Wills & estates: new case law on trusts, funds and probate issues

Private Charitable Trusts and Prescribed Private Funds

A Prescribed Private Fund (PPF) is a private charitable trust prescribed by tax law. It is a trust established by Will or trust instrument to which businesses, families and individuals can make tax deductible gifts.

James N Kirby Foundation-v-Attorney-General NSW [2004] NSWSC 1153 is an interesting case that involved an application to vary a trust deed for a charitable foundation so as to bring the private charitable trust within the definition of PPF set out in the Income Tax Assessment Act 1997 (Cth).

While the ATO originally approved the Foundation as a PPF, it was thought necessary to amend the trust deed to protect that status. The issue in the case was whether the Court had the jurisdiction to make the order varying the trust deed as the trust deed itself contained no provision for its amendment.

The Kirby Foundation argued the Court could invoke its inherent jurisdiction or it could rely upon section 81 of the Trustee Act 1925 (NSW).

In delivering his judgement, Justice White held that the Court did not have inherent jurisdiction to alter the terms of the trust deed. It then had to be determined whether the proposed amendments to the trust deed were expedient "in the management or administration of [the] property vested in [the] trustee", and may be authorised under section 81(1) of the Trustee Act.

It was noted that the expediency must be in the management or administration of the trust, not in relation to other matters. However, numerous cases had held that the concept of the expedient management and administration of trust property is wide ranging. Justice White was satisfied that the Court had jurisdiction under section 81(1) of the Trustee Act to confer upon the trustees the necessary power for them to amend the trust deed so as to satisfy the requirements for the Kirby Foundation to qualify as a PPF as defined in the ITAA 1997.

Unopposed Solemn Form Application

In Pratt-v-Estate of O'Sullivan [2005] NSWSC 1046 (10 October 2005), Justice Young sitting as the Chief Judge in Equity made some general comments about an unopposed application for grant of probate in solemn form.

The testatrix Mrs O'Sullivan died on 7 April 2004. She made a Will on 22 March 1998 and another Will in the year 2000. The evidence showed that in July 2000 the Guardianship Tribunal made orders with respect to guardianship which expired in 2001 and also for management of Mrs O'Sullivan's affairs. The evidence before the Tribunal showed Mrs O'Sullivan was suffering from mild dementia and had some problems in remembering which members of her family were still alive, and that she suffered from some depression.

The grandson of Mrs O'Sullivan applied for a grant of probate in solemn form of the 22 March 1998 Will giving the requisite legal notice to the principal beneficiaries of the 2000 Will. The principal beneficiaries did not take part in the proceedings for the grant in solemn form.

In finding that the testatrix did not have sufficient capacity to make the 2000 Will and in granting probate of the 1998 Will, Justice Young said:-

"The mere fact that a person is found by the Guardianship Tribunal to have those disabilities does not necessarily mean that they lack testamentary capacity. However, so where there is no other evidence the court can certainly draw from that evidence an inference of lack of capacity, which might be reinforced by the fact that in response to the citations the persons who might benefit under the 2000 will did not seek to be heard, nor to produce any evidence from the solicitor who seems to have made the 2000 will."

Photographs admitted to Probate

In Re Estate of Torr (2005) 91 SASR 117 the deceased had photographed many items in her house and had written on the photographs to whom she wanted the items to be given. Justice Besanko held that a photograph was a document that could be admitted to probate under the South Australian dispensing power as a codicil to a formal Will.

Contested Probate Discovery

The case of Simpson-v-Hodges; Re: Estate of the Late Pamela Amy Simpson [2005] NSWSC 1051 (17 October 2005) involved an application for discovery of documents in contested proceedings for probate. It was an application before Justice Campbell to review an order of the Registrar refusing to order any discovery.

The deceased lived with the defendant for about one year before she died and had given the defendant a power of attorney. It appears an amount of about $200,000 was transferred out of the deceased's bank account in a way which was for the personal benefit of the defendant.

The plaintiff in his Statement of Claim alleged that the money was removed using the power of attorney without the knowledge or approval of the deceased, or alternatively, that the transaction was the product of undue influence. The defendant claims that nothing improper had been done and she had received the money as a gift.

The plaintiff claimed that the deceased just prior to her death informed him that a large amount of money was missing and sought his assistance to recover it.

The defendant's barrister claimed the plaintiff could obtain the relevant information by the issue of a large number of subpoenas. The judge didn't consider that to be an appropriate course considering the small size of the estate and, whilst unusual in probate litigation, made an order for discovery.

Whilst the order for discovery turned upon the facts of this case, it may be possible, in appropriate circumstances, to use discovery rather than the power of attorney legislation to review the actions of an attorney who dealt with a deceased person's assets prior to their death.