Corneal (dec'd), Re [1994] QSC 288

IN THE SUPREME COURT OF QUEENSLAND O.S. No. 884 of 1994 Brisbane Before Mr Justice Shepherdson [William Henry Corneal (deceased)] IN THE MATTER of the Public Trustee Act 1978 - and - IN THE MATTER of WILLIAM HENRY CORNEAL deceased JUDGMENT - SHEPHERDSON J. Judgment delivered 4th November 1994 CATCHWORDS: EXECUTORS AND ADMINISTRATORS - Public Trustee Act 1978 - application by Public Trustee under s.134 Public Trustee Act - advice sought as to whether to appeal a decision of a judge at first instance on application by widow for Family Provision. SOLICITORS: Official Solicitor to Public Trustee APPEARANCE: Mr Cumming, from Official Solicitor HEARING DATE: 1.11.94 -- 1 of 8 -- IN THE SUPREME COURT OF QUEENSLAND O.S. No. 884 of 1994 IN THE MATTER of the Public Trustee Act 1978 - and - IN THE MATTER of WILLIAM HENRY CORNEAL deceased JUDGMENT - SHEPHERDSON J. Judgment Delivered 4th November 1994 The Public Trustee of Queensland "as trustee of the trusts created under the will" of the abovenamed William Henry Corneal deceased has applied for the opinion advice and direction of this Court pursuant to the provisions of s.134 of the Public Trustee Act 1978 as to the following question "respecting the assets of and the management or administration of the estate of the said deceased":- 1. Whether in all the circumstances of this matter the applicant should appeal against a decision of His Honour Judge Nase given in the District Court of Queensland held at Rockhampton on the 13th day of October 1994 Section 134 of the Public Trustee Act provides:- "134.(1) The Public Trustee may, without instituting formal proceedings, take the opinion or obtain the direction of the Court upon any question, whether of law or of fact, arising under this Act or in the course of the Public Trustee's duties. (3) Any such question shall be submitted to a Judge of the Court in such manner and at such time as the Public Trustee may direct, and shall be accompanied by such statement of facts, affidavits, documents, and other information as the Public Trustee -- 2 of 8 -- 2 may require and the Public Trustee or anyone authorised by the Public Trustee shall, if the Judge so desires, attend upon the Judge at such time and place as the Public Trustee may appoint. (4) The Judge may, before giving the Judge's opinion or direction, require the attendance of, or communication with, any person interested, but no such person shall have a right to be heard unless the Judge so directs. (5) The Judge shall give the Judge's opinion or direction to the Public Trustee and, subject to any order of the Court in other proceedings formally instituted, the Public Trustee, acting in accordance with such opinion or direction, shall be fully indemnified. (6) The Public Trustee shall, upon the request in writing of any such interested person, communicate to the person the effect of such opinion or direction." The application before me has proceeded ex parte. A statement of facts filed in support of the application shows:- (1) William Henry Corneal ("the testator") died at Clermont on 21 July 1993 leaving a will dated 28 February 1991; (2) The applicant, The Public Trustee of Queensland was appointed executor and trustee of that will; (3) On 21 September 1993, an order to administer with the will the estate of the testator was granted to the applicant by this Honourable Court at Rockhampton; (4) By his will the testator:- (a) gave his wife Ailsa Jean Corneal a life interest in house and land at 54 Mimosa St, Clermont with a gift over on failure or termination of the life interest to his children Michael John Corneal, Andrew Nathan Corneal, Kerry Ann Crew and Cameron David Corneal; (b) after dealing with motor vehicles, gave the residue of his estate "TO my Trustee ON TRUST for those of my grandchildren, CHRISTY LEE CORNEAL and -- 3 of 8 -- 3 THAOO CREW who survive me and if both then equally" with a gift over of the residue to such of his above four children as should survive him and if more than one equally. (5) The testator was survived by his wife Ailsa Jean Corneal and the above four children. The two grandchildren mentioned in the residuary clause also survived the testator. (6) On 9 September 1993, the widow Ailsa Jean Corneal, by her solicitors, gave the applicant notice of her intention to commence proceedings seeking provision out of the estate of the testator pursuant to the provisions of Part IV of the Succession Act 1981. By the operation of subsection 44(3) of the Succession Act 1981, that notice lapsed on 9 December 1993. (7) On 20 April 1994, the widow did apply to the District Court of Queensland at Rockhampton for an order for provision out of the estate pursuant to Part IV. (8) Prior to the filing of that application, the applicant, in due course of the administration of the estate of the testator, did, by book entry made on 29 March 1994, transfer the sum of $21,120 to each of two separate trust accounts held by it in the names of Christy Lee Corneal and Thaoo Crew respectively. Each of these sums is said to represent an equal distribution of the residue of the estate pursuant to the residuary clause of the will. (9) Such distribution was made more than six months after the death of the testator and with knowledge that the notice of intention mentioned in paragraph 6 hereof had lapsed on 9 December 1993. (10) On 13 October 1994, in the District Court of Queensland held at Rockhampton, Judge Nase gave judgment in respect of the widow's application under Part IV. -- 4 of 8 -- 4 It appears from the statement of facts before me that the applicant contends before me and contended before Judge Nase that such transfers to the separate trust accounts in the names of each of the grandchildren represented a final distribution of assets in the residue of the estate of the testator and that his Honour Judge Nase had no jurisdiction to treat those separate funds as part of the assets in the estate of the testator for the purposes of the widow's application. In a reasoned judgment and after referring to authorities His Honour held that these two funds were to be regarded as part of the estate of the testator for the purposes of the widow's application. At the end of the day His Honour made the following orders:- (1) that subject to a bequest of $2,500 to be held on trust by the Trustee for Christy Lee Corneal and a bequest of $2,500 to be held on trust by the Trustee for Thaoo Crew that the applicant receive the residue of the estate; (2) that the estate bear the costs of both the applicant and the Official Solicitor. The reference to "Official Solicitor" obviously is a reference to the Official Solicitor to the Public Trustee. Effectively then, the widow succeeded on her application and became the residuary beneficiary and at the same time each of the grandchildren became a legatee in respect of $2,500. The real question which is causing the applicant concern is whether or not His Honour Judge Nase was correct in saying that the funds held by the applicant for the two grandchildren were part of the estate for the purpose of the widow's application. On this aspect, the learned Judge reviewed a number of authorities and at the end of the day decided to follow the High Court decision in Easterbrook v. Young (1977) 136 CLR 308. The applicant is concerned that if he does not appeal the decision of Judge Nase, but allows it to remain he may, when the two grandchildren are sui juris, be exposed to an action for failure to take reasonable steps to protect the interests of the two -- 5 of 8 -- 5 grandchildren as residuary beneficiaries named in the will. The applicant wants the protection of the Court and that is the reason for his application to this Court. The applicant is in a dilemma; it is rightly concerned that if it appeals the decision, without the sanction of the Court it may be at its own risk as regards costs (see In re Beddoe: Downes v. Cottam (1893) 1 Ch. 547 at p.557 and Re. Kirkegaard deceased (1950) St.R. Qd. 144 at 146). On a liberal interpretation of s.134 the present application falls within s.134(1). If I advise an appeal the applicant will not be exposed to liability for costs of the appeal and whatever the outcome of such appeal, the probabilities are that costs will come out of the estate. If the appeal (brought on my advice) succeeds, the applicant widow's share as residuary beneficiary will be reduced by both her costs of the appeal and the applicant's costs of the appeal. Further, the original costs order will probably remain and this order already will have reduced the residue. If an appeal (brought on my advice) fails then the applicant widow, as residuary beneficiary will bear her own costs and, the widow's residuary estate will be reduced by the amount of the applicant's costs of the appeal. On either view, this estate will almost certainly be markedly reduced by further costs associated with an appeal. The estate is a small one - that is apparent from the fact that the residuary estate distributed to the two grandchildren totalled only $42,240. In my respectful view, the outstanding aspect of this case will be the effect of an appeal, which ever way the appeal goes, on the size of the estate. There will be only one real effect and that will be to substantially reduce what is a small estate. In my view, this is a case where common sense dictates that no appeal be made. As to the matter of law raised by the applicant as a basis for appeal, I must say that, having read Easterbrook -- 6 of 8 -- 6 v. Young (supra) I could not confidently assert that His Honour Judge Nase was wrong (see especially 136 CLR at pages 315-316 and 318). This is not the case in which to try to persuade the Court of Appeal that a decision of the High Court of Australia can be distinguished. I should add finally that the applicant's concern has been brought about by its distribution to the two residuary beneficiaries by a book entry within the period of time during which the widow could lawfully bring her application under s.41. By subsection 41(8) of the Succession Act the widow had nine months after the date of death of the testator within which to bring the application. She did this. The applicant had already had notice of her intention to bring that application and it is true that that notice had lapsed. However, it made its distribution at its own risk and it has in effect brought the dilemma on its own head. I say this bearing in mind the provisions of s.44 of The Sucession Act. It is appropriate for me to refer again to the warning given to executors by Vaisey J. in In re Simson deceased. Simson v. National Provincial Bank Limited (1950) 1 Ch. 38 at 42 and 43 where His Honour said (in speaking of the English legislation):- "I wish it to be made clear that in these cases it is the paramount duty of the executor to avoid embarrassing the court and to think once, twice and several times before allowing any part of (sic) all of the estate to be paid out to any beneficiary - whether a specific legatee or a residuary legatee or who ever it may be matters not - while any application under this Act is either pending or impending. If these legacies have been paid, as I understand they have, the matter comes before me in a form which adds further embarrassment to an already embarrassing jurisdiction. I wish it to be distinctly understood - I have said it before and I say it again and I hope some notice will be taken of it - that where an application under the Inheritance (Family Provision) Act 1938 is either pending or impending, that is to say, during the first six months after grant of representation, if it is a case in which there is any risk of such a thing happening, the executor distributes the estate at his risk. If beneficiaries come and pester him and say that they want their legacies and pressure is put on other beneficiaries to allow these anticipatory payments to be made, in my judgment it is the duty of the executor to resist any such pressure." The underlining is mine and in my view the above remarks are relevant to the Queensland legislation. -- 7 of 8 -- 7 In the instant case there was absolutely no need for distribution to be made to two infant beneficiaries - they were not sui juris and could not give discharges for the monies allocated to their accounts. This was a case where the applicant must have known, in the light of the earlier lapsed notice of intent, of a very real risk that the widow would apply within the period limited by subsection 41(8). At the end of the day, I answer the question posed in the application "No". On the question of costs, I have decided that the applicant must itself bear the costs of and incidental to this application. It is not appropriate to order that those costs be any charge on the estate assets. I have already given my reasons as to how the applicant has got itself into its present dilemma. -- 8 of 8 --