Hawkins v Farley[1995] QDC 336

Before Robin DCJ

[V.L. & E.K. Hawkins & D.T. Hawkins (by his next friend V.L. Hawkins) v. C.J. Farley as personal representative of the estate of E.M. Farley Deceased)]

BETWEEN:

AND:

AND:

Application 16 of 1994

IN THE MATTER of the Succession Act 1981

and

IN THE MATTER of the Will ELIZABETH MARY FARLEY Deceased

and

IN THE MATTER of an Application by VICTORIA LEE HAWKINS, ELIZABETH KATE HAWKINS and DAMON THOMAS HAWKINS (by his next friend VICTORIA LEE HAWKINS)

REASONS FOR JUDGMENT PUBLISHED: 17TH OCTOBER 1995

Catchwords:

Trusts - remedies open to beneficiaries on breach of trust - failure of trustee (beneficiaries' mother) to keep trust fund separate - on death of trustee her estate left to the defendant - defendant also personal representative of the deceased trustee - his benefit in the estate considerably exceeded the trust fund - knowledge by him of the trust not established - defendant held liable to make good the trust fund both personally and as personal representative Succession Act 1981 s. 66(1), (7), (8) and (9) - no case made out for relief - maintenance of beneficiaries by deceased trustee and defendant not relevant in this context - (Cth) Family Law Act s. 66B

Jurisdiction of District Courts to relieve a deceased trustee and trustee's personal representative from liability under Trusts Act 1973, s. 76 - jurisdiction doubted - view expressed that the applications lacked merit - issue to be remitted to Supreme Court under District Courts Act s. 85 if application for relief persisted in.

Trusts - moneys left by will to trustee on his oral undertaking to testatrix to hold them on trust for (a) his children and (b) three nephews and nieces - half given to the latters' mother - she died having used the moneys she received as her own - her estate and her personal representative (who was her principal beneficiary) sought to be made liable to make good the fund by group (b) - defendant not shown to have knowledge of any trust - plaintiffs failed to show any clear trust binding their mother or that (assuming a trust) her maintenance of them was not a proper disbursement of trust moneys.

Testators' Family Maintenance - Succession Act 1981 s. 41 - application by children, one still at school - provisions that would have been made indicated - orders not made as applicants (who required extension of time) did not wish to persist if successful (as they were) in other proceedings - estate held not fully distributed - further assets might be established and/or received pursuant to payment of balances indicated in company accounts valid transfer of estate's share in company appeared precluded by Stamp Act 1894 s. 31G. Easterbrook v. Young (1977) 136 C.L.R. 308 distinguished on basis of Court of Appeal decision in Holmes v. Webb (O.S. 542/89).

Testators' Family Maintenance - Succession Act 1981 s. 41 - application by testatrix's ablebodied second husband refused - substantial benefit to him from the estate - competing claims of three orphaned children.

Property - whether items part of a devise of a dwellinghouse - item removed or sought to be by personal representative for his own use, having been supplied in one or more instances by him - refrigerator connected to a water supply held not a fixture - dishwasher connected to water supply and domestic drainage held a fixture - large shed bolted to buried concrete blocks held a fixture - damages assessed for conversion and attempted conversion of fixtures.

BETWEEN:

AND:

Application 16 of 1994

AND:

IN THE MATTER of the Succession Act 1981

and

IN THE MATTER of the Will of ELIZABETH MARY FARLEY Deceased

and

IN THE MATTER of an Application by VICTORIA LEE HAWKINS, ELIZABETH KATE HAWKINS and DAMON THOMAS HAWKINS (by his next friend VICTORIA LEE HAWKINS)

REASONS FOR JUDGMENT - ROBIN D.C.J.

Delivered the 17th day of October, 1995

Elizabeth Mary Farley died of cancer on 16th July 1992 only 13 months after she had married Christopher Joseph Farley. She was a widow in 1992, having had three children (the plaintiffs in Action 452/94 and applicants in Originating Application 16/94) with her former husband, who predeceased her:

In the originating application, made under s. 41 of the Succession Act, there is a cross-application by Mr. Farley. Each of the s. 41 applications has been acknowledged as brought to alleviate the respective applicants' position should the other side prevail in the action. In the action, Mr. Farley is sued in his private capacity and as personal representative of Elizabeth Mary Farley.

The Will names him sole executor and trustee. It goes on:

The plaint claims that Mr. Farley on or about 31st March 1994 removed fixtures from the dwelling house, namely a dishwasher and “built-in refrigerator” and converted them to his own use. It further claims that on or about 21st May 1994 he attempted to remove and convert to his own use another fixture, being a galvanised iron shed. Those matters are established by the evidence which includes a schedule of agreed facts, and also shows that the electrical items were paid for by the defendant. The dishwasher was a replacement for one installed in the kitchen of the dwelling house before the defendant had any connection with the place and it ceased to work. It may be that the refrigerator was in similar case, but the evidence does not show it. The shed is a substantial structure which was used to house earthmoving machinery used in a business which the defendant conducted with the deceased (through a limited company). I have no clear impression whether or not Mr. Farley personally paid for the shed. This matter of who made payment in respect of all of the alleged “fixtures” is immaterial. The important question is whether they are fixtures and so part of the “dwelling house” (which was the deceased's unencumbered property) or were or became under the Will Mr. Farley's property to remove.

The shed, which is erected on the same land as the dwelling house, is clearly a fixture, in my view. The components of which it is made are bolted into substantial concrete blocks buried in the ground. I do not accept the defendant's suggestion that the shed ought to be regarded as something separate from the “dwelling house”. It is in a substantially disassembled state at the moment, police summoned at the plaintiffs' instance having prevailed upon Mr. Farley not to remove the disassembled components. The evidence in my opinion justifies a finding that the cost of reassembling the shed is no less than $2,000. That represents a sum which the defendant must pay in damages. (I ought to record that Mr. Kimmins submitted that the shed would be regarded as a “trade fixture” in the context of landlord and tenant, removable by the tenant on cessation of the tenancy: Webb v. Frank Bevis Ltd. (1940) 1 All.E.R. 247; he was unable to cite any authority which showed that law respecting “tenants' fixtures” applied in contexts such as the present. I do not think it does.)

Turning to the electrical items, the searches of Mr. Conrick, for the plaintiffs, have revealed a decision of Judge Ward in the District Court of Adelaide, Thomas v. Beck (1983-84) Australian and New Zealand Conveyancing Reports 200. A clothes dryer was held not to be a fixture, but his Honour went on:

Judge Ward's reasoning is as persuasive in my mind as the contrary view, and consistency in the law is promoted by my following it. It is clear from the photographs, Exhibit 7, that the other fixtures in the kitchen (benches and cupboards and the like) have been constructed to incorporate a dishwasher, to the extent that the floor in that area has not been tiled. The dishwasher is connected to inlets and outlets for water, the latter of which is integrated with the drainage system of the dwelling house. The absence of a dishwasher leaves a glaring and unsightly gap in the kitchen, which has been custom designed to hold such an item. The decision is adopted in the list of fixtures in Butt, The Standard Contract for Sale of Land in New South Wales (The Law Book Company Limited 1985) pp. 50-51. The list contains other items, which I think may well be analogous, such as an electric hot water system, although I accept that the plumbing connections of a hot water system may be less easily susceptible of disconnection, and perhaps the electrical connections, too. Given the evidence of the new cost of the item, I assess the damages payable in respect of the defendant's conversion as $500. The dishwasher was not new when converted.

So far as the refrigerator is concerned, I would not contemplate its being regarded as a fixture but for its being connected to the water supply, for the functioning of a facility which produced cold water and/or ice. The rival authorities cited are Abercrombie v. Wollington (1956) 73 W.N.(N.S.W.) 336 (an electric stove is not a fixture) and Palumberi v. Palumberi (1986) N.S.W.Conv.R. 55-287 (a gas stove is a fixture). I determine that the refrigerator is not a fixture. It was capable of serving the conventional functions of a refrigerator without being connected to the water supply at all. Unlike the dishwasher's, the outlet, presumably a dispenser or two in the door, is not connected to anything. It has to be conceded that the absence of the item leaves a space in the kitchen from which something is clearly missing, indeed, a refrigerator; however the empty space makes much less of an impact than the dishwasher space, the floor being substantially tiled, for example - see photographs, Exhibit 8.

I have heard no submissions as to the proper orders to be made in respect of the damages assessed for the defendant's conversion and attempted conversion. I can see no reason why the female plaintiffs who are now entitled to have their interests in the dwelling house, having reached the age of 21, should not be awarded their share of the damages now, and perhaps the young male plaintiff's share too, since should he not attain the same age, his potential interest will become theirs. Perhaps some declaration of trust could be made. Alternatively, it may be that, in the light of my findings, the parties are able to settle on some other satisfactory resolution of the “fixtures” issues.

The more substantial issues in the action concern what are called “the first trust fund” and “the second trust fund”, of $32,269.30 and $24,000 respectively. Accounts are sought, together with compound interest at a penal rate of 15% and ancillary orders. “An account of the estate of Elizabeth Mary Farley” is sought, together with “equitable damages or compensation not exceeding the jurisdictional limit for breach of trust together with interest”. At trial, it was conceded by Mr. Conrick that the plaintiffs (his clients) no longer had any interest in costly accounts.

In respect of the two trust funds referred to in the amended plaint, the primary defaulter is alleged to be the deceased.

The so-called “first trust fund” came into existence pursuant to the Will of the deceased's own mother, Mabel Flynn, who died on 19th December 1987. Her Will dated 27th April 1987, which was admitted to probate in the Supreme Court of Victoria on 23rd September 1988, provides, inter alia:

The “proceeds” and “amount” referred to in that provision were $7,482.18 and $46,300 respectively. The deceased received and deposited into her Metway bank account on 7th August 1989 monies including $4,489.30 being 3/5ths of the smaller sum. As to the larger, she received into that same account $10,000 on 16th June 1988 and $36,300 on 6th September 1988, so that (presumably owing to a gesture made by the family of her brother, Mr. Flynn, who gave evidence), the whole of the Mudgeeraba Retirement Village amount was received by her, rather than 3-5ths only. It is not contended that more than 3/5ths of the amount was received subject to the trust in Mrs. Flynn's Will.

7. In the premises the Defendant as executor of the estate of the deceased is liable to:

A court will normally be vigilant to ensure that when restoration of a trust fund is ordered, full restoration is achieved. See Re Dawson (1966) 2 N.S.W.R. 211. In this case the plaintiffs have elected to forego their full entitlements, which does them credit. Another avenue of possible relief which they have chosen not to pursue is tracing trust assets, or relief of the kind ordered in Scott v. Scott (1963) 109 C.L.R. 649.

The complaints in para. 6 are made out, although some ((a), (c) and possibly (e)) seem to me to apply a rather too harsh standard to a lay person. (Mr. Flynn conceded that in respect of an analogous fund held by him he had not complied with the obligation implied in 6(a).) The relevance of 6(f) in the present context is not clear to me.

Although Mr. Conrick cited authorities which support the propositions pleaded in para. 7(a) and (b), he intimated that his clients no longer wish to pursue Mr. Farley for interest. No claim is made against him that he is personally liable. He is only sought to be made liable to the extent of assets in the estate. The evidence does not show he knew of the existence or terms of “the first trust fund”, but the authorities show that to be irrelevant.

It was not contested by Mr. Kimmins that the applicable principles are set out in Jacobs' Law of Trusts in Australia (5th) 2212:

Section 66(1) of the Succession Act 1981 provides:

Subsections (7), (8) and (9) (formerly paragraphs (b), (c) and (d) of subsection (6) provide:

I have considered everything put up by Mr. Kimmins which might entitle his client to relief, but find there is nothing inequitable in enforcement of the present action. To the extent that the first trust fund has been depleted, the defendant has been the sole beneficiary. The deceased made no attempt to preserve the trust fund, having expended it on expensive items, and in particular, a large item of earthmoving equipment which she purchased for herself, establishing a business of similar nature to the defendant's established business. After some time, the businesses were amalgamated by means of a company, the capital contributions of the deceased to the joint business exceeding Mr. Farley's by some $17,500.

It is difficult to know how critical one should be of Mrs. Farley. As it happened, when she died, she had cash monies available (in the Metway account) which roughly approximated the aggregate of “the first trust fund” and “the second trust fund”, albeit without the accretions which ought to have been earned on them by prudent investment. There were certainly times when the state of the account was such that Mrs. Farley could not have produced the principal of either fund. It is possible that she regarded her investment of the monies in her own and later the joint business as promoting the interest of the beneficiaries, her children. I do not think that it is tenable to suggest that Mrs. Farley, in the course of providing for her children's needs as they arose from time to time during her lifetime can be regarded as making applications of “the first trust fund” - although the position in respect of alleged “second trust fund” seems to me different. Her obligation to maintain the children from her own resources is made clear by S. 66B of the Family Law Act:

On the assumption that Mrs. Farley was intending to do the right thing as trustee during her lifetime, she certainly became guilty of a gross abuse when she left all of her personal estate to Mr. Farley in her Will.

In my view, the liability of the estate, represented by Mr. Farley is clear in respect of the first trust fund. As to his own liability, to the extent that his own estate has been enriched by the deceased's testamentary gifts, he should be held liable to make good the first trust fund, none of which is shown to have been applied for the benefit of any of the plaintiffs. I would have been willing to make orders to increase the liability by an appropriate sum to cover what ought to have been earnt on “the first trust fund”, but the plaintiffs, perhaps out of sympathy for the practical position Mr. Farley finds himself in, have not pressed their pleaded claim in this behalf.

I would say two further things regarding Mr. Farley's position. It is a gross exaggeration for him to say that if the action succeeds, he will be left with nothing but debts from the estate. One matter his accounts do not bring in is his taking over the deceased's interest in the joint business. Even if he had to disgorge to the full amount of the plaintiffs' pleaded claims, I am not satisfied he would be the loser, even allowing for changes in position which may have occurred since the death. As a matter of principle, he is under no risk of having to disgorge more than he received. To the extent that he has contributed to the joint household (which he left only in March 1994, in consequence, I infer, of unhappiness felt by the female plaintiffs or one of them upon the coming onto the scene of his present wife), I do not think he is entitled to any credit. The credits claimed include general household expenses, such as maintenance of the swimming pool, care of a pet dog, groceries and so on. In respect of another of the items claimed, the cost of private health insurance, my understanding is that no additional premium was payable by reference to the coverage of the plaintiffs, and to the extent that this is wrong in respect of Victoria Lee Hawkins, she has probably paid the difference from her own funds. I appreciate that there may be particular items, particularly in respect of the boy, Damon, in respect of which real contributions have been made by Mr. Farley. However, I think it is right to take a “broad brush” approach, and not to regard even these items as ones in respect of which Mr. Farley is entitled to repayment or some kind of credit, given all of the circumstances.

Mr. Kimmins was allowed to tender survey material relating to the cost of maintaining children such as is commonly used in the Family Court of Australia. See Streets and Streets (1994) F.C. 92-509 in which the “Lee” and “Lovering” scales are discussed. In the end this material is not helpful to me. The idea of the tender was to establish a credit that Mr. Farley and/or the deceased's estate might be entitled to for the support given to the plaintiffs over recent years. Any correspondence between the scales and actual expenditure would be mere coincidence; some support of the plaintiffs (or one or more of them) has come from other sources. My view is that no credit along these lines is appropriate in respect of “the first trust fund” in any event.

The “second trust fund” is claimed to arise under the Will of the deceased's aunt, Mary Florence Flynn, whose entire estate was left:

The nephew is Mr. Michael John Flynn. He received $48,000. The evidence establishes that in or about July 1989 Mr. Flynn paid the deceased one half of that sum. The plaintiffs plead that it was “settled...inter vivos upon the deceased on trust for the benefit of the Plaintiffs”.

In my opinion, the pleaded claim has not been made out. The evidence of Mr. Flynn is too vague to establish the trust alleged, even without recourse to Wallgrove v. Tebbs (1855) 2 K & J. 313; 69 E.R. 800, on which Mr. Kimmins relied. The following occurred during Mr. Flynn's evidence:

That Mr. Flynn may have accepted $48,000 as trustee is consistent with what is written in Jacobs' Law of Trusts in Australia (5th) 714-5:

In the circumstances, I would say that Mr. Flynn discharged the trust to the extent that he handed $24,000 to the deceased. It does not follow that she received the money on the trust alleged in the plaintiffs' pleading, although the circumstances would suggest that her children were intended to benefit from the money. The evidence fails to show that they did not. I do not think it is shown there was any requirement of the kind applicable to the first trust fund that it be kept separate or identifiable and produce income. In the deceased's circumstances, being newly widowed, with three children, expenditure of the money on items that would normally form part of parental support does not strike me as improper. If the deceased was not in breach of trust, it follows that there is no question of Mr. Farley being held liable in respect of the so-called “second trust fund” in either of his capacities.

It seems strongly arguable that whatever moral obligations Mr. Flynn saw himself undertaking, he was free to deal with the $48,000 received from his aunt's estate as he chose, so far as the law and equity would be concerned. The circumstances in which he disposed of half to the deceased do not, in my opinion, show an attempt by him to create a trust of the kind alleged, much less the acceptance of such a trust by the deceased. Even if this were not so, I would be sympathetic to the contention that in the circumstances, some part at least of the expenses which the defence sets up as paid for the maintenance and advancement of the plaintiffs could fairly be regarded as disbursement of the $24,000.

The defendant, by a late amendment to his pleading, seeks that he and the deceased be excused in respect of any breaches by them of obligations as trustee under s. 76 of the Trusts Act 1973; which provides:

By section 5, “the Court” is the Supreme Court or a Judge thereof. I am doubtful that anything in ss. 66 or 67 of the District Courts Act confers jurisdiction on a District Court to apply s. 76. Mr. Conrick submits there is no jurisdiction. If the defendant wishes to persist in an application under s. 76, I should adjourn it to the Supreme Court under s. 85 of the District Courts Act. If the matter is for me to decide, I would have little hesitation about refusing the application. So far as the deceased is concerned, she has simply treated “the first trust fund” as her own money. This may have been honest, but is not shown to be reasonable. The evidence shows no significant change of position by her in reliance on a belief the money was hers; as it happens she had more than enough cash resources in her Metway account to make good the first trust fund at her death. Excusing her would simply be allowing her to keep the plaintiffs' money, and would not be “fair”. As to Mr. Farley, accepting that he acted without knowledge that he was taking trust moneys as the deceased's residuary legatee, I can see no basis on which it is any more “fair” to leave the plaintiffs without their money. It is not sought by them to hold Mr. Farley responsible for any more than he received, inappropriately, from the deceased's estate. In that sense he is not being made personally liable at all. Even if he has to disgorge $32,269.30, he will have retained far more than that sum in benefits from the estate.

Although Mr. Conrick's concession makes it unnecessary to consider the plaintiffs' application under s. 41 of the Succession Act, my view is that each of the applicants could properly be held entitled to an order for increased provision from the deceased's estate. This is particularly so in the case of Damon, given his young age. I would regard him as entitled, in ordinary circumstances, to an order for increased provision even on the basis of “the first trust fund” being made good. He is still a school boy, and receives nothing under the deceased's Will other than the prospect of obtaining a one third interest in the house on 12th December 2000. I have wondered whether or not the deceased's estate, apart from the dwelling house, could be held liable for the costs of maintaining the dwelling house, but I am doubtful that the gift of residue subjects the residue to any such obligation. Mr. Kimmins pointed out that the executor and trustee had authority to borrow on security of the dwelling house. In those circumstances the plaintiffs' expectations with regard to the dwelling house are in some jeopardy.

The plaintiffs require an extension of time for bringing their application. Mr. Kimmins submits that ought not to be granted, as the estate has been fully distributed. It seems clear that in Queensland, distribution (even where it occurs by the personal representative merely “changing his hat”, so to speak) defeats a claimant, even a minor, see e.g. Re Terlier (1959) Q.W.N. 5. The authority of this decision, which is quite close to the present case, has been accepted in later decisions such as Re Lowe (1964) Q.W.N. 37, Re Donkin (1966) Qd.R. and Re McPherson (1987) 2 Qd.R. 394, which disapproved the attempt made in Re Whitta (1984) 2 Qd.R. 356 to change what may have been a distinctive Queensland approach in the interests of coming into accord with Easterbrook v. Young (1977) 136 C.L.R. 308. The distinctive local approach noted in Anthony Dickey, Family Provision after Death (L.B.C. 1992) pp. 48-52 has recently been confirmed by the Court of Appeal in Steven Christopher Holmes v. June Mavis Webb (O.S. 542/89 unreported judgment of 18.8.92) and said to be attributable to differences in the relevant legislation. Mr. Conrick presented a clever argument, which I think is correct, that the estate of the deceased has not been distributed. There are two aspects. Section 31G of the Stamps Act applies so that the deceased's share in the company which ran the joint business cannot have been transferred from the estate to Mr. Farley, for want of a properly stamped transfer. In addition, the evidence shows the probabilities to be that monies are owing by that company to the estate, which may yet be collected. As I understand the authorities, in such circumstances, provision may be ordered under s. 41 on the basis that if the assets come into the estate, they will be available to satisfy it.

In my view, the deceased failed in her moral obligation to make better provision for the three plaintiffs by her Will. The plaintiffs are all young. None has any assets to speak of. Their father is dead, and there seems no prospect of any benevolent source becoming available to satisfy needs for funds which the vicissitudes of life may create. Each of the applicants is healthy, but none yet has any particular qualifications for work except in modestly paid occupations. The female applicants have only sporadic casual work. I accept that the deceased had a moral obligation to Mr. Farley. I would think that increased provision ought to be ordered (if there were a competent application before me) in sums such as $15,000, $20,000 and $25,000 to the plaintiffs, following the order in which the names appear in the plaint. Those sums should be reduced to the extent that “the first trust fund” is made good. As it happens, for reasons which appear above, the plaintiffs have not persisted in their applications for extension of time, which are a prerequisite to any jurisdiction arising to make orders under s. 41 of the Succession Act.

Given my decision in respect of “the first trust fund”, it is necessary to deal with Mr. Farley's application under s. 41 of the Succession Act. Mr. Conrick cited Thomas J's decision in Re Williams (O.S. 1109/87, 26.7.88, unreported) and the Full Court's decision in Gill v. Gill (O.S. 1050/89, 31.10.91, unreported) as illustrating what he said was the proper approach of preferring a testatrix's children by a first marriage over her able-bodied second husband. Accepting that s. 41 applications must be dealt with on their own merits, and not as if governed by authority, I consider that approach is the proper one here. It indicates that the plaintiffs' application is entitled to succeed, and that Mr. Farley's should fail. He is an able-bodied adult male, with assets such as a car and a house; he has a working wife. Although he may not have had all of those at the date of death of the testatrix, it would be silly to disregard favourable developments since. To balance the ledger, it has to be taken into account that Mr. Farley's business is struggling now, in comparison with its favourable situation at the date of death, thanks to a general slowdown in the construction industry.

Mr. Farley should be ordered, in both his capacities, to pay over the amount of the capital of the first trust fund. Once again, I indicate I will hear the parties, after they have had an opportunity of considering these reasons, as to what orders can best be made in the unusual circumstances of this case.

I shall also hear the parties on the question of costs. My present inclination, based on an impression that the plaintiffs' demands have been more than reasonably modest, is that they ought to have their costs.