Suduk v Duncan
[2013] QSC 85
•5 April 2013
SUPREME COURT OF QUEENSLAND
CITATION:
Suduk v Duncan & Ors [2013] QSC 85
PARTIES:
ANNA MAY SUDUK
(applicant)
v
PHILIPPA ELLEN DUNCAN, NICHOLAS PAUL SUDUK and DAVID JOHN EATON (as executors of the will of SUSAN ELIZABETH SUDUK, deceased)
(first respondents)
NICHOLAS PAUL SUDUK
(second respondent)FILE NO:
BS818 of 2011
DIVISION:
Trial Division
PROCEEDING:
Application
DELIVERED ON:
5 April 2013
DELIVERED AT:
Brisbane
HEARING DATE:
8 March 2013
JUDGE:
Mullins J
ORDER:
1. The application filed on 1 March 2013 is dismissed.
2. The applicant’s costs of the application assessed on an indemnity basis are to be paid from the estate of Susan Elizabeth Suduk deceased.CATCHWORDS:
SUCCESSION – ADMINISTRATION OF AN ESTATE – DISTRIBUTION – MATTERS RELATING TO BENEFICIARIES – OTHER MATTERS – where the deceased’s will directed the executors to hold a sum on trust for the applicant adult daughter to provide an annuity of $40,000 per annum during her life to be paid monthly – where the applicant made a family provision application – where pending the resolution of the family provision application the executors did not set aside the sum on trust for the applicant, but made interim payments to her equivalent to the amount of the annuity – where the family provision application was settled and the court made orders providing for a legacy to be paid to the applicant and provided for a further sum to be held on trust to pay the net income to the applicant during her life – where the executors deducted the total amount of the interim payments from the capital sum to be held on trust for the applicant – whether the applicant had the right to receive the annuity under the original terms of the will until the family provision order took effect
Succession Act 1981, s 41, s 49A, s 52
Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306, followed
COUNSEL:
C J O’Neill for the applicant
D J Morgan for the first respondentsSOLICITORS:
Bennett & Philp Lawyers for the applicant
Gleeson Lawyers for the first respondents
The applicant applied in this proceeding for family provision in respect of the estate of her late mother Susan Elizabeth Suduk (the deceased). The first respondents are the executors of the deceased’s last will. The deceased who died on 8 May 2010 was survived by her two adult children, the applicant and her son Mr Nicholas Suduk (Mr Suduk) who is one of the first respondents.
The parties resolved the applicant’s claim and joined in seeking an order from this Court on 12 December 2012 that reflected the terms of their negotiated settlement and an order was made in the proposed terms (the order).
A question has arisen in the course of the administration of the estate in carrying out the terms of the will, as varied by the order. The applicant filed an application on 1 March 2013 seeking a declaration that the sum of $1,000,000 be paid by the first respondents to the Public Trustee of Western Australia in terms of the order.
The will
In order to address the question the subject of the dispute between the parties, it is necessary to refer to the terms of the deceased’s will, prior to the making of the order.
Under clause 4 of the will, the deceased devised and bequeathed her estate to the first respondents on trust for the trusts that were then set out. Clause 4(a) dealt with specific bequests and a devise and was not affected by the order. Clause 4(b) provided for the creation of a charitable trust (the charitable trust), that was also not affected by the order.
Under clause 4(c), the balance of the estate was to be divided into two shares. Under clause 4(c)(i) one of the shares was to be held in trust for Mr Suduk until five years after the deceased’s death and thereafter to be given to him absolutely. The trustees were given an express power to apply the income from that share towards the maintenance, education and advancement of Mr Suduk.
Under clause 4(c)(ii), the remaining share was to be dealt with as provided for in paragraphs A and B. Under clause 4(c)(ii)A, the trustees were directed to hold $1,250,000 in trust (to be called The Anna May Suduk Trust) to provide an annuity of $40,000 per annum to the applicant during her lifetime which annuity was to be payable monthly in advance and on each of the 10th and 20th anniversaries of her death, the trustees were given the absolute discretion to make a special payment of $100,000 from those trust funds to the applicant, provided the trustees were satisfied that the applicant had satisfied the conditions set out in clause 4(c)(iii), (iv) and (v). On the death of the applicant, any funds remaining in the trust were directed to be transferred to the charitable trust.
Under clause 4(c)(ii)B, the balance of the share that was the subject of clause 4(c)(ii) was left to the charitable trust.
The trustees were given an express power under clause 5 of the will during the life of the applicant to apply income from time to time arising from the funds referred to in clause 4(c)(ii)A towards the maintenance, education and advancement of the applicant.
The order
Paragraph 1(a) of the order required the deceased’s will to be read and construed as if there were a new clause 4(b)(i) that gave the sum of $1,000,000 to the applicant for her own use and benefit absolutely. The order also required the omission of clause 4(c)(ii)A, the conditions set out in paragraphs (iii), (iv) and (v) of clause 4(c) and the gift over to the charitable trust on the death of the applicant of any funds remaining in The Anna May Suduk Trust set up by clause 4(c)(ii)A. The order then provided that clause 4(c)(ii)A be read as if it provided:
“I DIRECT THAT the sum of ONE MILLION DOLLARS free of legacy interest (in this will called ‘The Anna May Suduk Trust’) be held by the Public Trustee of Western Australia (‘Anna’s trustee’) ON TRUST to pay the net income (being the income less any fees or charges that might be payable to Anna’s trustee) thereof to my daughter ANNA MAY SUDUK during her lifetime at intervals to be nominated by Anna. Upon the death of my daughter, I DIRECT that Anna’s funeral expenses are to be paid from the Anna May Suduk Trust and that any funds remaining in the trust set up by this sub-clause, are to be transferred by Anna’s trustee to, and become part of, the Susan and John Suduk Charitable Foundation."
The order also required clause 5 of the will to be omitted, and in lieu thereof clause 5 was to provide:
“I DIRECT THAT if the net income (being the income less any fees or charges that might be payable to Anna’s trustee) in any year of the Anna May Suduk Trust is not, in the opinion of Anna’s trustee, sufficient for the proper maintenance, education, advancement and benefit of my daughter ANNA MAY SUDUK, THEN I AUTHORISE AND DIRECT Anna’s trustee from time to time to appropriate such part or parts of the capital of the Anna May Suduk Trust as may be necessary to provide for her proper maintenance, education, advancement and benefit, and to apply the same thereto.”
Under paragraph 6 of the order, the legacy referred to in paragraph 1(a) of the order was to be paid to the trust account of the applicant’s solicitors within 28 days of the date of the order. Paragraph 7 of the order specified that the burden of “the legacy referred to in paragraph 1(a) (which is to be free of legacy interest)” and the costs of the applicant, the first respondents and Mr Suduk provided for in paragraphs 4 and 5 of the order was to be borne by the residuary gift to the charitable trust in clause 4(c)(ii)B of the will. Paragraph 8 of the order provided:
“But for the issue of any annuity payable to Anna each party agrees to release and discharge all other parties from any claim whatsoever which they have, or at any prior time had, or at any later time may have, or but for the agreement could have in any way connected with the court proceedings and/or matters raised in the court proceedings and/or the general administration of the estate.”
The current dispute
On 17 January 2013 the first respondents’ solicitors gave notice to the applicant’s solicitors that they proposed to pay directly to the Public Trustee of Western Australia (Public Trustee) the sum of $892,000 pursuant to the order. That had been calculated by deducting the sum of $103,000 paid to the applicant by the first respondents under the will before the mediation and a further sum of $5,000 paid to the applicant as an advance for attending the mediation from the sum of $1,000,000 referred to in the order as the amount to be held by the Public Trustee.
The applicant seeks to hold the first respondents to the strict terms of the order requiring the sum of $1,000,000 to be paid to the Public Trustee pursuant to clause 4(c)(ii)A of the will. The applicant’s solicitors expressed the applicant’s position in these terms in their letter of 21 January 2013:
“Up until the orders were entered, your clients had a duty to comply with the terms of the Will, those duties including making the monthly annuity payments to our client. That duty ended upon the making of the Court’s order. As from the date of the Court’s order, your clients’ duty was to fulfil the terms of the Will as amended by the Court’s orders. This does not mean that the executors may seek to recover the annuity payments that were made before the orders were made. There is simply no legal basis for that proposition. Further, no order was made by the Court (and nor was it ever been agreed upon) that the $1,000,000 to be held in trust would be reduced by the amount of annuities previously paid.”
The payments made to the applicant before the order
After the deceased’s death the applicant gave notice of her intention to make a family provision application under the Succession Act 1981 (the Act) and, as a result, the first respondents did not establish The Anna May Suduk Trust, as provided for in the original clause 4(c)(ii)A of the will. The first respondents’ solicitors advised the applicant’s solicitors on 13 December 2010 that the first respondents did not propose to establish that trust until the family provision application had been finalised. The first respondents proposed, however, making “the advance of a single payment of $10,000.00 from the estate which will be deducted from your client’s ultimate entitlements.” The advance payment of $10,000 was deposited to the credit of the applicant’s bank account on 20 December 2010.
This proceeding was commenced on 7 February 2011. By letter dated 10 February 2011 the first respondents’ solicitors proposed that monthly payments of $3,333 be distributed to each of the applicant and Mr Suduk whilst the applicant’s claim was ongoing, such payments to be backdated to the date of death and the back payment to the applicant to be adjusted for the amount of $10,000 that had already been paid to her. The applicant’s solicitors on 17 February 2011 confirmed that the applicant was agreeable to that proposal for the monthly payments to both the applicant and Mr Suduk.
On 3 March 2011 the first respondents agreed to advance a further amount of $5,000 to the applicant that was to be deducted from the back payments that had been agreed to be made by the first respondents to the applicant from the date of the deceased’s death. The payments were not made immediately as the parties were in dispute about distribution of the deceased’s household contents and personal effects. In their letter of 31 March 2011, the applicant’s solicitors repeated their client’s request for an interim distribution of $3,333 per month from the date of the deceased’s death. The first respondents then agreed on 4 April 2011 to remit immediately to the applicant’s account the sum of $25,000 being the backdated payments adjusted for the previous payments of $15,000 up to and including 8 May 2011 and indicated that they would also pay the sum of $40,000 to Mr Suduk on the same basis. The first respondents advised that from 8 June 2011 monthly payments would commence at $3,333 per month to each of the applicant and Mr Suduk.
The December 2011 monthly payment of $3,333 was paid by the first respondents to the applicant’s bank account on 5 December 2011, but on that date the first respondents’ solicitors advised the applicant’s solicitors that there would be no further monthly distributions from the estate either to the applicant or Mr Suduk. By letter dated 14 December 2011 the applicant’s solicitors made representations to the first respondents’ solicitors as to why the monthly payments should continue. The first respondents’ solicitors replied by letter dated 20 December 2011:
“We refer to your letter dated 14 instant and have now received instructions to advise that payments will be made to your client in line with the provisions of the Will, namely $40,000.00 per year or $3333.00 per month. These payments are an advance of your client’s entitlement under the Will.
We are further instructed that identical payments will be made to Nicholas Suduk with such payments to recommence at the beginning of January 2012.”
The parties attended a mediation of the matter on 9 May 2012, but the matter did not settle at that time, but did so in principle later that month. The first respondents had forwarded the applicant the sum of $5,000 as an advance to attend the mediation. Thereafter the first respondents were not proposing to pay the amount of $3,333 to the applicant for the month commencing on 8 June 2012 and representations were made by the applicant’s solicitors to the first respondents’ solicitors by letter dated 14 June 2012. It appears the first respondents did not resume making monthly payments to the applicant, but made an advance to the applicant for living expenses pending the approval by the court of the settlement. Even though the parties had settled the applicant’s claim for family provision, they remained in dispute about the treatment of the interim payments made to the applicant.
The applicant’s submissions
The applicant contends that the amount of $3,333 per month was paid to her as an entitlement pursuant to clause 4(c)(ii)A of the will as it stood at the date of the deceased’s death. It is submitted that the annuity payable to the applicant pursuant to the deceased’s will remained in force until the date of the order reflecting the terms of the parties’ settlement which displaced clause 4(c)(ii)A in its original terms and the applicant is entitled to retain the benefit of the annuity paid to her in addition to the total amount of legacy substituted by paragraph 1(a) of the order.
The applicant submits that s 49A of the Act did not apply to the payments and the first respondents could not rely on s 49A(5) of the Act to deduct the payments from the legacy payable to the applicant. The applicant relies on Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306, 315-317 to support the submission in respect of s 49A of the Act.
The applicant also suggests that Schultz is authority for the proposition that the order of the court made on a family provision application did not change the benefit to be expected from a will, but imposed a new duty compelling the executor to comply with the terms of the court’s order. What Schultz was concerned with, however, was the effect of a family provision order on the beneficiary’s right to due administration of the will. The passage from Schultz at 315-316 makes that clear:
“The wide powers conferred by s 41 and the manner in which sub-s. (10) is expressed strongly suggest that the effect of an order under the section is not to change the benefits to be expected from the right to due administration arising pursuant to the will, but to superimpose upon the duty of due administration a judicial order made pursuant to statute. In other words, a new and independent obligation is created which has an impact upon the way in which the executor administers the estate pursuant to his or her existing duty, by compelling him or her to comply with the terms of the court’s order. Each beneficiary’s right to due administration is made subject to the terms of the order in the sense that the order governs the executor’s actions to the exclusion of any inconsistent direction contained in or derived from the will.”
The first respondents’ submissions
As the first respondents did not administer or distribute the estate to give effect to the applicant’s entitlement under clause 4(c)(ii)A of the will in its original terms, the first respondents submit that the applicant must account for the advances paid to her on account of her ultimate distribution in respect of the estate and that the only way that can be done is to treat them as capital distributions to be deducted from her ultimate benefit under the deceased’s will.
The first respondents submit that at the time the subject payments were made to the applicant, her right or entitlement was not to receive the annuity, but to a chose in action entitling her to compel the proper administration of the estate: Commissioner of Stamp Duties (Q) v Livingston (1964) 112 CLR 12, 27. When the applicant made her application for family provision, the first respondents were duty bound not to distribute the estate, but to preserve it, so that it was available for the court to determine the family provision application: Re Faulkner [1999] 2 Qd R 49, 53. The first respondents did not administer the estate to the extent of implementing the terms of the will so as to settle a sum to be held on trust to pay an annuity and generate an income for the applicant. The further provision made in the applicant’s a favour took effect from the date of the order: Schultz at 317 and s 41(10) of the Act.
The first respondents did not to rely on s 49A of the Act.
How should the interim payments to the applicant be treated?
Although the amount of the interim payments made to the applicant was calculated by reference to the annuity that was payable to the applicant if the original terms of clause 4(c)(ii)A of the will had been carried out by the first respondents, it does not follow that those payments must be characterised as the annuity. The fact that interim payments were made both to the applicant and Mr Suduk (for whom no annuity was provided under the will) is consistent with the approach expressly taken by the first respondents in correspondence to the making of the interim payments as advances, pending the finalisation of the family provision application.
As Schultz makes clear, the applicant did not have a proprietary right to receive the annuity under the original terms of the will while the estate was unadministered. Her right was to the due administration of the estate. The annuity was then displaced by the order, even though the order did not take effect until the date it was made.
It is indisputable from the circumstances in which the interim payments were made to the applicant, that the first respondents were not foregoing their right to have the applicant account for those payments in connection with the distribution of the estate. Delays in the administration of an estate caused by a family provision application are often mitigated by the payment of interest upon a general legacy under s 52(1)(e) of the Act. In this matter, however, the terms on which the applicant’s family provision application resolved expressly excluded legacy interest on the payment of the legacy of $1,000,000 payable to the applicant under the new clause 4(b)(i) and the sum of $1,000,000 set aside for the Anna May Suduk Trust.
In the circumstances applying to the making of the advances and arising from the terms of the order including paragraph 8, the first respondents were not in error in seeking to deduct the advances made to the applicant from the sum directed by clause 4(c)(ii)A of the will (as read and construed under the order) to be paid to and held by the Public Trustee of Western Australia on trust to for the benefit of the applicant during her lifetime. The applicant is not entitled to the declaration that the sum of $1,000,000 be paid to the Public Trustee of Western Australia without deduction.
Orders
The applicant in her application filed on 1 March 2013 sought costs against the first respondents personally on an indemnity basis. Ultimately at the hearing, however, both parties agreed that, irrespective of the outcome of the application, it was appropriate that the applicant’s costs to be assessed on an indemnity basis be paid from the deceased’s estate. It is not necessary to deal specifically with the first respondents’ costs of the application, as they are entitled (without an order) to be indemnified for their costs from the deceased’s estate.
The orders that I make are:
1. The application filed on 1 March 2013 is dismissed.
2. The applicant’s costs of the application assessed on an indemnity basis are to be paid from the estate of Susan Elizabeth Suduk deceased.
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