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  • Unreported Judgment

Davidson v Cameron

 

[2015] QSC 294

Reported at [2016] 2 Qd R 340

 

 

SUPREME COURT OF QUEENSLAND

  

PARTIES:

FILE NO:

Trial Division

PROCEEDING:

Application

DELIVERED ON:

29 October 2015

DELIVERED AT:

Brisbane

HEARING DATE:

24 June 2015

JUDGE:

Jackson J

ORDERS:

The order of the court is:

  1. Direct the parties to submit minutes of order to give effect to these reasons within 14 days.
  2. Direct the parties to make any submissions on costs in writing not to exceed three pages in length within 14 days.
  3. Adjourn the further hearing of the application for formal orders and orders for costs to a date to be fixed.

CATCHWORDS

SUCCESSION – CONSTRUCTION AND EFFECT OF TESTAMENTARY DISPOSITIONS – PRINCIPLES OR RULES OF CONSTRUCTION – READING WILL AS A WHOLE – where the applicant is the executor and trustee of a deceased’s estate – where the respondents are the beneficiaries – where the applicant applied for directions as to the construction of the will – where the will and codicils create a trust of a hotel – where the will allowed “deductions of all due and correct running expenses, including any reasonable day to day ‘out of pocket’ expenses from the net income of the hotel – where the will also included a right of the “present lessee” of the hotel to “remain for as long as she wishes providing her contribution is equal to and generally recognised as fair and reasonable” – whether the running expenses include the expenses of the administration of the estate not related to the hotel

SUCCESSION – PERSONAL REPRESENTATIVES – RIGHTS, POWERS AND DUTIES – OTHER MATTERS – where the applicant is the executor and trustee of a deceased’s estate – where the respondents are the beneficiaries – where the applicant applied to the court under s 96 of the Trusts Act 1973 (Qld) for advice as to the applicant’s duties as a trustee and executor –  whether the court should provide the judicial advice sought

Property Law Act 1974 (Qld), s 20(3), sch 1

Succession Act 1981 (Qld), ss 35(1), 52, sch 2, pt 2, item 4

Trusts Act 1973 (Qld), s 32(1)(e), 72, 97

Ainsworth v Criminal Justice Commission (1992) 175 CLR 564; [1992] HCA 10, applied

Attenborough v Soloman & Ors [1913] AC 76; [1912] UKHL 4, followed

Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334; [1999] HCA 9, applied

Bruton Holdings Pty Ltd (in liq) v Federal Commissioner of Taxation (2009) 239 CLR 346; [2009] HCA 32, cited

Re Butler [1969] QWN 48, cited

Chief Commissioner of Stamp Duties v Buckle (1998) 192 CLR 226; [1998] HCA 4, cited

Coore v Coore [2013] QSC 196, referred to

Curtis v Sheffield (1882) 21 Ch D 1, referred to

Fell v Fell (1922) 31 CLR 268; [1922] HCA 55, applied

Frey v Frey (2009) ASTLR 470; [2009] QSC 43, cited

Inland Revenue Commissioners v Smith [1930] 1 KB 713, cited

Kemp v Inland Revenue Commissioners [1905] 1 KB 581, cited

King v King [2012] 2 Qd R 448; [2012] QCA 39, referred to

Knox v Mackinnon (1888) 13 App Cas 753, cited

Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42, considered

McDonald v Ellis (2007) 72 NSWLR 605; [2007] NSWSC 1068, referred to

National Trustees Executors Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268; [1941] HCA 3, cited

Nichol v Chant (1909) 15 ALR 182, referred to

Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360; [1979] HCA 61, cited

Partridge v Equity Trustees Executors & Agency Co Ltd (1947) 75 CLR 149; [1947] HCA 42, cited

Radaich v Smith (1959) 101 CLR 209; [1959] HCA 45, cited

Re Cave-Brown-Cave [1906] VLR 283, referred to

Re Donkin [1966] Qd R 96, followed

Re Hoppe (deceased) [1961] VR 381, applied

Tanti v Carlson [1948] VLR 401, cited

Trustees of Church Property of Diocese of Newcastle v Ebbeck (1970) 104 CLR 394; [1960] HCA 88, applied

University of New South Wales v Moorhouse (1975) 133 CLR 1; [1975] HCA 26, applied

Worrall v Harford (1802) 8 Ves 4, applied

COUNSEL:

R D Williams for the applicant

J Otto for the first respondent

No appearance by the second respondent

P Goodwin for the third respondent

M Maloney for the Attorney-General

SOLICITORS:

De Groots Wills & Estates Lawyers for the applicant

Tudhope Lawyers for the first respondent

No appearance by the second respondent or fourth respondent

Gall, Standfield & Smith Solicitors for the third respondent

Crown law for the Attorney-General

[1] JACKSON J: The executor and trustee of the will of John Francis Jones applies for declarations as to the proper construction of the will and for other orders under s 96 of the Trusts Act 1973 (Qld) (“TA”). 

[2] The testator died on 6 December 2006 leaving assets comprising land at Coombabah and a hotel in Sydney called the Lord Roberts Hotel (“the hotel”). Those assets are described as material assets in the will.  He also had monies in a number of bank accounts.

[3] On 24 April 2008, the applicant was granted probate of the will dated 21 September 2004, together with two codicils.  The second, third and fourth respondents are named as income beneficiaries of a trust created by the will.  The first respondent is named as a beneficiary of the trust. She was also the lessee of the hotel from about 1995 until April 2014.

[4] Section 96(1) of the TA provides:

“Any trustee may apply upon a written statement of facts to the court for directions concerning any property subject to a trust, or respecting the management or administration of that property, or respecting the exercise of any power or discretion vested in the trustee.”

[5] Of course, “trustee” is defined in the TA to include a personal representative.

[6] A leading case upon the scope of the directions power under s 96 of the TA is Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand.[1]

[7] In Macedonian, the trustee of a charitable trust sought judicial advice as to whether he should defend proceedings and an order as to his entitlement to indemnity for the costs of doing so. The majority of the High Court laid down eight general principles,[2] which were summarised by Atkinson J in this Court in Coore v Coore.[3] The applicant relies upon the following two of those principles:

“It is not appropriate to read provisions conferring jurisdiction or granting powers to a court by making implications or imposing limitations not found in the express words.

The procedure has a summary character to assist the court’s administration of trusts by orders less extreme than a general administration order.”[4]

[8] The plurality in Macedonian said:

“While trustees acting gratuitously are entitled both under the general law and s 59(4) of the Act to an indemnity out of the trust assets for expenses incurred in administering the trust, it was understandable that the legislature should enact provisions enabling them to take advice before embarking on any course which might carry a risk of incurring costs that might be outside the indemnity… [P]rovision is made for a trustee to obtain judicial advice about the prosecution or defence of litigation in recognition of both the fact that the office of trustee is ordinarily a gratuitous office and the fact that a trustee is entitled to an indemnity for all costs and expenses properly incurred in performance of the trustee's duties”[5]

[9] The indemnity referred to in that passage is an equitable right by way of exoneration or recoupment from the trust property for expenses that are incurred “properly”.[6]  The TA also provides for reimbursement of expenses “reasonably” incurred.[7]  The equitable right to indemnity is a personal right that is supported by a proprietary right in the form of lien or charge over the trust assets to the extent of the right of indemnity.[8]

[10] Thus, one objective of a judicial advice application is to protect the right to an indemnity. That does not mean that judicial advice should be sought as of course in all respects for the exercise of a trustee’s or executor’s powers.  Many decisions that must be made by a trustee or executor are not of such difficulty as to warrant and do not justify the expense to the estate of an application for judicial advice.

Assent

[11] The applicant’s submissions did not take into account that the applicant has assented to the trust of the hotel and other gifts made by the will.  Assent of an executor means that the executor no longer requires property of the testator to pay the debts, funeral expenses or general pecuniary legacies of the testator.[9] 

[12] As was said by Gibbs J in Re Donkin:[10]

“…If however the executors are themselves the trustees, once the estate has assumed the character of a trust estate it equally ceases to be part of the testator’s estate; in equity it belongs to the beneficiaries and the Court is not empowered to divest what has been vested in them”[11]

[13] Whether or not an executor has assented is a question of fact and is to be inferred from the conduct of the executor.[12]

[14] Upon the grant of probate, the applicant’s duties were to collect and get in the testator’s real and personal estate, to administer the estate (including payment of the testator’s debts) and to distribute the estate, as soon as may be.[13]  

[15] The applicant collected and got in the Coombabah property, the hotel and the bank accounts.

[16] From 2007, the applicant made payments to the income beneficiaries under the trust of the hotel in accordance with the terms of the trust created by the will.

[17] On 30 April 2008, the applicant transferred the Coombabah property to himself in accordance with the terms of the will.  He sold it in 2010.

[18] It is not suggested that at those times there were any unpaid debts or pecuniary legacies.

[19] In my view, the applicant assented to the gifts of the will including the trust of the hotel. The effect of his assent was that the applicant ceased to be an executor administering the testator’s estate in respect of the hotel. He became trustee of the hotel on the terms of the trust created by the will.[14] 

Trust of the hotel

[20] The will provides, in part, as follows:

“I direct my Trustee to pay one THIRD of the net income from the Lord Roberts Hotel after deductions of all due and correct running expenses, including any reasonable day to day “out of pocket” expenses to each of three people who have been of great comfort/assistance and/or shown great affection during different times of my life. Each share shall be paid as near to monthly instalments as can be arranged. In the event of beneficiaries dying then their share shall be divided equally among the remain (sic) beneficiaries.  (emphasis added)

I direct that the present lessee of the Lord Roberts hotel shall have the right to remain there for as long as she wishes providing her contribution is equal to and generally recognized as fair and reasonable.

…”

[21] The first codicil provides, in part, as follows:

“…When the present beneficiaries of my will are no longer alive, I direct that the property be passed to the present lessee Mrs Susan Cameron.
She will be able to direct what happens to the Hotel property, because it will then be in her complete ownership.”

Expenses of administering the will from the trust of the hotel – par 1(a) and (b) of the application

[22] The applicant applies for a declaration that the words “after deductions of all due and correct running expenses, including any reasonable day to day ‘out of pocket’ expenses” should be construed so as to include the expenses of administering the estate under the will. 

[23] The applicant further submits that since the intention of the testator was to create an ongoing trust of the hotel the proper construction of the gift of the hotel should not confine the relevant expenses to the running expenses of the hotel.  The executor submits that would result in the hotel being sold because there are no other assets of the estate available to pay the estate’s ongoing administration expenses.

[24] I reject those submissions.  First, the process of construction must always begin with and most often must end with the text of the instrument to be construed.  The text refers to the net income of the hotel after deducting the running expenses including day to day out of pockets.  The structure of the will as an instrument is that the text is found in a separate gift and trust relating to the hotel.  There is no textual or structural contextual indication that the “running expenses” to be deducted are the expenses of the administration of the will. 

[25] Second, at the date of the will and at the date of the testator’s death there were significant cash assets in the estate. There is no reason to attribute to the testator a wider intention than the text and structure of the will disclose on their ordinary meaning based on the circumstance that unexpectedly, years after the event of the testator’s death, there are insufficient assets in the residuary estate to pay ongoing administration expenses of the will.

[26] In my view, properly construed, the words “after deductions of all due and correct running expenses, including any reasonable day to day ‘out of pocket’ expenses” refer to the expenses of the hotel, not to the general expenses of administration of the will.

[27] In my view, the testator intended that the trust of the hotel would continue long after the other provisions and gifts of the will had been carried into effect.  It was appropriate to provide for the expenses of running the hotel in the testamentary trust created by the will.  But there is no reason to think that the testator intended that the general expenses of the administration of his will, as opposed to the administration of the trust of the hotel, would continue for years after the other assets disposed of by the will had been distributed.

Lease or licence? – par 1(c) of the application

[28] The applicant also applies for advice as to the proper construction of that part of the text of the trust under the will that provides:  “the present lessee of the Lord Roberts hotel shall have the right to remain there for as long as she wishes providing her contribution is equal to and generally recognized as fair and reasonable”.  As previously stated, at the time the will was made the first respondent was lessee of the hotel from the testator.   Accordingly, she was “the present lessee”.  The question is whether the right to remain is a right of personal occupation or a right of possession as lessee.

[29] In ascertaining the intention of the testator, the will and codicils are to be read as a whole and construed according to the plain and ordinary meaning of the words.[15] 

[30] A contextual fact, admissible under the “armchair principle” of construction of wills, is that at the relevant time there was an existing lease of the hotel from the testator to the first respondent.

[31] In my view, it assists analysis of the question of construction to identify all the relevant interests in the hotel at the time of and created under the will as affected by the first codicil to take effect upon the testator’s death. 

[32] First, the testator held the reversionary interest in the hotel, subject to the existing lease for a term of years to the first respondent.  Second, the will devised to the applicant the reversion under the lease, (or if the lease had expired the fee simple) to hold on trust for the beneficiaries to enjoy a life interest in the net income of the hotel.[16]  Third, separate from the first respondent’s rights under the lease, under the trust created by the will, she was to enjoy a further right to remain at the hotel subject to the condition that she make a fair and reasonable contribution.  Fourth, on the determination of the beneficiaries’ life interests in the net income of the hotel, the first respondent was to take the trust estate of the hotel absolutely.

[33] The applicant submits that while the words “to remain” are unclear, both the reference in the will to the “present lessee” of the hotel and the provision in the first codicil that the hotel be passed to the “present lessee” once the present beneficiaries are no longer alive indicate an intention to grant a leasehold interest.

[34] The will and codicils describe individuals other than by name.  The applicant is referred to as “my Trustee”.  The first respondent is referred to as the “present lessee”.  Mr Graeme Holman is described as the person who “arrange[s] the Hotel income and accounting details with the lessee”.  A pecuniary legacy is bequeathed to the fourth respondent, as “Mother and Mother in Law”. 

[35] In this context, the words “present lessee” do not necessarily refer to the nature of the occupancy under which the first respondent is to be able “to remain” in the hotel.

[36] The word “remain” is defined to mean “to be left behind or over after others or other parts have gone or been removed, used, or dealt with”.[17]  Another definition is to “be in the same place or condition during further time; continue to stay or exist (in a specified place or state)”.[18]  In my view, the words “to remain” at the Hotel in the will create a personal right of occupation.  It is not a gift of a life interest.  If the first respondent does not remain at the hotel the right determines. It is not a gift of a leasehold interest.  There was no existing leasehold interest held by the testator to give.  It is not a direction to the applicant as trustee of the hotel to offer a lease to the first respondent.

[37] In Re Hoppe (deceased),[19] the Full Court of the Supreme Court of Victoria considered the effect of a provision in a deceased’s will giving a right of occupancy as follows:

“[T]o continue to reside in the home occupied by [them] … at my death … for so long as my … wife remains my widow and thereafter in the case of my daughter … only until she attains the age of twenty-three years”[20]

[38] The court said:

“They have an absolute right, if they so desire, to continue living in the premises, the applicant until death or remarriage and the daughter until she attains the age of 23 … It is true that the right given them is personal in the sense that they must exercise the right themselves, they cannot transfer that right to anybody else. Apart from statutory power they cannot let the premises and so enjoy them without residing there. … The owner may of course enjoy his residence in other ways, for example, by letting it. The person who merely has a personal right of residence cannot do this…”

[39] Re Hoppe (deceased) was considered in King v King[21] by the Queensland Court of Appeal.  The issue in King was the nature of a bankrupt’s right to occupy so as to determine whether it was property that passed to his trustee in bankruptcy.

[40] Chesterman JA said:

The applicant has a distinctly arguable claim that his right to occupy the unit was a personal right or privilege, not a right of property, and that he is the only person (subject to his former wife’s conjoint right) who may enjoy the right by occupying the premises. If the applicant does not exercise the right it will cease to exist. The right cannot be assigned, or sold, and therefore has no value to anyone but the applicant. It is not capable of realisation for the benefit of the applicant’s creditors.”[22]

[41] In my view, the first respondent’s right of occupation under the will is a personal right of occupation. At law, such a right is a licence not a lease.[23]

Requirement to lease – par 1(d)(A) of the application

[42] It is not a condition of the will that the first respondent is required to lease the hotel so as to continue to be entitled to remain at the hotel.  The condition of her right of occupation is that “her contribution is equal to and generally recognized as fair and reasonable”.  At the time of making the will and the first codicil the testator had leased the hotel to the first respondent.  However, that does not mean that the personal right of occupation given to the first respondent under the will and the first codicil is coterminous with or measured by the terms of the lease.

[43] To that extent, if the applicant desires it he would be entitled to a declaration that he is not obliged to lease the hotel to the first respondent by the terms of the will and the first codicil.

Contribution that is fair and reasonable – par 1(e) of the application

[44] The applicant sought a direction that the payment of a market rent, assessed by an independent valuer appointed by the applicant is a contribution that “is equal to and generally recognised as fair and reasonable”.   In my view, this particular order is one that it is appropriate to make, subject to it being in an appropriate form.

[45] The relevant words of the condition of the first respondent’s right to remain at the hotel - “providing her contribution is equal to and generally recognised as fair and reasonable” - are inelegant.  In my view, in context, they mean no more than providing her contribution is fair and reasonable.

[46] Once that point is reached, it is a short step to construe the proviso as requiring requirement a money payment equal to a market rent.  In a commercial sense, the contribution of the first respondent was specified as the quid pro quo required for her right to remain.  Second, that contribution was to be made during the present beneficiaries’ life interests in the net income of the hotel while the first respondent remains there.  Objectively construed, the contribution must include a money payment.

A statutory requirement of a “fair and reasonable” offer is well known in the context of regulated offers for securities under the Corporations Act 2001 (Qld) and the preparation of expert reports under that Act.[24]  In that context, the requirement of a “fair” offer is said to require that the consideration for the offer is equal to or greater than the value of the securities the subject of the offer.  In my view, nothing different is meant by the provision in the will that the first respondent is to make a contribution that is fair and reasonable while remaining at the hotel.

[47] In my view, it is appropriate for the court to direct that the applicant is justified in treating the provision under the will and the first codicil that the first respondent has the right to remain at the hotel provided her contribution is equal to and generally recognised as fair and reasonable as requiring the first respondent to pay an amount ascertained by reference to a market rent for the hotel.

Termination of any lease – par 1(d)(B)(i) of the application

[48] The applicant and the first respondent have been negotiating to enter into a further lease of the hotel.  Assuming that they enter into such a lease, the applicant seeks advice as to whether the first respondent’s right of occupation would be terminable if the first respondent ceases to comply with the terms of the lease. 

[49] A question can be asked by a trustee seeking judicial advice as to the rights of a beneficiary under a trust created under a will and in some circumstances such a question may result in a declaration or direction under s 96. 

[50] However, generally speaking, the court “will not answer a question which may never arise” on an application made for judicial advice by a trustee under provisions stemming from Lord St Leonard’s Act,[25] such as s 96 of the Trusts Act 1973 (Qld).  I emphasise that this is a matter of discretion, not power

[51] The way in which this question is framed elides the difference between the gifts made by way of the trust of the hotel made under the provisions under the will and the first codicil and any further lease that may be made between the applicant and first respondent.  The first respondent’s right to remain at the hotel under the trust created by the will does not depend upon the existence of a lease.

[52] As well, there are no facts on which the present question is predicated, except the general statement that “the first respondent ceases to comply with the [hypothetical] lease”. Nor does there seem to be any particular dispute as between the applicant as trustee and any of the respondents as beneficiary that raises the question. 

[53] Generally speaking, judicial advice should not be sought so as to obtain a pre-emptive opinion on a matter of this kind that has no proper factual basis about a question which may never arise.  Such a proceeding will not determine any rights inter partes and would be an unwarranted advisory opinion.

Termination of the right to occupy if there is no contribution that is fair and reasonable – par 1(d)(B)(ii) of the application

[54] The applicant also seeks judicial advice whether the first respondent’s occupation of the hotel under the right granted by the trust of the hotel is one that is terminable on the first respondent ceasing to make a contribution that is equal to and generally recognised as fair and reasonable. 

[55] To the extent that the question might raise a question as to the proper construction of the trust of the hotel created under the will and first codicil, there is no need for the advice sought, or a declaration as to the operation of the provisions of the trust in the will, because the first respondent does not dispute that is the proper construction of the words of the provision.

Identifying the present beneficiaries – par 1(d) of the draft order

[56] The applicant seeks judicial advice by way of declaration as to the meaning of the words “the present beneficiaries” in the text of the first codicil: “when the present beneficiaries of my will are no longer alive”.  This order is not sought by the application but is contained in a draft order that was handed up at the beginning of the hearing of the application.

[57] At the time of making the first codicil, the living beneficiaries, being the three people to receive the net income under the trust of the hotel created by the will, were Alma Bernice Perkins, Dorothy Anne Stevens and Kathleen Middleton.

[58] In my view, they are the “the present beneficiaries” referred to in the first codicil.  None of the parties served with the application contradicts that meaning.  It is not clear to me why there was thought to be any difficulty.  A suggestion was made that the “present beneficiaries” might include the first respondent.  That suggestion is easily dismissed.  In the first codicil, it is upon the deaths of the “present beneficiaries” that she is to take the hotel in complete ownership.   There is no reason to think that the testator would have intended that her death would be part of the condition to be satisfied before she could take that interest.  It is not necessary or appropriate to make the declaration sought.

Expenses of the trust of the hotel – par 2(a) of the application

[59] The application also seeks advice whether the applicant as trustee is authorised to deduct particular expenses from the income of the hotel. This part of the application was bound up in the misconception that the hotel was in the hands of the executor as such and not as trustee following the assent.  However, it may still be relevant to consider some of those expenses.

[60] The classes of expenses are:

(a) accounting fees in respect of the hotel;

(b) bank service charges for the hotel bank account;

(c) depreciation expenses for the hotel (primarily relating to an awning);

(d) indemnity insurance for the administration of the estate;

(e) legal fees for the administration of the estate;

(f) management fees for the hotel;

(g) out of pocket expenses such as, but not limited to, stationary;

(h) professional fees for the administration of the estate;

(i) travel and accommodation for overseeing matters at the hotel.

[61] The equitable right of exoneration or recoupment previously mentioned is that derived from Worrall v Harford,[26] where Lord Eldon said:

“It is in the nature of the office of a trustee, whether expressed in the instrument, or not, that the trust property shall reimburse him all charges and expenses incurred in the execution of the trust.”[27]

[62] The informing principle of the equitable right is that the scope of the indemnity is for “charges and expenses [that] are properly incurred by the trustee as an incident of [the] administration of the [trust] estate.”[28]

[63] The statutory right under s 72 of the Trusts Act 1973 (Qld), is that:

 

“A trustee may reimburse himself or herself for or pay or discharge out of the trust property all expenses reasonably incurred in or about the execution of the trusts or powers.”

[64] In my view, except for (d), (e), (g) and (h) those expenses are classes or categories of expenses of the trust of the hotel.  To the extent that expenses in those classes are reasonably or properly incurred they are items for which the trustee is entitled to indemnity from the assets of the trust. 

[65] The other items are not classes of expenses of the trust of the hotel, per se.  The relevant items of expenses will not give the applicant a right of indemnity unless for some other reason they were reasonably incurred in or about the execution of the trust

Arrears of rent or contribution that is fair and reasonable amount – par 2(b) of the application

[66] The applicant seeks a direction that he would be justified to start a legal proceeding to recover rent of $24,878.87 from the first respondent as from 22 April 2014 less any amounts paid by her for her occupation of the hotel since that date.

[67] In my view, the applicant would not be justified in doing so.  The basis of the alleged arrears of rent is that the first respondent’s occupation of the hotel has been as a tenant holding over under the expired lease. 

[68] But, as previously discussed, the first respondent has been entitled to remain at the hotel under the will.  The applicant’s basis for characterising her occupation as a tenant holding over is thereby undermined.  The will envisages that the amount payable for remaining in occupation is the contribution that is fair and reasonable.  That is not necessarily the amount payable by a tenant holding over under the lease.

[69] I decline to give the applicant the requested advice.

Requiring the first respondent to enter into a lease of the hotel – par 2(c) of the application

[70] The applicant seeks judicial advice whether he would be justified in requiring that Ms Cameron enter into a lease.  The way in which the question is framed assumes that the applicant has that power.  From my answer to the question as to par 1(d)(A) of the application, it follows that I do not consider that the applicant has that power.

[71] Nevertheless, subject to the provisions of the trust, the applicant has a statutory power to lease the hotel.[29]  It would not be inconsistent with the first respondent’s personal right of occupation for the applicant to lease the hotel to her on terms that are not inconsistent. It is not suggested that the first respondent’s right to complete ownership on the deaths of the present beneficiaries under the will and the first codicil would be affected.

[72] As previously stated, it appears that the applicant and the first respondent intend to enter into a further lease of the hotel.  That is a matter for them.  Although the applicant sought a direction that they should enter into a lease, it does not seem to me that it is necessary for the first respondent to do so, or a matter that requires a direction of the court, although it may be proper for the applicant and the first respondent to agree to enter into such a lease.

[73] In some circumstances it would be appropriate upon a judicial advice application to give advice to the trustee that it would be justified to enter into a transaction on particular terms if there were doubt about whether the trustee has power to do so or whether doing so might be a breach of the trustee’s duties.  In such a case, a trustee with the benefit of the court’s advice that he or she is justified in entering into the transaction will be protected.[30]  But, in doing so, the court does not create any obligation for the other party to the proposed lease transaction. 

[74] However, the first respondent did not object to the court establishing a mechanism by way of directions for the determination of a fair market rent or drafting of the terms of the proposed further lease of the hotel. 

[75] The jurisdiction of the court engaged by a judicial advice application is not the power of the court of equity to settle the terms of a conveyance upon an order for specific performance.  In any event, the court does not act as the arbiter of the terms for private parties to make a commercial contract of lease. 

[76] The institution of an administration action against trustees required the trustees to act under the court’s control in the exercise of the powers of management of the trust estate.[31] In that context, and where the power to lease trust property depended on the exercise of the power of the court, the court would settle the terms of the relevant lease.  However, this was done where there was already agreement with the putative lessee. [32]  In other words, the court’s exercise of power did not purport to require the proposed lessee to enter into particular terms.

[77] In my view, the court should not act as the means of resolving a dispute upon the commercial terms of a negotiation where neither of the parties is obliged to conclude a binding transaction, or at least should not do so by way of judicial advice in an application brought under s 96 of the TA.

Sinking fund for the trust of the hotel – par 2(g) of the application

[78] The applicant seeks judicial advice as to whether as trustee he should maintain a “sinking fund” to meet the expenses of the trust of the hotel.

[79] From the outset of the administration of the testator’s estate and trust the applicant has engaged an accountant to attend to the estate’s accounts and the trust’s accounts and tax affairs and has provided a yearly report to the beneficiaries setting out the income and expenditure.

[80] The applicant submitted that a sinking fund was required to balance the trustee’s duties to the present beneficiaries of a life interest in the net income of the hotel and the first respondent as the beneficiary of the remainder.[33]

[81] The interests as between the present beneficiaries to the net income during their lives on the one hand and the first respondent as beneficiary of the remainder on the other hand resemble the gifts and interest of a block of flats made by a testator in McDonald v Ellis.[34]  In that case, Bryson AJ said:

“It is in my view fairly arguable that the trustees should keep the building in an appropriate state of repair including undertaking renovations as well as effecting routinely occurring repairs, and that they are either authorised or required to act prudently to provide for renovations, to set aside money out of rental income before ascertaining the net annual income, and to carry out the renovations when required.

On the other hand it is also fairly arguable that what the terms of the Will require is that the trustees should deal only with affairs in the course of each year, collect the rent, pay the expenses which present themselves during that period, and pay the net annual income to the life tenant.”[35]

[82] By s 33 of the TA, the powers of the applicant as trustee include that:

 

“(1)Every trustee, in respect of any trust property, may—

(a)expend money (including capital money) subject to the same trusts for the repair, maintenance, upkeep or renovation of the property, whether or not the work is necessary for the purpose of salvage of the property; and

(b)expend money (including capital money) subject to the same trusts, but not, except with the sanction of the court, exceeding $10000 in the improvement or development of the property; and

(c)…; and

(d)pay out of money (including capital money) subject to the same trusts any rates, premiums, taxes, assessments, insurance premiums;…”

[83] In my view, if there are expenses associated with repair, maintenance, upkeep or renovation of the hotel, the trust of the hotel should be conducted by retaining sufficient money from the gross income to provide for the expenses reasonably made or to be made under s 33(1)(a)-(d). It is appropriate that a reasonable sinking fund be maintained for these purposes.

[84] However, the particular administration of the trust’s affairs in establishing and maintaining the sinking fund is not a matter for further advice by the Court in advance as to the subject matters that might properly be dealt with through it. 

[85] The answer to any question as to the particular requirements for a sinking fund must trace back to the proper classification of and purpose of the proposed expenditure.  The balancing of income interests against capital interests is a potentially complex task.  For example, the authors of Ford and Lee: Principles of the Law of Trusts, devote a chapter to it.[36]

[86] In my view, it is not appropriate to make any further direction by way of advice than that the applicant is justified in keeping a sinking fund for the repair, maintenance, upkeep or renovation of the hotel.

Further directions as to loans to friends and associates – paras 2(d) and 2(e) of the application and par 2(h) of the draft order

[87] In addition to the advice and directions sought by the applicant for the construction of the will and the trust of the hotel, the applicant sought directions by way of judicial advice as to:

 

(a) whether he should take further steps to recover loans the testator may have made in his lifetime to:

(i) the first respondent;

(ii) Lex and Alexandra Hayes;

(iii) Peter Krekelberg;

(iv) George Dubois; and

(v) “Neil or Lex”;

(b) whether the applicant should take further steps to investigate whether there are assets of the testator in Vanuatu; and

(c) whether there is a partial intestacy resulting in the crown taking the estate bona vacantia.

[88] In Re Cave-Brown-Cave,[37] Cussen J advised an applicant under an equivalent of s 96 of the TA that it was not necessary or desirable that he should take further steps to ascertain who was entitled to share in the distribution of an estate.

[89] The applicant submitted that the advice he seeks should be given, otherwise the administration of the testator’s estate would be held up. It is not clear to me why that would be so.  The true purpose of the application in this respect seems to be the desire of the applicant to be protected from liability for not taking any further steps to ascertain the existence of or to recover the possible loans as assets of the estate.

[90] The potential liability is in devastavit for failing to gather in the assets, by dilatoriness in collecting a debt.[38]  The “duty [of an executor] to collect and get in the real and personal estate of the testator and administer it according to law” is contained in s 52(1)(a) of the Succession Act 1981 (Qld).  It should also not be forgotten that the liability of a personal representative is for the assets which come into his or her hands or which would have done so but for his or her wilful default, but excludes assets which do not vest in him or her.  Vesting is provided for in s 45(1) of the Succession Act 1981 (Qld):

 

“The property to which a deceased person was entitled for an interest not ceasing on his or her death (other than property of which the deceased person was trustee) shall on his or her death and notwithstanding any testamentary disposition devolve to and vest in his or her executor…”

[91] The protection the applicant seeks is granted under s 97 of the TA, as follows:

 

“(1)Any trustee acting under any direction of the court shall be deemed, so far as regards the trustee’s own responsibility, to have discharged the trustee’s duty as trustee in the subject matter of the direction, notwithstanding that the order giving the direction is subsequently invalidated, overruled, set aside or otherwise rendered of no effect, or varied.

 

(2)This section does not indemnify any trustee in respect of any act done in accordance with any direction of the court if the trustee has been guilty of any fraud or wilful concealment or misrepresentation in obtaining the direction or in acquiescing in the court making the order giving the direction.”

[92] It should be noted that the protection obtained by a direction under s 96 of the TA is limited to “acting under [the] direction”.  In other words, the protection is prospective and will not protect the applicant from any liability that may already exist for his actions in the past.

[93] A relevant factor is that although those interested in the testator’s estate were represented on the hearing of the application, none of them submitted that the applicant should take any further step to recover any of the loans that the testator may have made during his lifetime.

[94] As to the loan made by the testator to the first respondent for $150,000 in December 2005, the evidence discloses a letter from the first respondent stating that if the testator was no longer alive at the completion of all options on the lease the loan would be considered finalised.  That date was 22 April 2014. 

[95] In my view, the applicant is justified in not taking any further step to recover the loan, because the available evidence suggests that it was not repayable after the time of expiry of the lease.

[96] As to the loans to Lex and Alexandra Hayes, whatever their balance, the second codicil devised those loans to Ms Middleton.  Ms Middleton does not submit that the applicant should take any further step to recover any loan to Lex or Alexandra Hayes.  In my view, the applicant was and is justified in not taking any further step to recover the loans.

[97] As to the loans to Mr Krekelberg, made for $30,000 in 2002 under a loan agreement dated 9 June 2002 and a further payment of $2,500 in the following year made for car repairs, the testator informed the applicant before his death that he did not wish to pursue the debts.  In my view, the applicant is justified in not taking any further steps to recover the loans.  It seems likely that the testator made the loans to Mr Krekelberg to assist a friend in need.  Mr Krekelberg died a year or so after the testator.   The amounts are relatively small.  And there is no reason why the applicant should not have adhered to the testator’s wish that the debts not be recovered.  In my view, the applicant is justified in not taking any further step to recover the loans.

[98] As to the loans to “Neil or Lex”, there are documents in the testator’s papers consistent with loans of $200,000 to Neil and $45,000 to Lex. 

[99] However, there was and is nothing to identify “Neil”.  In my view, the applicant is justified in taking no further steps to recover any loan to Neil.

[100] It seems possible or likely that “Lex” was Lex Hayes.  The second codicil disposed of his debts to the testator as a gift to Ms Middleton.  Ms Middleton does not submit that the applicant should take any further step to recover any such loan.  In my view, the applicant is justified in taking no further steps to recover any such loan.

[101] As to the loans to Mr Dubois, made on or before September 2005 Vanuatu totalling $120,000, the testator purported to deal with his estate in Vanuatu by a separate will.  Under that will, he would have made a gift of $200,000 to Mr Dubois.  That will was revoked by the testator’s later will in Australia that has been admitted to probate.

[102] The reason why the applicant did not take any steps to recover the loan after the testator’s death in December 2006 is that he incorrectly believed that the testator’s assets in Vanuatu did not form part of his estate under the will.  Nevertheless, in my view, the applicant is justified now in taking no further steps to recover the loan.  Unless the law of Vanuatu differs from that provided in s 3(1)(a) of the Limitations Act of that country, the limitation period for a debt is 6 years.  Failing an acknowledgement or some other basis to extend time any debt owing by Mr Dubois will now be time barred.

[103] In my view, the applicant is justified in taking no further steps to recover the loan to Mr Dubois.

Further direction as to assets in Vanuatu in a bank account

[104] The evidence shows that:

(a) on 13 January 2004, the testator made a will purportedly in respect of his assets in Vanuatu;

(b) the assets identified in the will were purportedly bank deposits with Westpac at “Vila” (presumably Port Vila); and

(c) on 29 April 2005, Westpac Port Vila confirmed to the testator that he had a deposit of $3,049,589;

(d) in January 2007, Mr Dubois by email informed the applicant that to the best of his knowledge there were no bank accounts in Vanuatu in the name of the testator at the time of his death in December 2006;

(e) in March 2007, Mr Dubois by email informed the lawyers then acting for the applicant that he did not have any knowledge of any cash, bank accounts or property which were held by the testator in Vanuatu; and

(f) in July 2007, Westpac Port Vila sent an email to the applicant attaching a copy of an email from Mr Dubois to the relevant officer from Westpac stating that “at the time of his death [the testator] did not have any account nor funds with Westpac Vanuatu”.

[105] The applicant says that he believes that the testator transferred the monies in the Westpac account to Mr Dubois before his death and that Mr Dubois has made payments to the intended beneficiaries of the “Vanuatu will”, who were Alma Bernice Perkins and the third and fourth respondents.

[106] Although assets in overseas countries may be part of the administration of the estate of a testator who makes a will and dies in this jurisdiction, a personal representative is not necessarily responsible for assets of that kind.  A grant of probate in this jurisdiction does not of itself give authority to compel payment in another jurisdiction to the executor appointed here.  Where a debt is owed in a foreign country that must depend on the law of the foreign country.[39]  By way of comparison, apart from statute, in this jurisdiction, a foreign personal representative is not able to be sue in that capacity without a local grant of probate.[40]

[107] It also seems to be the case that the applicant is not aware of the amounts of the payments made to Mr Dubois by the testator or by Mr Dubois to the recipients.  The picture as to whether there was any asset of the estate that might have been recovered is unclear.

[108] In the next section of these reasons I deal with the absence of a residuary gift in the will and that any residue passing on intestacy might pass to the Crown, who was represented by the Attorney-General before me on the hearing of the application.  The Attorney-General might have been expected to have the greatest interest in the Westpac Vanuatu deposit as an asset of the estate that might have fallen into the residuary estate.  

[109] The “beneficiaries” of the “Vanuatu will” were either served or were represented on the hearing of the application before me as beneficiaries under the will and two codicils admitted to probate in this jurisdiction.

[110] Neither the Attorney General nor the beneficiaries made any submission that the applicant would not be justified in not taking further steps to recover any asset in Vanuatu representing or derived from the Westpac Port Vila deposit. 

[111] As previously indicated, that says nothing about whether the applicant’s failure to take steps from 2007 until now was a breach of his duties as executor.

[112] In my view, there should be a direction that the applicant is justified in taking no further step to recover any asset in Vanuatu representing or derived from the Westpac Port Vila deposit.

Partial intestacy

[113] There was no disposition of the residue of the testator’s estate either in the will or the two codicils.  Any residue of his estate thereby passed on intestacy.  Because the testator was not survived by issue, by a parent or by next of kin, the applicant sought a direction that any property that falls into the residue of the testator’s estate passed bona vacantia to the Crown.[41]

[114] The starting point is that in the events that have happened, unless there is an unexpected development, there is and will be no residue of the testator’s estate, after payment of properly incurred expenses.

[115] It is well settled that courts will only decide actual controversies and not hypothetical issues.[42]  In a context analogous to the present, in Curtis v Sheffield,[43] Jessel MR said:

“Now it is true that it is not the practice of the Court, and was not the practice of the Court of Chancery to decide as to future rights, but to wait until the event has happened, unless a present right depends on the decisions, or there are some other special circumstances to satisfy the court that it is desirable at once to decide the future rights. But where all the parties who in any event will be entitled to the property are of age and ready to argue the case, the reason for the rule departs, and it becomes a bare technicality. The reason for the rule is this, that the Court will not decide on future rights, because, until the event happens it does not know who will be interested in arguing the question, and therefore may be shutting out parties who, when the event happens, may be entitled to succeed…”

[116] Further, in Trustees of Church Property of Diocese of Newcastle v Ebbeck,[44] Dixon CJ said:

The modern tendency to decide the effect of limitations of future interests before the question arises might be thought to have suffered some set back by the course taken in Davies v Perpetual Trustee Co (1959) AC 439; (1959) SR (NSW) 112; 76 WN 279 of allowing an appeal from an order forty years old made concerning a future interest at a time when a somewhat different understanding obtained of the principles upon which that order was based. In any case it is still the general prima facie rule that questions about future interests that will arise in events that have not yet happened and need not necessarily occur are not decided unless beneficiaries are hampered in their practical affairs in some significant respect by the uncertainty or some other positive ground exists for an anticipatory decree or order…”

[117] Strictly speaking, the present question is not one of the operation of a future limitation.  Any residue passed upon the testator’s death, and upon an intestacy.  Nevertheless, absent any residue in the estate, the question is analogous to deciding future hypothetical rights.

[118] The question whether there is a partial intestacy of the residue of the testator’s estate passing bona vacantia, is not one that has affected the applicant’s duties in administering the testator’s estate to date.  The applicant and the Attorney-General who appeared on behalf of the Crown both submitted that presently there is no residue in the testator’s estate.

[119] In my view, these circumstances do not justify the making of a direction that the residue passed bona vacantia to the Crown.   It is true that there seems to be no apparent basis for thinking that there is any next of kin.  But if there is not any residuary estate after payment of all debts and expenses, it seems to me an arid exercise to make a direction or declaration as to the passing of the interest in the residue as bona vacantia

[120] I am reinforced in this conclusion because the Attorney-General made no submission that the applicant should take any further steps to recover any of the loans the testator may have made during his lifetime or to recover any asset in Vanuatu representing or derived from the Westpac Port Vila deposit.

Footnotes

[1] (2008) 237 CLR 66.

[2] Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66, [54]-[76].

[3] [2013] QSC 196, [10]-[11].

[4] Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66, [54]-[76].

[5] Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66, [69].

[6] Chief Commissioner of Stamp Duties v Buckle (1998) 192 CLR 226, 245-247 [47]-[51]; Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360, 371.

[7] Trusts Act 1973 (Qld), s 72.

[8] Bruton Holdings Pty Ltd (in liq) v Federal Commissioner of Taxation (2009) 239 CLR 346, 358 [43].

[9] Kemp v Inland Revenue Commissioners [1905] 1 KB 581, 585.

[10] [1966] Qd R 96.

[11] [1966] Qd R 96, 117.

[12] Frey v Frey (2009) ASTLR 470, 497; Re Donkin [1966] Qd R 96, 118; Attenborough v Soloman & Ors [1913] AC 76, 83; Inland Revenue Commissioners v Smith [1930] 1 KB 713, 733.

[13] Succession Act 1981 (Qld), ss 52(1)(a), 52(1)(d).

[14] Frey v Frey (2009) ASTLR 470, 497; Attenborough v Soloman & Ors [1913] AC 76, 83.

[15] Fell v Fell (1922) 31 CLR 268, 273-274.

[16] Compare Nichol v Chant (1909) 15 ALR 182.

[17] Shorter Oxford English Dictionary, 6 ed (2007), p 2523, definition “remain”.

[18] Shorter Oxford English Dictionary, 6 ed (2007), p 2523, definition “remain”.

[19] [1961] VR 381.

[20] Re Hoppe (deceased) [1961] VR 381, 400.

[21] [2012] 2 Qd R 448.

[22] King v King [2012] 2 Qd R 448, [39], [45]-[46].

[23] Radaich v Smith (1959) 101 CLR 209, 218, 221.

[24] I. Ramsay and L. McDonald, Expert’s Reports in Corporate Transactions (Federation Press, 2003) 31-37.

[25] Macedonian Orthodox Community Church St Petka Inc v Petar (2008) 237 CLR 66, 85, [43].

[26] (1802) 8 Ves 4.

[27] (1802) 8 Ves 4, 8

[28] National Trustees Executors Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268, 279.

[29] Trusts Act 1973 (Qld), s 32(1)(e).

[30] Trusts Act 1973 (Qld), s 97(1).

[31] E. Daniell, The Practice of the Chancery Division of the High Court of Justice: and appeal therefrom: being the 7th edn of Daniell’s Chancery Practice (Stevens and Sons, 1901, 7 ed) 864.

[32] E. Daniell, S. Williams and F Guthrie-Smith, Daniell’s Chancery Practice (Stevens and Sons, 1914, 8 ed) 932.

[33] Knox v Mackinnon (1888) 13 App Cas 753, 768; Tanti v Carlson [1948] VLR 401, 405.

[34] (2007) 72 NSWLR 605.

[35] (2007) 72 NSWLR 605, 609 [13]-[14].

[36] Ford and Lee: Principles of the Law of Trusts, ch 11.

[37] [1906] VLR 283.

[38] Partridge v Equity Trustees Executors & Agency Co Ltd (1947) 75 CLR 149.

[39] A. Dicey, J. Morris and L. Collins, Conflict of Laws, (Sweet & Maxwell, 14 ed, 2006) par 26-026.

[40] Re Butler [1969] QWN 48.

[41] Succession Act 1981 (Qld), s 35(1) and Schedule 2, Part 2, Item 4; Property Law Act 1974 (Qld), s 20(3) and Schedule 1.

[42] Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334; University of New South Wales v Moorhouse (1975) 133 CLR 1, 10; Ainsworth v Criminal Justice Commission (1992) 175 CLR 564, 581-582.

[43] (1882) 21 Ch D 1, 3-4.

[44] Trustees of Church Property of Diocese of Newcastle v Ebbeck (1970) 104 CLR 394, 400-401.

Close

Editorial Notes

  • Published Case Name:

    Davidson v Cameron

  • Shortened Case Name:

    Davidson v Cameron

  • Reported Citation:

    [2016] 2 Qd R 340

  • MNC:

    [2015] QSC 294

  • Court:

    QSC

  • Judge(s):

    Jackson J

  • Date:

    29 Oct 2015

Litigation History

No Litigation History

Appeal Status

No Status