Ellis v Ellis [2012] NSWSC 1414

Supreme Court New South Wales

Medium Neutral Citation: Ellis v Ellis [2012] NSWSC 1414 Hearing dates: 15 November 2012 Decision date: 15 November 2012 Jurisdiction: Equity Division - Duty List Before: White J Decision: Refer to para [18] of judgment. Catchwords: WILLS, PROBATE AND ADMINISTRATION - TRUSTS AND TRUSTEES - judicial advice - surrender of life estate to enable sale of land forming part of deceased's estate - advantageous dealing - how proceeds of sale to be dealt with Legislation Cited: Trustee Act 1925 (NSW) Cases Cited: Tompkins v Simmons [1931] HCA 8; (1931) 44 CLR 546 Bassett v Bassett [2003] NSWSC 691; (2003) 58 NSWLR 258 Re Syme [1980] VR 109 Texts Cited: Jacobs Law of Trusts in Australia, 7th ed Category: Principal judgment Parties: Kevin Stanley Ellis (Plaintiff) Mavis Joyce Ellis by her tutor Megan Jane Colman (1st Defendant) Janice Margaret Ellis (2nd Defendant) Nicholas Mark Ellis (3rd Defendant) Lachlan Mark Christopher Ellis by his tutor Megan Jane Colman (4th Defendant) Representation: Counsel: J Needham SC (Plaintiff) Solicitors: Osbornes Lawyers (Plaintiff) Bowen Thomas & Barlow (Defendants) File Number(s): 2012/327877

Judgment 1HIS HONOUR: This is an application for judicial advice under s 63 of the Trustee Act 1925 (NSW) and for an order under s 81 of the Trustee Act conferring a power of sale on the executors and trustee of a will. 2The proceedings concern the estate of the late Stanley Samuel Ellis, who died on 21 August 1994. It concerns the disposition of two parcels of land that form part of the estate, one being parcel known as Lot 1 in Deposited Plan 855240; the other being Lot 2 in Deposited Plan 815045. Under the deceased's will, the deceased's widow, Mavis Joyce Ellis, is absolutely entitled to Lot 1 in Deposited Plan 855240. Under the will, the deceased's widow is entitled to a life estate in respect of Lot 2 in Deposited Plan 815045, which is terminable on her death or remarriage. On the occurrence of the first of such events, that Lot is to be held on trust for such of the deceased's children as shall then be living, and if more than one, in equal shares as tenants-in-common. 3The will defines the death or remarriage of the deceased's widow as "the Vesting Date". It provides that: "Lot 2 in Deposited Plan 815045 is to be held upon trust for such of my children Kevin Stanley Ellis, Janice Margaret Ellis and Mark Christopher Ellis, as shall be living at the vesting date and if more than one as equal shares as tenants in common absolutely, provided that if any of them should die before the Vesting Date leaving issue (being a grandchild or grandchildren of mine who shall be living at the Vesting Date and who shall attain the age of 21 years) such issue shall take and if more than one equally between them the share to which his, her or their parent would have been entitled under this subclause had he or she been living at the Vesting Date". 4The deceased's children, Kevin Stanley Ellis and Janice Margaret Ellis, survived him and are still living. The deceased's child, Mark Christopher Ellis, survived him, but died on 14 December 1995, aged 26. There are two children of Mark Christopher Ellis still living, one aged 18 and one 16. 5Lots 1 and 2 together form a property, which is currently suitable for grazing. But agreements have been entered into with a coal company called Stratford Coal Pty Ltd, for the purchase by that company of the land. The price which will be payable by Stratford Coal Pty Ltd for both lots of the land and for the entering into of deeds of releases by the relevant parties is substantially above what would otherwise be the market value of the land. The land has a special value to Stratford Coal Pty Ltd. 6It is clear that it would be advantageous and in the interests of all persons who have interests under the deceased's will for the executors to be able to dispose of both lots in the manner proposed. I will make an order under s 81 of the Trustee Act accordingly. That section provides that where, in relation to management or administration of any property vested in trustees, any sale or other disposition is, in the opinion of the Court, expedient, but the same cannot be effected by reason of the absence of any power for that purpose vested in the trustees by the instrument creating the trust, the Court may by order confer upon the trustees the necessary power for the purpose of such an advantageous dealing. 7There were initially two executors, namely, Kevin Stanley Ellis and Mark Christopher Ellis. Upon the latter's death, Kevin Stanley Ellis because the remaining executor of the deceased's will. I am satisfied that he would be justified in selling lot 1 and paying the net proceeds of sale of lot 1 to the first defendant, Mavis Joyce Ellis. 8The agreements provide for separate sales of both lot 1 and lot 2. The sale price for lot 2 is only $6,511.50. A further sum of $6,511.50 will be payable by way of a Deed of Release, which is an attachment to the contract for sale. It will be payable on the giving by the executor, Kevin Stanley Ellis, of releases to Stratford Coal, essentially against making any complaint or objection in relation to the obtaining of any approval by the company for any exploration authority or exploration licence, or obtaining any mining lease or other approval, or against making any complaint in relation to any mining operations in respect of the land. 9Similar terms have been agreed upon with Stratford Coal Pty Ltd in relation to lot 2, save that, in the case of that lot, the consideration for the purchase and the consideration for the entry into the Deed of Release are two sums of $1.2 million. The difference in the consideration payable in respect of each lot appears to arise from the different areas of land involved. Lot 1 is less than 1.2 hectares in area. Lot 2 is in excess of two hundred hectares. 10Part of the arrangements provide for the surrender by the deceased's widow, the first defendant, of her life interest in lot 2. The first defendant is now aged 81. She resides in a nursing home. She has given an enduring Power of Attorney to her daughter-in-law, the widow of Mark, who is also her enduring guardian. Her attorney and guardian is satisfied that the proposed surrender of the life interest is in her best interests. 11At present, the first defendant is receiving no income from the land over which she has a life interest, or the land to which she would be absolutely entitled. She is not residing on the property. The proposed dealings would confer advantages on the first defendant which she would not otherwise obtain. 12The price which would be paid by Stratford Coal Pty Ltd to the first defendant for the surrender of her life interest has been struck as the average of two valuations that have been obtained by actuaries as being the value attributable to the surrender of her life interest. 13There is no reason to doubt that the first defendant's attorney and enduring guardian could be properly satisfied that the transactions which she will enter into on the first defendant's behalf, or has done on her behalf, are proper transactions in the first defendant's interests. 14Questions arise as to how the net proceeds of sale of the Lots are to be dealt with. The first defendant would be entitled to the proceeds of sale of lot 1. As far as the proceeds of sale of lot 2 and the price payable for the Deed of Release in respect of lot 2 are concerned, under the will, those proceeds will be held for Kevin Stanley Ellis, Janice Margaret Ellis and the children of Mark Christopher Ellis upon the surrender of the first defendant's life estate. That is so notwithstanding that the Vesting Date has not occurred (Tompkins v Simmons [1931] HCA 8; (1931) 44 CLR 546 at 558-559; Bassett v Bassett [2003] NSWSC 691; (2003) 58 NSWLR 258; and Re Syme [1980] VR 109). 15I am also satisfied that the plaintiff and the second defendant, Janice Margaret Ellis, will be entitled to call for the transfer to them of their one third interests in the proceeds of sale of lot 2 and the consideration received from the entry into the Deed of Release with Stratford Coal in respect of that lot (Jacobs Law of Trusts in Australia, 7th ed, at [2311]). 16On the sale of lot 2 and the conversion of that property into money, those beneficiaries, being absolutely entitled to one third interests in respect of the proceeds of sale, will be entitled to call for the transfer of their one-third interest in those proceeds. The executor is entitled to judicial advice that he would be justified in dealing with the proceeds accordingly. 17The remaining one-third interest will be held for the children of Mark Christopher Ellis. One of Mark Christopher Ellis' children, namely, Nicholas, is 18 and the other child is 16. Under the will, following the acceleration of the first defendant's life estate, the executor will hold their one-third interest on trust for them upon their attaining the age of 21 years. The plaintiff does not press for an order pursuant to s 63 as to whether the interests of those children are vested or contingent. It would not be appropriate on this application for judicial advice to determine that question. If any issue arises in relation to that question, it would need to be determined on a construction summons to which those children were parties. 18For these reasons, I propose the following orders, subject to any submissions counsel may have as to the form of the orders: 1. Order pursuant to s 81 of the Trustee Act 1925 (NSW) that the plaintiff be empowered to sell the land described as Lot 2 in Deposited Plan 815045 ("Lot 2") to Stratford Coal Pty Ltd, in accordance with the contract for the sale of land dated 18 October 2012, which is tab 14 to exhibit A, being the Statement of Facts. 2. Order pursuant to s 63 of the Trustee Act that the plaintiff would be justified: (a) in selling the land which forms part of the residue of the estate of the deceased, being Lot 1 in Deposited Plan 855240 ("Lot 1") to Stratford Coal Pty Ltd; (b) in paying the net proceeds of sale of Lot 1 to the first defendant; and (c) in paying the net proceeds of any sale of Lot 2: (i) as to one-third for the plaintiff; (ii) as to one-third for the second defendant; (iii) as to one-third for the third and fourth defendants, on the trusts set out in clause 3 of the will of the deceased. 3. Order pursuant to s 63 of the Trustee Act that the plaintiff would be justified in paying to the plaintiff and to the second defendant his and her share of the proceeds of sale on the basis that the Vesting Date was reached on the date of the surrender by the first defendant of her life interest in Lot 2. 4. Order that the costs of these proceedings be paid out of the estate of the deceased. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 November 2012