Application by Clauson

1. [1]

   HER HONOUR: This is an application for judicial advice pursuant to s 63 of the Trustee Act 1925 (NSW) by the plaintiff (Ms Clauson) in her capacity as administrator of the estate of the late Patrick John David McKeon. The advice sought goes to whether the plaintiff would be justified in administering the estate of the deceased as an insolvent estate, which turns ultimately on whether the proceeds of certain insurance policies taken out by or on behalf of the deceased are liable to be applied in payment of the debts of the deceased. That raises a question as to the proper construction of s 205(1)(a) of the Life Insurance Act 1995 (Cth).

2. [2]

   The Commissioner of Taxation (the Commissioner) intervened in the proceedings as an interested party (being a creditor of the deceased’s estate) and made submissions as to that question. For the reasons that follow I accept the Commissioner’s construction of the expression “the person’s debts” in s 205(1)(a) of the said Act; relevantly, that it does not include the deceased’s “post-death tax liabilities”. Accordingly, the deceased’s estate should be administered on the basis that the proceeds of the relevant life insurance policies are not protected from application in respect of the deceased’s post-death tax liabilities.

Advice sought

1. [3]

   Section 63(1) of the Trustee Act provides that a trustee may apply to the Court for an opinion, advice or direction on any question respecting the management or administration of the trust property. Section 5 of the Trustee Act defines “trustee” as including a “legal representative” which term is in turn defined as “executor or administrator” and thus includes the plaintiff, to whom letters of administration were granted in respect of the deceased’s estate on 17 August 2015.

2. [4]

   There is no doubt that the present application for judicial advice is properly made (in accordance with the general principles applicable to such an application as articulated in Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 at 89–94 [54]-[75]; [2008] HCA 42), in circumstances where the plaintiff, in her capacity as administrator of the deceased’s estate, seeks to resolve legitimate doubts as to the proper administration of the estate and to protect the estate and those interested in it.

3. [5]

   That said, as framed in the amended summons filed by leave at the commencement of the hearing the advice sought went beyond this and, in terms, went to the settlement of other (family provision) proceedings. At the hearing, that aspect of the plaintiff’s application was not pressed – the application being limited to the seeking of advice in relation to the proper treatment of the proceeds of various insurance and superannuation policies held by or for the benefit of the deceased.

4. [6]

   In summary, the advice that is sought is whether the plaintiff, as administrator of the deceased’s estate, would be justified:

Background

1. [7]

   The deceased died intestate on 7 May 2014. At the time of his death he was a partner of PriceWaterhouseCoopers. The plaintiff was the deceased’s de facto wife. The deceased was survived by four children – two adult children from a former marriage and two minor children from a former de facto relationship.

2. [8]

   The deceased’s estate consisted, as at 20 June 2017, of the balance in a National Australia Bank (NAB) account (fully off-set against an NAB Business Loan); an entitlement to partnership profits (as at the date of death an amount estimated at $292,455), a loan of $38,300 and personal items estimated at $23,000, together with the proceeds of (or, perhaps more accurately in the case of the Metlife insurance policy, a beneficial interest in the proceeds of) the insurance and superannuation policies the subject of the present application. Those proceeds are a sum of about $700,000 under a Sunsuper superannuation policy which was payable as a death benefit and amounts totalling $3,135,424.69 plus £449.97 from the three insurance policies said to be life insurance policies within the meaning of the Life Insurance Act 1995. The amounts payable under the Abbey Life and TAL policies have already been paid to the estate. The amount payable under the Metlife insurance policy ($2.5 million) has been paid to PricewaterhouseCoopers Nominees (NSW) Pty Ltd (PwC Nominees), the policy in question being a PricewaterhouseCoopers Partners Group Life Plan.

3. [9]

   The estate has a number of unsecured liabilities, the most significant of which in monetary terms being the amount owing on the NAB Business Loan (estimated at $849,769.30 plus interest) and tax liabilities (of around $1.2 million, plus general interest charges). Some of those tax liabilities were incurred prior to the deceased’s death but by far the bulk of those tax liabilities (estimated by the Commissioner as being in the sum of $983,384.90) is comprised of a sum described in the amended statement of facts as a “post-death” liability. I was informed by Senior Counsel appearing for the Commissioner that the “post death” tax liability (or part of it) arose because an amount of about $780,000 was treated as income generated by a deemed dividend under Division 7A of the Income Tax Assessment Act 1936 (Cth) (referable to certain loans of the deceased on which interest was not paid after his death). In other words, it was said that this was not simply a matter of a notice of assessment issued after death in relation to income earned before death; rather, that a significant proportion of the tax liabilities arises from a notice of assessment issued after the death of the deceased in respect of income earned after his death (see T31-32).

4. [10]

   It does not appear to be disputed that the deceased’s assets, excluding the superannuation and life insurance proceeds, will be insufficient to meet his unsecured liabilities but that if the proceeds of the Abbey Life, TAL and Metlife policies are not protected from the deceased’s creditors (at least in respect of post-death liabilities) then there would be money available to discharge those debts. The Commissioner’s position is that the proceeds of the life insurance policies (if each of the three policies in question is properly to be treated as a life insurance policy) should be distributed to creditors (at least those claiming for post-death liabilities).

5. [11]

   On 5 May 2015, through their mother as tutor, the deceased’s two minor children commenced family provision proceedings under Ch 3 of the Succession Act 2006 (NSW). Agreement has been reached as to the proposed settlement of those proceedings (under which agreement the superannuation and life insurance proceeds are to be paid to the deceased’s four children). That settlement has not yet been approved and, having regard to its terms, there is clear potential for it to be affected by the outcome of the present application (since if the Commissioner is correct not all of the life insurance proceeds will be available for the children as contemplated by the proposed settlement of the family provision proceedings).

6. [12]

   The plaintiff’s application has been served on each of the Australian Taxation Office, NAB, and the deceased’s children (or, in the case of his two minor children, their tutor). Only the Commissioner has intervened in the hearing of the application, though a solicitor acting in the family provision proceedings (Mr Dornan) was in attendance at the hearing of this application. No submissions were made by Mr Dornan in relation to the issues the subject of the judicial advice application.

7. [13]

   The Commissioner accepts, as is clearly the case, that the proceeds of the deceased’s Sunsuper superannuation policy are unavailable to the estate’s creditors, not forming a part of the deceased’s estate. Therefore the second aspect of the advice sought by the plaintiff is not contested and should be given.

Relevant provisions of the Life Insurance Act 1995 (Cth)

1. [14]

   The Life Insurance Act 1995 relevantly provides:

Submissions

1. [15]

   The plaintiff submits that the relevant effect of s 205(1) is that money payable under a life insurance policy is not liable to be applied or made available in payment of the person’s debts, including debts to the Crown, whenever those debts were incurred.

2. [16]

   Although the Privy Council held in Attorney-General (NSW) v Curator of Intestate Estates [1907] AC 519 that s 4 of the former Life, Fire and Marine Insurance Act 1902 (NSW), a predecessor to s 205(1), did not bind the Crown, the Commissioner does not dispute that s 205(1) now binds the Crown. The Commissioner nonetheless submits that the proceeds of the TAL, Abbey Life and Metlife policies are liable to be applied to the deceased’s tax debts for one or both of two main reasons, to which I will shortly turn.

3. [17]

   First, however, I should note as a preliminary point that neither of the TAL and Abbey Life policies was in evidence on the present application and there was thus no evidence of the terms of either policy.

4. [18]

   In that regard there were copies in evidence of two statutory declarations made by the plaintiff: one, in relation to the claim made in respect of the TAL policy, in which she states that the TAL policy was lost or destroyed and declares that she, as administrator, is “the person legally entitled to claim the proceeds of [the specified policy] on the life of Patrick John David McKeon”; and the other, in relation to the claim made in respect of the Abbey Life policy, in which she declares that she is “the person legally entitled to a Grant of Representation Certificate of Confirmation to the deceased’s estate”. The latter declaration identifies a policy number and identifies the assured life as being that of the deceased. The plaintiff submits that the fact of payments made to the estate under each of the TAL and Abbey Life policies supports the view that the policies engaged both s 204 and s 205 of the Life Insurance Act 1995, as being policies “on the life of” the deceased.

5. [19]

   The Commissioner submits that it is not enough to know that TAL and Abbey Life have paid money to the estate; and argues that there must be evidence that the terms of the policy provided that on the death of the assured the money became “payable to the person’s estate” (T 25.22).

6. [20]

   In that regard, it is relevant to note that s 63(4) of the Trustee Act has the effect that there is no need for an applicant for judicial advice to adduce evidence; rather, it suffices, to attract the protection of s 63, that the applicant has stated the facts correctly to the Court. Conversely, an applicant is not protected if the relevant facts are not correctly stated to the Court.

7. [21]

   In the present case there is at least an available inference, from the fact that moneys were claimed (and paid) under an insurance policy from a life insurance company on the event of a person’s death, that the TAL and Abbey Life proceeds are moneys payable under a policy effected on the deceased’s life.

8. [22]

   Assuming that those policies were indeed policies effected on the deceased’s life, such that under those policies moneys became payable in the event of his death, then the plaintiff would be justified in treating the proceeds received from the claims made under those policies as being protected by s 205 of the Life Insurance Act 1995 (subject to the discussion below as to the scope of that protection).

9. [23]

   A second preliminary issue (before turning to the reasons advanced by the Commissioner for the construction of s 205 for which he contends) is as to whether (as the plaintiff submitted at the hearing) the Metlife policy death benefit is protected by both s 204 and s 205 of the Life Insurance Act 1995. There is no dispute that the Metlife policy falls within the definition of a “life policy” in s 9 of the Life Insurance Act 1995. Accordingly, the plaintiff submits, s 204 is engaged (even though the policy is owned by PwC Nominees) and hence the Metlife funds are protected under s 204 from “any judgment, order or process of a court in discharge of a debt owed by the person”.

10. [24]

    The Commissioner submits that s 204 deals with the rights and interests of a person while that person is alive in respect of a life policy whereas s 205 is the protection given to the proceeds of a life policy after the person’s death. The plaintiff, however, submits that s 204 has application both before and after the deceased’s death; it is said that “s 204 covers both life and death whereas s 205 only covers death” and that the sections “do very different work” (T 38).

11. [25]

    As framed, the advice sought by the plaintiff did not encompass the potential application of s 204 of the Life Insurance Act 1995 and it is fair I think to say that I did not have the benefit of any particularly considered argument on that point. Suffice it to say that I accept the Commissioner’s submission that the relevant section of potential application in the present case is s 205, which directly addresses the position applicable on the death of the person (as opposed to s 204, which in its terms appears more apt to apply to the protection of the rights and interests of the insured under life insurance policies whilst the insured is still alive).

12. [26]

    Finally, by way of preliminary comment, I accept the plaintiff’s contention that the phrase “a policy effected on the person’s life” in s 205(1) of the Life Insurance Act 1995 covers policies taken out by or owned by persons other than the deceased, even though reference to such policies is not expressly included in the section (cf s 204(2)(b)). There is nothing in s 205(1) of the Life Insurance Act 1995 to require that the policy be one that was effected by or in the name of the person in question and I see no reason to read that into the section (particularly since the two sections have a different sphere of operation).

13. [27]

    I turn now to the two main reasons one or both of which is advanced for the Commissioner as to why one or more of the three insurance policies in question are not protected from the deceased’s creditors (at least in relation to post-death debts).

14. [28]

    First, the Commissioner submits that s 205(1) is not engaged where the money is payable in any other manner.

15. [29]

    The Commissioner points to the terms of the Metlife policy, cl 6.1 of which provides that when a PwC partner covered by the Metlife policy dies the insurer is obliged to pay a death benefit to the “Policy Owner”. The First Schedule to the Metlife policy identifies the Policy Owner as PwC Nominees. The definition of Policy Owner provides that the Policy Owner acts as sole trustee for the insured partners, each of whom owns his or her own insurance cover. Similarly, cl 15 of the Metlife policy provides that:

16. [30]

    There is no evidence as to whether there is an applicable trust deed for the purposes of cl 15.1. The plaintiff and Commissioner have indicated that they are unaware of any such deed. However, as pointed out by the plaintiff (T 37.4), an applicant for judicial advice is bound to give all information relevant to the application to the Court lest the protection of s 63 be lost, or, as the Commissioner put it (T 23.50), the Court’s advice can be qualified by reference to an assumption that there is no such deed.

17. [31]

    The amount of the death benefit, is specified in the First Schedule, cl 7 of which provides:

18. [32]

    An extract tendered from the firm’s partner handbook indicates that partners are automatically insured under the Metlife policy and that premiums payable in respect of that policy are deducted from each partner’s profit draw.

19. [33]

    The Commissioner submits that since the Metlife policy obliges the insurer to pay the death benefit not to the deceased’s estate but to PwC Nominees, albeit as trustee for the deceased’s estate, the money did not become payable to the estate upon the death of the deceased and therefore does not fall within the terms of s 205 of the Life Insurance Act 1995.

20. [34]

    The plaintiff, however, emphasises that although the policy is owned by PwC Nominees, the moneys payable are to be held “in trust for the benefit of that Covered Person” (i.e., the deceased). The plaintiff submits that (in the absence of any applicable trust deed for the purposes of cl 15 of the Metlife policy) the funds paid out under that policy are held by PwC Nominees on a bare trust (it having no active duties except to pay those funds to the estate of the deceased). Accordingly, it is said that the funds became payable to the estate upon the death of the deceased because the policy was effected upon the life of the deceased and, upon his death, the moneys became payable to his estate, albeit through the conduit of PwC Nominees as policy owner and bare trustee.

21. [35]

    The plaintiff concedes that the circumstances may have been different if the policy owner had any kind of discretion in relation to the payment of the moneys received under the Metlife policy but in the present case (and contrary to the advice apparently communicated initially by PwC in response to an enquiry made of that firm) the plaintiff says there is no such discretion. Hence it is argued that the proceeds are protected by both s 204 and s 205 of the Life Insurance Act 1995.

22. [36]

    The second issue raised by the Commissioner goes to the scope of the protection conferred by s 205 of the Life Insurance Act 1995. The Commissioner submits that s 205 of the Life Insurance Act 1995 only provides that proceeds of a policy effected on a person’s life are not liable to be applied or made available in payment “of the person’s debts”; and does not apply to debts incurred after the death of the person. In particular, the Commissioner submits that funeral and testamentary expenses, post-death tax liabilities and legal costs incurred by the administrator are not “the person’s debts” and that the life insurance proceeds the subject of these proceedings (if they be life insurance proceeds) are liable to be applied to those debts.

23. [37]

    The Commissioner refers to analogues of ss 204 and 205 in the Companies Act 1915 (Vic) and Companies Act 1928 (Vic), in which the phrase “his debts” was confined to debts incurred in the life of the deceased (In the Will of O’Brien (deceased) [1924] VLR 262 at 268; (1924) 30 ALR 260 at 262; In re Wertheim [1934] VLR 321 at 332), and to a similar construction placed on s 92 of the Life Insurance Act 1945 (Cth) (namely that it only prevented policy proceeds from being liable to be applied to debts that were incurred in the life of the deceased – see White v Commissioner of Stamp Duties [1968] Qd R 140).

24. [38]

    The plaintiff, however, submits that s 205 protects benefits paid under life insurance policies from being applied even to debts incurred after the death of the deceased. She submits that the Commissioner’s construction of the section does not accord with its purpose of protecting policy proceeds for the deceased’s beneficiaries. It is said that the prima facie protection afforded by s 205 extends to all debts which are payable out of the estate. The plaintiff also points to the fact that Sch 3 of the Probate and Administration Act 1898 (NSW) requires the administrator to pay pre- and post-death liabilities of an insolvent estate and contends that the words “the person’s debts” should not be confined to pre-death debts.

25. [39]

    The plaintiff argues that in none of the cases cited by the Commissioner has s 205 of the Life Insurance Act 1995 been considered and submits that in those circumstances the Court should come to its own conclusion as to whether “the person’s debts” include post-death tax liabilities. The plaintiff seeks to explain the ratio of the cases relied upon by the Commissioner as being that the historical analogues of s 205 do not protect life policy proceeds from being liable to be applied to debts incurred by an administrator or executor or another person (not the deceased estate). The plaintiff argues that the tax debts in this case are distinguishable because they have a “direct line to the deceased” in that they are incurred on his income and his loan (T 35.8).

26. [40]

    The plaintiff notes that s 204 provides protection for the “rights and interests of the insured”, while s 205, even more broadly, provides “protection of policy moneys”. She submits that the clear purpose of each of the sections is to protect life insurance proceeds from creditors and, presumably (taking into account the predecessors of the section) to provide security for the family of the deceased. In those circumstances, it is submitted that the sections should be construed broadly and with that purpose in mind.

Determination

1. [41]

   As to the first of the two issues, this arises only in relation to the Metlife policy. The question is whether the Metlife policy’s death benefit was “payable to the person’s estate under a policy effected on the person’s life” (Life Insurance Act 1995, s 205(1)).

2. [42]

   In my opinion, if a life insurance policy obliges the insurer to settle the death benefit on a bare trust for a person who is by then deceased, then the proceeds are proceeds that become “payable to the person’s estate” “under” a policy effected on the person’s life within the meaning of s 205 of the Life Insurance Act 1995. In the present case, in the absence of any applicable trust deed for the purposes of cl 15 of the Metlife policy, the administrator of the estate would have an immediate right to call for the money from PwC Nominees, which is holding the funds as trustee for the “Covered Person”. Section 205 does not in terms require that the moneys be payable by the insurer directly to the deceased’s estate. All it requires is that the moneys “become payable” to the person’s estate under the terms of the policy. In this case the policy stipulates that the proceeds are payable to PwC Nominees “in trust for the benefit of” the Covered Person.

3. [43]

   The purpose of construing the text of a statute is to ascertain therefrom the intention of the enacting Parliament (Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 374–375; [1998] HCA 28 at [41]). It seems clear that the Commonwealth Parliament’s intention in including the words “payable to the person’s estate” was that the protection under s 205 was not to apply to policies effected on the deceased’s life but enuring to the benefit of a third party. This is not such a policy. The terms and scheme of the legislation also disclose a purpose to protect life policy proceeds from creditors. The interpretation I consider should be given to s 205 would best achieve that purpose and must therefore be preferred (Acts Interpretation Act 1901 (Cth), s 15AA).

4. [44]

   By way of introduction to the determination of this second issue, it was not disputed that ss 204 and 205 of the Life Insurance Act 1995 are to be construed in accordance with the general principles of statutory construction. As was said by the plurality in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at 46-47; [2009] HCA 41:

5. [45]

   The principal object of the Life Insurance Act 1995 is said in 3(1) to be “to protect the interests of the owners and prospective owners of life insurance policies in a manner consistent with the continued development of a viable, competitive and innovative life insurance industry”.

6. [46]

   The relevant question for present purposes is as to the meaning of “the person’s debts” in s 205(1)(a) of the Life Insurance Act 1995. As the answer to that question is not readily apparent on the face of the Act, both parties sought to make reference to materials outside the statute. In Certain Lloyd’s Underwriters Subscribing to Contract No IH00AAQS v Cross (2012) 248 CLR 378 at 412; [2012] HCA 56 Kiefel J (as her Honour then was) said in relation to extrinsic materials generally:

7. [47]

   In the present case, the materials outside the Act to which reference was principally sought to be made were two cases dealing with an earlier Victorian Act (O’Brien and Wertheim) and one case considering an earlier Commonwealth Act (White). Subsequent research in chambers after judgment was reserved unearthed a number of other statutes which may fairly be seen as precursors to the current Act as well as some case law discussing those statutes. Taken together, although these materials do not put the matter beyond doubt, they reveal a line of authority relevant to the resolution of the present question. (In circumstances where the conclusion I have reached draws heavily on the authorities to which reference was made at the hearing, I did not see the need to invite further submissions on the discussion that follows.)

8. [48]

   As was said in Lennon v Gibson & Howes Ltd [1919] AC 709; [1919] UKPCHCA 2 by Lord Shaw in delivering the judgment of the Privy Council in an appeal from the High Court of Australia (at 711-712):

9. [49]

   It has been said that whether statutes are in pari materia is determined on a case by case basis (Wilson v Transport Accident Commission [2017] VSC 209 at [27], referring to DC Pearce and RS Geddes, Statutory Interpretation in Australia (8th ed, 2014, LexisNexis) 128–9 [3.36]–[3.37]).

10. [50]

    Statutes affording protection in respect of policies of life insurance were enacted in the colony of NSW from the mid-1850s, a development later followed in Tasmania (in 1866), Victoria (in 1873), Queensland (in 1879), South Australia (in 1882) and Western Australia (in 1887) (AC Gray, Life Insurance in Australia: An Historical and Descriptive Account (McCarron Bird, 1977) at 62-63).

11. [51]

    Some key legislative enactments preceding the Life Insurance Act 1945 (the immediate predecessor to the Life Insurance Act 1995) include the Life, Fire and Marine Insurance Act ss 4-7; the Companies Act 1938 (Vic) s 554; the Life Assurance Companies Acts 1901-1934 (Qld) s 18; the Life Assurance Companies Act 1936-1941 (SA) s 7; the Life Assurance Companies Act 1889 (WA) s 33; the Life Assurance Companies Act 1885 (Tas); and the Policies Protection Act 1887 (SA) ss 3-5. Wickens (PC Wickens, The Law of Life Insurance in Australia (Lawbook Company, 1979) at 96) notes that:

12. [52]

    Before considering the Commonwealth legislation, it is instructive to consider the operation and effect given to the earlier legislation by state courts.

13. [53]

    In Anderson v Egan (1905) 3 CLR 269, the High Court considered s 33 of the Life Insurance Companies Act 1889. That section relevantly provided that:

14. [54]

    In Anderson v Egan, the administrator of an estate (which consisted solely of £1253 3s 2d, an amount payable to the legal representatives of the deceased under a policy of assurance) relied upon s 33 in response to a claim by a creditor owed £420 13s 2d. The High Court held that the proceeds were protected in the hands of an executor or administrator, whether or not the executor or administrator was also the next-of-kin of the deceased. For present purposes, the relevance of Anderson is simply that the High Court had regard to the interpretation of similar provisions throughout Australia (see, e.g., at 275: “Reference to previous Australian legislation on the subject makes, to my mind, this conclusion quite clear”) but nevertheless affirmed the need to construe the provisions on their own terms (see, e.g., 277-279).

15. [55]

    The earliest NSW Act appears to be the Australian Mutual Provident Society Act 1857 (NSW). Section 14 of the Act relevantly provided as follows:

16. [56]

    As Griffith CJ explained (at 276) in Anderson v Egan, the protection afforded by this Act was limited to members of the Australian Mutual Provident Society. A more general statute was passed in 1862 (see the Life Assurance Encouragement Act 1862 (NSW), s 2), though the relevant provisions were essentially identical. The preamble read, “[w]hereas it is expedient to encourage and protect Life Insurances and other like provident arrangements for the benefit of insurers their wives and families.” Although it was described as “statesmanlike and clear”, Manning J remarked that the Act was “ill-drawn” (In the Estate of Adams (1894) 15 LR (NSW) B & P 135 at 144; 149).

17. [57]

    When the Act came before Simpson CJ in Eq for consideration in Re Palmer; Perpetual Trustee Co Ltd v Palmer (1903) 3 SR (NSW) 141, his Honour acknowledged (at 142) that the scheme was “sufficiently clear” but considered the Act “not easy to construe”, even remarking at the conclusion of his judgment that he would “be glad if the parties could see their way to take the opinion of a higher Court on the matter” (at 146).

18. [58]

    The issues agitating the court in Adams and Palmer were different to the question now arising for consideration, but both highlight that notwithstanding the clear policy underlying statutes which propose to protect the proceeds of life insurance policies, courts have long found it difficult to discern the precise ambit of the protection envisioned by the legislature.

19. [59]

    In 1902, the Life, Fire and Marine Insurance Act was passed. Section 4 of that Act provided as follows:

20. [60]

    In In the Estate of Mattson (1906) 6 SR (NSW) 11, the deceased, an insane patient, had been maintained out of funds belonging to the consolidated revenue of the State. This gave rise to a debt. A petition by the Attorney-General brought against the Curator of Intestate Estates in respect of this Crown debt was resisted on the basis of s 4 of the Life, Fire and Marine Insurance Act. Walker J dismissed the petition on the basis that policies of insurance within the provisions of that Act were equally exempt from the claim of the Crown in respect of the Crown debt as they are in respect of debts due to ordinary creditors (see 13). The Court of Appeal affirmed his Honour’s judgment and held that the Life, Fire and Marine Insurance Act bound the Crown (cf Attorney-General (NSW) v Curator of Intestate Estates [1907] AC 519). Darley CJ said the following (at 15):

21. [61]

    Despite the width of the words “in the administrator’s hands for the payment of debts” and “all debts Crown or otherwise”, this passage, read in context, does not shed any light on the present issue of construction. In Mattson, the debt, though due to the Crown, was clearly one arising in the course of the deceased’s life. In any event, although s 4 of the Life, Fire and Marine Insurance Act is certainly one manifestation of the species of legislation under consideration (Palmer v The Public Trustee (1916) 21 CLR 645 at 665), like other enactments of the period, it contains no reference to the payment of an insured’s “debts” and its present relevance is therefore limited. The Victorian legislation, to which I now turn, stands in a different category.

22. [62]

    In Davey v Pein; Colonial Mutual Life Assurance Society v Davey [1883] 9 VLR 169, two cases were heard by the Full Court of the Supreme Court of Victoria which required consideration of the Life Assurance Companies Act 1873 (Vic). Section 37 of that Act provided as follows:

23. [63]

    Higinbotham J (as his Honour then was), with whom Cope J agreed, commenced his judgment with a general consideration of the Act (at 462-463):

24. [64]

    Pausing there, Higinbotham J’s reference to an individual dying “encumbered with debts” may be significant. On one reading the remark may be taken as attributing to the legislature an intention to confine the statutory protection to debts that the individual has incurred as at the time of his or her death, on the footing that those debts are the ones which an individual is “encumbered by” at death. Higinbotham J then considered how the object of the Act was to be carried out (at 463):

25. [65]

    His Honour emphasised the circumstances as existing at the date of death. In this passage his Honour refers to property “which belongs to [the deceased] at the time of his death” (my emphasis) immediately before a reference to the payment “of his debts”, and subsequently to property “existing in him at the time” (my emphasis). However, one should also bear in mind his Honour’s explicit acknowledgment (at 463) of the likelihood that the legislature had intended to appeal to both the interest of the insured, as well as to his “natural and proper regard to the care and interests of his family”. In other words, the temporal emphasis in this passage upon the circumstances of the deceased (that is, his assets and liabilities) must be read in its context; a context which involved the acknowledgment of the beneficial nature of the legislation

26. [66]

    Higinbotham J then considered the operation of the section (at 464):

27. [67]

    The reference to “the creditor at the assured’s death” (my emphasis) may be taken as suggesting that the protection is confined to debts incurred during the lifetime of the deceased. Nonetheless, I do not consider that these passages from Davey v Pein significantly advance the resolution of the question as to the interpretation of “his debts” in the Life Assurance Encouragement Act 1873 (and, by extension, “the person’s debts” in s 205 of the Life Insurance Act 1995).

28. [68]

    In Allen v Edmonds [1886] 12 VLR 789, the Court considered the position of a deceased who had in 1879 effected a policy of insurance on her life for a specified sum. She died in 1885. Prior to her death, her husband, Mr Edmonds, had become insolvent and in July 1886 the trustee of his estate assigned for value to another all the real and personal estate devised or bequeathed to Mr Edmonds under the deceased’s will (at 791). A question arose as to who was entitled to the proceeds of the life insurance policy that had been received by the executors. Webb J referred to Davey v Pein and deduced from the opinions in that case that (at 792):

29. [69]

    This passage accords with the view that a liberal construction was to be given to the Act. In respect of Mrs Edmonds’ funeral and testamentary expenses, his Honour said (at 792):

30. [70]

    Webb J appears to have been of the view that, absent the express direction by the deceased, funeral and testamentary expenses may have been protected by the Life Assurance Companies Act 1873. However, his Honour went on (at 793) to state that:

31. [71]

    In respect of the executor’s costs, charges and expenses, his Honour held that the executor could have resort to the policy money (at 793). In any event, Allen v Edmonds does not in terms limit the protection afforded by s 37 of the Life Assurance Companies Act 1873 to the debts incurred during the lifetime of the deceased and accordingly does little to advance the present discussion.

32. [72]

    However, the case of O’Brien does appear to take the matter further. That case involved consideration by Cussen ACJ of s 476 of the Companies Act 1915 (Vic) which provided, relevantly, as follows:

33. [73]

    In O’Brien, the testator had died on 8 January 1923 leaving a will in respect of which probate was granted to Messrs Patrick Raftis and Josephine Raftis (the plaintiffs). The will contained no directions as to the payment of the testator’s debts, funeral or testamentary expenses, or as to the payment of probate duty (at 263). At the time of his death the testator’s debts included an overdraft on his current account at the English, Scottish and Australian Bank Ltd (secured by certain preference shares, then held by the bank) (at 264). His estate included (in addition to realty specifically devised, certain shares, certain furniture and effects and other personal property) two life policies maturing only at death, the sum assured in each case being under one thousand pounds (at 263-264). By summons, the plaintiffs asked, inter alia (at 264):

34. [74]

    His Honour held that the bequest to the testator’s wife of “all my life policies furniture effects and all other personal property whatsoever” was residuary (at 267). His Honour then went on to determine how certain debts, funeral and testamentary expenses, and state probate duty were to be provided for (at 267). The probate duty was imposed by the Administration and Probate Act 1915 (Vic), ss 132 and 133 of which provided, relevantly, as follows:

35. [75]

    It was submitted for the plaintiffs in O’Brien that the life policies were exempt from being applied not only in respect of debts incurred by the testator during his lifetime, but from other claims subsequently arising which were in the nature of debts against the estate (at 266). His Honour said that the effect of s 476 of the Companies Act 1915 in the case before him was that the life policies were not liable for the payment of “ordinary debts” (at 268). His Honour later said the following (at 268):

36. [76]

    Accordingly, his Honour answered questions 3 and 4 as follows (at 268-269):

37. [77]

    The ratio of O’Brien would appear to be that s 476 of the Companies Act 1915 protected the property or interest of a deceased in a life insurance policy from being applied in payment of the “ordinary debts” of the deceased, by which Cussen ACJ meant debts which were incurred during the lifetime of the deceased. In O’Brien, the consequence was that the testator’s life insurance proceeds could be applied in respect of testamentary expenses and probate duty. In reaching this conclusion, Cussen ACJ relied upon two matters. First, the earlier decision of the High Court in Lilly & Steere v West Australian Trustee & Agency Co Ltd (1911) 13 CLR 416. Second, the reference in s 476 to insolvency and execution. In relation to the latter, I note that s 205 of the Life Insurance Act 1995 (although expressly said to be subject to the Bankruptcy Act 1996 (Cth) in s 205(3)) does not contain such a reference. In relation to the former, it is necessary to consider what was decided in Lilly & Steere itself.

38. [78]

    In Lilly & Steere, Griffith CJ, Barton and O’Connor JJ heard two appeals which required consideration of the Duties on Deceased Persons’ Estates Act 1895 (WA) (the DDPEA Act) and the Administration Act 1903 (WA). Section 12 of the DDPEA Act (which related to the Steere appeal) provided as follows:

39. [79]

    Section 13 of the DDPEA Act also provided as follows:

40. [80]

    Sections 87 and 111 of the Administration Act (which related to the Lilly appeal) were relevantly identical. In both of the appeals heard by the High Court, the testator had given the residue of his estate to certain persons after payment of his debts, funeral and testamentary expenses (Lilly & Steere at 417; 420). It was argued, among other things, that the duty payable under the relevant Acts was in either case a “testamentary expense” and should be paid in accordance with the testator’s directions as to testamentary expenses. In each case, the relevant direction was said to amount to a “special provision” within s 111 of the Administration Act or s 133 of the DDPEA Act, reliance being placed upon In re Clemow; Yeo v Clemow [1900] 2 Ch 182. (In that decision, Kekewich J had held, among other things, that a testator’s direction for payment of “testamentary expenses” in respect of his wife included the payment of any estate duty payable on her death.)

41. [81]

    Their Honours held that the duty payable in each case under the relevant Act was not a testamentary expense within the meaning of the wills under consideration. Their Honours drew attention to s 87 of the Administration Act which “clearly distinguishes between the duty under the Act and testamentary expenses” (their Honours noting that s 12 of the DDPEA Act was relevantly identical) (at 428). In relation to the reliance placed upon In re Clemow, their Honours said (at 428):

42. [82]

    Their Honours then said the following (at 428):

43. [83]

    For present purposes, the ratio of Lilly & Steere would appear to be that the duty imposed by s 87 of the Administration Act and s 12 of the DDPEA Act is to be paid before “all other debts”, “debts” in this context referring to those incurred by a deceased during his lifetime.

44. [84]

    Pausing here, the relevant passages in both Lilly & Steere and O’Brien interpret “debts” in their relevant statutory contexts as referring to those of the deceased, qualified with the phrase “incurred during his lifetime”. In Lilly & Steere, a distinction seems to be made between pre-death debts and post-death debts in the context of a consideration of a particular argument advanced by counsel (one which, it would seem, sought to subvert the clear intention of the legislature to confer priority upon the duty payable under the relevant Acts albeit with certain exceptions, this priority being provided for in a manner clearly premised on a distinction between testamentary expenses and all other debts). In O’Brien, the distinction appears in relation to a specific question as to the scope of s 476 of the Companies Act 1915 in relation to certain debts (namely, funeral and testamentary expenses and State probate duty) the answer to which turned on whether those debts were, properly understood “his debts” (that is, debts of the deceased).

45. [85]

    In the absence of other authority, it may be thought that determinative weight should not be placed on the phrase “incurred by him during his life” in O’Brien, a case dealing with s 476(3) of the Companies Act 1915, for the present task of construing s 205 of the Life Insurance Act 1995. One reason is O’Brien’s reliance upon Lilly & Steere. As is clear from the passage extracted above, their Honours were construing different legislation; specifically, a reference to duty being paid “in priority to all other debts”. The statements in Lilly & Steere and in O’Brien were directed at the particular legislative provisions in question, applied in a specific factual matrix. As was said in Quinn v Leathem [1901] AC 495 at 506; [1901] UKHL 2 (referred to approvingly in New Galaxy Investments Pty Ltd v Thomson [2017] NSWCA 153 at [280]):

46. [86]

    Even apart from this general proposition, while s 205 of the Life Insurance Act 1995 and s 476(3) of the Companies Act 1915 share common subject matter they are differently expressed. The latter concerns the protection of “the property and interest of such person in any policy or policies of assurance on his life maturing only at his death”; such property and interest “shall not be assets for the payment of his debts” (my emphasis). The former concerns the protection of “money [that] becomes payable to the person’s estate under a policy effected on the person’s life”; such money is not to be applied for “the payment of the person’s debts” (my emphasis).

47. [87]

    There is another reason why it may be considered that determinative weight should not be placed on the phrase “incurred by him during his lifetime” in that judgment. It is at least conceivable that the relevant phrase simply reflects an assumption that, generally speaking, in the ordinary course of events an obligation to pay a sum of money arises as a consequence of one’s own acts or omissions and therefore ex hypothesi in the course of one’s life, such words not however intending to foreclose the possibility that in an appropriate case a debt in the context of the statutory schemes considered in O’Brien may nonetheless be considered a debt of the deceased notwithstanding that it was technically incurred after death. The relevant debt in O’Brien was probate duty. That was deemed by statute to be a debt of the testator. In other words, the legislation itself acknowledged the true state of affairs (namely, that absent such a deeming provision probate duty was not a debt of the testator). Similarly, testamentary expenses are properly characterised as debts of the administrator or executor, not the deceased (see RA Woodman, Administration of Assets (2nd ed, Law Book Company, 1978) at 10).

48. [88]

    To return to the Victorian cases, in Wertheim, Mann ACJ (with whom Lowe and Martin JJ agreed) considered s476(3) of the Companies Act 1928 (relevantly identical to the corresponding section in the Companies Act 1915, as considered in O’Brien). Wertheim involved the equitable doctrine of marshalling. However, a question arose as to the availability of life insurance policies for the payment of certain debts, including (see 323-324):

49. [89]

    Mann ACJ said the following (at 332):

50. [90]

    In a concurring judgment, Lowe J referred to funeral, testamentary and administration expenses and the Crown debts, noting that (at 336):

51. [91]

    Accordingly, Wertheim confirmed the construction adopted by Cussen ACJ in O’Brien, the consequence being that s473 of the Companies Act 1928 was to be interpreted as referring only to debts of the testator incurred during the life of the testator. In fact, Wertheim appears to go further than O’Brien: protection is denied not only in respect of probate duty (a tax debt which was statutorily deemed to be a debt of the testator) but also in respect of certain taxes levied by reference to income derived by a testator before death but assessed and therefore incurred after death.

52. [92]

    In In re Aylwin [1937] VLR 105, at death the testator had unsecured debts of 1,511l. 13s 5d. A question arose as to whether the proceeds of certain life insurance policies could be applied in respect of (at 106):

53. [93]

    Martin J held (at 111):

54. [94]

    Aylwin thus also confirms that the protection afforded by the Victorian legislation (then found in s 476 of the Companies Act 1928) did not extend to debts incurred after the death of the deceased. The sole reason advanced for the non-protection of the policies in respect of arrears of state and federal income tax incurred as at the date of death was that the Crown was not bound by the statute. (As noted earlier, in the present case, the Commissioner does not deny that the Crown is bound (see T 10; 21.32).)

55. [95]

    By the time of In re Lesser; National Trustees Executors & Agency Co of Australasia Ltd v Lesser [1944] VLR 210, the relevant legislation was found in s 554 of the Companies Act 1938 (Vic). Section 554(4) provided as follows:

56. [96]

    In Lesser, the deceased had charged his estate with the payment of alimony to his former wife (at 212). It was submitted that his “estate” should not be regarded as including certain policy moneys, by virtue of s 554 of the Companies Act 1938. The originating summons asked, among other things (at 213):

57. [97]

    Gavan Duffy J noted that the legislation did not prevent the insured from charging the policy during his lifetime and that “legislation, now found in s 554 of the Companies Act 1938, prevents policies to the extent of 1,000l. being made liable for debts” (at 213). His Honour (adopting the language of Webb J in Allen v Edmonds at 792) held that despite the Act preventing the policy proceeds from being used “for the payment of debts after [the assured’s] death”, “the dominion over the policy is left with the assured, who may dispose of it either during his life, or by his will” (at 213). His Honour then said the following (at 213):

58. [98]

    His Honour’s conclusion (namely, that the policies were not protected by the Companies Act 1938 in respect of administration expenses, estate duty and “any other taxes levied on the estate”) does not appear to have turned solely on his Honour’s view that that Act did not prevent an insured charging the policy during his lifetime. In other words, although his Honour did not refer to the earlier cases, the reasoning in this passage appears to be premised on construction of the statute, not on the fact that the deceased had indeed charged the policies and thereby removed them from any protection they might have otherwise had. If that is the case, then although his Honour did not in terms refer to the earlier cases of O’Brien, Wertheim and Aylwin his conclusion is consistent with them. That said, it may be that Aylwin can be distinguished insofar as: administration expenses are debts personal to the administrator, not the deceased; estate duty is statutorily deemed to be a debt of the testator but is not, properly understood, such a debt (hence the need for statutory deeming); and his Honour refers to taxes levied on the estate (as distinct from, say, taxes which are properly considered to be “his debts”, namely those levied by reference to conduct of the individual during his (or her) life, even though they do not, for whatever reason, become due and payable until after death).

59. [99]

    In any event, as the foregoing demonstrates, there is indeed a line of authority by reference to the old Victorian Companies Acts suggesting (either in terms or in substance) that the protection afforded by those Acts extended only to the “ordinary debts” of the deceased, “ordinary debts” being those incurred by the deceased in the course of his or her life (O’Brien; Wertheim). The consequence was that the policies were not exempt from probate duty (O’Brien; Aylwin) or estate duty (Wertheim; Aylwin; Lesser); or from testamentary and funeral expenses (O’Brien; Aylwin) or administration expenses (Aylwin; Lesser); nor, most relevantly, from taxes levied in respect of income derived by the deceased during his lifetime but assessed and hence incurred after death (Wertheim; Aylwin).

60. [100]

    The various statutes enacted throughout Australia were replaced by Commonwealth legislation towards the middle of the last century. In the Second Reading speech on 25 May 1945, the purpose of the Life Insurance Bill 1945 (Cth) was said to be the regulation of life insurance business in Australia and “to protect the interests of persons who have effected life insurance policies” (at 1). A main object of the Life Insurance Bill 1945 was said (at 2) to be to replace all State legislation on the subject of life insurance. As to the protection of life policies from the payment of creditors, the explanatory memorandum provided as follows (at 6):

61. [101]

    As enacted, ss 92 to 93 of the Life Insurance Act 1945 (Cth) provided as follows:

62. [102]

    The only decision on the operation of s 92 to which I was referred in the course of argument on the present application was White. Although White is a first instance decision and his Honour confined his analysis to provisions of the relevant taxing statute, on one reading his Honour’s remarks appear to be consistent with the line of Victorian authority considered above.

63. [103]

    In White, Gibbs J (as his Honour then was) heard an appeal by petition from an assessment by the Commissioner of Stamp Duties on succession arising or deemed to arise on the death of the deceased. It was argued that the assessment was invalid because it was contrary to s 92 of the Life Insurance Act 1945. After setting out the relevant provisions, his Honour said the following (at [28]):

64. [104]

    The remarks in the first part of the passage effectively dispose of the argument raised by the petitioner in White. Section 92 required that the debt be that of the person in respect of whose life the policy was effected but the succession duty was clearly not such a debt – it was a “debt due by the successors” and certain other persons.

65. [105]

    On one reading, the second part of the passage contains a confirmation of the view expressed in the Victorian cases (albeit without reference to those decisions) if read as suggesting that the succession duty was not properly the debt of the deceased solely because it was “not chargeable until after [his] death” (my emphasis). Reading the passage as a whole, it appears that the reason for the non-application of s 92 was that the debt could not in any sense be that of the deceased because it was a debt incurred by the successors and certain other persons on the statutory hypothesis that the insured had in fact died. It is not clear from the passage that his Honour intended to lay down any broad principle as to the meaning of “his debts”. Rather, the remarks were made in the course of emphasising that which is made express in s 92; namely, that protection is conferred in respect of “his debts” (that is, the deceased’s) alone. Debts arising as a consequence of succession duty imposed on the deceased’s successors are clearly not debts of the deceased.

66. [106]

    Accordingly, although White is not inconsistent with the Victorian authorities (and, as noted, on one reading is consistent with them), I do not consider that it settles conclusively for present purposes the meaning of “his debts” in s 92.

67. [107]

    For completeness, I note certain parallel developments.

68. [108]

    Section 94 of the Life Insurance Act 1945 provided as follows:

69. [109]

    As Crisp J noted in In re Perry (1963) 5 FLR 116, s 94(1) was not “a novelty”. His Honour there referred to s 11 of the Married Women’s Property Act 1882 (UK), which relevantly provided as follows:

70. [110]

    In Commissioner of Probate Duties (Vic) v Mitchell (1960) 105 CLR 126, Fullagar J described (at 143) the object of s 94 of the Life Insurance Act 1945 as being:

71. [111]

    It was held that the effect of s 94 was to create an immediate trust in respect of the beneficial interest in the policy. This meant that the policy moneys did not form part of the dutiable estate of the deceased for the purpose of s 104 of the Administration and Probate Act 1958 (Vic) (liability depending on whether the transaction creating the beneficial interest amounted to a “disposition of property” within s 100 of that Act) (at 139-142; 152).

72. [112]

    In Forsyth v Commissioner of Stamp Duties (1966) 114 CLR 194 the High Court held that there was no constitutional inconsistency between s 94 of the Life Insurance Act 1945 (Cth) and s 102(2)(h) of the Stamp Duties Acts 1920-1959 (NSW). Kitto J explained the operation of s 94 as follows (at 202-203):

73. [113]

    The potential relevance of this passage for present purposes lies in his Honour’s acknowledgment that the protection afforded by s 94 was not absolute in the sense one might have otherwise expected in light of the beneficial nature of the legislation, though the constitutional context, and the fact that, unlike s 92, s 94 creates an immediate trust, must be borne in mind.

74. [114]

    Taylor J considered the meaning of the concluding words of s 94 (those being in similar terms to s 92) (at 209-210):

75. [115]

    Finally, of potential relevance is the following remark of Barwick CJ (with whose judgment McTiernan J expressed agreement) in Hill v Federal Commissioner of Taxation (1969) 119 CLR 72 at 74:

76. [116]

    The relevant provisions of the Life Insurance Act 1995 have been extracted earlier. The Court was not referred to any judicial consideration in relation to s 205 of the Life Insurance Act 1995 shedding light on the present issue of construction. Some cases have considered s 205 but, as none advances the matter, it is not necessary to consider them (see Burke v Commissioner of Taxation [2004] FCA 126 at [17]; Re the Estate of Robbins (Deceased); ex parte Robbins [2008] WASC 243 at [16]-[21]; Riches v McInnes [2010] WASC 298; In the Estate of Cornford (Deceased) [2015] SASC 15 and Addison v Shore [2016] WASC 223). For completeness, I note that it appears that s 205 was inserted into the Life Insurance Bill 1994 following a Committee of the House of Representatives on 16 November 1994, the Supplementary Explanatory Memorandum in relation to s 204 providing as follows (at 39):

77. [117]

    In relation to s 205, the Supplementary Explanatory Memorandum provided as follows (at 39):

78. [118]

    If the present question were res integra, I would have considered there to be considerable force in the submission that the expression “the person’s debts” in s 205 of the Life Insurance Act 1995 is not necessarily confined to those debts of the deceased which he or she incurred in his or her lifetime (as opposed to debts arising after the person’s death by the operation of some deeming position as is the case here). Confining “the person’s debts” to those debts incurred during the lifetime of the deceased, as opposed to debts for which the deceased’s legal personal representative is liable to pay out of the deceased’s estate (not being debts incurred by that legal personal representative in the administration of the estate) stands in an uneasy relationship to that which the authorities considered above have taken to be the underlying object of provisions such as ss 204 and 205 of the Life Insurance Act 1995, and the clearly remedial or beneficial nature of legislation of this kind (which, it has been said, suggests that it should not be construed “in any narrower or more restrictive sense than its language would fairly allow” - see NM Superannuation Pty Ltd v Young (1993) 41 FCR 182 at 43.

79. [119]

    I am of course mindful of the warning sounded by French CJ and Hayne J in Certain Lloyd Underwriters at [26]:

80. [120]

    Nevertheless there are indications in the text supporting the plaintiff’s construction. First, the comprehensive nature of the prohibition in s 205(1)(a)(i)-(ii) (“not liable to be applied or made available under any judgment, order or process of a court or in any other manner whatsoever in payment of the person’s debts” (my emphasis)). Second, the limited nature of the exceptions enumerated in s 205(1)(b) (namely, express provision by contract, the charging of the money, or an express direction), coupled with the precise clarifications in s 205(1)(c). Third, the absence of anything in the text or context of the provision which is indicative of a legislative intention that there be imposed on the concept of “debts” a distinction drawn by reference to the precise time at which the debt in question crystallised. As the plaintiff submits, s 205 refers to “debts” but does not attempt further to define that term, whether by category of debt or category of creditor.

81. [121]

    Accordingly, absent authority on the point, I would have been inclined to the view that the plain and ordinary meaning of s 205 of the Life Insurance Act 1995 is that money becoming payable to a person’s estate under a policy effected on that person’s life is not liable to be applied or made available “in payment of the person’s debts”, whensoever those debts were incurred, provided that those debts – upon a proper consideration of the circumstances giving rise to the debt, including any relevant legislation – are properly to be characterised as debts of the person (as distinct from, say, debts arising out of the administration of the estate or debts personal to the administrator or executor).

82. [122]

    However, there is indeed a line of authority weighing in favour of the construction advanced by the Commissioner. Particularly decisive in this regard is Wertheim, a decision of the Full Court of Victoria, where Mann ACJ (with whom Lowe and Martin JJ agreed) said that debts owing by virtue of Commonwealth and Victorian income tax (both in respect of income derived by the testator before his death, but assessed since his death) were not claims “in respect of a debt of the testator in his lifetime” and hence that the proceeds of the life policy was available for their payment (at 338) (my emphasis). As noted above, their Honours endorsed the view of Cussen ACJ in O’Brien which itself relied upon the decision of the High Court in Lilly & Steere.

83. [123]

    Notwithstanding the possible difficulties I have noted in the course of these reasons as to the scope or meaning of these authorities, I do not consider that it is open to me, sitting as a court of first instance, to depart from them in circumstances where they are decisions of relatively long standing concerning legislation clearly antecedent to s 205 of the Life Insurance Act 1995 and cannot in my respectful opinion be said to be plainly wrong. As suggested above, s 205 does indeed convey the impression that the legislature intended to confer broad protections, subject to limited exceptions. However, that impression can also be derived from a plain reading of the earlier legislation (namely, the Victorian Companies Acts of 1915, 1928 and 1938), yet cases such as O’Brien, Wertheim and Aylwin each adopted (either in terms or in substance) the view that the word “debts” in the relevant provisions was to be read as the ordinary debts of the deceased, being those incurred by the deceased in the course of his or her lifetime.

84. [124]

    Accordingly, although I consider that there is considerable force in the view that one should not read into s 205 any temporal distinction between “pre-death debts” and “post-death debts” (that is, that the sole question should be whether the debt is the person’s debt, with no a priori assumption as to the relevance of the precise time at which the debt is incurred), I have concluded that in view of the existing authorities, the Commissioner’s construction of s 205 in this regard is the one that should be adopted at least at first instance.

85. [125]

    As I have made clear earlier, I accept the Commissioner’s submission that s 205 is the relevant provision in a case such as the present. In any event, the above reasoning would apply mutatis mutandis in respect of the phrase “a debt owed by the person” in s 204.

86. [126]

    As to the content of the advice now to be provided in accordance with the above reasons, it is in two respects predicated on the assumption that the facts as presented by the plaintiff are correct: first, that the TAL and Abbey Life policies were indeed policies effected on the life of the deceased such that moneys became payable thereunder to his estate on his death; and, second, that there is no applicable trust deed for the purposes of cl 15 of the Metlife policy that would cause the trust on which PwC Nominees holds the funds for the benefit of the deceased’s estate to be properly characterised as more than a bare trust. The advice will be qualified accordingly. Also, I do not consider it appropriate to provide judicial advice as to the solvency or otherwise of the estate as a result of the conclusion that I have reached as to the proper scope of the protection afforded by s 205 of the Life Insurance Act 1995 to the proceeds of the three life insurance policies. It should be sufficient for the plaintiff’s purposes as administrator for judicial advice to be provided as to the construction of s 205.

Costs

1. [127]

   As to costs, the plaintiff seeks her costs on the indemnity basis from the estate (such costs having priority as costs of estate administration). Such an order should be made.

2. [128]

   As for the Commissioner’s costs, the plaintiff points out that the only party to judicial advice is the trustee (referring to s 63(4)-(11)) and argues that, the Commissioner having chosen to take an active role in the proceedings aimed at protecting his own position, there should be no order as to his costs with the intent that he should bear his own costs (referring to Re Rosewood Research Pty Ltd (No 2) [2014] NSWSC 1226). However, the Commissioner having intervened as an interested party has been successful in advancing the construction of s 205 in his favour and in those circumstances I am of the view that the Commissioner should have his costs on an ordinary basis out of the estate of the deceased though with no priority over other unsecured creditors.

Orders

1. [129]

   For the above reasons, I make the following orders:

   1. (1)

      Pursuant to s 63 of the Trustee Act 1925 (NSW), advise the plaintiff that, as administrator of the estate of the late Patrick John David McKeon (“the deceased”), the plaintiff would be justified in administering the estate of the deceased on the basis that:

   2. (2)

      Note that the advice in order 1(b) above is predicated, in relation to the proceeds of the Abbey Life Assurance Company Limited and TAL Life Limited policies, on the assumption that those policies were insurance policies effected on the life of the deceased within the meaning of s205 of the Life Insurance Act 1995 (Cth) and, in relation to the proceeds of the Metlife Insurance Limited policy, on the assumption that there is no applicable trust deed (for the purposes of cl 15 of the said policy) pursuant to which PwC Nominees Pty Ltd was to hold the proceeds of the policy other than as bare trustee for the estate of the deceased.

   3. (3)

      The costs of the plaintiff be borne on the indemnity basis out of the estate of the deceased, with priority as an expense of the administration of the estate.

   4. (4)

      The costs of the Commissioner of Taxation be paid out of the assets of the estate on the ordinary basis, with no priority over unsecured creditors of the estate.

2. [130]

   The above will presumably have an impact on the agreement pursuant to which the family provision proceedings were to be settled. When judgment is delivered in the present proceedings I will invite submissions (and to the extent practicable make directions) as to the further disposition or conduct of the family provision proceedings.