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Re: OSD; SMA & Anor v FJX & Anor; OSD & Anor v ABJ QSC 264
SUPREME COURT OF QUEENSLAND
Re: OSD; SMA & Anor v FJX & Anor; OSD & Anor v ABJ  QSC 264
In Proceeding BS 7775/23:
AN APPLICATION BY ABJ AS EXECUTOR OF THE WILL OF BST, DECEASED
In Proceeding BS 8986/23:
SMA and ZCT as attorneys for MPA
FJX AND OSD
In Proceeding BS 9111/23:
ABJ as executor of the Will of BST, DECEASED
BS No 7775 of 2023; BS No 8986 of 2023; BS No 9111 of 2023
Supreme Court at Brisbane
Ex tempore reasons delivered on 30 August 2023
31 July and 29 August 2023
EQUITY – TRUSTS AND TRUSTEES – APPOINTMENT, REMOVAL AND ESTATE OF TRUSTEES – ESTATE – GENERALLY – where the Executor, Attorneys and Beneficiaries have generally agreed to settle the proceedings – where the Executor seeks judicial advice pursuant to s 96 of the Trusts Act 1973 (Qld) or the Court’s equitable jurisdiction – where the Attorneys seek retrospective conflict transaction approval pursuant to s 73(2) and s 118(3) of the Powers of Attorney Act 1998 (Qld) – where the Attorneys seek an order justifying their steps to establish certain trusts and transfer assets to said trusts – where the Beneficiaries submit that if the court is satisfied with the terms of the settlement that their application should be dismissed
SUCCESSION – MAKING OF A WILL – TESTAMENTARY CAPACITY – SOUNDNESS OF MIND, MEMORY AND UNDERSTANDING – LOSS OR LACK OF CAPACITY AND STATUATORY WILLS – where the applicant in one of the proceedings has an enduring power of attorney for the financial matters of the testatrix, a 94 year old woman – where the testatrix has lost testamentary capacity – where the testatrix is in permanent residential care at a care facility – where the testatrix does not have capacity to make decisions about her personal health and finances – where the testatrix’s will bequeathed assets to her daughter, grandson and charities – whether the court should exercise its discretion to authorise the proposal – whether the Executor, Attorneys and Beneficiaries are entitled to their costs of the Applications on an indemnity basis
Powers of Attorney Act 1998 (Qld)
Trusts Act 1973 (Qld)
BP v PM  QSC 268
Buckingham v Buckingham  QSC 230
E (Mrs) v E (1986) 31 DLR (4th) 1
GAU v GAV  I Qd R 1
Henry Matthew Fitzgerald (deceased) v Kane & Ors  QSC 372
Invensys Australia Superannuation Fund Pty Ltd v Austrac Investments Ltd  1 VR 87
JPT v DST  NSWSC 1735
Karger v Paul  VR 161
Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66
MZY v RYI  QSC 89
Public Trustee v Cooper  WTLR 901;  All ER (D) 1524
Re Fenwick (2009) 76 NSWLR 22
Re JT  QSC 163
RKC v JNS  QSC 313
Secretary, Department of Health and Community Services v JWB and SMB (Marion's case (1992) 175 CLR 218
SPM v LWA  QSC 1383
DA Skennar KC & MW Crofton for the applicant in proceeding BS 7775/23
J Otto KC & KJ Kluss for the applicant in proceeding BS 8986/23
M Williams for the first applicant in proceeding BS 9111/23
CC Heyworth-Smith KC for the second applicant in proceeding BS 9111/23
Merthyr Law for the applicant in proceeding BS 7775/23
Hopgood Ganim for the applicant in proceeding BS 8986/23
Thynne + Macartney Lawyers for the first applicant in proceeding BS 9111/23
Cornford-Scott Lawyers for the second applicant in proceeding BS 9111/23
- Each of the current proceedings emanate from originating applications filed in this court seeking various forms of judicial guidance and relief by parties involved in the personal testamentary and financial affairs of MPA and her deceased son BST.
- MPA is 94 years of age and a very wealthy woman, with assets of about $14.54 million primarily accrued from family inheritances. She currently resides in a nursing home with high care needs, having been diagnosed with Alzheimer’s Dementia. Although it cannot be said with any certainty when she will die, it is uncontroversial that she lacks capacity for all relevant “matters”, as that term is defined in schedules 2 and 3 of the Powers of Attorney Act 1998 (Qld), and that since mid-2021 she presents with increasing paranoia and anger.
- MPA had two children. BST passed away on 4 January 2018 at the age of 59. BST was also very wealthy leaving an estate presently valued at about $10.25 million. The vast majority of his wealth was also derived from the family’s wealthy forebears or it was gifted to him by his mother inter vivos. BST never married and had no children.
- MPA’s only other child is FJX. FJX is 69 years of age and lives in France with her son, OSD, who is 28 years of age. FJX left Australia for Europe as a young adult, and met and married a Frenchman, who passed away from cancer in February 2019. OSD was their only child, although FJX’s deceased husband had children from an earlier relationship.
- The Applicants in proceeding 8986/23 are MPA’s attorneys under an enduring power of attorney signed by her on 1 February 2018. SMA was a friend and colleague of BST, and he was appointed for personal/health matters on 4 November 2000; SMA and ZCT (MPA’s accountant since 2002) were appointed as her attorneys for financial matters from about March 2022.
- On 18 July 2018 these attorneys filed an originating application seeking orders pursuant to ss 73(1), 118(1) and 118(3) of the Powers of Attorney Act authorising them:
- (retrospectively) to cause certain trusts to be established; and
- (prospectively) to transfer MPA’s assets valued at about $13.4 million to one of those trusts and to retain about $1 million in her bank account.
- Probate of BST’s will dated 14 December 2017 was granted on 19 June 2018 appointing MPA as executor. That grant was revoked and a further grant of probate of the will was given on 27 August 2020 under which BST’s solicitor, ABJ who was the substitute executor under the will, was appointed as executor of the will due to concerns as to MPA’s capacity to administer BST’s estate.
- As executor of BST’s estate ABJ is the applicant in proceedings 7775/23 by which she applied to exercise her discretion as executor:
- to pay part of the estate of the deceased to an inter vivos trust that would have benefited the deceased mother (for life) and then charities and retain part of the estate;
- or as she may be directed.
- FJX and OSD objected to these initial proposals. Among their objections, they contended that the initial proposals dramatically underestimated the costs that they and their descendants may incur in relation to their health, rehabilitation, aged care and education.
- They also contested MPA’s views, wishes and preferences and her capacity at the time she made the 2018 will and her letter of wishes, which I will come to shortly.
- FJX and OSD also filed an originating application in proceedings 9111/23 seeking orders for the removal of ABJ as the executor of BST’s estate, the appointment of Michael Klatt as administrator and consequential and associated orders.
- The three proceedings were successfully mediated together on 15 August 2023. Written terms of settlement were reached but are subject to and conditional upon this Court making orders necessary to carry them into effect.
- Generally speaking, the parties have agreed to settle the three proceedings on the following basis:
- the Attorneys shall cause to be established a trust (the MPA Trust), for the benefit of:
- (i)MPA, for the remainder of her lifetime; and
- (ii)upon the death of MPA, for the benefit of:
- (A)FJX and OSD, to the extent of 85% of the capital of that trust; and
- (B)a perpetual charitable trust, to the extent of 15% of the capital of that trust;
- the Executor shall cause the whole of the estate of BST – subject to the retention of the sum of $1 million for the purpose of meeting administration and estate expenses – to be paid to the trustee of the MPA Trust;
- the Attorneys shall cause the whole of MPA’s assets (with the exception of her personal and household effects) to be paid to the trustee of the MPA Trust;
- approval is to be granted for certain transactions entered into by the Attorneys, and the making of certain payments to one or other of the Attorneys (which shall not be addressed further in these submissions; FJX and OSD defer to the Attorneys to make submissions in relation to same);
- the Executor’s costs of the three proceedings be paid from the Estate of BST, on the indemnity basis;
- the Attorneys’ costs of the three proceedings be paid from the assets of MPA, on the indemnity basis; and
- the Beneficiaries’ costs of the:
- (i)Attorneys’ Application be paid from the assets of MPA, on the indemnity basis; and
- (ii)Executor’s Application and the Beneficiaries’ Application be paid from the Estate of BST, on the indemnity basis.
- the Attorneys shall cause to be established a trust (the MPA Trust), for the benefit of:
- As a consequence, the Executor and the Attorneys have filed and served Amended Originating Applications, the effect of which is to now seek:
- for the Executor, “judicial advice” pursuant to s 96 of the Trusts Act 1973 or the Court’s equitable jurisdiction, to the effect that she would be justified in exercising a discretion under the Will by transferring the net assets of BST to the trustee of a trust referred to therein as “the MPA Trust” (save for a retention amount of $1 million ), and for consequential and associated relief;
- for the Attorneys:
- (i)pursuant to ss 73(2) and 118(3) of the Powers of Attorney Act 1998, retrospective conflict transaction approval for entry into a retainer with BDO Australia dated 1 July 2022;
- (ii)pursuant to ss 73(1), 118(1) and 118(3) of the Powers of Attorney Act an order that they are authorised to take and are, and were, justified in taking all steps reasonably necessary to establish “the MPA Trust” and the “BBA and XCV Perpetual Trust”, and transferring MPA’s assets (with a few exceptions) to the MPA Trust; and
- (ii)associated costs and remuneration orders.
- The Beneficiaries have not amended their Originating Application. But take the position that if this court is satisfied that the terms of settlement should be approved and authorised then it follows that their application should be dismissed, with certain orders as to costs in their favour.
- The hearing of these amended applications were ventilated before me yesterday and a I reserved my decision.
- Given MPA’s age and condition there is obviously some urgency to this court determining whether the giving of this advice and authority consistent with the terms of settlement is appropriate, having regard to what are essentially an agreed statement of facts as they are applied to the relevant legal principles.
- Having considered the key evidence overnight in light of the excellent written and oral submissions I received from the parties, I am satisfied that it is appropriate to advise and authorise the steps required to give effect to the terms of settlement. It follows that I am prepared to make the orders sought in the drafts provided by all three applicants.
- These are my reasons which I will revise, anonymise and publish at a later date.
- The starting point is an examination of the relevant documents governing the affairs and estates of MPA and BST.
- First, MPA’s Enduring Power of Attorney which she executed on 1 February 2018. On any view, this document is nonsensical or as the beneficiaries’ counsel described it in their written submissions, “absurd”. It refers to a will that did not exist at the time it was executed. It refers to a trust, the terms of which did not then exist. It refers to the discretion to transfer of assets inter vivos to this non-existent trust “in contemplation of my succession plan as a whole” but does not identify nor refer to any document which might advise as to such a plan.
- Next there is BST’s Will, dated 14 December 2017, which is well described by the various parties as both impenetrable and stiflingly complex. It is bound up in trusts and discretions, directions and wishes. The Will was drafted by the ABJ – the executor in proceeding 7775/23.
- Relevantly BST’s Will has the following features:
- after payment of debts and expenses, the Executor was to hold the estate on trust as provided in the Will;
- in the first instance, a “Life Interest Fund” was created in favour of MPA by clause 6.2;
- however, clause 6.2 was subject to discretions in clause 6.3 and 6.4. Relevantly, clause 6.4 provided:
“6.4 If MPA (or her duly authorised attorney) consents to its exercise, my Executors, prior to the commencement of or during MPA’s Life Interest, shall have the discretionary power to distribute all or any part of the assets that would otherwise have formed the Life Interest Fund to any other trust (whether or not such trust existed at the time of making my Will), in which MPA has, directly or indirectly, an absolute, contingent or expectant interest or in which MPA is the income and/or capital beneficiary.”
- clause 8 of the Will created a “Capital Protected Trust” with the principal beneficiary being BST’s nephew OSD. This is described in more detail below, but interleaved between the “Life Interest Fund” (ie. a life interest for MPA) and the “Capital Protected Trust” (an income trust for OSD) was another discretionary provision in clause 7.2 which relevantly enabled the distribution by the Executor of all or any part of the assets to “any other trust” provided that it was also a “Capital protected trust with income beneficiaries confined to the same beneficiaries that would have been the Principal Capital Protected Beneficiaries of the Capital Protected Trust”.
- the “Capital Protected Trust” under clause 8 was to be called the “BBA and XCV Capital Protected Testamentary Trust”. In his lifetime, OSD was to be the “Principal Capital Protected Beneficiary” for distributions of income for medical treatment, therapy or rehabilitation costs, health care or aged care costs or for any education or associated costs. With OSD’s consent, income for such purposes could also be distributed to “any person who is a Descendant of a grandparent of OSD…” (pausing there, this includes FJX) “… the Children of any of the persons specified in the preceding paragraph”.
- the terms of the “Capital Protected Trust” continue that, relevantly, if FJX survives her son OSD, the same distributions may be made for FJX or with her consent to “any person who is a Descendant of a grandparent of FJX and so on.
- on FJX’s death, the benefit continues for “FJX’s Descendants” in the same manner.
- the terms of the Will also provided that if the income was insufficient to meet the stated needs in any year, the Trustees could use 1% of the capital in addition to the income.
- the Will then created a further trust, to be called the “BBA and XCV Perpetual Charitable Fund” to be held in perpetuity for certain purposes including certain named charities. Given the terms of the “Life Interest Fund” and the “BBA and XCV Capital Protected Trust”, the charities would not likely benefit for many decades hence.
- Finally, there are MPA’s Wills, of which there are two.
- The first in time is dated 10 January 2007. Relevantly by its terms it provides that in the circumstances of OSD predeceasing MPA without spouse or issue, if FJX survives MPA, the effect of the 2007 will is that she will, directly or indirectly, have the benefit of the whole of MPA’s estate.
- The second Will is dated 13 December 2018. It is, I accept, not dissimilar in language and form to BST’s Will and equally impenetrable. The circumstances in which it was made are somewhat concerning and slightly bizarre and are set out in some detail in paragraph 39 to 59 of the attorney’s written submissions. Relevantly, ABJ drafted this will as well but it was later amended (to a limited extent) and taken by another solicitor.
- MPA’s second Will has the following relevant features:
- the executors are her present attorneys: ZCT and SMA;
- BST had predeceased his mother approximately one year prior to the Will, therefore, there is no “Life Interest Fund” component;
- the Will creates by clause 10.1 the “BBA and XCV Capital Protected Testamentary Trust No. 2” on terms very similar to the “BBA and XCV Capital Protected Testamentary Trust” in BST’s Will;
- the Will also created a subsequent trust, namely the “BBA and XCV Perpetual Charitable Fund No. 2” (clause 11.1), naming the same purposes and charities as BST’s Will (mirroring the “BBA and XCV Perpetual Charitable Fund”).
- again, before the creation of the “Capital Protected Trust” under MPA’s Will, the Executors were empowered to distribute all or part of the assets to “any other trust (including but not limited to any trust established during [MPA’s] lifetime, or to any Capital Protected Trust or to any Perpetual Charitable Trust established pursuant to the terms of [BST’s Will])”. Again, this trust was required to be “capital protected with income beneficiaries confined to the same beneficiaries that would otherwise have been the Principal Capital Protected Beneficiaries of the Capital Protected Trust”.
- Both BST’s Will and MPA’s second Will attached “Letters of Intent” which were similar although not identical. From the chronology and file notes deposed to by the Executor, BST amended the draft of his letter in significant ways. For example, the draft referred to “My sister FJX …” and then said, “My sister FJX is estranged from my mother and I”. BST amended this to refer to FJX as “My dear sister FJX…” and deleted the description of being “estranged”, instead saying “The relationship between my sister FJX, MPA and me has evolved to be tense”. While casting their relationship as “tense”, BST significantly diluted the language of estrangement used by the Executor in the draft.
- FJX and OSD dispute the underlying factual basis of, in particular, BST’s antipathy towards them. It is impossible to know to what extent BST’s influence over MPA and his antipathy towards FJX poisoned MPA’s affection for FJX and OSD and it cannot now be known, but it is reasonable to infer as I do that it is at least possible that he did.
- The terms of the 2018 Will are unduly complex and given MPA’s age and state of health at the time, I accept the submission on behalf of the beneficiaries that there are serious questions about whether MPA knew and approved of the contents of the will and whether she understood the effect of the will, and in particular, that the extraordinarily broad discretions granted to the executor under the terms of her will enabled them to effectively dispose of her assets in a manner which could exclude her only surviving blood relatives, FJX and OSD, and generally on any terms which they had a complete discretion to ascertain.
- I accept the parties submissions and I find that that the evidence establishes that neither BST nor MPA had any intention of disinheriting OSD from any benefit under their respective estates.
- Against this general background I now turn to the amended applications.
The amended applications
- First, ABJ’s application as executor of BST’s Will for judicial advice pursuant to s 96 of the Trusts Act, or in the alternative, in the Court’s equitable jurisdiction, to the effect that she is justified in exercising the discretion conferred upon her by clause 6.4 of BST’s Will by paying the whole of his estate in the manner set out in the amended application.
- Section 96(1) of the Trusts Act 1973 (Qld) allows, inter alia, for a trustee upon a written statement of facts to the court to apply for directions concerning any property subject to a trust, or in respect of the management or administration of that property, or respecting the exercise of any power or discretion vested in the trustee.
- An application under s 96 therefore proceeds on the basis of the statement of facts and as the authorities establish any other facts the Court is asked to assume for the purposes of the application. The statement of facts and other relevant facts relied upon by the parties are identified in the submissions and contained in the material before me and referred to where relevant in these reasons.
- Section 96 (2) provides that an application made under this section shall be served upon, and the hearing thereof may be attended by, all persons interested in the application or such of them as the court thinks expedient.
- In the present case, FJX and OSD are legally represented but the other interested parties are the various charities. Those charities have been given notice of the amended application and the terms of the settlement – and indeed they were given notice of the originating applications from the outset. These parties either do not oppose or agree to the orders – and in one case advise that they have not had a chance to read the material – but instructively that charity has not applied for an adjournment. I am therefore satisfied in terms of both the executors’ application and the attorneys’ application, that adequate notice has been given and that the interest of these charities in the proceedings is so remote such that that their lack of attendance is of no concern. Rather, it is understandable.
- The principal purposes of s 96 are the protection of the interests of the trust and the protection of a trustee who is acting in that regard and upon advice.
- The question for consideration by the Court in relation to the exercise of a discretionary power by a trustee is not whether the Court would exercise the discretion in the way proposed by the applicant but whether the exercise is made in good faith, upon real and genuine consideration and in accordance with the purposes for which the discretion was conferred. The role of the Court is primarily passing judgment on the lawfulness of the course which the applicant is determined to pursue.
- On this issue, the observations of Hart J In Public Trustee v Cooper  WTLR 901;  All ER (D) 1524 that trustees are prima facie in a much better position than the court to know what is in the best interests of the beneficiaries, remain apposite.
- With these principles in mind, I am satisfied that the Court should provide the advice in the terms sought in paragraph 1 of the Amended Originating Application for ten good reasons.
- First, the applicant has obtained the advice and information required by clause 6.3 of the Will, that is:
- She has obtained the necessary advice from:
- A specialist in French Law as to the possible French taxation implications associated with exercising or failing to exercise the discretion.
- She obtained necessary advice from ZCT as to the taxation implications of transferring assets into a trust in which MPA has directly or indirectly, an absolute, contingent or expectant interest or which MPA is the income and/or capital beneficiary.
- Secondly, she has had regard to MPA’s circumstances.
- Thirdly, she has had regard to the deceased BST’s wishes as contained in his Will dated 14 December 2017 and his letter of wishes dated 20 December 2017.
- Fourthly, she has:
- considered the material filed by FJX and OSD in proceeding 7775/23.
- considered the application by MPA’s attorney for directions, being the material in proceeding 8986/23.
- Fifthly, and as required by clause 6.4 of the Will:
- the applicant has the consent of MPA’s attorneys to the proposed exercise of the discretion (as is evidenced by the Terms of Settlement).
- the Trust is a trust in which MPAis an income beneficiary.
- Sixthly, the effect of the exercise of the discretion is to transfer the balance of the estate (after the retention of $1 million) to the Trust. That Trust will initially benefit MPA and will provide the beneficiaries (being OSD, FJX and the charities) with a clear share of the capital (85%). The benefit to the charities is that they will receive a substantial (and certain) sum of money now rather than having to potentially wait a very long time to receive any benefit (15%).
- Seventhly, the assets being transferred to the Trust will not trigger a CGT event. It is likely that the transfer of the real estate in Queensland will not attract stamp duty, but if it does, it will be $33,525. The transfer of real estate in Tasmania may attract stamp duty. If there is stamp duty payable in Tasmania, it is likely to be $23,135.
- Eighthly, the way in which the applicant proposes to exercise the discretion in clause 6.4 will minimise the French taxes payable on the deceased’s estate and provide certainty in that regard. The impost of French taxes was an event that the deceased expressly and understandably wished to avoid. Indeed, had the deceased had time, he would have established an inter vivos capital protected trust to minimise the assets held in his estate which might otherwise be subject to significant French inheritance tax.
- Ninthly, while the transfer of the deceased’s estate to the MPA Trust does not preserve the capital or limit the interests of FJX and OSD (and their descendants) to access to the income of the trust for limited purposes (health, education and aged care), it is otherwise in accordance with the deceased’s wishes in that:
- it is for the benefit of MPA, in accordance with the deceased’s wishes.
- it is in accordance with the priorities identified by the deceased in clause 11 of his Will; and
- it has the benefit of minimising French Inheritance.
- Finally, in all of the circumstances of this case, I am satisfied that the proposed exercise of discretion is reasonable, prudent and in the best interest of the estate and a proper exercise of the discretion in that the applicant:
- is acting honestly and in good faith;
- is acting ‘upon genuine consideration’; and
- is exercising her power with due consideration for the purpose for which it was conferred, and not for some ulterior purpose.
The attorney’s application
- Turning now to the attorney’s application.
- Section 109(1) of the Powers of Attorney Act preserves the court’s inherent jurisdiction, including its parens patriae jurisdiction and the powers it has other than under the Powers of Attorney Act. As Justice Henry observed in BP v PM, the protective jurisdiction “evolved at common law to enable care to be taken of those without capacity to take care of themselves” and “involved a form of substituted judgment by which the court judged what was in the person’s best interests, including by consideration of what the person would likely want done if capable of self-management”. In GAU v GAV, the Court of Appeal said that the jurisdiction:
“... is purposive; the purpose being, at its highest level of abstraction, protection of a person in need of protection. So grounded, the jurisdiction is broad in scope and flexible in nature. Its guiding principle is that whatever is done, or not done, for or on behalf of the person in need of protection must be for the benefit, and in the interests, of that person.”
- The protective jurisdiction is “extremely wide”. Its limits cannot be defined. Although the jurisdiction “may be theoretically unlimited in scope, it must be exercised in accordance with its informing principles”.
- The court’s protective jurisdiction in relation to matters where a principal has made an EPA is enabled by ss 100(1) and 118 of the Powers of Attorney Act. Most particularly, s 118(2) requires the court to be satisfied that the transaction would be in accordance with general principles. Those General Principles which I will come to in a moment are set on in s 6C of the Powers of Attorney Act. As Justice Henry identified in BP v PM at  the section requires the court to answer two questions in the affirmative:
- First, is the court satisfied the transaction accords with the general principles?
- Secondly, should the court exercise its discretion to authorise the attorney to undertake the transaction?”
- Although as Justice Henry also relevantly observed in BP v PM at  such guidance is dependent on the incapacity of the adult in question and the nature of the consideration in question. Consistent with the flexible broad approach to be taken in the circumstances of the case, more recently in TJ v Public Trustee of Queensland  QCA 158 at , Boddice JA (with whom Bond JA and Callaghan J agreed), observed that the general principles “are not fixed rules, but rather considerations which must genuinely be taken into account to the extent appropriate in the circumstances.”
The General Principles in s 6C of the Powers of Attorney Act
- The starting point then is a consideration of the general principles as they apply to this case.
- General principle 1 states:
“An adult is presumed to have capacity for a matter.”
- It is common ground that MPA lacks capacity for any matters by reason of her advanced dementia.
- General principle 2 requires the court to recognise and take into account “various iterations” of MPA’s “rights and freedoms and the principles on which they are based, being informed in so doing by considerations such as non-discrimination and equality and ... respect for “individual autonomy (including the freedom to make one’s own choices)”’.
- General principle 3 relevantly requires the importance of “empowering an adult to exercise the adult’s human rights and fundamental freedoms” to be taken into account. However there is nothing which can be done to empower MPA to resume the capacity needed for her to have sufficient comprehension of the nature and consequences of the proposed transaction as to be able to make her own choice in the matter.
- General principle 4 requires the importance of maintaining an adult’s existing supportive relationships with families, carers and other significant persons to be taken into account, which may involve consultation with any persons who have an existing supportive relationship with the adult.
- Initially, based on statements made to them by MPA and contained in the 2018 will and letter of wishes, the attorneys believed that MPA was “estranged” from FJX and did not enjoy a good relationship with FJX or OSD. But that view has changed after it was disputed by FJX and OSD. Their evidence I accept reveals the real position to be far more nuanced. It is accepted that both FJX and OSD maintained contact with MPA and were concerned for her welfare. MPA’s perception of herself as being “estranged” from FJX does not appear to be borne out by the evidence when all that FJX appears to have done is move overseas, marry a French national and have a family.
- That in her old age MPA’s affections for FJX and OSD appear poisoned may be seen as a “symptom of testamentary incapacity”, which should not reflect adversely on the nature of their relationship.
- In this case I am satisfied that it is appropriate and indeed important for the court to take into account the importance of MPA maintaining her relationships with FJX and OSD, who are her only surviving family members.
- General principle 5 requires the importance of maintaining an adult’s cultural and linguistic environment and set of values to be taken into account.
- In the present case, the only evidence about such values is that MPA lived frugally and emphasised the importance of the family wealth and recognition. On the other hand, in her later years, her frugality may be seen as another symptom of her deteriorating capacity. But then the current proposal facilitates the value of family wealth and recognition as it maintains two relevant things:
- First, the retention of MPA’s family wealth within the family by, upon MPA’s death, providing for 50% of her assets to be available for FJX and 35% for OSD;
- Secondly, MPA’s intention to benefit Australian charities, now, rather than postponing their benefit under her and BST’s will until the class of FJX’s descendants fails or the perpetuity period elapses, either of which events may not occur for many decades.
- General principle 6 requires an adult’s privacy to be taken into account and respected. In the present case, that sounds only in the court making orders, as are usually made in the protective jurisdiction, anonymising any version of the court’s judgment that may be published to the public. I will come to that at the end of my reasons.
- General principle 7 requires an adult’s right to liberty and security to be taken into account. MPA’s right to liberty has no potential relevance in the present case. Her right to “security”, assuming that includes “financial security”, is accommodated by the current proposal, which will see the MPA Trust established with a fund of about $24 million to be held for her maintenance, advancement and benefit for life.
- General principle 8 promotes an adult’s right to make or participate “to the greatest extent practicable” in decisions affecting the adult’s life by providing that, “to the greatest extent practicable”, a person or other entity exercising powers for a matter for an adult “must seek the adult’s views, wishes and preferences”.
- Again, in the present case, MPA’s advanced dementia and “limited ability to converse” makes it impracticable for the court (and the attorneys) to seek her views, wishes and preferences in relation to the proposed transactions.
- General principle 9 states:
“A person or other entity in performing a function or exercising a power under this Act in relation to an adult, or under an enduring document for an adult, must do so —
- in a way that promotes and safeguards the adult’s rights, interests and opportunities; and
- in the way that is least restrictive of the adult’s rights, interests and opportunities.”
- For reasons which I will come to I am satisfied that the proposal in this case is in MPA’s best interest.
- General principle 10 has four stages. The first being that the court (and the attorneys) may recognize that MPA has a right to make a decision about the proposed transactions. But, of course, in this case MPA’s significant cognitive impairment precludes her from doing so or being supported in such a way that she can do so.
- The second stage provides for the recognition of MPA’s views. Again, MPA does not have capacity to express her views, wishes or preferences about the current proposal.
- The third stage requires the attorney or this court to work out those views and take them into account. The available evidence about MPA’s views, wishes and preferences particularly as they are expressed in the 2018 are undermined by the shadow over the way in which her second will and her letter of wishes were prepared. Even after BST’s death, MPA hesitated before making the will. She misplaced drafts of it. She was pressed by ABJ at their meeting on 1 February 2018 but said that she “wanted more time to consider” it. There is no evidence of any explanation given to her of the contents of the will and letter of wishes by ADA at the point at which they were signed. There is no evidence to support BST’s opinion, which may or may not have been shared by MPA to a greater or lesser extent, that FJX was a spendthrift who lived beyond her means and could not manage their wealth if she inherited it. Yet that was the principal reason given for the imposition of capital protected trusts.
- Further and relevantly, as stated earlier, the evidence does not support the view that MPA was estranged from MPA. The concern about MPA’s testamentary capacity is a pertinent one. The evidence now led is sufficient to raise at least a prima facie doubt as to whether MPA retained testamentary capacity when she made the 2018 will and letter of wishes. Her personal habits at the time were described as unusual. Her statement to OSD that she could not afford care was obviously delusional, suggesting that she did not appreciate the nature and extent of her assets. Further it is instructive that BST himself said to ABJ that MPA had an “inclination to say one thing”, leading him to “think has he her agreement” only for him to discover that “he does not”. That in my view is telling.
- I am satisfied that the evidence established that MPA’s views, wishes and preferences are that:
- she emphasised the importance of the family wealth;
- she principally wished to benefit FJX and OSD as the surviving members of her family. Her secondary wish was to benefit Australian charities;
- she was concerned to protect her assets from testamentary challenge and to minimize the impact of French taxes.
- At the fourth stage, the function is to be performed or the power exercised.
- This leads into whether the court should exercise its discretion to authorise the current proposal?
Exercise of Discretion to Authorise
- I am satisfied that for the following eight reasons, the court should exercise its discretion to authorise the current proposal.
- First, it is protective of MPA’s interests. If it is authorised, the whole of MPA’s assets and BST’s net assets, and their income, will be available to provide for MPA’s aged care and accommodation, and other needs, for the rest of her life. The proposed MPA Trust provides:
- MPA is the only “Primary Beneficiary”, and during her lifetime, the trustee is to hold the income firstly, “to pay, distribute, apply or set aside the whole or any part ... for the maintenance, advancement and benefit of the Primary Beneficiary for her life”;
- The trustee will also have the power to apply such part of the capital of the fund, not to exceed 50% in aggregate, for MPA’s maintenance, advancement and benefit should the income in any year be insufficient for the purpose;
- Given MPA’s current expenses, there can be no doubt that the trust fund will generate sufficient income to meet all of her needs;
- BBA and XCV Pty Ltd is to be the initial trustee of the MPA Trust. It has the attorneys as its sole directors and shareholders, ensuring that they will be able to continue to provide for MPA’s needs in the exercise of the trustee’s powers.
- Secondly, upon her death, the trustee is to distribute to MPA’s personal representatives a sum sufficient to pay and discharge all of her debts, administration and testamentary expenses, to the extent that there are insufficient funds in her estate for that purpose. After her death, MPA’s estate will receive a refund of her accommodation deposit of $90,000. It will only be if that is insufficient to discharge her debts, administration and testamentary expenses that the trustee will be required to make a distribution to her personal representatives.
- Thirdly, upon the vesting of the MPA trust, at which time the balance of the trust fund (remaining after any distribution made to MPA’s personal representatives) will be distributed:
- as to 50%, to FJX;
- as to 35%, to OSD;
- as to the remaining 15%, to the trustee of the “BBA and XCV Perpetual Trust”, which is the charitable trust that the attorneys caused to be established on 23 June 2023, for the benefit of the charitable purposes and institutions named in MPA’s will (and also BST’s will).
- Fourthly, that distribution of the trust fund to FJX and OSD is also more likely to achieve MPA’s wish (and BST’s wish) of minimising French tax consequences than would be the case if the Capital Protected Testamentary Trusts under their wills were established.
- Fifthly the current proposal, by vesting fixed shares in the trust assets remaining after MPA’s death, and after the payment of her debts, administration and testamentary expenses, minimises the risk of the penal rate of French inheritance applying at all and maximises the likelihood that the marginal rates applicable to gifts and inheritances between parent/grandparent and child/grandchild will apply. The difference between these two possible outcomes could be as much as $6 million.
- Sixthly, FJX has foreshadowed that she holds concern that, at the time she made her 2018 will, MPA:
- lacked testamentary capacity;
- did not know and approve of its contents.
- Because FJX and OSD are parties to the terms of settlement, and support the current proposal, if it is authorised the prospect that MPA’s estate may be depleted by the significant costs that would be incurred in a solemn form probate proceeding and/or family provision application will be averted. Further, if FJX succeeded in challenging the validity of the 2018 will, the likelihood is that the 2007 will would be admitted to probate, under which FJX would receive, directly or indirectly, the benefit of MPA’s whole estate. That consideration is relevant in two ways:
- First, it strengthens FJX’s claim on MPA’s estate and may be said to justify the 50% share of the MPA Trust that is to vest in her after MPA’s death; and
- Secondly, in that event, the charitable purposes and institutions which MPA and BST apparently wished to benefit would receive no benefit. The current proposal retains a significant benefit for them, equal to 15% of the trust assets remaining after MPA’s death and the payment of her debts, administration and testamentary expenses, and enables those charitable institutions to enjoy the benefit of that fund now, rather than many decades from now.
- Seventhly, the authorisation of the current proposal will bring to an end the incurring of legal costs in the three proceedings presently before the court which are already significant and will become even more so should the current proposal not be authorised and the proceedings progress to a four-day hearing.
- Finally, paragraph 1 of the attorneys amended originating application seeks the court’s advice and direction as to whether the attorneys were and are authorised to enter into the 2022 retainer and the 2023 retainers as they did with BDO, and any future such retainers in the same, or substantially the same, terms.
- Because ZCT is a partner of BDO, entering into a retainer with BDO would likely I accept be considered a conflict transaction as s defined in s 73(6) of the Powers of Attorney Act. That is “a transaction in which there may be conflict, or which results in conflict, between the duty of an attorney towards the principal and...the interests of the attorney, or a relation, business associate or close friend of the attorney”.
- Pursuant to s 73(1), an attorney for a financial matter may enter into a conflict transaction only if the principal, or the court under s 118(2), has authorised the transaction, conflict transactions of that type, or conflict transactions generally.
- Although entering into a retainer with BDO would be, prima facie, a conflict transaction, I am satisfied that the court should authorize the transaction because by clauses 10(3) and 10 (4) of the EPA, MPAs pecifically authorised the engagement of ZCT and BDO by directing the attorneys to engage ZCT’s services, in his capacity as an accountant with BDO; and pay the charges of ZCT and BDO for any such services provided.
- While MPA has not specifically approved the 2022 retainer and the 2023 retainer, s 73(1) permits authorisation by the principal for “conflict transactions of that type” or “conflict transactions generally”. I am satisfied that the retainers reflect the purposes for which MPA directed the attorneys to engage the services of ZCT and BDO, such that it is a “conflict transaction of [the] type” contemplated by ss 10(3) and 10 (4) the EPA.
- I therefore find that:
- MPA has approved a conflict transaction of the type reflected in the 2022 and 2023 retainers;
- alternatively, MPA has approved conflict transactions between the attorneys and BDO generally;
such that the attorneys were justified in and authorised to enter into the retainers, and would be justified in and authorised to enter into any future retainers with BDO in the same, or substantially the same, terms as the retainers.
- If I am wrong in my conclusion, I am otherwise satisfied that retaining BDO is in MPA’s best interests, having regard to the applicable general principles under the Power of attorney Act.
- Turning now to three other matters raised in the terms of settlement that require my determination.
- The first of those is the attorney’s remuneration.
- Clauses 3(4) and 10(7) of the EPA permit the attorneys to receive payment for their services on certain terms.
- Pursuant to the terms of settlement, the parties agreed to SMA’s remuneration being dealt with as follows:
- a fixed amount of $50,000 for services provided as attorney for personal and health matters since 5 November 2020, and financial matters since 1 April 2022, until 15 August 2023; and
- from 16 August 2023 onwards, as assessed by an independent costs assessor at the rate prescribed from time to time under s 17 of the Public Trustee Act 1978 and paid at three- monthly intervals and on completion of his duties as attorney.
- I am satisfied that the remuneration sought by Mr McConnell as reflected in paragraph 3 of the amended originating application is justified in all of the circumstances for three reasons:
- First, the right to, and basis of, remuneration was specifically authorised and stipulated by MPA in clauses 3(4) and 10(7) of the EPA;
- Secondly, the fixed sum of $50,000 for services performed up to and including 15 August 2023 has been calculated with reference to the relevant Public Trustee Fees Notice.
- Thirdly, agreeing on the amount payable to SMA since the commencement of his duties as MPA’s attorney to 15 August 2023:
- avoids the costs of having such past services formally assessed;
- minimises the period of time over which such services are to be assessed in future (that is, from 16 August 2023 onwards rather than from 5 November 2020 and 1 April 2022 respectively); and
- Fourthly, it is agreed by the parties.
- The second other matter concerns the anonymity orders sought in paragraphs 5 and 6 of the attorneys amended originating application.
- I am satisfied that such orders are commonly made in cases concerning a person’s testamentary and personal financial affairs.
- Furthermore, in SPM v LWA  QSC 138, Henry J held that such orders ensure public access and open justice whilst also protecting the “truly private affairs” of an individual.
- I am satisfied that the orders sought are appropriate in the present case in order to protect the dignity and privacy of MPA, as a person under a legal disability, in relation to her personal testamentary and financial affairs.
- Turning to the final and third other matter and that is the issue of the parties’ respective costs of the three applications.
- Under Uniform Civil Procedure Rules 1999 (Qld), r 700(2), the executor ABJ and the Attorneys are prima facie entitled to an indemnity for their costs of the proceedings from the estate of BST and the assets of MPA, respectively. The Terms of Settlement reflect this.
- The Terms of Settlement also provide for FJX and OSD’s costs of the Executor’s Application and Beneficiaries’ Application to be paid from the estate of BST, on the indemnity basis, and for their costs of the Attorneys’ Application to be paid from the assets of MPA, on the indemnity basis.
- I am satisfied that those costs were properly and necessarily incurred, in order that the three matters be properly ventilated before the Court, and that, on that basis, the agreement to costs reached by the parties (pursuant to the Terms of Settlement) is a reasonable one and ought to be given effect.
- I therefore make the orders sought by the applicants in each of the three proceedings in the terms of the drafts provided to my associate yesterday. I have changed the date on each of these order to 30 August 2023.
 Buckingham v Buckingham  QSC 230 at -; Nofz as executor of the estate of Henry Matthew Fitzgerald (deceased) v Kane & Ors  QSC 372 (Henry J).
 Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 at 107 Kiefel J (as her Honour then was).
 Karger v Paul  VR 161 at 164–5. Invensys Australia Superannuation Fund Pty Ltd v Austrac Investments Ltd  1 VR 87 at . See Heydon, D & Leeming, M, Jacobs’ Law of Trusts in Australia 8th ed., Lexis Nexis, Australia 2016 at [16-08].
  QSC 268.
 Ibid at .
  I Qd R 1 at 25 .
 JPT v DST  NSWSC 1735 at  per Lindsay J, citing E (Mrs) v E (1986) 31 DLR (4th) 1 at 19 and Secretary, Department of Health and Community Services v JWB and SMB (Marion's case) (1992) 175 CLR 218 at 258.
 BP v PM  QSC 268 at .
 Re Fenwick (2009) 76 NSWLR 22 at 55 .
 See para 43 above.
 MPA Trust deed, clause 3.1(a).
 See para 67 above.
 $24,000,000 x penal rate of 60% = $14,400,000. 50% of $24,000,000 x IHT at marginal rates with Helen’s exemption = $4,969,117. 35% of $24,000,000 x IHT at marginal rates with no exemption for OSD = $3,379,783.
 For example see, MZY v RYI  QSC 89 at  per Wilson J; SPM v LWA  QSC 138; Re JT  QSC 163 at  per A Lyons J; RKC v JNS  QSC 313; BP v PM  QSC 268.
- Published Case Name:
Re: OSD; SMA & Anor v FJX & Anor; OSD & Anor v ABJ
- Shortened Case Name:
Re: OSD; SMA & Anor v FJX & Anor; OSD & Anor v ABJ
 QSC 264
30 Aug 2023