Risk Watch: When is an estate distributed?: An important new

When is an estate distributed?: An important new authority for all Wills and Estates practitioners

GRANT FEARY, LEGAL RISK COUNSEL, LAW CLAIMS

The South Australian Court of Appeal has recently handed down an interesting authority — Noyce v Jeromel [2021] SASCA 87 — which should be noted by all practitioners advising on claims under the Inheritance (Family Provision) Act 1972 (SA) (IFP ACT) and all practitioners administering estates.

The facts of the case raised an acute point as to when an estate has been distributed for the purposes of Section 8 (5) of the IFP Act, which provides that any distribution of any part of the estate made before an application for an extension of time shall not be disturbed by reason of that application or any order made on that application. This subsection must be read in conjunction with Section 8 (4) of the IFP Act, which provides that an application for an extension of time to commence an application for further provision shall be made before the fi nal distribution of the estate.

The facts of the case were as follows:

PRE-1992 Irene Jeromel was married to Ferdinand Jeromel. They had three children, Fred Jeromel, Danuta Noyce and Paul Jeromel.

1992 Irene became the owner of a property on Arnold Terrace at Royal Park.

1993 2000

2017 Ferdinand and Irene became owners as joint tenants of a property on Royal Terrace at Royal Park. Ferdinand died in 2000. No grant of probate or letter of administration was sought or made in respect of his estate and his name remained on the certifi cate of title for the Royal Terrace property. Fred died.

2018 Irene made a will (her last) appointing Paul as executor and trustee. She left $2000 each to Danuta and Danuta’s two children. The residual was left to Paul. SEPTEMBER 2019 Irene died. The major assets of Irene’s estate were the Arnold Terrace and Royal Terrace properties. 17 NOVEMBER 2019 Probate of Irene’s will was granted to Paul. 17 MAY 2020 The prima facie time limit for an application for further provision out of Irene’s estate under the IFP Act expired. 19 MAY 2020 Paul signed a Client Authorisation document authorising his lawyers to do certain things to effect the gifts made in Irene’s will.

Paul’s lawyers signed and lodged for registration at Land Services SA three documents. These were: i. an Application to Register Death by Survivor in respect of the Royal Terrace property, describing the Applicant as “Paul… as executor of the deceased proprietor vide Probate dated 17 November 2019”; ii. a Transmission Application by Personal Representatives in respect of both properties describing Paul as

Applicant in the same way; and iii. a Transfer of both properties from Paul as executor of the estate of the deceased proprietor vide Probate dated 17 November, 2019 to Paul as benefi ciary.

It will be immediately noted that the references to the Probate in the above documents made no distinction between Irene’s Probate and the estate of Ferdinand, where no probate had been sought. 29 MAY 2020 Danuta instituted an action for further provision from Irene’s estate (i.e. some 12 days after the time limit expired). This action included an application for an extension of time, as well as an interlocutory application seeking an injunction restraining Paul from distributing any assets not already distributed. 1 JUNE 2020 Paul’s lawyer received a requisition from the Registrar-General requiring a change to the description of Paul on the Application to Register Death document so as to refl ect the proper position with respect to Ferdinand’s estate. Paul’s lawyer initialled the necessary amendments. 2 JUNE 2020 Danuta’s originating application, injunction application and supporting affi davits were served on Paul. The injunction application was listed for hearing at 10am on 3 June, 2020. 3 JUNE 2020 Shortly after 10am, a Master granted an interim injunction restraining Paul from taking any further steps to distribute and restraining the Registrar-General from registering the Transfer in respect of both properties. Later that day a staff member of Paul’s lawyer lodged the amended Application to Register Death.

Paul said that the estate had been distributed because, on his case, he had done everything that he needed to do to transfer the properties prior to the injunction being made. Danuta argued that the estate had not been distributed because the actual registration of the transfers had not been completed. This was of critical importance for Danuta because, if the estate had been distributed, by reason of Sections 8 (4) and 8 (5) of the IFP Act, her IFP claim would be thwarted, because there would be no remaining assets in the estate for her to claim against.

The Court noted various provisions in the Real Property Act 1886 (SA) (RPA) dealing with registration, including Section 67 which provides that an estate or interest in land only passes under an instrument registrable under the Act upon registration of the instrument, as well as Section 249 which preserves equities. The Court also reviewed the authorities relied upon by Paul to the effect that equity may recognise that a gift is effectual if the donor has done everything that is necessary by the donor to effect a legal transfer of the property and render the gift binding on themselves, as well as the authorities as to what constitutes “distribution” under the IFP Act and equivalent legislation.

The Court placed great weight on Easterbrook v Young (1977) 136 CLR 308 where the High Court referred to: • “an actual distribution of the deceased’s property to persons benefi cially entitled thereto”; • “the actual distribution of the estate, its removal from the hands or name of the personal representative and its placement in the hands or name of the testamentary or statutory benefi ciary”; • “the words ‘distribute’ and ‘distribution’ [being] used in the Act … in the sense of a physical parting with that asset and its placing in the hands or name of an intended benefi ciary”; and • “only a complete removal of the whole of the assets of the deceased from the hands or name of the personal representative will prevent the court extending the time for making an application for an order of maintenance.”

The Court of Appeal concluded that neither the Arnold Terrace property nor the Royal Terrace property had been distributed within the meaning of Section 8 (5) of the IFP Act.

It was found that: • the word “distribution” in Section 8 (5) of the IFP Act takes its meaning from the text, context and evident purpose of that provision and does not merely import equitable concepts applying to

executors and trustees or as to when gifts become effectual; • the Registrar-General was entitled and obliged to reject the Application to Register Death (because it did not correctly refer to the capacity in which

Paul was making the application); • because the amended Application to

Register Death had not been lodged on 2 June, 2020, and the other documents were dependent on the registration of that document, neither the Arnold

Street property nor the Royal Terrace property had been distributed as at 2

June, 2020; and • even if equitable principles as to when gifts become effectual were applied, neither property had become effectual in equity as at 2 June, 020.

As a result, Danuta’s application was not nugatory and could proceed in the normal course.

The case therefore contains lessons for practitioners administering estates (i.e. it is important to be clear and correct when drafting documents giving effect to testamentary dispositions) and also for those advising on IFP claims (i.e. that it is critically important to issue and serve IFP claims within time and to always consider what effect distribution of estate assets might have on the effi cacy of the IFP claim).

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