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Outram v Public Trustee of Queensland

 

[2020] QSC 80

SUPREME COURT OF QUEENSLAND

CITATION:

Outram v Public Trustee of Queensland [2020] QSC 80

PARTIES:

LYNETTE ANN OUTRAM, JUDITH ADA EVERINGHAM AND GARY RAYMOND EVERINGHAM

(Applicants)

v

PUBLIC TRUSTEE OF QUEENSLAND

(Respondent)

FILE NO/S:

BS 1410 of 2020

DIVISION:

Civil

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court

DELIVERED ON:

17 April 2020

DELIVERED AT:

Brisbane

HEARING DATE:

12 March 2020

JUDGE:

Brown J

ORDER:

The parties provide submissions as to the appropriate form of order and as to costs within seven days by filing and serving written submissions of no more than three pages.

CATCHWORDS:

SUCCESSION – CONSTRUCTION AND EFFECT OF TESTAMENTARY DISPOSITIONS – TESTAMENTARY DISPOSITIONS GENERALLY – DIRECTIONS AS TO PAYMENT – where the deceased left her property to the applicants and the remainder of her estate to the residuary beneficiaries – where one of the residuary beneficiaries, acting under an power of attorney after the deceased ceased to have capacity, sold the deceased’s house in 2016 to pay a bond for a nursing home – where the property had been sold by a third-party two months prior to the deceased’s death in 2018 – where there is no dispute that the applicants are entitled to compensation and an extension of time to make the application – where the applicants contend that their compensation should be assessed according to the most proximate sale of the property in 2018 – where the residuary beneficiaries contend that the compensation should be assessed according to the net proceeds of the 2016 sale – whether the compensation is to be assessed according to the 2016 sale or the most proximate sale in 2018

Powers of Attorney Act 1998 (Qld) s 107

Moylan v Rickard [2010] QSC 327, considered

Neuendorf v Public Trustee of Queensland [2015] 1 Qd R 513; [2013] QSC 156, followed

COUNSEL:

J Byrnes for the Applicant

G Dickson for the Respondent

C Brewer for the Residuary Beneficiaries

SOLICITORS:

Cooke & Hutchinson for the Applicant

Official Solicitor to the Public Trustee for the Respondent

Biggs Fitzgerald Pike for the Residuary Beneficiaries

 Introduction

  1. [1]
    Heather Everingham (the Deceased) died on 29 November 2018. The Public Trustee (the Respondent) is the executor and trustee of her estate under her Will. Under clause 7 of the Deceased’s Will, her house and land at 39 Blackwood Road, Geebung (the Property) was to be given to her stepchildren, Lynette Ann Outram, Judith Ada Everingham and Gary Raymond Everingham (the Applicants) in equal shares. Under clause 8 of her Will she gave the residue of her estate to Peter Webster, Heather Bett Milner and Ian Webster (the Residuary Beneficiaries), who are the niece and nephews of the Deceased. The Residuary Beneficiaries were also represented in the present application.
  2. [2]
    Prior to the Deceased’s death, the Property was sold and the monies used, in part, to pay an accommodation bond. As a result, the Applicants lost their entitlement under the Will. They now seek compensation under s 107 of the Powers of Attorney Act 1998 (Qld) (the Act). There is no dispute that the Applicants should be granted an extension of time to make their claim, nor that they are entitled to compensation. The dispute lies as to how that compensation is to be assessed, which is the matter for determination by this Court.

Factual Background

  1. [3]
    The following facts are not in contention.
  2. [4]
    On 6 May 2015, Dr Catton provided a certificate which stated that the Deceased’s mental state and memory capacity had deteriorated and that she was no longer capable of making decisions in relation to financial, personal and health matters.  Peter Webster held the Deceased’s power of attorney. The power of attorney did not become operative until a medical practitioner had certified that the Deceased was incapable of making decisions in relation to financial matters.
  3. [5]
    As a result of the Deceased’s deterioration it was determined, in consultation with the Deceased, that she would go into Cooinda Retirement Village and Care Facility at Gympie.  Prior to that time, she had lived with Mr Webster and his wife for some three or four months in mid to late 2015.  To enable her to go into care at Cooinda Aged Care Accommodation, Mr Webster’s evidence is that the Property had to be sold.  Prior to doing so, Mr Webster stated that he consulted Gary Everingham as a representative of the Everingham family about the proposed sale of the Property and Gary Everingham agreed.  Mr Webster also canvassed whether any of the Everingham family were interested in buying the Property, but no-one wished to do so.  Subsequently, the house was sold for the sum of $570,000.  It is evident from emails from Mr Webster to Cheryl Everingham, Mr Everingham’s wife, that he kept them abreast of the sale of the property.[1]
  4. [6]
    Settlement occurred on 12 February 2016. Mr Webster signed the transfer exercising his powers as attorney.  The net proceeds of the sale of the Property in February 2016 was $552,195.09. A bond of $475,000 was paid to Cooinda Aged Care Accommodation and the balance was paid into an account of the deceased.
  5. [7]
    There is evidence that the Property was further sold in September 2018 for $705,000.

Monies in Estate

  1. [8]
    The assets and liabilities in the estate as at 10 March 2020 were:

Public Trustee cash account

$2,931.89

Public Trustee term investment account

$659,108.84

Personal effects

$500.00

Total

$662,540.73

  1. [9]
    The Respondent is the executor of the Will.  It does not oppose the application nor the orders sought, but has withheld the distribution of the estate pending this application.

Section 107 of the Powers of Attorney Act 1988 (Qld)

  1. [10]
    The Applicants apply for compensation for the loss of benefit in the estate pursuant to s 107 of the Act.  It provides that:

107 Power to apply to court for compensation for loss of benefit in estate

  1. (1)
    This section applies if a person’s benefit in a principal’s estate under the principal’s will, on intestacy, or by another disposition taking effect on the principal’s death, is lost because of a sale or other dealing with the principal’s property by an attorney of the principal.

(1A) This section applies even if the person whose benefit is lost is the attorney by whose dealing the benefit is lost.

  1. (2)
    The person, or the person’s personal representative, may apply to the Supreme Court for compensation out of the principal’s estate.
  1. (3)
    The court may order that the person, or the person’s estate, be compensated out of the principal’s estate as the court considers appropriate but the compensation must not exceed the value of the lost benefit.
  1. (4)
    The Succession Act 1981, sections 41(2) to (8), (10) and (11) and 44 apply to an application and an order made on it as if the application was an application under part 4 of that Act by a person entitled to make an application.
  1. (5)
    In this section –

 attorney means an attorney under –

 (a) a general power of attorney made under this Act; or

 (b) an enduring document; or

 (c) a power of attorney made otherwise than under this Act, whether before or after its commencement.”

  1. [11]
    The Applicants’ material establishes a prima facie case of an entitlement for compensation under s 107, given that the Property was sold by Mr Webster, acting as the Deceased’s attorney, that resulted in the Applicants losing their entitlement under clause 7 of the Will.  It is accepted by all parties that the section applies.

An extension of time

  1. [12]
    An application under section 107 of the Act is to be made within nine months after the death of the deceased, which in the present case was by 29 August 2019.[2]
  2. [13]
    The Court, however, has a broad discretion for extending time to grant relief. In determining whether to extend time, the court takes into account:[3]
    1. (a)
      whether there is an adequate explanation for the delay;
    2. (b)
      whether there could be any prejudice to the beneficiary;
    3. (c)
      whether there has been any unconscionable conduct by the applicants; and
    4. (d)
      the strength of the applicants’ case.
  3. [14]
    In the present case, there is no opposition by the Residuary Beneficiaries or the Respondent to an extension of time being granted to the Applicants.  The evidence of Mr Hutchinson shows that there has been correspondence between the parties in relation to this issue prior to the time expiring. The estate has not been distributed by the executor, such that there is no prejudice to any beneficiaries. There is no suggestion of any unconscionable conduct by the Applicants and it is accepted that the Applicants have lost the benefit under the deceased’s Will by virtue of the sale of the Property.
  4. [15]
    I am satisfied that it is appropriate to grant the extension of time for the making of the application and I do so accordingly.

Compensation

  1. [16]
    The real issue in the present case is how to quantify the appropriate compensation.  In Neuendorf v Public Trustee of Queensland (Neuendorf),[4] Martin J considered the power to compensate beneficiaries under section 107, stating as follows:[5]

[21] The discretionary power given to the court under s 107(3) is to compensate, out of the principal’s estate, by an amount “the court considers appropriate”.  No further guidance is given.

[22] The matters which might be the subject of consideration when determining an appropriate level of compensation will change from case to case.  Some matters, though, will always be of general interest.  They include:

  1. (a)
    The size of the estate;
  1. (b)
    The identity of the other beneficiaries and the nature of the gifts to them;
  1. (c)
    The proportions that the gifts to the applicants bear to the whole estate.  In cases involving real property some form of valuation will be necessary;
  1. (d)
    The actions of the Attorney;
  1. (e)
    Whether there was any default by the Attorney;
  1. (f)
    Whether any action could or might have been taken under s 106 of the Act;
  1. (g)
    What was done with the funds after the sale took place;
  1. (h)
    The costs which have been incurred and which will be paid out of the estate; and
  1. (i)
    Had the property not been sold, what would the position have been?”
  1. [17]
    In the present case, the estate is relatively small.  The beneficiaries all have relationships with the Deceased.  The Applicants were her stepchildren, their father having remarried after their mother passed away.  The Deceased was the sole beneficiary under their father’s Will.  The Residuary Beneficiaries are the niece and nephews of the Deceased, who enjoyed a close relationship with the Deceased. Mr Webster was one of the primary parties responsible for the Deceased’s care when she began to deteriorate, including prior to her loss of capacity.  It is accepted that Mr Webster, as the Deceased’s attorney, acted properly in selling the Property.[6] As I have indicated, the Applicants were consulted about the sale and were also kept informed of the progress of the sale and what was being done with the funds. 
  2. [18]
    The sale was to provide funds for the Deceased to go into Cooinda Retirement Village and Aged Care Home.  The balance was paid into an account of the Deceased.  It is uncontentious that Mr Webster was not aware of the terms of the Will and the fact that he and his siblings were the Residuary Beneficiaries under the Will at the time that the property was sold. 
  3. [19]
    There is no suggestion that any of the beneficiaries are guilty of any wrongdoing.
  4. [20]
    If the Property had not been sold, it would have been available for distribution to the Applicants under clause 7 of the Will.
  5. [21]
    The loss to the beneficiary under section 107 is not a loss based on need, but rather the loss of the benefit under the Will.  Section 107(3) gives the disappointed beneficiary the right to “be compensated out of the principal’s estate as the court considers appropriate but the compensation must not exceed the value of the lost benefit”.
  6. [22]
    In Neuendorf, Martin J found that the action by the Attorney in selling the house was consistent with her duty as an attorney and for the benefit of the donor of the power. I consider that is also the case here. In Neuendorf, the sale resulted in the gift to the attorney and another beneficiary failing. His Honour ordered compensation based on the market value of the property approximated at the time of the death of the deceased. The property of the deceased had been sold for $320,000 in May 2010.  The deceased had died in August 2012.  There was evidence of a market appraisal of the property in March 2013, which estimated its value to be between $300,000 and $310,000.  His Honour used the figure of $310,000 as the value of the property had it not been sold in 2010 for the purposes of determining appropriate compensation. However, his Honour also had regard to the interests and conduct of the residuary beneficiary which was a charity. In that regard, his Honour considered that if the costs of the application were paid in the usual way, namely, ordered to be paid out of the estate, the residuary beneficiary would lose a substantial amount.  His Honour found that it would not have been consistent with the wishes of the testatrix if the residuary beneficiary’s gift was reduced to that extent. His Honour determined that an appropriate way of recognising the intentions in the Will, the removal of the property from the estate through its sale and the requirement to expend costs on the application was to spread the burden of the costs across the beneficiaries.  His Honour, therefore:
    1. (a)
      determined the proportions of the estate to be distributed by using the amount which the beneficiaries would have notionally received from the sale of the property.  In that regard, he found that the applicants would be entitled to 84.5 percent of the total estate and the residuary beneficiaries 15.5 percent;
    2. (b)
      deducted the total amount of the costs from the value of the estate;
    3. (c)
      having done that, applied the proportions to the remaining figure to determine the appropriate compensation.
  7. [23]
    In Neuendorf, Martin J considered the earlier case of Moylan v Rickard,[7] where Peter Lyons J found that there had been a breach of s 106 of the Act by the attorney in relation to use of proceeds of the sale of a property owned by the testator. His Honour considered the question of compensation under s 107 of the Act. His Honour determined the compensation by having regard to evidence of the movement of the median house prices in the relevant area over time on the basis it was the best evidence available. In that regard his Honour noted that because of changes made to the house since it was sold there were particular difficulties in attempting to determine what value it would have had if it had not been sold at the date the deceased died.[8] His Honour estimated the change in value of the property from the time it was sold compared to the date the testator died. His Honour ordered that the beneficiary was to be compensated to the extent of the difference between the gift to which he was presently entitled under the will, and the value which it would have had[9] at the date of the testator’s death.

Consideration

  1. [24]
    The Applicants submit that the starting point for the calculation of compensation is to have regard to the value of the Property at the date of the Deceased’s death based on the 2018 sale and take account of the costs of sale to determine the net proceeds, consistent with the approach in Moyland v Rickard.  Thus, the Applicants submit that the appropriate value of the property at the Deceased’s death was $705,000 based on the fact the property sold for that price in September 2018.  They have suggested that the costs of the 2016 sale, which was approximately $25,000, should be used to calculate the net value of the Property as at the Deceased’s death. That is a sum of $680,000. That is greater than the amount of the Deceased’s estate as at 10 March 2020. The Applicants accept that the size of the estate and the costs incurred are relevant to the exercise of the Court’s discretion.
  2. [25]
    The Residuary Beneficiaries submit that the appropriate compensation should be determined by reference to the net proceeds of the 2016 sale of the Property, namely $552,195.09 and determining what proportion it bears to the total estate, which is approximately 86 percent.[10] They submit that it is not appropriate to use the 2018 sale of the Property as the relevant value of the lost benefit because there is no evidence as to the state of the house at that time, such that it reflects the state it would have been in if not sold in 2016 or whether it had been subject to extensive renovation.   They submit that one therefore cannot determine whether it represents the lost benefit.  They say further that no version of the facts of the case could the Property actually still have existed as a benefit under the Will at the time of the Deceased’s death, given the proceeds were predominantly used for her care in an aged care facility. That may be so. However, I note that that was also the case in Neuendorf. Notwithstanding that, in that case, his Honour had regard to the market value proximate to the time of the deceased’s death. That is consistent with the fact that the section provides for compensation for the lost benefit under the Will.  The benefit would not crystallise until the Deceased died.
  3. [26]
    It is relevant to have regard to the interests of the Residuary Beneficiaries in determining the appropriate compensation who, like the Applicants, are innocent of any wrongdoing. Given the relationship of the Residuary Beneficiaries with the Deceased, it is unlikely, consistent with the Deceased’s testamentary intentions, that the Deceased would have intended that they would have received nothing and would bear all of the cost of her home having to be sold prior to her passing.  However, the Applicants were to be the primary beneficiaries under her Will.
  4. [27]
    At the time of the 2016 sale of the Property, the evidence is that other assets of the Deceased consisted of: approximately $115,000 held in a bank account; the contents of her house which were estimated to be some $10,000;[11] and her pension which was some $860 a fortnight.[12] Relative to the total estate at that time, using a very rough calculation the applicants’ would have received some 82% of the estate.[13]
  5. [28]
    The sale of the Property in September 2018 for $705,000 occurred some two months prior to the passing of the Deceased, thus being proximate to the date that the gift would have come into effect.  However, no evidence is provided as to the state of the property at the time of the 2018 sale, and in particular whether the price represents the movement in the market and/or whether it had been improved from the time that it had been sold by Mr Webster in February 2016.  That it is of significance because if the house had been the subject of renovation, the sale price would represent a greater amount than the value of the lost benefit.  In the present case, there is no valuation evidence,[14] nor any evidence based on market appraisals,[15] nor the movement in the median house price of the area.
  6. [29]
    Given the lack of evidence as to the state of the house at the time it was sold in September 2018 and whether it was in a comparable state to what it would have been had it not been sold in 2016, the evidence of the sale price in September 2018 is of little assistance in determining the appropriate compensation. The 23.7 percent increase in the sale price between the 2016 sale and the 2018 sale suggests that there may well be more contributing to the increased price than market movement, such as renovation of the property. However, there is no evidence to indicate whether or not that is the case. On the present evidence, I do not find that $680,000 represents the lost benefit to the Applicants. Further, given it exceeds the value of the estate and having regard to what can be inferred as to the Deceased’s intention from the terms of the Will, it would not, in any event, be the appropriate base for the Court to determine compensation.
  7. [30]
    In the circumstances, I consider that the net sale proceeds in 2016 is the best evidence of the lost benefit and the appropriate compensation to be made to the applicants. That amount would not exceed the value of the lost benefit, ie $552,195.09. That compensation is to be distributed evenly between each of the Applicants. I consider, however, that the costs of the application and the administration and testamentary expenses should be paid out of the residue of the estate in the usual way, rather than borne equally by all beneficiaries. This approach is in contrast with that used in Neuendorf. However in that case there was evidence of the market value of the property proximate to the death of the deceased. In my view while the value of the Applicants’ lost benefit would not be less than $552,195.09, it  could possibly have been more given the 2018 sales price. As such, the amount of compensation paid to the Applicants should not be less than $552,195.09. To the extent that the residuary estate may be larger than it otherwise would have been, assuming the value of the Property would have increased between 2016 and 2018, that is fairly taken into account by the costs being borne out of the residue of the estate.
  8. [31]
    I will hear the parties further as to the appropriate form of order in light of these reasons before making formal orders and as to costs.
  9. [32]
    I order that the parties provide submissions as to the appropriate form of order and as to costs within seven days by filing and serving written submissions of no more than three pages.

Footnotes

[1]See for example email from Peter Webster to Cheryl Everingham “November report” CEO3 to affidavit of Cheryl Everingham CFI2; see also “January report” CEO4.

[2]By operation of section 107(4) of the Powers of Attorney Act 1988 (Qld) (‘the Act’).

[3]Moylan v Rickard [2010] QSC 327 at 107.

[4][2015] 1 Qd R 513.

[5]At [21] and [22].

[6]To the extent the Applicants’ submissions referred to “curiosities” about Mr Webster’s actions, they are to be disregarded. The Applicants were not alleging a breach by him of his duties or asserting a case under s 106 of the Act. He was not cross-examined and the evidence supports the fact that he was consultative about the steps taken to sell the property and properly accounted for the proceeds.

[7][2010] QSC 327, which was approved by Ann Lyons J as the correct approach to be adopted under s 60 of the Guardianship and Administration Act in Public Trustee of Queensland v Stibbe [2012] QSC 357 although in that case her Honour used the current sale price and deducted the costs to determine the net benefit and ensured that the compensation was not greater than the value of the lost benefit: at [62].

[8]At [102]

[9]Based on the notional value of the house by reference to the median price of which the beneficiary was entitled to fifteen per cent.

[10]At the date of Deceased’s death, the value of the estate was $639,408.65.

[11]But described by Mr Webster as of sentimental value in a QCAT application.

[12]See the Affidavit of Daniel Hutchinson filed 21 February 2020, exhibit DEH-19, “A Financial and Management Plan for proposed administrators” at pages 59-62. It was estimated that $660 of the $860 fortnightly payment would be used to pay daily costs, at page 57.

[13]Based on a rough calculation of  the net sale proceeds received in 2016 measured against the approximate value of assets in 2016, namely some $677,415.09, calculated using the net proceeds of sale, $115,220 in the deceased’s bank account in October 2015 and personal assets estimated to be $10,000

[14]See Moylan v Rickard at [101] – [102].

[15]Evidence of the solicitor using an online program for a valuation of the property was ruled inadmissible.

Close

Editorial Notes

  • Published Case Name:

    Outram v Public Trustee of Queensland

  • Shortened Case Name:

    Outram v Public Trustee of Queensland

  • MNC:

    [2020] QSC 80

  • Court:

    QSC

  • Judge(s):

    Brown J

  • Date:

    17 Apr 2020

  • White Star Case:

    Yes

Litigation History

No Litigation History

Appeal Status

No Status