiries as to and bringing in a cy près scheme. Thus had much costs been incurred, and these should not fairly fall on the general residuary estate.
It was evident that the submissions of the Attorney-General and the residuary beneficiaries were much motivated by the costs of OA, MO and MCO as presently estimated. They seem very large. It is of course another thing altogether to know the amount at which those costs may be assessed on taxation; I cannot speculate as to that. I would add to the broad distinction identified by counsel for the Attorney-General that there are limits to what would be considered as costs properly incurred in relation to the questions in the originating motion. Without suggesting anything in relation to the costs that any party might seek to recover on a taxation I would, with respect, make a few observations. It seems to me that a party added to the proceeding at its request is not entitled to whatever costs come to be incurred on the file. Further, it seems evident that OA, MO and MCO were involved in out of court discussions directed to achieving enjoyment of the VSO share, but it by no means follows that such costs should be treated as costs of the proceeding. Instances that come to mind are representations made to government, and negotiations between MO and MCO on a merger. It is to be emphasised that this was an originating motion for the answer of questions concerning a single gift of residue as to which the answers were, with respect, reasonably apparent. It was not a commercial case in which the added parties, OA, MO and MCO, were fighting about a fund in which they had a claim of right.
Considering the matter overall, and having regard to all that counsel has said, I conclude that in the very particular circumstances of this matter and for the reasons advanced by the residuary beneficiaries and the Attorney-General in their written and oral submissions, the just and equitable approach is that submitted by counsel for the Attorney-General. What was reasonably commenced as an administration proceeding with tolerably clear answers, became, following the joinder (at their request) of OA, MO and MCO and as between them, akin to an adversarial contest over the fund with attendant and substantial cost and expense and the substantial displacement of the usual role of the Attorney-General. On the basis suggested by the Attorney-General the costs of OA, MO and MCO relating to the cy près aspect would be taxed as between solicitor and client and paid out of the VSO share. It will be in the interest of OA to ensure that the costs of MO and MCO are kept to the minimum and in the interest of VOCL that OA’s costs are kept to the minimum and only such as are properly recoverable on taxation. For its part OA is acting in this matter with a view to the interest of VOCL and of the Melva Thompson Bequest Fund.
Accordingly, and on the basis that question one is amended as set out I will answer the questions in the originating motion as follows:
1. In the events that have happened can the gift in cl 5(b)(a) of the deceased’s Will dated 27 March 1991 take effect?
No
2. If the answer to question 1 is “no”, has the deceased manifested in the residuary disposition in Clause 5(b)(a) of her Will a general charitable intention?
Yes
3. If the answer to question 2 is “yes” should the Plaintiffs, given the events which have happened, administer the trusts relating to the one quarter share of the residuary estate, gifted to the Victorian State Opera cy près for the benefit of:
(i) Opera Australia; or
(ii) Melbourne Opera:
The trust should be administered in accordance with the cy près scheme to be approved in this proceeding 4. Alternatively, has the gift to the Victorian State Opera lapsed?
No
5. If the answer to question 4 is “yes”:
(a) does the one quarter share of the residue go to the next of kin of the deceased by way of an intestacy? Or
(b) does the one quarter share of the residue accrue or go to the other beneficiaries referred to in clause 5 of the Will, namely:
(i) the National Trust of Australia (Victorian Section);
(ii) the Presbyterian Church of Victoria Trusts Corporation;
(iii) the Walter and Eliza Hall Institute?
Not necessary to answer
For the reasons mentioned earlier the answer to question three refers to a scheme “to be” approved. I will approve the scheme when brought in with the changes discussed.
As to orders I mention, as referred to earlier, that it does not seem necessary to make a representative order in respect of the next of kin. If I am wrong in that I should be so advised. As to costs I will make the following orders:
(a)The costs and expenses of the plaintiffs of and incidental to the originating motion, including reserved costs, be taxed as between solicitor and client and retained out of the residuary estate under cl 5(a) of the said will.
(b)The costs of the first defendant, including reserved costs, be taxed as between solicitor and client and paid out of the residuary estate under cl 5(a) of the said will.
(c)The costs paid, and the amount of $40,000 payable, by the plaintiffs to the second to fourth and eighth to twenty fifth defendants under a settlement agreement be borne by the residuary estate under cl 5(a) of the said will.
(d)The costs of the fifth, sixth and seventh defendants, including reserved costs, be taxed as between solicitor and client and:
(i)insofar as they relate to questions one, two, four and five in the originating motion be paid out of the residuary estate under cl 5(a) of the said will, and
(ii)otherwise be paid out of the share of residue to pass under cl 5(b)(a) of the said will.
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2
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