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Key decisions

  • Dowdy v Clemson [2021] NSWSC 1273
  • Commissioner of Taxation v Bosanac [2021] FCAFC 158
  • Re Burstyner; Application by Burstyner [2021] VSC 531
  • Case 699921 (concerning QSuper Board)
  • Re Estate Acquaro, Deceased [2021] NSWSC 1156
  • Estate of Marcia Ann Dolan [2021] NSWSC 1197
  • Genesian Theatre Company Inc v State of New South Wales [2021] NSWSC 1089
  • Martin v Matthews [2021] NSWSC 1040
  • Wertheim v Perpetual Trustee Company Ltd [2021] NSWSC 1229

Financial manager liable for acting without authority and contrary to fiduciary duty

In 2012 Jenny Dowdy was appointed financial manager for her brother’s managed estate. Over a 12-month period between 2015 and 2016, Dowdy withdrew funds from her brother’s bank account totalling $277,085. There were 19 cheques drawn in her favour. They were all for substantial round sums ranging from $1,000 to $44,000. Action was brought for an accounting.

Dowdy said that she acted on her brother’s directions. The Court in Dowdy v Clemson [2021] NSWSC 1273 (Lindsay J) stated that, by virtue of s 71(1) of the NSW Trustee and Guardian Act 2009, ‘[the] power of a managed person to deal with his or her estate is suspended in respect of so much of that estate as is subject to management under’ the Act. Accordingly, the brother had no power to give directions to Dowdy as his financial manager. Moreover, she had no entitlement, in that office, to act at his direction (at [37]). ‘A [financial] manager cannot be absolved from liability by deflecting responsibility unto a person in need of protection. In cases of doubt about how to proceed, a manager can apply for directions, in the first instance to the NSW Trustee and, if need be, to the Court’ (at [45]). The Court noted that Dowdy was entitled, and obliged (by reason of s 39(d) of the Act), to consult the protected person in the application of his funds. ‘She was not entitled, however, merely to act at his direction. Her failure to exercise any independent judgement about management of his funds was a failure to act in his interests, and for his benefit, in circumstances in which he lacked capacity to manage his own affairs’ (at [46]).

The Court declined to excuse Dowdy’s wrongdoing. It stated that ‘[i]n her disbursement of his funds to purchase things of use to her, as well as [her brother]… she acted in her own interests, and for her own benefit, rather than, as she maintains, simply in the interests and for the benefit of the plaintiff. She did not meet the standard of propriety required of the fiduciary which, as the plaintiff’s financial manager, she was. Even if, according to her own lights, she acted honestly, she did not meet the standard of reasonableness necessary for a finding that, in fairness, she should be excused, in whole or part, from liability for her breaches of duty’ (at [56]). Judgment was entered for $346,172, which included interest.

Presumptions of resulting trust and advancement

Vlado and Bernadette Bosanac were husband and wife. They paid part of the purchase price for their home from a joint bank account and borrowed other money, which borrowing was secured by a mortgage registered on the title to that real estate. The title to the home was put in the wife’s name alone. This meant that the presumption of advancement arose (Commissioner of Taxation v Bosanac [2021] FCAFC 158 (Kenny, Davies and Thawley JJ) at [27]). That presumption was rebutted having regard to the nature of the borrowing: ‘the purpose or predominant purpose of the loans… was to purchase the [home]. It must also be borne in mind that the securities for the… loans were mortgages, including over the [home]. It seems to us that this circumstance tends strongly against the presumption of advancement applying in this case. We consider less probable than not in the circumstances just described that [the husband] would take on a very substantial liability in respect of the [home] without at the same time acquiring a corresponding beneficial interest in the [home]’ (at [21]). The presumption of resulting trust applied, meaning the real estate was owned in equity in proportion to the contribution to the purchase. The Court found that the husband and wife owned the real estate in equal shares.

Breaking the chain of representation

Henry Burstyner was executor of a deceased’s estate at the date of his own death. The executors appointed by Henry’s will, his three adult sons, did not want to assume administration of the deceased’s estate by reason of the chain of representation, as would occur if they obtained probate of Henry’s will. They applied for letters of administration with the will annexed, so as to break the chain. The Court decided they needed to renounce their right to probate but not their rights to administration (Re Burstyner; Application by Burstyner [2021] VSC 531 (McMillan J) at [29]). They did so and letters of administration was issued.

AFCA’s limited role

The trustee of the superannuation fund decided to pay the death benefit to the member’s de facto spouse. The member died intestate and his spouse was the presumptive administrator. The spouse did not seek a grant of administration. Nevertheless, the member’s son alleged that the spouse was conflicted in seeking payment of the death benefit for herself, and the trustee was liable as a knowing assistant in the spouse’s dishonest breach of fiduciary duty (pursuant to the second limb of Barnes v Addy). AFCA stated it has limited jurisdiction to determine superannuation complaints and the son’s remedy, if any, should be obtained in a court (Case 699921 (concerning QSuper Board)).

Construction to avoid intestacy

The relevant clause in Francesco Acquaro’s will gave ‘the entire balance and residue of my estate after payment of all my just debts, funeral and testamentary expenses as follows: as to one half share between my grandson… and my granddaughter…’. The clause was ambiguous on its face because it purported to dispose of ‘the entire balance and residue’ of the deceased’s estate but then only specifically referred to a ‘one half share’. A literal construction of the will left the other half share to be dealt with on a partial intestacy according to Chapter 4 of the Succession Act 2006. A rival construction read out the word ‘between’ and read in the words ‘a one-half share’ before reference to Tiffany.

The Court favoured the second construction, so that the clause was construed to provide ‘“the entire balance and residue” of the deceased’s estate to be divided between Raffaele Junior and Tiffany as tenants in common in equal shares’ (Re Estate Acquaro, Deceased [2021] NSWSC 1156 (Lindsay J) at [34]). The Court stated that that ‘is consistent with the law’s presumption that a testator does not intend property to pass on intestacy’ (at [36]).

Inheritance of forfeited share on intestacy

Marcia Dolan left a will made in 1998, which was admitted to probate in 2003. She left the residue of her estate as to 40% to her biological child, Paul Stow; and 10% each to the six children of her husband (being her stepchildren). One of the stepchildren murdered Marcia, so his share in the residue was forfeited. The gift to the six stepchildren was construed as not being a class gift, but separate independent gifts (Estate of Marcia Ann Dolan [2021] NSWSC 1197 (Ward CJ in Eq) at [5]–[6]). Under the succession law in place at the date of the deceased’s death – the position would have been different if the will had been made after 1 March 2008 – the forfeited share fell into intestacy. On intestacy, the share passed to Marcia’s children. She had only one child, Paul Stow, but he had been adopted out. There was evidence that it was a ‘forced adoption’. Nevertheless, the Court determined that, legally, Marcia died without children and the share passed to her only sibling.

A body corporate is a person for the purpose of intestacy

Paula Bate died intestate in 2008 (i.e. before the commencement of Chapter 4 Succession Act on 1 March 2010). Administration of her estate was conducted by NSW Trustee & Guardian (‘the Trustee’). The Trustee determined that Paula had no relatives entitled to receive her estate and paid her estate to the Crown as bona vacantia.

For over 30 years before her death, Paula had a close association with an incorporated association called the Genesian Theatre Company Inc (‘the Theatre’). She gave instructions for, saw, expressed satisfaction with, but never executed a will leaving her estate to the Theatre. The Theatre applied to the Crown for payment to it of Paula’s estate. By reason of Wills, Probate and Administration Act 1898, s 61B(8), the Crown could ‘provide for dependants, whether kindred or not, of the intestate and any other person for whom the intestate might reasonably have been expected to make provision’. The Crown stated that no provision could be made for the Theatre as it was not a person, within the meaning of the subsection. The Theatre sought a determination from the Supreme Court.

The Court considered that s 61B(8) represented ‘a “catch all” provision, at the end of the statutory list of categories individuals who are blood relatives (or halfblood relatives), so as to permit the State to pay out the property of an intestate to any person, including a not-for-profit or charitable organisation, that could establish that the intestate “… might reasonably have been expected to make provision”. There is no reason [to] construe these words as only referring to individuals. Organisations, including charities and not-for-profit associations may well have reasonably expected the deceased to make provision for them’ (Genesian Theatre Company Inc v State of New South Wales [2021] NSWSC 1089 (Garling J) at [50]). The Court declared that the Theatre came within the meaning of the subsection.

Practice point: caveats in probate proceedings

Evidence: The Court in Martin v Matthews [2021] NSWSC 1040 (Hallen J) explained the longstanding practice of the court that, on the first return date of a notice of motion to have a caveat cease to be in force, ‘the caveator is expected to have available, and ready to be tendered, evidence “to show … in broad terms, that he had an interest to support the caveat and that he had a prima facie case of a ground of invalidity upon which he relied” (Nobarani v Mariconte (2018) 265 CLR 236, [45]; [2018] HCA 36), and that in default of having such evidence available’, the Court may order that the caveat cease to be in force with the costs of the application being paid by the caveator (at [21]). Accordingly, ‘a caveator should take steps, both before, and after, the lodgement of a caveat, to gather the necessary evidence to demonstrate, in broad terms, that he, or she, has an interest to support the caveat and facts raising a doubt, upon which reliance is to be placed’ (at [23]).

Costs: A person ‘who files a caveat before making full enquiries has to make up his, or her, mind when he, or she, is doing so, that he will pay the costs of the caveat if he is not in a position to carry it further when an application is made for an order absolute, or if he, or she is otherwise unsuccessful. Similarly, a party who brings, and persists, with a notice of motion seeking to have a caveat cease to be in force, without considering, realistically, whether, on the evidence advanced by the caveator, a doubt exists, should also be prepared to pay any costs occasioned by that notice of motion should he, or she, be unsuccessful’ (at [47]).

Outcome: In the proceedings to remove the caveat, the Court found there was a doubt based on a range of factors including the deceased’s memory, his inconsistent statements, changes from earlier wills, the solicitor not taking instructions about assets and claimants, the unexplained basis for a beneficiary to be included, and the deceased’s explanations being inconsistent with other evidence (at [41]). Because the executors persisted with their notice of motion after this material was disclosed to them, the Court ordered that they personally pay the caveators’ costs of the notice of motion (at [49]).

Family provision for independent spouse

Carol Wertheim had been Adrian Armytage’s de facto spouse for 23 years up to his death in 2019. She lived in his strata unit but they kept their finances separate. By his last will, Armytage left $20,000 to Wertheim and gave her a right to reside in the unit for two years after his death. The rest of his estate of about $3.7 million was divided between his four adult children. Armytage explained his reasons for the gifts to Wertheim as: he and Wertheim agreed to look after themselves; they were financially independent; each wanted their estate to pass to their children; neither expected the other to make provision for them; and he didn’t expect Wertheim to seek further provision from his estate. Wertheim’s evidence was that she thought that Armytage would look after her and care what happened to her after he died. However, the Court considered that Armytage had done what he could to make it clear, from the commencement of the relationship, that Wertheim should not look to him for financial support (Wertheim v Perpetual Trustee Company Ltd [2021] NSWSC 1229 (Hallen J)). The relationship was described as one of mutual companionship and convenience without financial or domestic interdependence (at [170]).

The Court noted the agreement of the parties that adequate provision for the proper maintenance or advancement in life of Wertheim had not been made by Armytage’s will. The Court took into account that Wertheim was a de facto spouse for 23 years who had no accommodation. It had regard to her limited financial resources, age (75 years), medical condition and disabilities, and lack of earning capacity (at [208]). In the later part of Armytage’s life, Wertheim had been his primary carer (at [209]).

The Court considered that a life estate or Crisp order was not appropriate as it would require Wertheim to be a tenant and the executor to continue administration of the estate (at [214]). It ordered a gift of $100,000 in lieu of $20,000, and an interest free, secured loan repayable, at the latest, within two months of Wertheim’s death. These amounts were to be paid from the net proceeds from sale of the strata unit. The children would receive the rest of the estate of no less than $2 million now, and repayment of the loan after Wertheim’s death (at the latest).

Darryl Browne
is the Principal at BROWNE.Linkenbagh Legal Services, and Chair of the Law Society Elder Law, Capacity and Succession Committee.