Regine v Pletka
[2020] VSC 129
•20 March 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TESTATORS FAMILY MAINTENANCE LIST
S ECI 2018 00900
| ROSA REGINE | Plaintiff |
| v | |
| DANIELLE MARGARETHE PLETKA (who is sued as the Executor of the Estate of Peter George Pletka deceased) | First Defendant |
| - and - | |
| JOSHUA DAVID PLETKA (who is sued as the Executor of the Estate of Peter George Pletka deceased) | Second Defendant |
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JUDGE: | MOORE J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 5 February 2020 |
DATE OF JUDGMENT: | 20 March 2020 |
CASE MAY BE CITED AS: | Regine v Pletka |
MEDIUM NEUTRAL CITATION: | [2020] VSC 129 |
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WILLS AND ESTATES – Where terms of the will require a trust to be created – Where executors have given consideration to the plaintiff’s request for specific terms of the will to be carried out – Where estate is still in administration phase – Where plaintiff has made an application for further provision – Where liabilities of estate are not known – Where plaintiff’s claim not based on financial need – Jurisdiction of the Court – Re Ralphs; Ralphs v District Bank Ltd [1968] 1 WLR 1522, considered – Re Simson; Simson v National Provincial Bank Ltd [1950] 1 Ch 38, considered – Blackman v Permanent Trustee Co Ltd [2003] NSWSC 305, considered.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R C Wells | Wainwright Ryan Eid Lawyers |
| For the Defendants | Mr S T Pitt | King & Collins |
HIS HONOUR:
Peter George Pletka died on 21 October 2017, leaving a will dated 26 May 2017. He was survived by his de facto partner, Rosa Regine, and his children, Danielle Pletka and Joshua Pletka.
On 16 May 2018, probate of the will was granted to Danielle Pletka and Joshua Pletka. They are the executors of his estate and the defendants in this proceeding.
The deceased’s estate is very substantial, being valued at in excess of $38 million. Within Victoria, the estate is comprised of property valued at $6,750,000 and $3,624,565 in cash.
Clause 3 of the deceased’s will, titled ‘Provision for Rosa Regine’, provides for an annuity of $150,000 to be paid to Ms Regine. It states that:
3.1I give to my trustees the sum of $1,500,000.00 to be held upon trust and to pay from the capital and any income annual instalments in arrears on each anniversary of my death the sum of $150,000.00 to my partner Rosa Regine of Viale Majno 20 Milano, Italy 20129 (“Rosa”) during her lifetime or until the capital and any income of such fund is exhausted.
3.2If my partner Rosa fails to survive me or survives me but dies before the fund established by this clause is exhausted the capital and any income of that fund shall fall into and form part of my net residuary estate to be dealt with in the manner contemplated in clause 6 of this my Will.
Ms Regine has brought an application for further provision from the deceased’s estate pursuant to Part IV of the Administration and Probate Act 1958. That claim is yet to be heard.
The annuity provided for by cl 3 of the will is payable on the anniversary of the deceased’s death, 21 October 2017. The executors have not paid Ms Regine the annuity for the years 2018 or 2019.
In June 2019, Ms Regine’s solicitors made formal demands of the executors that they distribute to Ms Regine the annuity for 2018. The executors denied her request. Their solicitors correctly took issue with the erroneous claim previously made by Ms Regine’s solicitors that cl 3.1 of the will did not require the creation of a separate trust. They continued:
By reason of your client’s claim and the possible taxation obligations of the Estate (details of which have previously been provided to you), our clients, as executors and trustees of the Estate, have not settled the clause 3.1(a) fund. This would involve creating a separate bank account, investing the money and quarantining the fund away from the rest of the Estate. There is no sensible alternative to such a course. As you will be well aware, unless ordered otherwise by the Court, our clients are bound by the terms of the will.
The reference to the estate’s ‘possible taxation obligations’ is a reference to a contingent liability in the deceased’s estate of approximately USD9 million which is apparently dependent upon whether or not the deceased is determined to have been domiciled in the United States.
In light of the position adopted by the executors, on 8 October 2019, Ms Regine filed a summons in which she seeks an order that the executors of the estate commence payment of the annuity. She seeks the following orders:
1.In accordance with Clause 3.1 of the Will of the Deceased dated 26 May 2017 the Defendants commence payment of the annuity provided for in the Will to the Plaintiff from the Deceased’s Estate, the first of which was due on 21 October 2018 and the second on 21 October 2019;
2.That the Defendants pay to the Plaintiff interest pursuant to the Penalty Interest Rates Act 1983 on the sum of $150,000 calculated from 21 October 2018 to the date of the payment referred to in 1 above;
This judgment concerns Ms Regine’s application for these orders.
Plaintiff’s submissions
Counsel for Ms Regine expressly eschewed any suggestion that her application was brought by reason of any financial need on her part; Ms Regine has deposed that she has net assets of approximately $5,391,166. Her application was instead put on the basis that she has an existing absolute entitlement to payment of the annuities pursuant to cl 3.1 of the will and that her application for further provision was not sufficient justification for the executors to refuse to make those payments.
Central to Ms Regine’s application were observations made by Cross J in Re Ralphs (deceased); Ralphs v District Bank Ltd in relation to an earlier statement by Vaisey J in Re Simson; Simson v National Provincial Bank Ltd.[1] In Re Simson,[2] the widow of a deceased made an application for further provision from the deceased’s estate. Vaisey J granted the widow’s application and ruled that the further provision would have to be taken from the other beneficiaries’ legacies. However, the executor had already paid the legacies due from the estate to the other beneficiaries. His Honour said that:[3]
I think it must be said that where the court has to deal with a matter under this Act the estate should be there intact. Of course, duties and debts, and that sort of thing, can be paid – there is no question about that – but no distribution to beneficiaries should be made while there is any possibility or expectation that an application under this Act will be made.
[1][1968] 1 WLR 1522 (‘Re Ralphs’), discussing Re Simson; Simson v National Provincial Bank Ltd [1950] 1 Ch 38 (‘Re Simson’).
[2]Re Simson (n 1).
[3]Ibid 43.
In Re Ralphs,[4] the widow of a deceased was entitled to payments under the deceased’s will. The widow had also made an application for further provision. The executors decided not to make any payments to the widow under the will until her application for further provision had been determined. Although the case settled, the parties sought a ruling from the Court about the statement by Vaisey J in ReSimson referred to above. On behalf of the High Court (Chancery Division), Cross J stated as follows:[5]
I think in this passage in his judgment Vaisey J went too far. An adherence to such a rigid rule may well produce unnecessary hardship – as indeed has happened in this case. Take first the case of a benefit given by the will to the applicant who is asking for more. The only event, so far as I can see, in which payment of that benefit could possibly injure the estate would be if the judge dismissed the application and not merely refused to give the applicant any costs but ordered her to pay the costs of the defendant herself. In such a case, if a benefit given to the applicant had not been paid, the estate would have a fund to which it could resort for payment of the costs in the event of the applicant being unable to meet them after they were taxed. But the court would only make such an order in a case where the application was totally unmeritorious. In the great majority of cases where some benefit is given to the applicant by the will there can be no good reason for withholding it pending the hearing of the summons. Indeed, I doubt whether Vaisey J really meant his remarks to extend to the benefits to be given to applicants themselves at all, though the words which he used would cover them, and have apparently been construed in some quarters as covering them.
…
[Executors] should form their own view, with the assistance, of course, of their legal advisers, as to the payments which can properly be made, and if they are not prepared to make such payments on their own responsibility, they should ask the parties who might conceivably be affected – whether applicant or residuary legatee – for their consent. If such consent is not forthcoming the executors can apply to the court for leave to make the payment in question, and the court, if it thinks that any withholding of consent was unreasonable could throw the costs of the application on the party to blame.
[4]Re Ralphs (n 1).
[5]Ibid 1525 (emphasis added).
In Blackman v Permanent Trustee Co Ltd,[6] Young CJ made the following observations in relation to the last paragraph above from Cross J’s judgment in Re Ralphs:[7]
That passage throws up the principle that trustees cannot merely take the view that if there are contested proceedings they cannot do anything in and about the estate, particularly making any interim distributions, until all those problems are resolved. It is the duty of the trustees to direct their minds to the proper administration of the estate. Everyone knows it is difficult where there are warring members of a family who will not budge from their positions, but it needs to be done. If the trustee is to seek consent he or she has to make a decision as to what should happen and, if necessary, seek the imprimatur of the court.
[6][2003] NSWSC 305.
[7]Ibid [16], discussing Re Ralphs (n 1) 1525. See also the statement by Ward J in Schneider; Re Estate Blashild [2009] NSWSC 566, [45] that ‘[t]he executors have, quite properly, considered whether it is appropriate at this stage to make an interim distribution’.
On the basis of the above statement of principle in Re Ralphs,[8] it was submitted that the duty of the executors was not to ‘merely sit on their hands and refuse point blank to make any distributions at all from an estate which is subject to litigation, but rather it is their duty to consider whether some legacies or entitlements can be paid out of the estate in whole or part’.
[8]Re Ralphs (n 1) 1525.
Ms Regine submitted that, in the circumstances at hand, there is no justification for the executors refusing to immediately make the payments to which she is entitled under cl 3.1 of the will. Emphasis was placed upon the fact that the trustees of the fund created by cl 3.1 are the present executors and that the trust is limited and very simple, requiring only the ear-marking of $1,500,000 in funds from the estate. Further, it was submitted that the estate has more than adequate cash available within the jurisdiction, as well as substantial other assets.
It was also submitted on behalf of Ms Regine that there is no proper basis for the executors to withhold paying the annuities due under cl 3.1 on the basis that that entitlement might in effect be overtaken by some alternative form of provision made once Ms Regine’s application for further provision is finally determined. It was contended that only the following three scenarios could then ensue:
(a) The making of an order for payment of a lump sum amount in substitution for the annuity provided for in cl 3.1. In that event, the lump sum could not be less than $1,500,000 as any lesser amount could not be said to constitute further provision. Further, the Court would necessarily take into account any annual payments already made to Ms Regine under cl 3.1.
(b) Payment of a lump sum amount in addition to the existing annuity provided for in cl 3.1.
(c) No order for any further provision. In that event, the existing provisions of the will, including the right to the annuity pursuant to cl 3.1, would necessarily remain unaffected.
It was also submitted that, in the event that Ms Regine failed in her application for further provision and a costs order was made against her, there still remained no proper basis for the executors to withhold payment of the annuity because, in that event, the executors would be able to retain from the next annuity to which Ms Regine would be entitled any costs orders made against her.
Consideration
The deceased’s estate remains in the administration phase. The defendants continue to hold the deceased’s estate in their capacity as executors, not as trustees. In those circumstances, each beneficiary of the estate, including Ms Regine, ‘has an interest in seeing that the whole of the assets are treated in accordance with the executor’s duties’.[9] They have a right to have the deceased’s estate ‘administered in accordance with the duties of the executors’.[10] The beneficiaries do not have any immediate right to any particular assets of the estate, but a chose in action, being a right to require that the deceased’s estate be duly administered.[11]
[9]Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306, 313 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ).
[10]Ibid 314.
[11]Commissioner of Stamp Duties (Queensland) v Livingston (1964) 112 CLR 12.
Here, the relevant duty on the executors fixed upon by Ms Regine, is the duty to direct their minds to the proper administration of the deceased’s estate. Consistent with the statements of principle in Re Ralphs,[12] that duty carries with it an obligation on the executors to consider what payments can properly be made from the deceased’s estate.
[12]Re Ralphs (n 1).
It is apparent however from the correspondence sent on behalf of the executors in June 2019 that they have properly turned their minds to Ms Regine’s claim to be paid the annuity. The suggestion by counsel for Ms Regine that the executors ‘sat on their hands’ and ‘refused point blank’ to make any distributions at all from the deceased’s estate is a plainly inaccurate characterisation of this correspondence.
Further and in any event, the reasons given for refusing Ms Regine’s request are reasonable on their face.[13] Several points may be made. First, the purpose of Ms Regine’s request is not to meet any situation of financial or other need. Her request must be seen in this light.
[13]See [7] above.
Secondly, as submitted on behalf of the executors, the total value of the estate will not be known until the question of the estate’s substantial contingent taxation liabilities is resolved.[14]
[14]Ibid.
Thirdly, as to the fact that Ms Regine’s application for further provision remains unresolved, it is not to the point that, however the claim is resolved, she could not do worse than receive the annuity provided for by cl 3.1. Counsel for Ms Regine accepted that the Part IV application might result in payment to her of a lump sum amount in total substitution for the annuity benefit provided for by cl 3.1 of the will. In that event, the prior establishment of the fund provided for by cl 3.1 would give rise to real difficulties and uncertainties. The defendants would have become the trustees of the fund when funds were set aside for that purpose. Those funds would no longer form part of the deceased’s general estate. In the example posited where further provision was granted in substitution for the annuity, it presumably would then be necessary to dissolve the previously established trust provided for by cl 3.1. The Court’s jurisdiction and power to take such action was unexplained.
This highlights a key feature of the subject matter of Ms Regine’s claim; cl 3.1 of the will provides for the creation of a testamentary trust, not a bequest in the form of a legacy or specific gift. The fact that the trust is straightforward and provides that the trustees will be the same persons who are the executors of the estate misses the point. By her interlocutory application, Ms Regine seeks to compel executors of an estate which remains in the administration phase to take steps to create a testamentary trust. If I was not otherwise satisfied for the reasons I have already outlined that the defendants had met their executorial duties with the consequence that Ms Regine’s application should be dismissed, this would give rise to important issues about the Court’s jurisdiction and powers. I outline them briefly below.
Ms Regine has expressly elected not to proceed under r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015. That provision allows a beneficiary under a will to bring a proceeding for relief without general administration and empowers the Court to make an order directing an executor to do or abstain from doing any act. Nor does Ms Regine rely upon any provision of the Trustee Act 1958.[15]
[15]It may also be noted that, in Victoria, there is no analogue provision to s 62 of the Succession Act 2006 (NSW) which, in general terms, permits a plaintiff in a proceeding seeking further provision for an estate to make an application for a grant of interim provision.
It was instead submitted on behalf of Ms Regine that, ‘the inherent power of the Court to enforce the obligations of executors to carry out the terms of the will, or to administer the estate in accordance with the terms of a will’, gave the Court jurisdiction to grant the relief sought by Ms Regine. Other than Re Ralphs and the other authorities referred to above, no authority was cited in support of this proposition.
Re Ralphs and the other authorities relied on by Ms Regine do not establish any proposition that the Court has power, in its inherent jurisdiction, to order an executor to administer an estate which remains in the administration phase by creating and then partly performing a testamentary trust. In the circumstances, and in light of the conclusion I have otherwise reached in relation to Ms Regine’s application, it is unnecessary and inappropriate for me to consider this question further.
Ms Regine’s summons will accordingly be dismissed. Within seven days, the parties are to file any proposed consent orders in relation to costs or, in the absence of agreement, their proposed orders in respect of costs and short submissions in support.
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