7th Deadliest Sin – No Power of Attorney

7th Deadliest Sin – No Power of Attorney
April 14, 2019 /

With recent significant amendments to the QLD Powers of Attorney Act, this is a timely article about preparing for retirement and the critical role a professionally crafted Power of Attorney can make to your retirement plans.

There are critical changes to the definitions of conflict transactions and the law of ademption. If you have left a specific gift in your will and your Power of Attorney disposes of that gift, there is now a complex and expensive process of compensation that applies.

If you want to know more about this, please contact us on (07) 5576 9999

#powerofattorney #legaladvice #retirementplanning #planningforthefuture #robbinswatsonsolicitors #goldcoastlawfirm #wills #elderlyplanning

BEATLES & BILL GATES – WHAT IS AN EXPERT?

BEATLES & BILL GATES – WHAT IS AN EXPERT?
April 9, 2019 /

10,000 hours / 10 years of practice? Some say it takes more, others say it takes less; albeit rarely.

The 10,000 hour rule was identified after a study in which it was found to be a commonality in those who were highly capable at what they do. Some of the most famous examples given were The Beatles and Bill Gates, who apparently spent years honing their craft before making the big time. This article explains that it takes more than 10,000 hours – talent, inclination, dedication and level of competition.

I’m guessing at 163 cm short, 10,000 hours practice won’t make me an expert high jumper, unless of course the bar is set low.  When looking for a legal adviser for your legal problems, perhaps you might check to see how high the bar is set, when the claim of “expert” is made.

First step – are they in fact licensed to practice law? You can check with the relevant Law Society – in Queensland you can use the Find a Solicitor search feature on the QLS website.

To read more, click here!

Passing and filing estate accounts

Passing and filing estate accounts
April 3, 2019 /

To many of us, estate administration disputes can seem Pythonesque – gravely serious, yet often comedic in their depth and nature.

The position of personal representative (PR)1,2 is, at times, burdensome; for beneficiaries, at times bewildering. The mix frequently results in disputes over the manner in which the estate administration is conducted, with both often left floundering for a productive resolution. 

Introduced in 2011, Chapter 15, Part 10 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR)3  is an overlooked yet economic way to resolve these disputes. It starts as a quasi-judicial process and, if necessary, can proceed through to a full judicial determination. 

This article provides a practical step-by-step guide to navigating Part 10.

LEGISLATION

The current version of Part 10 4 was introduced through 2011 amending legislation under the Uniform Civil Procedure Amendment Rule (No.1) 2011.5

The explanatory memorandum to this amendment summarised its objectives as follows:

  1. clarifying the procedure for applying for the assessment and passing of an estate accounts;

  2. prescribing the minimum standards for the procedure of the assessment;

  3. clarifying the powers and functions of an estate account assessor;

  4. clarifying and updating the procedure for applying for and awarding of a trustee’s or executor’s commission.6

Part 10 proscribes a formal process whereby the manner in which an estate trust is administered can be considered in a structured way through the oversight of an independent third party, an estate account assessor. The estate account assessor is both accredited and appointed by the court, and an accredited specialist in succession law. The estate account assessor has powers akin to a registrar, including the power to determine the process.7

Sadly, estate administration disputes often involve prolix and incendiary correspondence disputing the adequacy or otherwise of the estate accounting and administration, increasing the costs and acrimony between the parties without any real or satisfactory resolution.

An application to file and pass estate accounts therefore has the very real potential to save time and money by bypassing these exchanges, providing the parties with an independent assessment of the issues in contention which is proscriptive, and therefore economic and efficient. 

PROCESS – BY PERSONAL REPRESENTATIVE

As a shield, a PR concerned about potential or actual criticism of their conduct in administering the estate can simply apply to the court, ex parte,8  seeking an order for the appointment of an estate account assessor to assess and pass the estate accounts. The process provides the PR with the imprimatur of the court for its conduct in the estate administration and, if necessary, guidance  on any matters to be addressed.

Part 10 sets out the minimum requirements for what must be included in a set of estate accounts and the way in which they are presented – see rule 648. This proscription alone can remove a great deal of unnecessary disputation on what ought to be included in estate account reporting.

As with all things related to the law, language is key to understanding the process. Practitioners are directed to rule 644, which contains the definitions for Part 10. These  clarify the expectations on what must be included in the material sought and presented.

Once the PR has filed an application for the filing and passing of estate accounts, they must follow the process as per steps five and six below.

PROCESS – BY BENEFICIARY

A concerned beneficiary may utilise Part 10 as a sword by holding the trustee to account in a formal and relatively economic way. 

STEP 1: Eligibility

Is the beneficiary eligible to seek an assessment of the estate accounts?9 

See the definitions in rule 644.

Only a beneficiary entitled to an accounting may apply to the court under Part 10. Typically, the residuary beneficiary/ies are the only entitled beneficiaries. The case authority for this proposition is Re Schilling [1995] 1 Qd R 696. In that decision, the beneficiary’s right to seek an account was generally limited to those in whom a beneficial interest, as opposed to a mere right to due administration, had vested on completion of the administration. It was further held that the beneficiary should ordinarily exercise the right to inspect the accounts before bringing an action.10

STEP 2: Notice to the trustee of the estate – rule 646(1)

The beneficiary must write to the PR and request an estate account to be prepared and served within 30 days.11

STEP 3: No response

If no estate account is provided after 30 days, the beneficiary is entitled to make an application to the court under rule 645 for the filing, assessing and passing of an estate account – see rule 646(7).

STEP 4: Response provided – Objection

If the response is not satisfactory, then the beneficiary may serve a notice of objection on the PR – rule 646(2).

The notice of objection must be in the approved form and must set out in a particular manner the objections –  rules 646(3)-(6). The approved form is form 127 of the UCPR.

The notice must give the PR 21 days to address the objections – rules 646(7)(b)-(c).

STEP 5: Estate account assessor appointment

If no response is given or is unsatisfactory, the beneficiary may then apply to the court for the appointment of an estate account assessor.12   In preparation for that application, the beneficiary must write to the estate account assessor 13 seeking their written consent to act, confirmation of their fees, and to obtain clearance of conflict of interest – rule 645(3).

The beneficiary then files an application seeking orders that the PR file an estate account and that the estate accounts be assessed and passed – rule 645(1). The respondent to the application is the PR – rule 645. The application is supported by an affidavit.

The affidavit must depose to the reasons for the application – rule 645(2).

Exhibited to the affidavit are the following:

  • 1. Letter to the PR seeking account

  • 2. Response from PR

  • 3. Notice of objection

  • 4. Response to notice of objection

  • 5. Consent to act from nominated estate account assessor

  • 6. Any other relevant material.

If the court orders the estate account be assessed, then it must appoint an estate account assessor and may give directions to the estate account assessor as to the assessment – rule 645(6).

STEP 6: Process of assessment

The appointed estate account assessor may determine the process – rule 651(1). However, that power is tempered by the requirements of rules 651(2) and (3). The costs of the estate account assessor are ordinarily borne by the estate – rule 651(4). 

The powers of the estate account assessor are quasi-judicial – rule 652.

Once the assessment of the estate accounts has been completed by the estate account assessor, they prepare, sign and file a certificate – rule 657(1), within 14 days after the end of the assessment, providing a copy to the parties – see rule 657(4). The certificate confirms the appropriateness of the manner in which the estate has been administered – rule 657(1)(a) or otherwise see rules 657(1)(b)-(d).

The estate account assessor isn’t required to give reasons in the first instance, but must provide them if requested – rule 657A. The cost of preparing the reasons is borne by the person requesting – rule 657A(4).

Once the certificate has been filed, the matter may be relisted for the accounts to be passed – rule 657B. If a party is dissatisfied with the decision of the estate account assessor, they may seek the court’s review – rule 657B(3). From there the court determines the matter on the material filed, at which point it becomes a wholly judicial process. 

Conclusion

Grief, expectation and responsibility are a heady mix that can easily spill over into  intractable, heated disputes. Often it is a lack  of knowledge about what is expected of both the PR and the beneficiaries that results in  an expensive escalation of tensions as to the rights and responsibilities of the parties.

The process of applying for the passing of estate accounts, while not a panacea, can go a long way to resolving those disputes in an efficient and final way through the supervision and imprimatur of the court. 

Hopefully, with this step-by-step guide, practitioners can add another tool to  their reservoir of options available to clients, which you can recommend,  while demonstrating your value  proposition as a trusted legal adviser. 

Christine Smyth is a former President of Queensland Law Society, a QLS Accredited Specialist (succession
law) – Qld, and Consultant at Robbins Watson Solicitors. She is an Executive Committee member  of the Law Council Australia – Legal Practice Section, member of the QLS Specialist Accreditation Board, Proctor Editorial Committee and STEP and an Associate Member of the Tax Institute.

NOTES:
  1. It is notable that the definitions simply refer to ‘personal representative’, without mention of ‘legal’.
  2. Note that the definition of ‘trustee’ in this part includes a personal representative of a deceased individual – see rule 644.
  3. Referred to in this article as Part 10.
  4. legislation.qld.gov.au/view/html/inforce/current/sl1999-0111#ch.15-pt.10.
  5. legislation.qld.gov.au/view/html/asmade/sl-20110296#sl-2011-0296. It amended the original UCPR as effective 1 July 1999 – legislation.qld. gov.au/view/html/inforce/1999-07-01/sl-19990111#SL-1999-0111.
  6. Space doesn’t permit an analysis of the process of executor’s commission on this occasion.
  7. In accordance with rule 651. 
  8. See rule 647, although the court can direct the application be served.
  9. Note that this application is different to an application under s 52(1)(b) Succession Act 1981, which provides for a legal personal representative to provide accounts to the court, and s 8 Trusts Act 1973, which enables any person with  an interest in any trust property to apply to court to review acts and give directions.
  10. Lee’s Manual of Queensland Succession Law  (7th ed., 2013). Note that Re Schilling was decided pre-UCPR.
  11. Note the Acts Interpretation Act 1954 (Qld) s 38 excludes the day the notice issues, but includes all ordinary calendar days, not just business days.
  12. But note the court may dispense with compliance  if it is considered urgent – rule 646(8).
  13. Please note the author is a registered Estate Account Assessor. For a list of all registered estate account assessors see courts.qld.gov.au/__data/assets/pdf_file/0020/173306/register-approved-account-assessors.pdf.

Want to download a copy of this article? Please click here.

POWERS OF ATTORNEY & GUARDIANSHIP LEGISLATIVE CHANGES

POWERS OF ATTORNEY & GUARDIANSHIP LEGISLATIVE CHANGES
March 27, 2019 /

A brighter future for those in the sunset years. 

Guardianship and Administration and Other Legislation Amendment Bill 2018 (GAOLA)

After being introduced on 15 February 2018,  the GAOLA Bill was passed yesterday by Queensland Parliament. Amongst others, it amends the Guardianship and Administration Act 2000 and the Powers of Attorney Act 1998. Any person who is  appointed as an Attorney or an Administrator, ought to seek independent legal advice as to any actions they may take moving forward with respect to the affairs of their Principal, as this legislation significantly alters many rights and responsibilities of incapacitated persons.

The legislative changes aim to incorporate safeguards for adults with impaired capacity and improve the current QLD guardianship legislation, with an underlying focus on human rights for incapacitated adults.[1]

While the Bill takes into account a number of the recommendations made in the Queensland Law Reform Commission’s review of the guardianship legislation in 2010, it makes some additional amendments not considered by the QLRC. Significantly, one of these amendments is providing a legislative exception to the doctrine of ademption.

Ademption occurs where a specific gift in a will fails due to the gift being sold or disposed of prior to the testator’s death, potentially removing any interest that the beneficiary may have had under the will. Issues commonly arise where the testator is an adult with impaired capacity whose attorney or administrator deals with the property, and the testator is unable to change their will due to their impaired capacity. This Bill acts as a safeguard against ademption, so that when an attorney or administrator deals with specifically gifted property prior to the testator’s death, the beneficiary still has an entitlement under the will. This protects and ensures that the testator’s intentions prior to losing capacity are maintained.[1][2]

[1] Explanatory Notes, Guardianship and Administration and Other Legislation Amendment Bill 2018 (Qld), 1.
[2] Queensland, Parliamentary Debates, Legislative Assembly, 26 March 2019, 635-659 (David Janetzki MP)
[3] My thanks to Robbins Watson Law Clerk Rachel Mallard for the assistance she has provided me in monitoring this legislation and with this post.

FAKE LAWYER – NOT FAKE NEWS

FAKE LAWYER – NOT FAKE NEWS
March 12, 2019 /

Great work by Queensland Law Society in protecting the public from the scourge and rise of fake lawyers. 

It is an offence under s24 of the Legal Profession Act to give any form of legal advice if you are not a registered Australian Legal Practitioner.

It is not enough to have a law degree or simply some experience within the law even within other professional spheres. You must have a license to give legal advice.  The licencing is an important and comprehensive vetting process which confirms the credentials and suitability of a person to give legal advice. 

If you are not a Registered Australian Legal Practitioner and you are giving legal advice you can be fined, and even jailed for breaching this provision.

No Practicing Certificate = No sleep, No Code of Legal Conduct, No Ethical Codes, No Insurance, No Legal Professional Privilege, No Legal Confidentiality, No Fidelity Guarantee Fund, & Bad Advice. 

If someone is giving you legal advice, check to see if they are licensed by visiting the Find a Solicitor search feature on the QLS website.

To read more, see this media release from QLS calling for the public to take care when seeking legal advice, and to be mindful of unlawful legal practice. 

Foraging further for fewer funds

Foraging further for fewer funds
March 1, 2019 /

with Christine Smyth

Australia is increasingly accused of having a ‘blame and claim culture’, with some asserting that it is probably second only to the United States when it comes to our penchant for litigation. 1

Following this theme, it seems succession law is a fresh field for those foraging for fortune.

Mason v Shepherd & Bell [2018] QDC 278 (Mason) is an example of how a relatively simple and low-value claim for further provision can morph into an expensive and unnecessary contested litigation. It is one of a number of cases that give us pause for consideration as to how far the pendulum has swung in further provision applications.

The testator died on 2 April 2017 survived by her four children, leaving a will dated 21 June 2002. Apart from a few minor specific bequests, the bulk of the estate fell into the residue to be distributed equally among her four adult children. The net value of the estate was a mere $226,200. 2

The applicant filed her application for further provision from the estate. Aside from her quarter share in the small estate, she did notspecify what amount would be satisfactory provision. The affidavits of the respondents set out the circumstances of each of the remaining beneficiaries. They contended that each of their circumstances were similar to the applicant, save that the applicant did not have superannuation, and this as ultimately acknowledged by the applicant.

Prior to the hearing, the applicant’s solicitor wrote to the respondents indicating that his client was willing to resolve the matter on the basis that she receive $30,000 from the estate, in addition to her existing entitlement.
A deed of agreement was drawn up to give effect thereto. It was at this point the matter took a problematic turn. The applicant signed the deed of agreement, but added some of her own commentary:

“I am signing this under duress. I have been bullied and treated unfairly. My siblings are stealing from me.” 3

Understandably, the agreement was not accepted by the respondents and they proceeded directly to a hearing 
for final determination.

“It is no use to blame 
the looking glass if your
face is awry.” 

–  Nikolai Gogol, The
Inspector General (1836)

Readers may recall the decision of Charlesworth, 4  in which Porter QC DCJ discussed the discretion of the court to hear a matter without it being referred to a mediation and the circumstances where that might be suitable. In Mason, the applicant claimed that she did not give authority to her solicitor to reach the agreement. She also now claimed she ought to receive the entire estate and that she ought to be granted the opportunity to detail the level of care she claimed she provided to the deceased in support of her position, with that, she insisted the matter be  referred for mediation. Despite her protestations, the court did not refer the matter to mediation, instead proceeding to determine final orders. In doing so the focus of the court was on the circumstances of the deed of agreement.

The applicant claimed that she did not authorise her solicitor to reach the agreement and that she only signed the deed of agreement “as a result of pressure applied to her by her solicitor”. 5

The court noted the correspondence clearly demonstrated the solicitor at least believed he had her authority. The respondents argued that they were entitled to rely on the ostensible authority of the solicitor in reaching the agreement. Accordingly, they were entitled to rely upon and enforce it. 

The court agreed and found that “[T]he fact of the applicant signing the deed, albeit at the same time registering her protest, seems to me to confirm the solicitor had authority to make the agreement. However, what is  incontrovertible is that the respondents were entitled to conclude a valid agreement was reached.” 6

In reaching its conclusion as to enforcing the agreement the court relied on the principle of Harvey v Phillips (1956) 95 CLR 23, affirmed by Fraser JA in Braodbent v Medical Board of Queensland [2010] QCA 352 citing Harvey v Phillips: “The power to decline to enforce a compromise does not arise where the party who seeks to impeach the compromise expressly authorized a compromise, even if that authority was given after considerable
equivocation and under pressure. That is so, provided there is no ground sufficient to render the compromise void or voidable, or to entitle the client to equitable relief.” 

Accordingly, the court concluded an agreement as to the amount of $30,000 was in fact reached and proceeded to determine the application having regard to the principles  in Singer v Berhouse (1994) 181 CLR 201. In so doing the court particularly noted that “Agreement between the parties, as to an outcome, should be respected by the court in making a determination”. 7  With that the court ordered further provision for the applicant of $30,000. However, she was ordered to bear her own costs of the proceedings. 

The decision provides insight into the length which some clients will go to press their claims for further and better provision from the estate. In this case the client pressed her position to her detriment, whilst simultaneously impugning the reputation of her legal advisers. 

In the financial year 2017-2018 Lexon Insurance claims cost in wills and estates doubled on the years 2003-2017.
8  This is despite the existence and use of numerous Lexon wills and estate checklists, all designed to reduce claims. Perhaps, notwithstanding the extent to which we as professionals go to reduce litigation, some matters are redolent with the inevitability of it. 

Christine Smyth is a former President of Queensland Law Society, a QLS Accredited Specialist (succession law) –
Qld, and Consultant at Robbins Watson Solicitors. She is an Executive Committee member of the Law Council Australia – Legal Practice Section, member of the QLS Specialist Accreditation Board, Proctor Editorial Committee and STEP and an Associate Member of the Tax Institute. 

Notes
1  Among them American management liability specialist Kevin LaCroix, speaking at the Australian Professional Indemnity Group’s conference in Sydney, 2016.
2  Mason at [1]-[3].
3  At [8].
4  Charlesworth v Griffiths & Anor [2018] QDC 115.
5  At [9].
6 At [16].
7  [20].
8  Page 22 Proctor September 2018.

Should you wish to download a copy of this article please click HERE.

Trustee’s minute of meeting evidences bad faith

Trustee’s minute of meeting evidences bad faith
February 27, 2019 /

by Katerina Peiros, ATI, Hartwell Legal, and Christine Smyth, ATI, Robbins Watson Solicitors

The failure of a discretionary trustee to give real and genuine consideration in their decision-making, and to act in good faith and for proper purpose, invalidated a distribution decision. 

Trani v Trani1  defies all odds. The legal principles are simple and yet rare to be applied successfully.

The facts are trite. Patrizia Trani lost control of a conventional discretionary trust to her brothers, Luciano and Marco Trani. The trust was passed to the siblings by their parents on the understanding that the trust benefit the three siblings equally. Following a disagreement, Luciano and Marco ejected Patrizia from control, liquidated the valuable real estate owned by the trust, and distributed the trust capital equally to themselves to the exclusion of Patrizia.

Private client advisers witness this scenario increasingly repeating itself in this era of entitlement and confidence.

The usual advice given to those in Patrizia’s situation is two -fold. 

First, unless there is a defect in the paperwork ejecting Patrizia from control or benefit, there is little that can be done to recover control or to include her in the distribution. Proving that there are defects in the paperwork is difficult and rather rare. Michael Norbury examined this in detail in the June issue of this journal,2  so it is
unnecessary to go over these principles again here. 

Second, if Luciano and Marco, as fiduciaries, acted in bad faith or for an improper purpose in excluding Patrizia,
she may be entitled to reinstatement or a share of the distribution. Even though this is almost always entirely true in every case (why else wouldn’t Luciano and Marco give their sister a third of the proceeds like their parents intended), it is almost always entirely impossible to prove (because discretionary trustees have a right to confidentiality over their reasons for decisions).  

Patrizia succeeded on both counts, but it was the latter that brought her a share in the distribution.

Key persons in the conventional discretionary trust

The Gino and Caterina Trani Family Trust was a conventional discretionary trust, of which Latina Investments Pty Ltd (Latina) was the trustee. Latina had wide and unfettered powers and discretions. 

The siblings were:

  • primary beneficiaries;
  • appointers with the power to remove the trustee; and
  • directors of Latina.

For reasons unknown, Luciano was the sole shareholder. 

Ejecting from control and excluding from distribution

The first procedural step in divesting Patrizia of any control was taken by Luciano, as the sole shareholder of Latina, removing Patrizia as a director of Latina. This step could not be impeached by Patrizia.

Even though Patrizia was one of the appointers, she needed her brothers’ consent in order to remove Latina as
trustee. So, from that point on, Patrizia was powerless.

After that, in their capacity as the sole directors of Latina, Luciano and Marco liquidated all of the trust assets and
resolved to distribute the trust fund equally to themselves as beneficiaries.  The affairs of the trust were then wound up, the trust vested, and Latina deregistered. 

First, impeaching the paperwork

Patrizia was able to impeach some of the paperwork giving effect to these decisions. However, on Luciano and
Marco’s request, the court rectified the clerical or administrative shortcomings of the paperwork based on the principles that rectification is available where the intention is clear. The rectification validated the acts, so Patrizia could not recover control of the trust or share in the trust fund on this basis. The first 60 pages of the judgment
are about this . 

Second, fiduciary breaches

Patrizia succeeded in her claim that her exclusion from distribution by Marco and Luciano was in bad faith and for an improper purpose, and, therefore, was a breach of Latina’s fiduciary duties owed to Patrizia.

It was found that Marco and Luciano knowingly assisted Latina in its breaches of trust and fiduciary duty (ie caused Latina to do so) and received the funds from Latina with that knowledge, therefore, holding a third of the funds on trust for Patrizia. 3

Hurdles overcome by Patrizia 

The miracle of Patrizia’s case was that she was able to prove bad faith and improper purpose based on circumstantial evidence only. 

Latina, as a discretionary trustee, was entitled to immunity for its reasons in the making of the decisions. 4
In other words, Latina could not be forced to disclose its reasons for, or the reasoning process in, deciding to exclude Patrizia from a benefit. 5 No negative inference may be drawn from Latina’s unwillingness to give up this
immunity.

Not only are Latina’s (like any discretionary trustee’s) reasons and processes secret, but also the court role is not to review Latina’s exercise of discretion where the trustees have acted “in good faith, upon real and genuine consideration and in accordance with the purposes for which the discretion is conferred”, 6 but only to review whether Latina actively examined the necessary information and whether the attitude applied to the analysis was
open-minded and for the purpose imposed on it.

The court cannot examine the evidence to decide whether Latina’s decision was good or bad, fair or unfair, wise or unwise, reasonable or unreasonable. The existing authorities only impugn the exercise of trustee discretion for bad faith, arbitrariness, capriciousness, irrelevancy, mischievousness, recklessness or malice in respect of the settlor’s expectations.7 Patrizia had to impeach Latina’s discretionary decision relying on the following principles: 8

“(a)  mere carelessness or honest blundering will not negative good faith; [9]

(b) a trustee is not required to observe the rules of natural justice; [10]

(c) a trustee must take an informed view of whether or not to exercise their discretion; [11]

(d) a trustee must not act irresponsibly, capriciously, or wantonly, or for any ulterior
purpose; [12]

(e) while it is not the role of the Court to consider whether an exercise of discretion is fair or reasonable, a grotesquely unreasonable result may be evidence of a breach of duty; [13]

(f) the discretion must be exercised with an absence of indirect motive, with honesty of intention, and a fair consideration of the issues;[14]

(g) what amounts to bad faith includes, but goes beyond fraud, to include a refusal to make an informed decision, making a decision for an ulterior motive or purpose, and a failure to take relevant considerations into account;[15]

(h) the Court will presume that a trustee has exercised their discretion with propriety, and the onus of proving any bad faith on the part of a trustee rests with the party seeking to challenge the exercise of discretion; [16]  and 

(i) notwithstanding the above, the Courts may be prepared to review the exercise of a trustee’s discretion not only having regard to the reasons of the trustee (if available), but also the objective consequences of the decision upon the beneficiaries of the trust.[17]

Given these principles, only circumstantial evidence 18  was available to Patrizia to prove  that the decisions were made in bad faith  and for an improper purpose. Because obtaining sufficient circumstantial evidence is rare, cases challenging discretionary trustees’ exercise of discretion are rare, only a handful are reported judgments, and even fewer successful.

Circumstantial evidence of bad faith and improper purpose

Patrizia led extensive evidence about the irretrievable breakdown of the relationship between her, on the one hand, and her brothers, on the other. The relationship was damaged to such a point that the brothers were willing to hurt the trust and themselves just to hurt Patrizia. For example, the business of Patrizia’s de facto partner occupied one of the properties owned by Latina. The partner offered to buy the property from Latina for $550,000,
but this offer was rejected, and Latina later sold the property on the open market for $100,000 less.

Apart from this example, there was other extensive evidence of the brothers’ unreasonable and detrimental conduct powered by animosity towards Patrizia.

Patrizia was able to show that, until the falling out in approximately 2013, the brothers had accepted that the trust was intended to benefit all three siblings as per the parents’ legacy. 

So, although, Marco and Luciano had a right to and, in fact, did refuse to give reasons for why they exercised their
discretion to exclude Patrizia, 19 Patrizia’s evidence made it clear that there was no alternative view but to conclude that she had not been genuinely considered for a distribution and had been excluded from it because of the bad blood between the siblings. This was bad faith and exercise of discretion for an improper purpose.

A lot of time was spent at the trial examining the minute of the meeting which recorded Latina’s distribution decision.It was a short standard minute of the meeting completed by Latina’s accountant. Patrizia’s counsel cross-examined Marco and Luciano about the process of creation of the minute and the procedure followed at the meeting of directors of which the minute was meant to be an accurate record.

The minute appeared to be contrived; although it said all the right things, it did not actually reflect the decision-making process or what transpired at the meeting.Not only did Marco and Luciano make the decision to distribute to themselves to the exclusion of all others, well in advance of the meeting itself (despite the minute saying that the decision was made at the meeting), but also Marco and Luciano never tabled or considered the trust deed 
or other beneficiaries of the trust (despite the minute saying that the directors had done that). The falsity of the minute brought into question whether Latina gave wide, real and genuine consideration to all of the issues which a discretionary trustee should give when making a decision to distribute the trust fund and wind up the trust.

Latina’s accountant gave evidence about the veracity of the resolution to distribute to Marco and Luciano. He was crossexamined about:

  • the processes he followed at the meeting of the directors in creating the resolution and authenticating it with the directors;  
  • the clerical error in distribution amounts in the resolution and other oversights; 20 and
  •   whether he had asked Marco and Luciano to consider Patrizia (or anybody else) for a distribution.21

The accountant’s evidence was that the resolution was “simply read aloud at the meeting and that no actual discussion of the issues [such as who to distribute to and why] occurred at that time. The minute took only a couple of minutes”. 22

The court said: 23

 “While I would not go so far as to describe the … minute as a ‘ruse’, as was suggested by counsel for Patrizia, it is abundantly clear that the … minute was prepared by lawyers sensitive to the  obligations upon a trustee in the position and circumstances of Latina, in the event that the decisions made that day were later scrutinised (as they were). However, the attempt to convey an impression that a fulsome discussion about the decision to distribute the trust funds during the course of the meeting ultimately did not stand up to scrutiny.”

Moreover, the brothers damaged their own credibility by implausibly denying the animosity. The court also found that the brothers “were careful to avoid giving fulsome and meaningful answers to difficult questions. Luciano in particular gave evasive and at times self-serving evidence”. 23

The court also took into account the haste with which Marco and Luciano wound up the trust, which the court found was an indication of a guilty conscience. Consequently, the court accepted that Latina failed “to give proper consideration to the interests and entitlements of the other beneficiaries …, especially Patrizia” and that Latina’s decision to distribute the trust fund to “Marco and Luciano was motivated by [Marco and Luciano’s] animosity towards [Patrizia] and their desire to enrich themselves at her expense”. 24

This was sufficient for the court to find that Latina’s decision was made in bad faith and for an improper purpose, 25 and therefore invalid. 26  Applying the equitable principles (discussion of which is beyond the scope of this column), the court declared that Marco and Luciano hold a third of the trust fund on a constructive trust for Patrizia and were required to pay it over to her. 

Conclusion

The judgment elucidates that discretionary trustees are not omnipotent, despite the popular misconception. Trustees are subject to onerous and honourable fiduciary duties and the court has an inherent jurisdiction to supervise and intervene. It is a reminder that trustees cannot be audacious or smug in their decisions or conduct. 

The judgment is valuable to the future “Marcos” and “Lucianos”, as it may bring them to their senses.

For the future “Patrizias”, this case will assist in negotiations with the trustees to bring to their attention their duties and obligations, and that “Patrizias” sometimes do succeed in their claims and trustees held accountable.

The case is instructive to lawyers and accountants when drafting resolutions and minutes of meetings:

  • the minute must be an accurate record of what transpired at the meeting and not in any way contrived; 
  • the meeting itself must cover the essentials of trustee duties and obligations. In other words, the trust deed and beneficiaries must be considered, a wide range of other information should be considered, and trustees must conduct themselves as fiduciaries;
  • the reasons for decisions should not be recorded in the minute;
  • and the minute must be carefully drafted — complying with legal principles, but also clerical error free.

The case also reminds estate planners to check the structure of the trust. Disaster could have been averted if the parents had been properly advised at the time control of the trust was passed to the siblings or if the siblings checked the structure while everybody was getting on well. Luciano should not have been the sole shareholder.
If he was, then an independent person should have been the appointer of the trust to monitor the activity of Latina.

Irreparable financial and emotional damage comes from bad planning or no planning.

Katerina Peiros, ATI 
Incapacity, Wills and Estates Lawyer
Accredited Specialist – Wills & Estates (Vic)
Hartwell Legal

Christine Smyth, ATI
Partner
Accredited Specialist – Succession Law (Qld)
Robbins Watson Solicitors

References
1 Trani v Trani [2018] VSC 274 (Trani).
2 M Norbury, “Mercanti: recovering control of a discretionary trust”, (2018) 53(1) Taxation in Australia 39.
3 Relying on the principles in Barnes v Addy (1874) LR 9 Ch App 244.
4 Curwen v Vanbreck Pty Ltd [2009] VSCA 284; Mandie v Memart Nominees Pty Ltd [2014] VSC 290; Cohen
v Amberley Corporation Australia Pty Ltd [2016] VSC 140.
5 Re Londonderry’s Settlement [1965] Ch 918.
6 Trani at [176].
7 Attorney-General (Cth) v Breckler (1999) 197 CLR 83; Wilkinson v Clerical Administrative and Related Employees Superannuation Pty Ltd [1998] FCA 51; Esso Australia Ltd v Australian Petroleum Agents’ &
Distributors’ Association [1999] 3 VR 642; Karger v Paul [1984] VR 161.
8 Trani at [173].
9 Karger v Paul [1984] VR 161 at 164.
10 Ibid at 166.
11 J Heydon and M Leeming, Jacobs’ law of trusts in Australia, LexisNexis Butterworths (Jacobs’ law of trusts), para 1608. 
12 Wilkinson v Clerical Administrative and Related Employees Superannuation Pty Ltd (1998) 79 FCR
469 at 480.
13 Jacobs’ law of trusts at para 1608.
14 Jacobs’ law of trusts at para 1610, referring to Parkes Management Ltd v Perpetual Trustee Co Ltd (1977) 3 ACLR 303 at 311.
15 Jacobs’ law of trusts at para 1609, referring to Re Pauling’s Settlement Trusts [1964] Ch 303 and Esso Australia Ltd v Australian Petroleum Agents’ & Distributors’ Association [1999] 3 VR 642.
16 Jacobs’ law of trusts at para 1614.
17 Hampden v Earl of Buckinghamshire [1893] 2 Ch 531 at 544.
18 Trani at [169] and [171].
19 Trani at [39].
20 Trani at [90].
21 Trani at [91].
22 Trani at [93].
23 Trani at [99].
24 Trani at [171].
25 Trani at [106].
26 Trani at [219].

Should you wish to download a copy of this article, please click HERE.

Informal video will declared valid

Informal video will declared valid
February 5, 2019 /

With Christine Smyth

As we make our way through the new year, we tend to reflect on old conversations and experiences with a mind to see how they might shape our approach to the year ahead.

The decision of Radford v White [2018] QSC 306, handed down late last year, had me reflecting in a similar manner.

Many years ago my children had a great music teacher, who also had a recording studio. In 2006 Queensland introduced amendments to the Succession Act 1981, implementing the informal will provision through s18.

About that time, I got a call from him. He had been approached with a proposal for a possible new venture. The idea was that people could hire his recording studio to make videos about what their wills meant. I didn’t say much, other than, to query if he was keen to be a witness in a will dispute? Of course, I went on to explain the impact of s18. Since then there have been numerous s18 applications seeking the court’s imprimatur to all manner of documents that constitute informal wills, with some unusual documents being deemed to be a final valid will.1

Sadly, for Katrina Radford, she had a moment of looking to the future that saw her dealing with the death of her partner and a complex application to the court for a determination as to whether a video he had made satisfied the elements of s18 of the Succession Act 1981 sufficient for it to constitute his final will. 

On 21 November, 2016 Ms Radford’s partner, Mr Schwer, bought and then rode, for the first time, his new motorcycle. Before going for that ride, Ms Radford urged him to make a will. Heeding her concern, but in his own words being “too lazy” 2  to make a formal  will, he instead made a video recording on his computer. He then rode the bike, had an accident and suffered serious head injuries. 3

Just over a year later, on 24 January 2018, he died 4, never having formalised his testamentary intentions beyond the  video recording. Havingsuffered the loss of her partner and father of her child (born after the accident), Ms Radford found herself in the Supreme Court seeking a determination as to the validity of the video recording as his last will. A transcript
extract of the video appears at paragraph 5 of the judgment. It reveals complex family relationships and property arrangements.

“A good solution applied with
vigor now is better than a perfect
solution applied ten minutes later.”
General George Patton

Mr Schwer was still married to his former wife,Ms White, both at the time of making the videoand at the time of his death. They also had a child together, Aleena. The video recording went into elaborate detail as to conditions attaching to gifts to his daughter Aleena, as well as intricate details associated with her care and contact with her mother. It also dealtwith his three superannuation policies. He was also quite emphatic that his “soon to be ex-wife”,5  Ms White, was to receive nothing from his estate. (On 15 April, 2015 (prior to the accident) Ms White and Mr Schwer had entered into consent orders in Family Court of Australia by way of final property orders.) 6 S18 is proscriptive in its elements. In short, the court must be satisfied:

1. There is a document not executed in accordance with the formal requirements.

2. It contains testamentary intentions.

3. It is intended to operate as a final will without anything more.

Here the court was readily satisfied that the video recording fitted the definition of document and that it clearly contained his testamentary intentions. The focus was on the question of whether it was intended to operate as a will without anything more. Central to that question was a statement by the deceased, that he would “fill out the damn forms later”, but  continued with the words “but as sound mind and body”. 7

The question being whether the reference to completing forms at a later date meant that he intended to do something more to formalise his testamentary intentions. The court found that the phrase “sound mind and body” denoted formality of language  that was “intended to convey that this was his testamentary instrument”, 8 noting that “[t]he starting point is that a will made under Part 2 of the Act is not made so as to operate from some future nominated date or some future nominated event other than death. It is an instrument that disposes of property, in the event of death, that operates upon death unless revoked sooner.” 9  The court found that the deceased not completing forms at a later date was explained by reference to the head injury he suffered in the accident. 10  As such,  the court declared the video recording in the terms of the transcript at paragraph five of the judgment to be the deceased’s will. 

Ms Radford’s foresight, combined with s18, ensured Mr Schwer died with a will. Unfortunately, a close read of the judgment manifests a number of associated issues indicating this application was simply the start for Ms Radford’s long and distressing journey.

The document did not appoint an executor, with the court commenting the application for orders might have been better made as an application which included the appointment of an administrator. 11 The gifts to his daughter Aleena were subject to various conditions raising issues of construction; the will did not and could not have contemplated the birth of his child with Ms Radford, raising prospects of an FPA, and then there was the question of whether the superannuation funds fell into the estate to be dealt with in the estate and the attendant issues of raising a claim upon those funds.

While s18 provides relief for informal wills, it cannot be, and is not, a substitute for fulsome estate planning advice that covers the issues s18 simply cannot address. 

Christine Smyth is a former President of Queensland Law Society, a QLS Accredited Specialist (succession 
law) – Qld, and Consultant at Robbins Watson Solicitors. She is an Executive Committee member of the Law Council Australia – Legal Practice Section, member of the QLS Specialist Accreditation BoarProctor Editorial Committee and STEP and an Associate Member of the Tax Institute.

Notes
1 @[13] digital video disc – Mellino v Wnuk I [2013]
QSC 336; audio recordings – Re Estate of Carrigan(deceased) [2018] QSC 206; see also unsent text
message – Re Nichol; Nichol v Nichol [2017] QSC
220.
2 @[5].
3 @[6].
4 @[2].
5 @[5].
6 @[10].
7 @[16].
8 @[16].
9 @[17].
10 @[19].
11 @[25]. 

Should you wish to download a copy of this article click HERE.

DEBT & DOMESTIC VIOLENCE

DEBT & DOMESTIC VIOLENCE
February 5, 2019 /

DEBT & DOMESTIC VIOLENCE: Financial Abuse & the Shifting of Debt Through Family Court Orders

Family Law matters are, by their very nature, deeply distressing.  Imagine though how that angst escalates, when in the midst of your family break down you are subjected to the wrath of the Taxation Department seeking to pit its authority and power against the Family Court, in the High Court!  It is a power struggle not even the best “Suits” writers could script. 

Nevertheless, this is precisely what happened in the recent decision of Commissioner of Taxation v Tomaras[1] Now of course the decision raised a cacophony of commentary from all manner of Family and Taxation Law experts, on social media, professional publications and the like.  Properly, much of the commentary and analysis was around the key issue of whether the Family Court has the jurisdictional authority to order the ATO to transfer a party’s taxation debt in a Family Court proceeding.  For those who missed it – the Family Court does have that power, and I recommend readers seeking to understand the more technical aspects to read the many learned articles on the topic. 

But in this piece, I shine the spotlight on the impact this decision may have in Domestic Violence situations, more particularly, Financial Abuse.   I note with some irony that such a power struggle between two mighty institutions could provide hope and relief to the many hundreds of thousands who suffer each year, through a different, and much more personal, yet deeply damaging kind of power struggle – Domestic Violence.

It is well established that in family law property matters, the Court can hold both parties equally responsible for debts acquired during a relationship or, depending on the circumstances, hold one partner responsible for the debt of the other. Additionally, the Court can prohibit a (third party) creditor from pursuing a party for a debt and require they seek payment from the other party.

In short, if you acquired a debt in a relationship, now, even a personal tax debt, due to your ex-partner’s actions, you may have grounds to seek the debt be transferred to them.

This is where circumstances of Financial Abuse in Domestic and Family Violence comes sharply into focus.  Such abuse not only involves manipulating and controlling an individual’s own or joint finances, but often simultaneously exploiting and sabotaging that person’s economic position.[2]

Near 16% of all Australian women and almost 90% of people experiencing domestic violence, encounter financial abuse.[3]

Often the behavior begins gradually and over an extended period of time, before a party realises the seriousness of the situation. Other times it can be more blatant, forcing a party to put their name on accounts or to sign documents. The situation can leave a person feeling depressed, embarrassed and helpless.  These feelings, along with the prospect of being burdened with an insurmountable debt are factors that frequently result in a person remaining in an abusive relationship.  But what if you can be freed of that debt? 

What the decision of Tomaras reveals is that there is scope for the court to order a violent party to carry the debt they force onto another through their acts of Domestic and Family Violence.

Of course, any shifting of debt would need to be determined based on individual facts and like all property settlements, be “just and equitable”.  

The keys factors may be the amount of control and/or lack of knowledge a person had of the situation.

Considering the epidemic of Financial Abuse, if a perpetrator can be shown to be the more financially capable party, the shifting of any debt, including a tax debt, may not be as isolated as first thought. 

To download a copy of this blog, click here.  If you would like to confidentially and safely discuss your concerns about Domestic and Family Violence please call me, at Robbins Watson Solicitors on: 55769999

DISCLAIMER:
1. The information on this blogpost is of a general nature, not intended to be specific professional advice.
2. Please seek the opinion of a professional to advise you of your situation.
3. The author’s opinions are his/her own and do not represent the views of any other person, firm or entity.
4. The author is not responsible for the accuracy or appropriateness of third-party comments or articles, including those of guest authors and editorial contributions.
5. Any comments, letters, and other submissions are moderated and may be edited or withheld at the sole discretion of the author.

[1] Commissioner of Taxation for the Commonwealth of Australia v Tomaras & Ors [2018] HCA 62

[2] Adams AE, Sullivan CM, Bybee D, Greeson MR. Development of the Scale of Economic Abuse. Violence Against Women. 2008; 14(5): 563-88.

[3] The Center for Relationship Abuse Awareness, http://stoprelationshipabuse.org/educated/types-of-abuse/economic-abuse/

LAW COUNCIL OF AUSTRALIA APPOINTMENT

LAW COUNCIL OF AUSTRALIA APPOINTMENT
January 16, 2019 /

Robbins Watson are proud to announce our Christine Smyth – Consultant,  has been appointed to the the Law Council of Australia Legal Practice Section Executive.  Christine extends her thanks and gratitude to our colleagues for your support and endorsement in voting Christine into this position.  The Legal Practice Section focus is on legal practice management issues with a particular focus on areas of specialist practices.   The Section’s objectives are to:

  • Contribute to the development of the legal profession;
  • Maintain high standards in the legal profession;
  • Offer assistance in the development of legal and management expertise in its members through training, conferences, publications, meetings, and other activities.
  • Provide policy advice to the Law Council, and prepare submissions on behalf of the Law Council, in the areas relating to its specialist committees.

Christine looks forward to working with

  • Chair – Ms Maureen Peatman,
  • Deputy Chair – Mr Michael James,
  • Treasurer – Mr Geoff Provis,

Executive Members

  • Ms Tanya Berlis
  • Mr Dennis Bluth
  • Mr Mark Cerche
  • Ms Peggy Cheong
  • Mr Philip Jackson SC
  • Dr Leonie Kelleher OAM

If you would like to know more about the work of the section I invite you to visit: https://www.lawcouncil.asn.au/legal-practice/about-the-section