Ross v Sebek

These proceedings concern the estate of Ian Ivan Sebek (the deceased), who died on 23 February 2020, leaving property in New South Wales, and a duly executed Will dated 10 July 2019.

The deceased was survived by his two, now adult, children, being the Plaintiff, Jana Ross, and the Defendant, Martina Michelle Sebek, to whom Probate of the deceased’s Will was granted on 25 May 2020. Shortly, I shall return to all of the relief sought in the amended Statement of Claim.

The proceedings provide yet another sad example of an unfortunate legal dispute, waged between the living over the property of the dead, and the costly, unrelenting battle between siblings over the estate of one parent. As will be read, it provides an even more depressing example of sibling emotions overtaking commercial good sense. The Court made every effort to encourage the resolution of the proceedings, bearing in mind the amounts involved, without success.

The hearing was listed for two days, and it was concluded within that time. Mr J E F Brown of counsel, instructed, at the hearing, by Ms I Buckendorf, solicitor, appeared for the Plaintiff, and Mr D C Price, of counsel, instructed, at the hearing, by Mr A Dewell, solicitor, appeared for the Defendant.

At the hearing, the pleadings relied upon were an amended Statement of Claim filed on 11 October 2021 and a Defence to the amended Statement of Claim filed on 15 October 2021. There was no Cross-Claim filed by the Defendant.

In the amended Statement of Claim, the Plaintiff sought the following relief:

In the Plaintiff’s written Opening Submissions, counsel only referred to the issue concerning the relief relating to the transfer of real estate owned by the deceased, to which I shall return, stating “[t]he balance of the relief will be addressed in closing”.

Bearing in mind the nature of the relief being sought and the fact that the matter was listed for hearing, submissions should have been made in respect of all of the relief that the Plaintiff intended to seek at the hearing. To the extent that she did not wish to proceed with any part of the claims for relief, that should have been disclosed. The Court, and the parties, have an obligation to facilitate the just, quick, and cheap, resolution of the real issues in the proceedings.

Counsel for the Defendant’s submissions were also limited, referring to facts relating to the administration of the estate and 5 paragraphs relating to the conduct of the Defendant.

During submissions, counsel for the Plaintiff confirmed that the only claims for relief that were being pressed were those referred to in Paragraphs 4, 5 and 9: Tcpt, 7 September 2022, p 79(17-39). (Paragraphs 10, 11 and 12 relate to costs and it has been assumed that the relief sought in those Paragraphs are also being pressed.)

There was no challenge to the validity of the deceased’s Will. It was obviously professionally drawn but there was no evidence about the circumstances in which it was drafted or executed. On 25 May 2020, the Court granted probate thereof, to the Defendant.

Relevantly, the deceased appointed the Defendant as the sole executor and trustee (Clause 2). The Will, then provided:

In Clause 5 of the Will, the deceased gave certain powers to the executor, which powers the executor was entitled to exercise in her discretion. These powers, relevantly, included any powers given to her by law (Clause 5.1); the powers of a trustee for sale in respect of any assets in the estate, including a power to postpone sale (Clause 5.2); and also a power to use income, capital or both, to pay capital gains tax assessed on the disposal of any asset (Clause 5.5).

Because it is relevant to what appears to now be the most important issue in dispute between the parties, it is necessary to set out, verbatim, Clause 5.6 of the deceased’s Will:

Importantly, the deceased did not include in the Will any express instruction to the executor, to sell the property in the estate and distribute the proceeds to the two beneficiaries named in Clause 4 of the Will.

In the Inventory of Property, which was attached to, and placed inside, the Probate parchment, the estate of the deceased was said to comprise real estate situated at Sodwalls Road, Tarana (“the Tarana property”). Tarana is a small town in the Central West of New South Wales, about 28 kilometres west of Lithgow and about 160 kilometres west of the Sydney CBD.

In the Inventory of Property attached to the Probate, the estimated, or known, value of the Tarana property was disclosed to be $370,000. There was also money held in a bank account ($10,003).

As will be read, the Plaintiff asserted, in correspondence sent to the Defendant’s solicitors prior to the commencement of the proceedings, that there were other assets which ought to have been included as property in the estate of the deceased. At the hearing, however, there was no evidence to support any assertion that there was property, of substantial value, not referred to in the Inventory of Property, that formed part of the estate of the deceased.

In addition, in paragraph 7 of her affidavit affirmed on 16 September 2021, the Plaintiff appeared to accept that the deceased’s estate comprised the assets referred to in the Inventory of Property. (I interpolate that in Paragraph 5 of her Defence to the amended Statement of Claim, the Defendant asserted that the deceased’s personal effects had no value.)

In Paragraph 9 of her affidavit, the Plaintiff appeared to accept, also, that the liabilities of the estate included funeral and wake expenses ($7,920 and $384), Probate filing fees ($1,033), council rates ($1,055) and costs and disbursements of obtaining Probate ($5,383). (I have omitted, and will continue to omit, a reference to cents.)

Unsurprisingly, in Paragraph 10 of her affidavit, the Plaintiff also accepted that the liabilities of the deceased’s estate ($15,775) exceeded the cash in the bank account. It follows that the only property in the deceased’s estate, after the payment of the liabilities, was the Tarana property.

(In light of the Plaintiff’s evidence set out above, it is difficult to understand why the Plaintiff sought so much of the relief in the amended Statement of Claim.)

The evidence reveals that the Tarana property comprises 3.325 hectares. It is an irregularly shaped allotment that is predominantly cleared. The land is generally undulating. Upon the land is a vinyl clad detached house, with a tile roof, comprising three bedrooms, a semi-modern kitchen/dining, lounge, original bathroom, separate w/c, internal laundry and two small, covered, verandahs. There is no specific car accommodation, although there is a large shed capable of accommodating vehicles. There are some ancillary improvements, including two concrete water tanks, two small dams, the large shed, and two small sheds.

At no time, it would seem, was there agreement between the parties on the value of the Tarana property, as at the date of death, or subsequently, as at about April 2021, the relevance of which date will shortly be apparent, or at the date of the hearing.

Much of the time was spent at the hearing dealing with evidence of the value of the Tarana property, asserted by each of the parties, to which reference will be made. Argument raged about whether what was relied upon by each party was a valuation, and in the case of the Defendant, was one as required by Clause 5.6. The weight to be attached to the evidence was also a topic of dispute at the hearing.

I take the following facts from the evidence, which I am satisfied were not the subject of real dispute between the parties, or which have been established, on the balance of probabilities.

The deceased was the sole registered proprietor of the Tarana property at the date of his death.

On 14 April 2020, the Defendant obtained two written valuations of the Tarana property, at the date of the deceased’s death (23 February 2020) from Peter Matthew Craig of Cityside Valuers Pty Ltd, a Certified Practising Valuer and member of the Australian Property Institute. One valuation was stated to be for “Probate Purposes”, and the other was stated to be for “Stamp Duty Purposes”. Each valuation stated that the market value of the property was $370,000. (I refer to each being a “valuation” in this paragraph without prejudgment.)

In the valuations, Mr Craig, the valuer stated:

Mr Craig also wrote that:

He went on to write that:

On 19 May 2020, the Defendant’s solicitor, Mr Paul McPhee, sent an email to the Plaintiff stating that the approximate net value of the estate was $360,199, and that accordingly the value of the 25 per cent to which the Plaintiff was entitled, was $90,049.75. The Defendant’s solicitor set out the way in which the Plaintiff’s entitlement had been calculated. It was disclosed that there had been a notional deduction from the total value of the property of the deceased (said to be $380,003), funeral, and wake, expenses ($7,920 and $384), an amount paid on account of the Probate filing fee and valuation ($2,500) and what were described as “estimated costs and expenses” ($9,000). This yielded a net figure of $360,199, 25 per cent of which was $90,049.75.

The email went on to state that:

A copy of the valuation from Mr Craig was attached, as was a copy of a Funeral Agreement dated 24 February 2020 and a bank record disclosing the amount held in bank.

In an email of 10 July 2020, from the Defendant’s solicitor to the Plaintiff, a further request was made for “an urgent response to my emails of 19 May 2020 and 2 June 2020.” (The email of 2 June 2020 was not in evidence).

The Plaintiff responded to Mr McPhee’s email on 6 November 2020, stating:

The Plaintiff did not provide any explanation for not responding to the email correspondence from the Defendant’s solicitor. Nor did she explain, in any other way, how the calculation of her entitlement had been reached.

The Plaintiff, in her affidavit, did not suggest that “the property valuations and advice” referred to were provided to the Defendant at the time she made the proposal. However, it would seem that the estimated value of the Tarana property would have had to have been in the order of $600,000, for the Plaintiff’s share thereof, to be calculated at $150,000. (In using that amount, the debts, funeral and testamentary expenses, to the extent that they were not paid out of the cash in the estate, were not deducted.)

Mr McPhee sent an email, dated 27 November 2020, to the Plaintiff, querying the Plaintiff’s calculation and requesting a copy of “all valuations, upon which you have relied in calculating the $150,000”.

The Plaintiff responded by email on 9 December 2020, enclosing what were said to be two “real estate market opinions” which she appears to have obtained in June 2020. The first was one by Jaharn Torok of Ray White, a firm of real estate agents, who opined that the price of the property was between $500,000 - $600,000. It was not suggested that she was a valuer.

The second was one from LJ Hooker Lithgow, another firm of real estate agents, in which it was written that the property “would have a current sales potential of $550,000 - $580,000” and that the “Recommended asking price $ Public Auction”. Again, it was not suggested that the “sales potential” was expressed by a valuer.

In addition, in her email, the Plaintiff stated that she had “taken into consideration the disclosure of assets … which only lists the Real estate and … bank account. I note no inventory or valuation was provided of the farm equipment or personal items…”.

On 17 December 2020, Mr McPhee responded to the Plaintiff’s email dated 9 December 2020, and stated:

On 17 February 2021, 22 March 2021 and 12 April 2021, Mr McPhee sent emails to the Plaintiff noting that no response had been received from the Plaintiff to his email dated 17 December 2020. In his emails dated 22 March 2021 and 12 April 2021, respectively, he stated that the Defendant had instructed him to transfer the Tarana property to her, in her personal capacity, for $90,049.75. He also suggested that if the Plaintiff objected to the Defendant doing so, she should:

On 14 April 2021, the Plaintiff sent an email to Mr McPhee attaching an updated “Market appraisal”. In fact, this document was a copy of an email dated 5 June 2020 from Mr Blake Edgell, who was identified as “a licensed real estate and stock and station agent” at LJ Hooker Rural. That email contained what was said to be a market opinion and other matters regarding sale.

Relevantly, the copy document provided that “It is my opinion that the property would have a current sales potential of $600,000 - $660,000”, that the “Recommended asking price - $Auction” and a sale price of $600,000. Later in the document, the estimate was referred to as “The Appraisal Amount”.

The document also included a statement that the “selling fee would be $19,800 inc GST”, but this may not have included a “Marketing and Advertising Budget” referred to separately of $3,120 (including GST).

There was a further email, dated 12 April 2021, from Mr Edgell to the Plaintiff, a copy of which was sent by the Plaintiff to the Defendant’s solicitor, which was responding to an email dated 11 April 2021 to him in which she had referred to a “market opinion” that Mr Edgell had provided in June 2020. She asked whether “the market value of the property has changed or do you think it is the same”.

In his email, Mr Edgell stated that “the market has moved since we spoke last…In my opinion there is a premium to be achieved in the current market due to high buyer demand and a shortage of quality rural listings”.

In her email to the Defendant’s solicitor, the Plaintiff then repeated her offer of $150,000 for her share of the deceased’s estate.

It is worth repeating that neither of the real estate agents who provided the appraisals, a copy of which were sent to the Defendant’s solicitors, was disclosed as being “an independent valuer”. Neither gave evidence in the proceedings, and none of the documents identified is in the form of a valuation.

Mr Craig provided another valuation of the Tarana property determined at 22 April 2021. He wrote, in this written valuation, that:

(As will be read, Mr Craig, acknowledged, in cross-examination, that he had not inspected the Tarana property externally on 22 April 2021 and that this was an error contained in the later valuation.)

The valuation repeated, in a summary form, much of what was included in his first valuation and repeated what he had written as to the “Valuation Rationale” concluding that:

At or about this time, the Defendant, by her solicitors, sought, and obtained, another valuation. There was a successful objection to its contents so nothing more will be said about it.

On a date not disclosed in her affidavit, the Plaintiff engaged her current solicitors, and on 27 April 2021, they sent a letter to the Defendant’s solicitors that was marked “without prejudice”. On 13 May 2021, the Plaintiff’s solicitors sought a response to the letter sent on 27 April 2021, to the Defendant’s solicitors. Naturally, a copy of each letter is not in evidence.

On 22 May 2021, the Plaintiff’s solicitors sent an email to the Defendant’s solicitors requiring a “substantive response to our letter of 27 April by 4:00 pm on Monday 31 May 2021, we hold instructions to commence proceedings against your client seeking a revocation of the grant of probate made to her, orders for the sale of estate realty and an order that your client pay the costs of our client personally”.

On 26 May 2021, the Defendant’s solicitors sent by express registered mail a Trust cheque to the Plaintiff for $102,500, being “distribution of your one-quarter share as a beneficiary of the above estate”. (The cheque sent was not banked by the Plaintiff.)

In an email sent on 27 May 2021, to the Plaintiff’s current solicitors, by the Defendant’s solicitors, the way in which the amount of the Plaintiff’s 25 per cent share of the deceased’s estate had been calculated was explained. In broad terms, it was written that the value of the deceased’s estate based upon the value of the Tarana property and cash, less liabilities (said to be $28,866) was $406,543, which resulted in the value of the Plaintiff’s 25 per cent share to be $101,635. It was asserted that the sum paid was “$864 in excess of your client’s 25% entitlement”.

Regrettably, some of the liabilities of the estate included reimbursement of the costs of “painting materials for the property” ($300), “labour contributed by Martina Sebek and her family in respect of painting” ($400), labour contributed by Martina Sebek and her family towards maintenance…” ($4,050), costs and expenses of the Defendant’s solicitors ($5,383 and $1,683). There were other expenses also deducted.

Subsequently, on 19 August 2021, the Defendant’s solicitors sent a cheque for $1,187, being a one quarter share of the labour expenses referred to ($4,750).

On 12 May 2021, the Defendant transferred the Tarana property to herself. She agreed that she had done so, upon the basis that she had complied with the terms of the deceased’s Will in ascertaining the entitlements of the beneficiaries: see Paragraph 7 of the Defence to the amended Statement of Claim. A copy of the Transfer was not in evidence, although it was not in dispute that title to the Tarana property is now registered in the name of the Defendant.

Pausing here, it is important to note that even assuming the correctness of the Plaintiff’s assertions as to the value of the Tarana property, the difference between the parties, as to the Plaintiff’s share, was, initially, slightly less than $60,000; was subsequently, $47,500; and then, after the payment of the last cheque, in August 2021 was $46,313.

The bases of the calculations on each side, and the amount in issue, will be relevant to the issue of costs and supports the view expressed earlier that both parties appear to have allowed emotion to overtake commercial good sense.

At no time, did the Plaintiff assert, in the pleadings, or otherwise, that she wished to acquire the Defendant’s interest in the Tarana property for 75 per cent of the value as determined by an independent valuer.

I am satisfied, and there was really no dispute, that the documents, which had been sent by the Plaintiff to the Defendant’s solicitor, for the reasons set out earlier, do not constitute a determination of value by a valuer: Tcpt, 7 September 2022, p 102(49)-103(30). The Plaintiff did not provide any evidence, by a valuer, of the value of the Tarana property.

Importantly, in a directions hearing, held on 11 October 2021, a notation was made that “the Plaintiff is to file and serve evidence of the value of the property said to have been appropriated to the Defendant by 4:00 p.m. on 1 November 2021”.

In addition, at this directions hearing, in order to enable the formal valuation to be carried out, the Defendant was directed “to consent to any reasonable request made on behalf of the Plaintiff in regard to enabling the formal valuation to be carried out.” The notation and direction were made in the context of previous directions for the filing and service of evidence in chief, or in reply, with which the Plaintiff had not complied.

The Plaintiff provided no explanation for the failure to serve evidence, in accordance with the direction, or otherwise. Prior to the commencement of the proceedings, she had received a copy of the valuations upon which the Plaintiff intended to rely, and after the commencement of the proceedings, was given more than one opportunity to obtain a valuation.

Neither party gave evidence that the Plaintiff had, or had not, retained a valuer in accordance with the direction that had been made.

Counsel for the Defendant submitted that the Court should draw an inference that any evidence that the Plaintiff had obtained and not served would not assist her case.

Although he did not refer to authority, I note that in Chant v Curcuruto; Chant v Curcuruto [2021] NSWSC 751, I wrote at [80]-[81]:

In Bluemine Pty Ltd (in liq) v AKA (Civil) Pty Ltd; Earth Civil Australia Pty Ltd (in liq) v AKA (Civil) Pty Ltd; Diamondwish Pty Ltd (in liq) v Ivana Cassaniti; Rackforce Pty Ltd (in liq) v Ivana Cassaniti; RCG CBD Pty Limited (in liq) v Borg Family Pty Ltd [2022] NSWCA 160 at [202], and at [204], the following passages appear:

In the present case, if there is a difficulty with drawing an inference, it arises from the fact that the Plaintiff was not cross-examined, and, therefore, was not asked whether the direction to which reference has been made was complied with, or whether any valuation, written or oral, had been obtained by her.

The only inference I am prepared to draw relates to the fact that the opportunity was given to the Plaintiff to obtain evidence of the value of the Tarana property and that she either did not take up that opportunity, or, if she did, she did not produce any valuation she had obtained.

Each of the Plaintiff and the Defendant made an affidavit that was read in the proceedings. In addition, the Defendant relied upon an affidavit from Mr Craig, the valuer. Only the Defendant and Mr Craig were cross-examined.

It is necessary to note that because of the failure by the Plaintiff to comply with a direction made regarding the service of evidence, the Defendant’s affidavit was filed and served before the Plaintiff’s affidavit.

Mr Craig affirmed the contents of an affidavit made by him on 21 September 2021. He confirmed that he remained a Certified Practising Valuer and a member of the Australian Property Institute. He annexed a copy of the valuations to which reference has previously been made.

He stated that:

In cross-examination, Mr Craig confirmed that the first valuation report provided to the Defendant was for probate purposes, “and then they changed the instruction to stamp duty from memory and certainly, the most recent one which I think is the one of most relevance, was for stamp duty”: Tcpt, 6 September 2022, p 11(6-9).

In cross-examination, Mr Craig was asked whether it was his understanding that in preparing a report for stamp duty purposes, the client for whom the report was to be prepared was looking for a valuation at the lower end of the property valuation. Mr Craig responded (Tcpt, 6 September 2022, p 12(15-20)) that he had

Mr Craig explained, in cross-examination, the process by which the Tarana property was valued, including by comparing the property to sales of similar properties in the area. He maintained that the properties upon which he relied were relevant and explained how the characteristics of each property informed his analysis of the value of the Tarana property.

Although Mr Craig agreed that there was a substantial difference in the preparing of a report for stamp duty purposes and one for which there may be a contest as to its true value, he disagreed with the assertion that it was more probable than not that the value attributed to the Tarana property may have been different had he been aware of his obligation under Clause 5.6 of the Will.

He stated that “[t]he result may have been the same, but I certainly would have produced a more detailed report that was, you know, that explained things better, had more, more evidence included so that it was – if it ended up in this place, that it looked a bit better”: Tcpt, 6 September 2022, p 22(40-43).

Mr Craig agreed that it was plausible that the value he attributed to the property may have been different but disagreed that such an outcome was more probable than not: Tcpt, 6 September 2022, p 23(4-10).

Mr Craig was asked, given what he now knew about Clause 5.6 of the deceased’s Will, namely that the purpose of the report was one to have the value of the Tarana property determined by an independent valuer appointed by the Defendant, whether the report did, or did not, comply. He stated that he was “an independent valuer and it’s a valuation report, so I think yes”: Tcpt, 6 September 2022, p 37(9-28).

Mr Craig denied that it was probable that, had he been asked to determine valuation under Clause 5.6, his opinion of the valuation may have been more than $500,000, stating that he had “seen no evidence to suggest that it might come in higher than 500,000”: Tcpt, 6 September 2022, p 39(22-26). He did, however, agree that it was possible that he could have come to the view that the property was worth only $200,000, or that the property could be worth more than $500,000.

In response to questions from the Bench, Mr Craig explained the meaning of giving a valuation for “stamp duty purposes”. He stated (Tcpt, 6 September 2022, p 42(22-30), that:

Mr Craig is, and was at the relevant time he made each report, a member of the Australian Property Institute as well as being a certified practising valuer. In addition, he was not a valuer with whom the Defendant had any connection. Indeed, the instructions to him were provided by the solicitor for the Defendant. It could not reasonably be asserted that he was not an independent valuer.

In answer to questions from the Bench, he explained that the Australian Property Institute is the pre-eminent governing body for property valuers in Australia and it had replaced the registration that the government previously had. He stated that it is the leading compliance regulatory body for property valuers in Australia. (The Australian Property Institute defines a Certified Practising Valuer as “a person who, by education, training and experience is qualified to perform a valuation of real property.”)

I found Mr Craig to be a forthright, truthful and credible witness. I am satisfied that when, in his second report, in which he concluded that the value of the Tarana property was $420,000, he was an independent valuer who had carried out a valuation to determine the value of the Tarana property.

The Defendant, when cross-examined, denied requesting a valuation for stamp duty purposes because she was hoping for a low value of the property. She agreed that it had been her intention to acquire the Tarana property since the deceased’s death: Tcpt, 6 September 2022, p 45(36-42).

She also gave evidence that she had not appointed Mr Craig but that she had instructed her solicitors to obtain a valuation from an independent valuer. She had not spoken to the valuers so retained.

I also found her to be a truthful and credible witness.

At the conclusion of the evidence, counsel for the Plaintiff made an open offer that the property transaction should be set aside, that the Tarana property be listed by auction, with the Defendant to have the ability to bid at the auction, with each party to pay her own costs of the proceedings. The offer was not accepted.

Counsel for the Plaintiff submitted that the transfer of the Tarana property to the Defendant should be set aside as a self-dealing transaction by an executor. The Plaintiff wished to test the market properly by putting the property on the open market for sale.

It was submitted that the Defendant sought to appropriate the property to herself in satisfaction of her 75 per cent interest in the estate, when it was worth more than the Defendant’s interest in the estate. Therefore, the Defendant must also have purchased the balance of the property from herself as trustee.

It was submitted that the Defendant did not have the power to carry out either of those transactions and that the Will did not permit the executor to purchase the Plaintiff’s interest in the estate, which it was submitted was what actually occurred.

Counsel for the Plaintiff submitted that there was no manner in which a trustee has power to appropriate an asset to a beneficiary which is worth more than the beneficiary’s entitlement in the Will. It was submitted that it was therefore necessary to infer that the Defendant has purchased (and sold to herself) the 25 per cent balance of the Tarana property.

At common law, the power of appropriation exists independently of a will, but cannot be exercised where it would be inconsistent with the clear provisions of the Will: Wigley v Crozier (1909) 9 CLR 425 at 440-441, 444; [1909] HCA 86. Where the power was included in the Will, it must be exercised in accordance with the terms of the Will and the extent of the power will be a matter of construction of the Will.

Counsel for the Plaintiff submitted that, in the circumstances where Clause 5.6 of the Will provided a specific mechanism for the operation of an appropriation, it was not open to the Defendant to effect an appropriation at common law.

It was submitted that if the Defendant sought to exercise the power of appropriation at common law, she would have required the Plaintiff’s consent because of the prohibition at common law against self-dealing.

Counsel for the Plaintiff relied on the description of the self-dealing rule by Gleeson CJ, McHugh, Gummow, Hayne and Callinan JJ in Clay v Clay (2001) 202 CLR 410; [2001] HCA 9 at [50]-[51]:

It was submitted that the Defendant’s purchase of the 25 per cent share of the Tarana property was caught by the fair dealing rule, and that the purported power of appropriation is also caught by the rule.

It was also submitted that, although s 46 of the Trustee Act provides a power of appropriation, that power is subject to the terms of the Will. In circumstances where the Will has laid out the steps that need to be taken for a party to appropriate assets; those steps must be undertaken in order for a valid appropriation to take place. It was submitted that the Trustee Act does not provide the Defendant with any power to purchase trust assets, or which would otherwise enable her to purchase 25 per cent of the land in breach of the self-dealing rule.

Counsel for the Plaintiff relied on Clause 5.6 of the deceased’s Will, stating that the Defendant did not obtain the consent of the Plaintiff, as a beneficiary, to appropriate her interest in the Tarana property, nor did the Defendant have an agreement with the Plaintiff as to the value of the property.

It was submitted that in order to obtain a valid appropriation of the Tarana property, the Will required the Defendant to obtain the value of the land from an “independent valuer”. Instead, she obtained valuations from valuers who were not instructed to be independent, and each valuation contained a disclaimer to the effect that the valuation is for the use only of the party to which it is addressed and for the purpose stated within the valuation (being either Probate or Stamp Duty purposes).

Counsel for the Plaintiff submitted that the valuations were for the Defendant’s use only and were not in the form of independent valuations which had been anticipated by Clause 5.6 of the Will, rather, they were in the form of valuations which Young J warned would be improper in Carol Boian; Re Estate of Dan Antonio Boian (2014) 17 BPR 33,005; [2014] NSWSC 800.

It was submitted that the Will did not provide any power for the Defendant to purchase assets from the estate, and that even if the Defendant had validly exercised a power of appropriation, there is no power under the Will for the Defendant to have purchased the remaining 25 per cent interest in the property, noting that such actions would already offend the self-dealing rule.

Counsel for the Plaintiff submitted that the transfer of the Tarana property to the Defendant should be set aside, the Defendant should account for her dealings with the estate and an independent administrator should be appointed to sell the property and administer the estate. The dealings referred to were not identified.

Counsel for the Defendant submitted that the Plaintiff’s claim was misconceived, and that the Plaintiff’s case was one based on semantics and was without substance. He submitted that each element of Clause 5.6 had been satisfied, and that there was an appropriation of the Tarana property in satisfaction of the Defendant’s share of the estate.

He submitted that there had been attempts to agree upon the value without success, following which an independent valuer had been appointed by the Defendant, he had valued the Tarana property and that then an appropriation, without the consent of the Plaintiff, had occurred, the Plaintiff having been paid her 25 per cent share of the estate.

It was submitted that the Defendant had acted entirely consistently with the express words of the Will. She had not received more than she was entitled to receive, and the Plaintiff had not received less than she was entitled to receive.

Counsel also submitted that, by the Defendant acquiring the Tarana property, both parties were better off because the estate did not incur the costs and expenses of having the property sold with the involvement of a real estate agent.

Neither party relied upon any evidence going to whether, had the Tarana property been transferred to the Defendant pursuant to a power of appropriation, then the capital gains tax liability would either be reduced or that no capital gains tax liability would arise.

Although the case was not one pleaded as a will construction suit, it seems to me that it is first necessary to consider the construction of the deceased’s Will and in particular, the construction of Clause 5.6. This was accepted by counsel at the commencement of the oral submissions.

It will then be necessary to consider whether what was done complied with Clause 5.6 of the Will.

The classic statement of the principles of construction of a will is found in Allgood v Blake (1873) LR 8 Ex 160 at 162 (Blackburn J):

Because the Will is in writing, a necessary consequence is that its meaning must be discovered from the writing itself, aided only by such extrinsic evidence as is necessary in order to enable an understanding of the words which the will maker used. The language chosen is important.

The Will must receive a construction according to the plain meaning of the words and sentences therein contained. But the Court looks at the whole Will in order to give effect, if it be possible to do so, to the intention of the will-maker.

In Fairbairn v Varvaressos (2010) 78 NSWLR 577; [2010] NSWCA 234 at [19], Campbell JA (with whom Macfarlan and Young JJA agreed) cited a passage written in Coorey v Coorey (Supreme Court (NSW), Powell J, 22 February 1986, unrep):

In Muir v Winn [2009] NSWSC 857, Bryson AJ wrote at [24]:

The expressed intention of the deceased in relation to the scheme is to be found in the answer to the question, “what is the meaning of what the will maker has written”, and not to the question, “what did the will maker mean to write?”: Byrnes v Kendle (2011) 243 CLR 253; [2011] HCA 26 at [53] (Gummow and Hayne JJ) (also, see Heydon and Crennan JJ at [102]–[107]).

In Byrne v Macquarie Group Services Australia Pty Ltd [2011] NSWCA 68 at [2], Campbell JA wrote, in another context, that construction is a process of coming to understand the meaning of a text, which meaning is disputed. It involves a consideration of the disputed text in itself, both as a whole, and in its constituent parts.

(An application for leave to appeal to the High Court was dismissed in Byrne v Macquarie Group Services Australia Pty Ltd [2011] HCASL 167 by Hayne and Crennan JJ as no disputed point of general principle would fall for consideration if special leave to appeal were granted and as the appeal would enjoy insufficient prospects of success to warrant a grant of special leave.)

In Fulton v Fulton [2014] NSWSC 619, which I referred to more recently in Estate of Aspasia Kandros [2019] NSWSC 757 at [44], I wrote, at [201]:

It is necessary, in relation to the estate of a person who dies after 1 March 2008, to refer, on the question of construction, to the Succession Act 2006 (NSW) which so far as is relevant, in s 32 provides:

In this case, it is accepted by the parties that there was no extrinsic evidence that could be used to construe the deceased’s Will.

In ANZ Executors & Trustee Co Ltd v McNab [1999] 3 VR 666, Fullager J wrote, at 667:

In this case, it is next necessary to refer to the meaning of the express power given to the executor to “appropriate in full or partial satisfaction of any beneficiary’s share” in Clause 5.6 of the deceased’s Will.

A power of appropriation can be employed in lieu of a distribution to a beneficiary of an equivalent sum of money, to which she, or he, might otherwise be entitled in accordance with the terms of the Will whether by way of a specific legacy or by way of a share in residue.

The purpose of such a power has been described in GE Dal Pont, Law of Succession (3rd ed, 2021, LexisNexis) at [13.15] as:

A commonly accepted theoretical basis upon which appropriation operates has been described by Griffiths CJ in Wigley v Crozier at 438:

At 431, O’Connor J adopted counsel’s proposition that “a valid appropriation is a substitute for a valid sale”.

In Re Estate Late Austin Mack (1956) 73 WN (NSW) 218 at 220-221, Sugerman J (with whom Herron and Kinsella JJ agreed), wrote:

A power of appropriation was described in Long v Comptroller of Stamps [1964] VR 796 at 801, by Adam J, as a power:

In Lystra Allison Tagliaferri as Administrator of the Estate of David Eugenio Tagliaferri v Lystra Allison Tagliaferri and Lisa Dianna Sawyer as Trustees for Hayley Beatrice Tagliaferri and Caitlyn Thelma Tagliaferri [2013] WASC 321 at [11] (‘Tagliaferri’), EM Heenan J, wrote:

In Yule v Irwin (No 2) [2016] SASC 178 at [168], Nicholson J wrote:

In St John v St John [2021] NSWSC 399, Parker J observed, at [30], that “the effect of an appropriation at a nominated valuation is to sell the appropriated asset to the beneficiary at that valuation, which is set off against the beneficiary’s entitlement under the will”. His Honour added that the power must be exercised in a way that is not to the detriment of the estate or to the beneficiary whose interests is affected, whether generally or particularly.

Where a legal personal representative has a beneficial interest in the estate, she, or he, is entitled to self-appropriate in respect of that interest: In the Estate of Gamble (1915) 32 WN (NSW) 121. This is an exception to the prohibition of a trustee from engaging in self-dealing: Tagliaferri at [7] (EM Heenan J).

In Tagliaferri, at [45]-[46], E M Heenan also wrote:

It was submitted that there was no evidence that agreement was not able to be reached before the appointment of Mr Craig. I do not accept this submission as it flies in the face of all of the evidence. The email correspondence to which reference has been made requires me to reject the submission.

In Carr v Carr (1987) 8 NSWLR 492 at 496, Young J, considered the statutory power of appropriation in s 46(3) of the Trustee Act which refers to “a duly qualified valuer” and wrote that the section provided that the trustee shall, for the purpose of making a fair appropriation, employ a duly qualified valuer. His Honour said that “[t]hat term is not defined by the Trustee Act and would seem to me to mean any person who would be considered to be able to give the trustee proper advice as to the valuation of the land”.

There is no reason to consider that the reference to an independent valuer would not have the same meaning.

There was a complaint made that each of the two valuations obtained by the Defendant from him were not ones to which the Will referred. It is not really necessary to deal with the first valuation said to have been obtained “for Probate purposes” as this is not the valuation upon which the Defendant ultimately relied in reaching the amount to be attributed to the Plaintiff’s 25 per cent share of the Tarana property.

(In Re Estate of Boian, the administrators (who were also beneficiaries) of an intestate estate sought judicial advice in relation to the exercise of the statutory power of appropriation. Young AJA observed at [28] that “one must never appropriate on the basis of valuations obtained for probate purposes” and, more specifically, that “[t]here must always be proper independent valuations made close to the time of the proposed appropriation”.)

In the deceased’s Will, the date of the valuation of the property to be appropriated was not identified. In Williams on Wills (11th ed, 2021, LexisNexis) at [29.11] under the heading: “Value for Appropriation”, the following passage appears:

In Robinson v Collins [1975] 1 WLR 309 at 314-315, although a case involving a statutory right of appropriation, Pennycuick V.C. stated:

In Yule v Irwin at [174], Nicholson J wrote:

The meaning of “valuation” is described in the Encyclopaedic Australian Legal Dictionary, online ed, as “the act or process of ascertaining the worth of a thing” and “the assigning of a value to land, property, or assets, usually to establish the likely market price”.

The valuation of real property is described as “[b]oth the activity of assessing land value and the reduction of that assessment to written form, and includes the amount of the valuation … . The value will be the price at which a sale, after proper negotiation between willing parties, would probably be concluded. Formal valuations are often undertaken for a variety of commercial reasons. It is not a science, but an imprecise, opinionative activity involving the consideration of many variables, sometimes with different but equally legitimate outcomes”.

This meaning accords, broadly, with what was written in Spencer v The Commonwealth of Australia (1907) 5 CLR 418 at 441; [1907] HCA 82 (Isaacs J), that value means the price which a buyer would give, and a seller take, for the land in all the relevant circumstances at the acquisition date, assuming the hypothetical buyer and seller are parties “…willing to trade, but neither of them so anxious to do so that [they] would overlook any ordinary business consideration”, and both being “perfectly acquainted with the land, and cognizant of all circumstances which might affect its value”.

The value of property, “for stamp duty purposes”, refers to the “market value” of the property, as at the date of the conveyance. The ordinary principles of valuation set out in Spencer v The Commonwealth of Australia apply to the determination of dutiable value of land and the price is to be assessed with regard to the highest and best use of the land: SPIC Pacific Hydro Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 395 at [168]; Commissioner of State Revenue v Hazel Holdings Pty Ltd [2014] WASCA 203.

Whilst not specifically stated in Clause 5.6 of the deceased’s Will, the appropriation of the relevant property will be in its actual condition at the time of the appropriation. The property appropriated is taken “for better or worse, and any increase or decrease in the value of the appropriated property or the investments representing the same belongs to or falls on the beneficiary. Further, the beneficiary is not affected by any subsequent decrease in the value of the remainder of the testator’s estate or any part of it”: Liang Pui Saw Kian v Leung Yuk Chun [2016] HKCFI 1014 at [29] (Deputy High Court Judge Saunders).

An appropriation does not require any writing to carry it into effect. However, insofar as an appropriation requires, for its complete effect, a transfer of property, the necessary transfer must be made in the appropriate way, either by delivery or writing under hand or by deed as the nature of the property requires. The effect of the appropriation is that the executor ceases to hold the property as executor, and if she, or he, does not transfer it, the property is held as a trustee for the beneficiary, and not as part of the assets of the deceased’s estate.

Where other persons are interested in the property, the right of the executor to appropriate their share of the property is “governed by practical considerations and, in particular, by considerations of convenience of division and of the risk of prejudice to other beneficiaries": Manfred v Maddrell (1951) 51 SR (NSW) 95; Re Kippling [1914] 1 Ch 62.

The deceased would have been likely to have been aware of the property that he owned at the time he made the Will. At the date of death, his estate consisted of the Tarana property and cash. Each of the parties, upon administration, was entitled to the percentage share of the deceased’s estate, after the payment of debts, funeral and testamentary expenses.

I am also satisfied that the following matters are established by the evidence:

Having considered all of the facts, it seems to me that the deceased, in using the words “appropriate … any beneficiary’s share” in Clause 5.6, wished to enable the acquisition of “any beneficiary’s share” by the other beneficiary of an asset not specifically given in the Will.

Reading the Clause in this way enables sense to be made of the whole Clause:

In my view, the method adopted by the Defendant was as a substitute for a sale of the Tarana property or the transfer to the Plaintiff and the Defendant as tenants in common in different shares, and then a subsequent sale by trustees for sale. The method used effected the intention of the deceased without circuity and to avoid the associated costs and expenses of a sale in the manner submitted by the Plaintiff.

In view of the terms of the deceased’s Will, permitting the acquisition of “any beneficiary’s share” (the Plaintiff’s share) in the estate did not constitute a breach of trust.

In all the circumstances of the case, the Plaintiff’s amended Statement of Claim should be dismissed.

Counsel agreed that there may be a document that is relevant to determine how the costs of the proceedings should be borne. I shall allow the parties an opportunity to agree upon how costs should be borne and, if possible, the quantum of costs.

The Court: