Application of Doolan

1. [1]

   HIS HONOUR: The application before the Court is a request for judicial advice by the two executors of the Estate of the late John Andrew Barkus (“the deceased”) regarding distribution of the deceased’s estate.

2. [2]

   The first plaintiff (“Mr Doolan”) is a legal colleague of the deceased who knew the deceased from about February 1998 until his death, and the second plaintiff (“Ms Ball”) is the deceased’s surviving wife.

3. [3]

   The deceased lived together with Frances Mary Edwards (Ms Edwards) as a couple from May 1998. They married in November 1999 and separated in June 2005. Ms Edwards is the mother of two of the deceased’s children namely Isabella and Bridget. The deceased is survived by Ms Ball and his four children who are all adults: Isabella and Bridget and, in addition, James and Edward.

4. [4]

   The deceased died on 25 August 2020 leaving a Will dated 28 June 2018 (Will) and a Codicil dated 31 March 2020 (Codicil). Probate was granted to the plaintiffs being the named executors on 1 February 2021.

5. [5]

   For convenience, where I refer to the Will of the deceased it is the Will that is probated including the Codicil.

An important issue

1. [6]

   The application to the Court is for judicial advice pursuant to s 63 Trustee Act 1925 (NSW) (Trustee Act). The advice sought is whether the executors would be justified in distributing the entirety of the deceased’s estate without retaining any further security notwithstanding any potential contingent liability arising from the deceased’s legal practice or a claim for which his estate may become liable. The particular concern that such a liability might arise is linked to the risk that potentially the deceased might have acted negligently in advising or acting for clients in the course of his legal practice giving rise to a damages claim or suit against the estate (contingent liability concern): Statement of Facts (SF) at [27].

2. [7]

   The Opinion provided by Dr Birch dated 14 November 2022 (Opinion) provides a degree more elaboration to the context to the above-mentioned question. He indicates that he is asked to advise (Opinion at [10]):

   1. (1)

      first, whether a notice published by the executors pursuant to s 92 Probate and Administration Act 1898 (NSW) (PA Act) will protect the executors against any claim against them personally as opposed to a claim restricted only to the assets of the deceased’s estate arising from the contingent liability concern; and

   2. (2)

      secondly, whether, in the event that he (Dr Birch SC) considers there to be doubts about the extent of protection that the notice pursuant to s 92 PA Act provides, the executors would be justified in seeking judicial advice for the direction of the Court prior to distributing the estate.

3. [8]

   Dr Birch SC’s opinion is that he considered there is a significant doubt as to whether the notice published pursuant to s 92 PA Act does protect the executors from all possible claims relating to the deceased’s legal practice and that, in those circumstances, they are justified in applying for judicial advice or direction of the Court prior to distributing the estate: Opinion at [11].

4. [9]

   Dr Birch SC’s submissions proceeded on the basis that advice pursuant to s 63 Trustee Act would afford the executors protection from personal liability in a way in which they would not be protected if they had knowledge of circumstances that might give rise to the contingent liability concern and distributed pursuant to s 92 PA Act: Submissions at [15]-[16].

5. [10]

   I leave to one side, for the moment, actual knowledge of any claim.

6. [11]

   In their essence, Dr Birch SC’s submissions draw a distinction between the type of notice or knowledge that might enliven protection under one statutory provision but not be enough to enliven protection under another statutory provision.

7. [12]

   Understanding what notice or conduct triggers protection is important.

8. [13]

   Protection afforded by a s 92 publication is predicated on the executor or administrator not having “notice of the claim at the time of the distribution”: s 92(2) PA Act.

9. [14]

   Protection afforded by s 63 advice is predicated on the executor not being “guilty of any fraud or wilful concealment or misrepresentation in obtaining the opinion advice or direction” of the Court: s 63(2) Trustee Act.

10. [15]

    There are no express provisions in either s 92 PA Act or s 63 Trustee Act which detail in the former case what amounts to notice and in the latter case (leaving aside cases of fraud or wilful concealment) what amounts to misrepresentation.

11. [16]

    The provisions beg the question as to what for the purposes of:

    1. (1)

       s 92 PA Act amounts to “notice” of a claim; and

    2. (2)

       s 63(2) Trustee Act amounts to “misrepresentation” in the obtaining of the advice.

12. [17]

    I address this below, as these matters bear upon the question of whether it is appropriate for the Court to give advice pursuant to s 63 Trustee Act if there is another form of statutory provision which provides them protection in distributing the estate and the extent of such protection.

13. [18]

    For the reasons outlined below, I have determined that it is appropriate to give advice essentially in the terms that the plaintiffs seek.

14. [19]

    The plaintiff’s legal representatives Dr Birch SC and Ms Money provided helpful assistance to the Court.

Will and estate

1. [20]

   The deceased left an estate which according to the inventory of property totalled approximately $6,679,770.

2. [21]

   By far the largest asset of the estate is the proceeds of a binding death benefit nomination of the deceased’s superannuation fund.

3. [22]

   The assets also included a debt owed to the deceased in the sum of $850,000 by Ms Ball, shares in two private companies, relatively small amounts in two bank accounts, a car and various personal chattels. The estate has a number of liabilities for legal costs. The proceeds of the death benefit and the debt owing to the deceased have been collected and paid into an estate bank account.

4. [23]

   One of the private companies, Quida Pty Ltd (Quida), was trustee for the superannuation fund.

5. [24]

   The deceased by his Will:

   1. (1)

      Gave to his four children the choice of artworks;

   2. (2)

      To Mr Doolan an amount of money calculated by reference to a formula in lieu of commission;

   3. (3)

      To James and Edward shares in Quida as tenants-in-common equally;

   4. (4)

      To Ms Ball various forms of digital property and chattels of a personal nature.

6. [25]

   The deceased directed his executors to pay all his debts funeral and testamentary expenses and any applicable duties and, after transferring the chattels and gifts as identified above, provided for the executors to hold the balance of his estate (residuary estate) to be transferred as to 32% to each of James and Edward and 18% to each of the trustees of testamentary trusts established for Bridget and Isabella.

7. [26]

   Each of Bridget and Isabella under provisions of the Will were nominated as being primary beneficiaries of their respective testamentary discretionary trusts.

8. [27]

   Subsequent to the deceased’s death, Bridget and Isabella brought family provision claims pursuant to the provisions of Ch 3 of the Succession Act 2006 (NSW) (Succession Act) which claims were resolved by consent and orders relevantly made on 15 February 2022 which had the effect of providing to them, in lieu of the provision given to them under the Will, lump sums which equate to 18% each of the residuary estate.

9. [28]

   The deceased’s motor vehicle has been transferred to Ms Ball. However, other than that, no other assets of the estate have been distributed.

10. [29]

    Presently, the distributable estate is in the order of $6,601,195.

11. [30]

    The executors published a notice of intended distribution on 26 July 2021.

Contingent liabilities

1. [31]

   The framing of the specific question on which the plaintiffs seek advice is, as noted above, by reference to what I have described as the contingent liability concern.

2. [32]

   The executors wish to make a distribution of the entirety of the estate without retaining any such further security in respect of such contingent liability concern.

3. [33]

   The Macquarie Dictionary, online ed defines “contingent liability” as being an obligation, associated with a past transaction, which will occur in the future only if some particular event occurs.

4. [34]

   There are various descriptions of “contingent liability” for different purposes under the law: see e.g. Australian Karting Association Ltd v Karting (New South Wales) Incorporated [2022] NSWCA 188 (Australian Karting) at [66] referencing comments of Kitto J (Barwick CJ agreeing) in Community Development Pty Ltd v Engwirda Construction Co (1969) 120 CLR 455 at 459; [1969] HCA 47 citing English authority in the context of defining a “contingent creditor”. In Australian Karting, Gleeson JA (Meagher JA and Simpson AJA agreeing) described a “contingent liability” as “a liability that may or may not arise, depending on the occurrence (or non-occurrence) of a certain event” and contrasted that with a “prospective liability” which is “an obligation to pay a sum of money which is not immediately payable, but which will certainly become due in the future either on some date which has already been determined or on some date determinable by reference to future events” citing Edwards v Attorney-General (2004) 60 NSWLR 667; [2004] NSWCA 272 at [59] per Young CJ in Eq (as his Honour then was).

5. [35]

   For the purposes of financial statements, accounting standards provide for specific definitions of contingent liabilities: e.g. Australian Accounting Standards Board, Accounting Standard AASB 137: Provisions, Contingent Liabilities and Contingent Assets at [10].

6. [36]

   The above Macquarie Dictionary, online ed description is apt for the purposes of this case.

Evidence and representation

1. [37]

   The summons filed on 3 November 2022 seeks the opinion, advice or direction of the Court pursuant to s 63 Trustee Act based on facts set out in the SF filed on 21 November 2022 and Exhibit SOF-1 to the SF (Exhibit SOF-1) as supplemented by affidavits of Ms Ball affirmed 16 November 2022 and Mr Doolan affirmed 17 November 2022 (Doolan November Affidavit).

2. [38]

   Exhibit SOF-1 relevantly attaches the Opinion, a copy of the grant of probate attaching the Will and inventory of property, a copy of the Court orders in relation to the claims of each of Bridget and Isabella, a deed of retirement (between the deceased, Mr Doolan and other members of the partnership Barkus Edwards Doolan dated 24 March 2009) and details of the Firm’s professional indemnity insurance policies for the years 2008/2009, 2014/2015 and 2022/2023.

3. [39]

   None of the deceased’s children (all of whom are adults) have been named as defendants in the proceedings. Nonetheless, the interests of James and Edward have been represented by Ben Dornan, solicitor (Mr Dornan), and the interests of Bridget and Isabella represented by Andrew Thorpe, solicitor (Mr Thorpe).

4. [40]

   Both of those solicitors have been provided with relevant materials in respect of the application and each of Mr Dornan and Mr Thorpe attended on the hearing in an observing capacity.

5. [41]

   On 24 March 2023, the matter was listed before me for hearing of the application.

6. [42]

   I raised with Dr Birch SC that one way of attempting to assess the possibility of risks of a claim was for the executors to consider placing before the Court evidence bearing upon whether:

   1. (1)

      there were any drafting issues raised by Courts consequent upon legislation dealing with financial agreements;

   2. (2)

      the deceased had a set of basic precedents used as a starting point for drafting prenuptial or cohabitation agreements for clients;

   3. (3)

      whether any such precedents reflected any of the issues that were raised by Courts and whether the precedents were revised at any time, and if they were revised, whether they were revised because of issues that were being raised: T 8-10.

7. [43]

   Further, I noted sometimes specific audits can be conducted which identify potentially commercial risk areas which might give rise to a loss.

8. [44]

   Within those specific areas, there are techniques of statistical audit sampling involving a sampling approach where the auditor utilizes statistical methods such as random sampling to select items to be checked or verified or judgement-based auditing where the samples chosen are not based upon statistical analysis (such as random selection) but rather chosen based on the auditor’s judgment by dint of experience (commercial, legal or otherwise) and common sense.

9. [45]

   In non-statistical audit sampling, the auditors may choose to select items based on criteria such as a minimum value threshold or a particular subject matter.

10. [46]

    The extent of the risk of the contingent liability concern raised is difficult to establish by evidence. Having regard to the difficulties I gave the plaintiffs an opportunity to consider whether further evidence might be adduced to address the risks that might arise from the deceased’s practice. Specifically, I made the following orders. The Court:

    1. (1)

       directs that any further material, whether it be by affidavit or otherwise, be provided by 2pm on Thursday, 30 March 2023; and

    2. (2)

       lists the matter for further hearing at 10am Friday, 31 March 2023 before Meek J, noting that the determination of whether the further hearing will be required will be assessed after 2pm on Thursday, 30 March 2023.

11. [47]

    On 30 March 2023, helpfully, the plaintiffs’ solicitor provided my associate with two further affidavits being an affidavit of Mr Doolan affirmed 29 March 2023 (Doolan March Affidavit) and an affidavit of Ms Edwards sworn 30 March 2023, which provided further facts bearing upon the contingent liability concern.

Deceased’s legal practice

1. [48]

   The deceased practised as a solicitor principally in the area of family law.

2. [49]

   Mr Doolan worked with the deceased in a professional capacity from about April 1998 until 30 June 2015.

3. [50]

   Initially, during the period from September 1999 to March 2009, the deceased and Mr Doolan were equity partners of a firm initially known as Barkus Pearson and then as Barkus Edwards Doolan. Thereafter, the deceased was a salaried partner in the firm known initially as Barkus Doolan Kelly and then Barkus Doolan until he ceased practice as at 30 June 2015. It is convenient to describe the various partnerships and firms as simply “the Firm”.

4. [51]

   Whilst the deceased was a salaried partner, he was responsible with all the other partners for debts and liabilities of the Firm. He was entitled to indemnity from the equity partners such that if a claim was made against him, to the extent that the equity partners could satisfy any claim, he had such indemnity.

5. [52]

   The deceased and the Firm when practising in the area of family law were involved in advising upon the drafting and procuring the execution of a substantial number of property settlements after separation between married or de facto couples and financial agreements prior to or during a marriage or cohabitation and before separation colloquially known as prenuptial or cohabitation agreements (financial agreements).

6. [53]

   The clientele of the Firm relevantly included high-net-wealth individuals.

7. [54]

   Indeed, it appears the deceased practised exclusively in the area of family law and during the time that he was an equity partner of the Firm he regularly acted on behalf of high-net-worth individuals and sometimes their related entities.

Professional indemnity insurance

1. [55]

   The SF and the Doolan November Affidavit set out details of the professional indemnity insurance held by the firms of which the deceased was a member relevantly from 1999/2000 up to and including the time of the deceased’s retirement and, additionally, details from that time until the present.

2. [56]

   For reasons which are not entirely clear, no application for registration of participation in or exemption from the NSW Professional Standards Scheme (PS Scheme) was made for each scheme year from 2001-2002 up to and including the 2005-2006 scheme year (22 November 2001 to 21 November 2006) during which time the deceased was an equity partner of the Firm.

3. [57]

   Neither of the plaintiffs are aware of any claim or notice of claim against the Firm that relates to any period that the deceased was an equity partner.

4. [58]

   Mr Doolan has given evidence that considering the long period of time that the deceased was a practising solicitor of the Firm that to conduct a detailed audit of the files he and the Firm had worked on and to assess the potential risk that a claim might be made against him or the Firm would be a difficult, time-consuming and costly process. He further notes that some of the files of the Firm from that period have been destroyed.

5. [59]

   Mr Doolan indicates that even if such an audit were conducted it is difficult to calculate or quantify with any degree of precision or any certainty the real probability of a claim being made against the deceased’s estate [arising out of his practice] as a solicitor and at least for that reason an audit has not been conducted.

6. [60]

   Although there are no particular details as to the reasons for nonparticipation in the PS Scheme for the above-mentioned five-year period, the evidence reveals that in the 2000-2001 scheme year, an application for exemption for that year was received by The Law Society of New South Wales (Law Society) and no application for registration of participation in or exemption from the PS Scheme was received in the subsequent years until an application for registration of participation in the PS Scheme was received for the scheme year commencing from 22 November 2006.

7. [61]

   The professional indemnity insurance policy for the (current) Firm records that Lawcover Insurance Pty Ltd (Lawcover) insures a person who was a principal or employee of the law practice as well as the estate of such person: clause 2 (a)&(d).

PS Scheme

1. [62]

   The application to the Court referred to the existence of PS Schemes and the fact that the Firm was not registered, and did not participate, in the PS Scheme for the period from 22 November 2001 to 21 November 2006.

2. [63]

   In understanding the risks that are said to give rise to the application for advice it is of some relevance to briefly address the PS Scheme operation and provisions. Legislation regarding the PS Scheme and other details of the PS Scheme’s operation are publicly available and accessible. I note the following basic details.

3. [64]

   The PS Scheme of the Law Society is a legal instrument established under the Professional Standards Act 1994 (NSW) (Professional Standards Act) and approved by the Professional Standards Council: s 7(3) Professional Standards Act.

4. [65]

   The first Scheme of the Law Society became operative from 1996.

5. [66]

   In a document titled “Professional Standards Scheme: Improving standards. Reducing Risk” stated to be current as at August 2022, the Law Society summarises the operation of the PS Scheme as follows:

6. [67]

   The relevant PS Scheme which covers the period from 22 November 2001 to 21 November 2006 is one that was operative from 22 November 2000 to 21 November 2005 (Scheme 2000-2005). While PS Scheme 2000-2005 as originally approved by the Professional Standards Council was due to cease operation on 21 November 2005, the operative period of this scheme was extended for one year beyond its original term by the responsible Minister pursuant to s 32(2) Professional Standards Act. The PS Scheme documents are available to be downloaded from the Professional Standards Council website from the page titled “Current Scheme Documents”.

7. [68]

   The preamble to Scheme 2000-2005 provided, inter alia, that:

8. [69]

   The persons to whom the scheme applied are described at clause 2:

9. [70]

   As of 12 January 2002, clause 2.2 as extracted above was amended in a manner which does not bear upon the relevant issue at hand. Subsequently, commencing on 11 July 2015, clause 2 was substantially amended. This latter amended form of clause 2 provided that:

10. [71]

    As between 15 September 2000 and 14 November 2004, ss 18, 19 and 20 of the Professional Standards Act (adverted to in clause 2.3 above) stipulated that:

11. [72]

    Section 18 was amended (commencing on 15 November 2004) to extend the coverage of the provision to apply to “officers” (being officers of a body corporate if a scheme applied to a body corporate) as well as partners.

12. [73]

    A new provision, s 20A (adverted to by the amended form of clause 2 above), was added into the Professional Standards Act and commenced operation on 15 November 2004. Section 20A says:

13. [74]

    Additionally, s 17 deals with exemptions and persons to whom the scheme applies:

14. [75]

    The term “occupational association” is defined in s 4 as:

15. [76]

    The Law Society is an occupational association. Accordingly, taken at face value, the effect of the PS Scheme and the Professional Standards Act is that the PS Scheme applied to:

    1. (1)

       all members of the Law Society who held a current practising certificate issued by the Law Society who had not been exempted and who satisfied the indemnity insurance requirements: Scheme 2000-2005 clause 2.2; and

    2. (2)

       partners and employees (and, from 15 November 2004, officers) of persons (or body corporates) to whom the PS Scheme applied unless those partners or employees (or officers) were entitled to be a member of the Law Society but were not members: ss 18 and 19 of the Professional Standards Act.

16. [77]

    The effect, prima facie, of these provisions is that the coverage of the PS Scheme extended to all members of the Law Society (who met the indemnity insurance requirements) except those who had been exempted. On one reading, this would mean that the PS Scheme applied to even those persons who had not applied for registration of participation in the scheme (and, therefore, who had not paid the relevant annual fee for participation).

17. [78]

    However, the position was and is not as simple as that. The practical reality of the matter is that a member of the Law Society must, each PS Scheme year, lodge an application for registration of participation or exemption. At least in recent times (and presumably, similarly, for the scheme years 2001-2006), in practice the application form would be completed by a “Scheme Co-ordinator” (who is a principal of the relevant law practice) authorised to make an application for participation or exemption on behalf of the law practice. The form would particularise (in a schedule) the names and details of the law practice’s legal practitioners on whose behalf the application for registration of participation or exemption was being made. Further, an application for registration of participation in the scheme would entail payment of an associated annual fee for that PS Scheme year.

18. [79]

    Pursuant to these applications, the Law Society has and continues to maintain a register recording whether a law practice has registered to participate in or be exempt from the relevant PS Scheme corresponding to a particular PS Scheme year.

19. [80]

    Indeed, the Second Reading speeches for the Professional Standards Bill 2004 (NSW) envisage that a register of members of a PS scheme would be kept by each occupational association (in this case the Law Society):

20. [81]

    Therefore, in addition to the requirements of Scheme 2000-2005 clause 2.2, in order for a member of the Law Society such as Mr Doolan to have qualified as a member of the scheme, the law practice at which he was employed (Barkus Edwards Doolan) would likely have needed to have applied for registration of participation in the scheme (and have paid the relevant fee).

21. [82]

    Having now established the mechanism for determining which members of the Law Society are participants in the PS Scheme, I turn now to examining the benefits conferred by participation, and, correspondingly, the consequences of non-participation in the PS scheme.

22. [83]

    The limitation of liability conferred by Scheme 2000-2005 is circumscribed by clause 3.1:

23. [84]

    Clause 3.3 contained a table which specified different classes of persons and the maximum amount of liability for each class of person depending on the number of legal principals in a particular legal practice. For example, the maximum amount of liability for persons in a legal practice having 4 principals was $2 million.

24. [85]

    Commencing on 11 July 2005, clause 3 was amended to insert a new clause 3.4 as follows:

25. [86]

    The PS Scheme, therefore, is an important mechanism which places a cap on the liability arising in tort, contract or otherwise (with some important exclusions) from the acts or omissions of a member of the Law Society who is a participant in the PS scheme for the relevant scheme year.

26. [87]

    A natural consequence of a failure to make an application for registration of participation in, or exemption from, the PS Scheme, therefore, is that the non-participant law practice would not receive the benefit of the cap or limitation on liability arising out of claims against members of its law practice.

27. [88]

    For the purposes of considering the plaintiffs’ application for judicial advice, the Opinion proceeded on the basis that the deceased was not protected by the limitation of liability by a PS Scheme for the scheme years 2001-2002, 2002-2003, 2003-2004, 2004-2005 and 2005-2006: Opinion at [25].

28. [89]

    I will proceed on the basis that the deceased’s estate would not have the benefit of the cap on liability for claims for liability arising out of the deceased’s acts or omissions across those PS Scheme years.

Stated Facts

1. [90]

   I have already addressed details regarding the deceased’s Will, probate, state of distribution, net distributable estate and publication of the s 92 notice.

2. [91]

   The facts relied upon in respect of the deceased’s legal practice and professional indemnity insurance are in summary as follows: SF [16]-[26], Submissions at [21]:

   1. (1)

      the deceased practised as a solicitor principally in the area of family law;

   2. (2)

      the deceased was an equity partner from 1 September 1993 to 31 March 2009 of the Firm and thereafter a fixed draw/“salaried” partner from 1 April 2009 to 30 June 2015;

   3. (3)

      whilst the deceased was a salaried partner, he was responsible, with all other partners, for the debts and liabilities of the Firm partnership though he was entitled to indemnity from the equity partners such that if a claim was made against him, to the extent that the equity partners could satisfy the claim he has the benefit of that indemnity;

   4. (4)

      the Firm and the deceased in the area of family law were involved in advising upon, drafting and procuring the execution of a substantial number of financial agreements often between parties of significant net worth;

   5. (5)

      the Firm was not registered in and did not participate in the PS Scheme for the period from 22 November 2001 to 21 November 2006;

   6. (6)

      the deceased held professional indemnity insurance during the time of his practice as a solicitor;

   7. (7)

      the Firm since the 2006/2007 practice year was registered in or otherwise participated in the PS Schemes;

   8. (8)

      the PS Schemes have caps on claims against solicitors (including the deceased) which caps are and have been always below the limit of indemnity under the claims-based policy for the years that the PS Schemes applied;

   9. (9)

      the limits of liability imposed by the PS Schemes are governed by the PS Scheme in operation for the relevant practice year in which the negligent acts occurred;

   10. (10)

       the limits of indemnity for insurance are covered by the limit of indemnity under the claims-based policy at the date that the claim is made;

   11. (11)

       professional indemnity insurance is claims-based and is available to the executors if a claim is now made, except perhaps with the qualification of possible “substantial” claims in the case of high-net-worth clients;

   12. (12)

       there is present cover likely available in the order of a maximum limit of indemnity of $20M;

   13. (13)

       the executors do not have PS Scheme protection capping liability in relation to conduct of the deceased in which a claim is based where the conduct occurred prior to the 2005/2006 scheme year;

   14. (14)

       existence of insurance cover into the future depends (at least) upon (a) the preparedness of an insurer to accept liability for indemnity when a claim is made, and (b) the maintenance by Lawcover in the NSW Law Society of a PS Scheme to provide run-off cover; and

   15. (15)

       the executors have no current notice of any actual claim made against the deceased.

3. [92]

   The context relied upon (Submissions at [21]) is as follows:

   1. (1)

      there is a six-year limitation period for actions in negligence;

   2. (2)

      actions for negligence against a solicitor may not expire until many years, potentially even decades after ceasing practice; and

   3. (3)

      as a matter of commonsense the likelihood of claims diminishes as time progresses particularly where a period in excess of a 6 year limitation period (now 8 years) has expired.

Further facts

1. [93]

   The Doolan March Affidavit reveals the following further facts:

   1. (1)

      The Firm utilised primarily paper-based files until in or about 2019 when there was a transition to primarily electronic files.

   2. (2)

      Non-active paper files are stored offsite from the firm’s premises and there has been some degree of file destruction for files aged beyond seven years. There are currently approximately 5,800 boxes of files in offsite storage holding approximately 11,000 files. An archive list gives details of the name of clients but not the subject matters of the files.

   3. (3)

      The Firm’s file opening system did not always identify matters by reference to a description of financial agreement work. Nonetheless, there are some files where some clients are identifiable from the subject matter as relating to a financial agreement and other files in which having regard to the client in question Mr Doolan is personally aware that the file involved a financial agreement.

   4. (4)

      Without examination of files, it is not known as to whether even if a file was opened, any financial agreement was drafted or, if drafted, signed by the parties. Further, there may be instances where some agreements on the generic subject of family law were drafted or advised upon rather than in respect of financial agreements.

   5. (5)

      For the period between 2002 and 2009:

   6. (6)

      The Firm undertook work in the drafting and advising of financial agreements and:

   7. (7)

      During the period from 2000 to 2012, the total number of matters in respect of which financial agreements were advised upon by the lawyers across the Firm was probably between about 100 and 130 albeit that not every one of those matters resulted in a complete and signed agreement.

   8. (8)

      There is no simple means by which all of the Firm’s files that relate to financial agreements can be identified.

   9. (9)

      The Firm developed a precedent bank of financial agreements which were constantly refined by the Firm by a variety of means including comments or amendments proposed by lawyers including lawyers acting for other parties, perusing agreements drafted by other firms, receiving advice from Senior Counsel, reviewing caselaw and statutory amendments.

   10. (10)

       Whilst precedents were used and refined any financial agreements used by the Firm were moulded as a matter of drafting to the individual circumstances of any given client.

   11. (11)

       Notwithstanding that refinement of precedents occurred by reviewing caselaw and statutory amendment, Mr Doolan is not aware of any particular caselaw developments or statutory amendments that would cause any particular or special concern that any financial agreement drafted by the Firm would be invalid for any particular reason.

   12. (12)

       The deceased was a very experienced and diligent solicitor with a great level of attention to detail and he kept abreast of statutory and caselaw changes regularly.

   13. (13)

       Financial agreements drafted by the deceased were regularly and almost invariably peer reviewed internally by another partner of the Firm and were settled by Senior Counsel experienced in family law at the highest level and or by commercial lawyers or in-house counsel for the clients.

   14. (14)

       Mr Doolan is only aware both personally and from records available to him of one instance where a notification was given by the Firm to Lawcover foreshadowing a potential damages claim for professional negligence about a financial agreement. An expert opinion prepared by a senior barrister engaged by Lawcover expressed the opinion that there was no negligence by the deceased or the Firm which opinion was shared with the potential claimant’s lawyers and the claimant did not ultimately institute proceedings.

   15. (15)

       There have been several other (albeit relatively minor as to quantum) notifications given to Lawcover by the Firm over the last two decades of practice of potential claims not related to family law agreements and none of those notifications related to work conducted by the deceased.

   16. (16)

       In November 2021, a former client of the deceased contacted the Firm seeking copies of an agreement prepared by the deceased in 2009. The file was able to be sourced although the Firm was unable to locate a signed certificate of independent legal advice given by the deceased. The basis for the request is not known and Mr Doolan is not aware of any subsequent queries raised by that former client nor notified of any potential claim.

2. [94]

   The affidavit of Ms Edwards sworn 30 March 2023 reveals the following further facts:

   1. (1)

      Ms Edwards worked with the deceased at the predecessor of the Firm from January 1985 and became a partner in about 1997 retiring from the Firm partnership on 31 March 2009.

   2. (2)

      The deceased specialised only in family law and did not practice in other areas. He was an accredited specialist in family law having achieved his accreditation in the first year that it was offered by the Law Society in the early 1990s.

   3. (3)

      During the period that Ms Edwards was a partner of the Firm there were no claims made under the Firm’s Lawcover policy

   4. (4)

      When the legislative amendments regarding financial agreements were enacted in December 2000, the Firm did not immediately start doing work in that area but did subsequently accept instructions to advise on and/or draft financial agreements.

   5. (5)

      Work in relation to financial agreements was not a major or substantial part of the Firm’s practice during the time that Ms Edwards was a partner. She estimated (without the benefit of access to documentation) that it comprised no more than approximately 2.5% to 5% of the Firm’s cases per annum on average.

   6. (6)

      The deceased and other partners of the Firm held the view that the law in relation to financial agreements was complex and they kept abreast of changes including by attending seminars as part of their continuing legal education.

   7. (7)

      The Firm has a comprehensive set of precedents including precedents for financial agreements and letters of advice enabling them to give certificates required where they were advising on financial agreements.

   8. (8)

      The financial agreement precedents and letters of advice were lengthy and comprehensive. The precedents were updated frequently as the law changed and the agreements and letters of advice were adapted to suit the particular facts of each matter.

   9. (9)

      At some point prior to Ms Edwards’ retirement from the Firm in March 2009, by reason of legislative changes the partners of the Firm decided to implement and in fact implemented a policy not to advise on financial agreements due to the heightened risks associated with them for practitioners.

3. [95]

   In light of the further evidence of Mr Doolan, I take it that Ms Edwards’ reference to the Firm implementing a policy not to advise on financial agreements appears to have been implemented in or about 2011 or 2012 at least for the following decade.

Counsel’s opinion

1. [96]

   Dr Birch SC’s opinion addressed family law legislative provisions in caselaw regarding financial agreements.

2. [97]

   Relevantly commencing on 27 December 2000, provisions of the Family Law Amendment Act 2000 (Cth) (assented to on 29 November 2000) introduced the concept of financial agreements to family law. The amendments provided for pre-nuptial agreements where parties could make binding agreements prior to a marriage as to the division of property in the event that they separated. Prior to this amendment, there was provision for such agreements in regard to de facto relationships under some State laws.

3. [98]

   The legislation was initially highly prescriptive as to the form and manner in which the agreements were to be made including requiring parties to be given independent legal advice and for such advice to be certified.

4. [99]

   In 2008, the Full Court of the Family Court of Australia held that strict compliance with the statutory requirements was necessary if the financial agreement was to be binding: Black v Black (2008) 38 Fam LR 503 at 511-512 per Faulks DCJ, Kay and Penny JJ.

5. [100]

   Although there was no evidence to this effect, the Opinion anecdotally referred to a prevailing view of family law practitioners at the time that there was likely to be a very substantial number of agreements that would prove unenforceable which would likely result in a substantial number of negligence claims against solicitors.

6. [101]

   There was a legislative response to the Full Court decision and, on 4 January 2010, the Federal Justice System Amendment (Efficiency Measures) Act (No 1) 2009 (Cth) commenced, which retrospectively changed the requirements to make a financial agreement binding and, in particular, required strict compliance with the requirements of s 90G Family Law Act 1975 (Cth).

7. [102]

   Apart from the potential for a solicitor to incur liability through failure to produce a binding financial agreement, the Opinion referred to complications arising from applicable limitation principles.

8. [103]

   In particular, it was noted that an action in tort against a negligent solicitor does not crystallise until a loss is suffered citing Hawkins v Clayton (1988) 164 CLR 539; [1988] HCA 15. It was further noted that in certain circumstances a loss is not suffered even though a transaction may have been legally defective unless a claim or demand is made citing Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; [1992] HCA 55.

9. [104]

   In determining whether a loss is suffered one must determine with some precision the nature of the interest that the transaction is intended to protect. Thus, for example, where a valuer negligently values a security for a mortgage, the interest is ensuring the debt may be paid from the security and a loss is suffered where there is default and sale of the property. In such circumstances, it is not necessary to wait to see whether the mortgage debt may ultimately be paid under the personal covenants pursuant to the mortgage: see Todd Hadley Pty Ltd v Lake Maintenance (NSW) Pty Ltd (No 2) [2020] NSWCA 81.

10. [105]

    Because any defects in relation to financial agreements will only [or I infer perhaps usually] crystallise in a loss giving rise to a claim if and when the relevant marriage breaks down, it was submitted that there is almost no outer limit on when a claim may be made against the deceased’s estate which would still be within the relevant limitation period.

11. [106]

    Dr Birch SC described the risk of the contingent liability concern as being the risk that the deceased might have been negligent in the preparation of a prenuptial agreement and that a loss had crystallised within the last six years in consequence of a party to such agreement making a claim consequent upon dissolution of a marriage: Opinion at [22].

12. [107]

    Apart from the possibility of a claim against the deceased’s estate in negligence in relation to the drafting of any financial agreements, the extent of the estate’s liability would also depend upon the limits on such liability imposed by the PS Schemes if applicable at the relevant times and the availability of professional indemnity insurance: Opinion at [24].

13. [108]

    The application has proceeded on the basis that professional indemnity insurance is generally a claims-based indemnity and unless circumstances had been notified in a previous year it is the policy of the year in which the claim is made that responds to the claim, not the policy of the year in which the work was done that gives rise to the claim: Opinion at [26].

14. [109]

    The present Firm policy gives coverage to a solicitor who was a principal or employee of the Firm and extends to a prior practice of which the existing practice is held by Lawcover to be a successor firm: Opinion at [27].

15. [110]

    Thus, to the extent that there is presently in existence a successor firm to the Firm for which the deceased worked as a solicitor, that policy would respond to a claim made against the estate of the deceased for any negligent conduct by him at the Firm: Opinion at [28].

16. [111]

    Further, there is a PS Scheme in place whereby the Law Society and Lawcover arrange cover for solicitors who are no longer practising or the estates of such solicitors where there is no successor firm: Opinion at [29].

17. [112]

    Accordingly, whilst it is expected that there will be insurance cover for the deceased’s estate in regard to claims alleging negligence by him during his years of legal practice in New South Wales, the cover will be up to the limits of the relevant indemnity: Opinion at [30].

18. [113]

    However, in relation to the period at least between 22 November 2001 and 21 November 2006, with respect to any claim made against the deceased’s estate arising from conduct by the deceased during that period there is no limit on the liability of the deceased or the Firm: Opinion at [31].

19. [114]

    The current Firm policy has an upper limit per claim of $2 million with a top up endorsement to the policy providing for a maximum amount of indemnity of $20 million. There are certain exceptions to that indemnity where the insured was or reasonably should have been aware of the claim prior to the period of insurance or the claim relates to or arises out of any fact or circumstance prior to the period of insurance specified in which the insured was aware or should reasonably have been aware of circumstances which might give rise to a claim: Opinion at [32].

20. [115]

    It appears that the PS Scheme which operates where there is no successor firm may provide cover up to the extent of a previous top-up endorsement although there appear to be difficulties in how that would operate in circumstances where a top-up is optional and what is being provided is indemnity in lieu of insurance held by firm where there is no firm holding insurance: Opinion at [33].

21. [116]

    Dr Birch SC concluded that there is at least a possibility of a contingent claim against the deceased’s estate arising from his legal practice which, if there was such a claim, would most probably arise from his conduct in regard to advising upon and facilitating the execution of financial agreements by clients: Opinion at [34].

22. [117]

    Dr Birch SC addressed the extent of protection afforded by s 92 PA Act.

23. [118]

    In discussing the scope of protection afforded by s 92(2) PA Act, Dr Birch SC indicates that there are a number of decisions in which the Court has given advice to executors in circumstances where there was fear of a future claim and where the claimant had not come forward or been identified at the date of the advice. He submitted that those cases did not discuss in detail whether or not s 92(2) (or the English equivalent) would have given protection but appeared to assume that it is at least doubtful that it would: Submissions at [17].

24. [119]

    Dr Birch SC observed that the terms of s 92(2) PA Act appear on a superficial reading to suggest a high level of protection to executors who distribute assets after the publication of the relevant notice. However, he noted that that protection does not extend to an executor or administrator who has notice of a claim at the time of distribution: Opinion [36].

25. [120]

    Dr Birch SC is of the opinion that whilst executors with actual notice of a claim (in context, a claim of a liability) may deal with that by way of the provisions of s 93 PA Act, where the claim is merely contingent or potential, the matter is far less clear: Opinion [36].

26. [121]

    Dr Birch SC made reference to the fact that a number of dicta in English and Australian authorities suggest that despite the apparently clear terms of s 92(2) PA Act, it may not protect against a number of potential contingent claims. He observed that the difficulties of similarly worded English provisions were summarised by Lindsay J in Re Yorke (deceased); Stone v Chataway [1997] All ER 907 (Re Yorke), referring to the considerable doubts existing about the full extent of protection afforded by the English provision for contingent claims: Opinion [37].

27. [122]

    The Opinion then made reference to and commented on the decision of Slattery J in Thompson v Gamble; Gamble v Thompson [2010] NSWSC 878 (Thompson v Gamble): Opinion [38]-[39].

28. [123]

    The Opinion stated that Slattery J considered that similar doubts existed about the protection afforded to executors in New South Wales under s 92(2) PA Act: Opinion at [38].

29. [124]

    I pause to observe that I do not think it is correct to say that Slattery J expressed similar doubts. His Honour did not consider the terms of s 92 PA Act in the reasons for judgment. His Honour briefly made reference to there being evidence in relation to the advertising of the trustees' intention to distribute under s 60 Trustee Act, but without making any comments regarding the extent of protection afforded by s 60 Trustee Act: at [45].

30. [125]

    The Opinion states that there is a dearth of authority, or textbook commentary on the extent and nature of what constitutes notice for the purpose of s 92 PA Act: at [41]. That proposition is at least self-evidently qualified by the fact that there are clearly authorities dealing with actual notice.

31. [126]

    The Opinion addresses the more vexed question of what beyond actual notice constitutes notice for the purpose of s 92 PA Act.

32. [127]

    Dr Birch SC made reference to the taxonomy of knowledge discussed by Peter Gibson J in Baden v Société Générale pour Favoriser le Developpement du Commerce et de l'Industrie en France [1992] 4 All ER 161 (also reported at [1993] 1 WLR 509) (Baden): Opinion at [42].

33. [128]

    The five Baden categories of knowledge specified by Peter Gibson J are actual knowledge (category (i)), wilfully shutting one’s eyes to the obvious (category (ii)); wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make (category (iii)); knowledge of circumstances which would indicate the facts to an honest and reasonable man (category (iv)); and knowledge of circumstances which would put an honest and reasonable man on inquiry (category (v)): Baden at [1993] 1 WLR 509 at 575-576, 582.

34. [129]

    Dr Birch SC suggested that it is doubtful that the concept of notice for the purposes of s 92 PA Act would be viewed by the Court through the prism of the five Baden categories. He opined that nonetheless, whilst those categories have been criticised as overly analytical and praised as useful by different Courts at different times, they provide a useful means of attempting to grapple with the concept of notice where little guidance is otherwise available: Opinion at [42], [45].

35. [130]

    Whilst I accept that there is no clear authority in New South Wales as to what form or degree of constructive notice might preclude reliance upon s 92(2) PA Act, there is some discussion of the issue in the United Kingdom, to which I will refer below.

36. [131]

    There is no suggestion that the plaintiffs have any actual knowledge of the claim against the estate of the deceased that would give rise to contingent liability arising from acts or omissions by the deceased and the conduct of his legal practice. Nor is there any suggestion that the plaintiffs have wilfully and/or recklessly failed to make such inquiries as to any such contingent liability concern.

37. [132]

    The arena of risk addressed by the Opinion is whether, assuming the Baden categories of knowledge were to be somehow analogously applied as being categories of notice, the plaintiffs might have constructive notice which might preclude reliance upon the s 92(2) PA Act notice of distribution, and so not be protected against liability in the face of distribution of the entirety of the estate. In particular, Dr Birch SC entertained the possibility that:

    1. (1)

       notice of circumstances which would indicate the facts to an honest and reasonable person that a claim of a contingent liability existed and would be made might be thought to potentially constitute a form of notice;

    2. (2)

       but notice of circumstances which would put an honest and reasonable person on inquiry that a claim of a contingent liability existed and would be made would more doubtfully be considered to be a form of constructive notice for the purposes of s 92(2) PA Act: Opinion at [43]-[44].

38. [133]

    Dr Birch SC acknowledged that it may be hard to determine the exact scope of the concept of notice as used in s 92(2), particularly in the context of a type of ex parte application without a contradictor: Submissions at [19].

39. [134]

    Ultimately, Dr Birch SC did not submit what view the Court ought to take regarding what constitutes “notice of a claim” for the purposes of s 92(2). In essence, he noted that the cases permit a conclusion that there may be “notice of a claim” for the purposes of s 92(2) where the executors are aware of the potential nature of a possible claim, although not aware of any specific claimant or not aware as to whether any specific claim will in fact ever crystallise: Submission at [19].

40. [135]

    That submission is in essence a step away from a type of constructive notice to a more generalised awareness of possibilities.

41. [136]

    The Opinion states that in neither Re Yorke nor Thompson v Gamble was there any specific insured claimant identified who could have a contingent claim as distinct from a potential class of persons who could possibly make a claim against the deceased’s estate in the future: Opinion at [46]. That is correct. The Opinion further states that that must have been treated as sufficient as to preclude reliance by the executors upon the protections provided by s 92(2) PA Act: Opinion at [46]. For the reasons I have indicated, I do not accept that as being the case. Slattery J in Thompson v Gamble did not address the extent of the protections provided by s 92(2) PA Act, nor (subject to a general comment on advertising to which I will refer) did Lindsay J in Re Yorke expressly address the statutory United Kingdom equivalent to s 92(2) PA Act.

42. [137]

    Dr Birch SC is of the opinion that:

    1. (1)

       by reason of the deceased’s engagement in practice in the area of family law in respect of advising in relation to financial agreements and there being a period between 22 November 2001 to 21 November 2006 for which the deceased’s estate has no PS Scheme cap protection from liability, there is a possibility of a claim for damages for negligence against the estate and, accordingly, it is not reasonable for the executors to simply hope no claim will be made against them: Opinion at [49], [51]; and

    2. (2)

       if a fund were to be set aside or retained by the executors there are obvious difficulties in determining what if any amount should be retained and for what period of time: Opinion at [55].

43. [138]

    The Opinion addressed a contention in a letter dated 11 August 2022 from Mr Thorpe to the effect that Mr Doolan, who is presently a partner in the successor Firm would have an interest in ensuring that in the event of a claim being made against his current Firm, it would be in Mr Doolan’s interests to see the largest sum retained in the estate to contribute to a claim that might be made: Opinion at [56].

44. [139]

    Dr Birch SC is of the opinion that the possible conflict did not disable Mr Doolan from seeking judicial advice for various reasons including the fact that he does not seek to retain any portion of the estate but rather to distribute it in its entirety and that no form of security is being sought by the plaintiffs as executors: Opinion at [57]-[59]. I agree. I do not consider that Mr Doolan is disabled from seeking judicial advice and, whilst Dr Birch SC referred to several other considerations regarding this issue in the Opinion, I do not consider it is necessary to address those matters.

Issues

1. [140]

   Having regard to the issue that I have identified at the commencement of these reasons for judgement, I will outline the law in relation to the obligation of executors with respect to ascertainment and payment of debts or liabilities of a deceased and, in particular, contingent liabilities and what protective options are available to executors with respect to distribution of the deceased’s estate in light of such risks.

2. [141]

   The particular issues that arise are:

   1. (1)

      What is the likelihood of the risk of the contingent liability concern arising?

   2. (2)

      What enquiries have the executors made in respect of risk of the contingent liability concern and what knowledge do the executors have of such risks?

   3. (3)

      What advice should be given to the executors?

What are the LPRs obligations regarding payment of debts and contingent liabilities?

1. [142]

   In New South Wales, a grant of probate to an executor is based on a sworn representation (by oath or affirmation) in an affidavit that the executor if granted probate will administer the estate according to law: Uniform Civil Procedure Rules 2005 (NSW) (UCPR) Form 118 at [9(a)].

2. [143]

   What is required by an executor to administer an estate according to law depends upon the terms of any given Will, statutory provisions and the general law.

3. [144]

   Under the general law, an executor or any legal personal representative (LPR) is under a duty to pay the debts of the deceased: see Alexander Learmonth, Williams, Mortimer & Sunnucks - Executors, Administrators and Probate (21st ed, 2018, Thomson Reuters) (WMS) at 817.

4. [145]

   The LPR’s duty is said to be one to pay debts with due diligence having regard to the assets in the hands of the LPR which are properly applicable for that purpose. Whether due diligence has been shown is determined in all the circumstances of the case: WMS at 817 citing In re Tankard; Tankard v Midland Bank Executor and Trustee Co Ltd [1942] Ch 69 (Re Tankard) at 72 per Uthwatt J.

5. [146]

   Nonetheless, there is no specific rule of law to the effect that a LPR must pay the debts of the estate within the so-called “executor’s year”. There will be occasions where the LPR’s duty to act with due diligence will mean that early payment is necessary whilst on other occasions circumstances and the nature of assets comprised in the estate may justify a delay in payment: WMS at 817.

6. [147]

   Often there will be directions in the Will to pay debts funeral and other testamentary expenses. However, creditors are entitled to payment of debts regardless of what the deceased may have stipulated in his Will: WMS at 817; Re Tankard at 74. This contrasts with the position of beneficiaries whose entitlement to estate assets depends upon and is subject to the terms of the Will: WMS at 817; Re Tankard at 74. Importantly, although a LPR is under a duty to pay the debts of an estate, the LPR is not automatically under a duty to contact potential creditors to see if they wish to pursue claims that may be disputed or stale: WMS at 817.

7. [148]

   Under the general law, the debts and liabilities of the deceased are enforceable against (and met from) the estate and are the subject of priority ahead of distribution of the estate to beneficiaries: GE Dal Pont, Law of Executors and Administrators (2022, LexisNexis) (Dal Pont) at 336.

8. [149]

   A LPR is not personally liable for debts beyond organising the payment of those debts and liabilities from the estate (assuming there are sufficient estate funds to do so). A distinction is made between (a) liabilities arising in the deceased’s lifetime, for which the LPR is responsible only to the extent of the assets of the deceased, and (b) debts and liabilities incurred by the LPR after the deceased’s death, for which the LPR is personally liable but nonetheless may look to the estate for an indemnity: Dal Pont at 336-337.

9. [150]

   In respect of liabilities of the deceased the LPR is liable (to the extent he has assets to pay them) even if he had no notice of them: WMS at 818 citing, inter alia, Chelsea Waterworks v Cowper (1795) 1 Esp 275; 170 ER 355.

10. [151]

    Failing to pay an estate debt before distributing an estate may constitute a devastavit: Taylor v Taylor (1870) LR 10 Eq 477 (Taylor v Taylor) at 478 per Lord Romilly MR.

11. [152]

    Particular considerations apply in relation to circumstances in which a debt is statute-barred and decisions of a LPR in relation to whether to pay the debt or not or whether the LPR is obliged to set up a defence of a plea of res judicata, namely a judicial determination that the claim is statute-barred. In part, analysis of these matters will depend upon the terms of statutory provisions in any given jurisdiction: see e.g. Midgley v Midgley [1893] 3 Ch 282 at 297-300 per Lindley LJ, 301-303 per Lopes LJ and 306-307 per AL Smith LJ; McGrath v Troy (as administratrix of the estate of the late Wade) [2010] NSWSC 1470 (McGrath v Troy) at [54]-[58] per White J (as his Honour then was); Re Mayes; Application by O'Reilly [2015] VSC 708; (2015) 15 ASTLR 376 at [43]-[90] per McMillan J; Coshott v Parker (2019) 268 FCR 288; [2019] FCAFC 14.

12. [153]

    LPRs have powerful statutory authority to compromise debts.

13. [154]

    For the purposes of the Trustee Act, a trustee relevantly includes a LPR: s 5 Trustee Act.

14. [155]

    A LPR may allow any time for payment of any debt: s 49(1)(c) Trustee Act.

15. [156]

    In particular, a LPR may compromise, abandon or otherwise settle any debt, account, claim, or thing whatever relating to the estate or trust: s 49(1)(d) Trustee Act.

16. [157]

    For those purposes, the LPR may enter into agreements or arrangements and make releases as seem expedient: s 49(1)(e) Trustee Act. Significantly, a LPR may pay or allow any debt or claim on any evidence that the LPR thinks sufficient: s 49(2).

17. [158]

    The LPR is not responsible for any loss occasioned by any such act or thing so done if he has acted in good faith: s 49(3).

18. [159]

    The provisions of s 49 apply subject only to there being a contrary intention expressed in the Will or relevant other instrument creating the trust: s 49(4).

19. [160]

    The onus of establishing that the LPR has acted other than in good faith is on the claimant. Should there be a challenge to the LPR acting in good faith at least one of the considerations which the Court may consider in determining whether the LPR has so acted is whether the LPR had sought advice and, having obtained advice that seemed sensible, acted in accordance with it: Ludwig v Public Trustee [2006] NSWSC 890 (Ludwig) at [35].

20. [161]

    Thus, even if a LPR’s actions in settling a claim were later challenged in contested proceedings and in the context of the sort of minute examination which is possible in such proceedings were shown to be lacking to some extent, unless good faith was seriously challenged, the LPR would, by reason of s 49(3), have no liability in respect of the relevant decision in relation to a compromise of a debt: Ludwig at [35]; McGrath v Troy at [54]-[55].

What protective options are available to LPRs to distribute an estate in light of potential contingent liabilities of an estate?

1. [162]

   There are various options available to a LPR who wishes to distribute an estate but nonetheless be provided with protection against liabilities.

2. [163]

   Under the general law, the options available to LPRs include:

   1. (1)

      retaining a fund to meet possible liability;

   2. (2)

      obtaining indemnities from beneficiaries to whom the estate is to be distributed;

   3. (3)

      obtaining insurance; and

   4. (4)

      applying to the Court for distribution in an administration suit.

3. [164]

   Apart from general law protections, there are also statutory provisions. The main statutory protective provisions include:

   1. (1)

      distribution of estates after advertising for claims: s 92 PA Act (and cognate legislation and prior legislation);

   2. (2)

      obtaining discrete orders relating to distribution of the estate: r 54 UCPR (and previously Pt 68 Supreme Court Rules 1970 (NSW) (SCR)); and

   3. (3)

      obtaining the advice of the Court: s 63 Trustee Act.

4. [165]

   I address these various protective options below.

5. [166]

   Such options are not the only possibilities of protection, and it has been said that personal representatives, particularly of small estates, should not be discouraged from seeking practical solutions to difficult administration problems, without the expense of resort to the Court: Re Evans (deceased); Evans v Westcombe [1999] 2 All ER 777 (Re Evans) at [24] 785 per Richard McCombe QC (sitting as a Deputy Judge of the High Court).

6. [167]

   The abovementioned options are not entirely mutually exclusive courses.

7. [168]

   Thus, a LPR might seek an indemnity as well as retaining part of a fund.

8. [169]

   Further, there is a flexibility of statutory procedures so that, subject to compliance with procedural fairness principles, proceedings commenced as an application for judicial advice under s 63 of the Trustee Act might evolve into contested application in which parties are joined (for example in a “construction suit”) under r 54.3 UCPR or vice versa: Re Estate of the late Chow Cho-Poon; Application for Judicial Advice [2013] NSWSC 844; (2013) 10 ASTLR 251 (Cho-Poon) at [20] citing Application of Perpetual Trustee Company Ltd [2003] NSWSC 1185 (Application of Perpetual) at [14]-[20] per Young CJ in Eq (as his Honour then was); AG Nevill and AW Ashe, Equity Proceedings with Precedents (NSW) (1981, Butterworths) at [1204].

9. [170]

   LPRs considering distribution of an estate may seek an indemnity from beneficiaries in relation to various matters including in respect of contingent liabilities. That includes as a practical matter the possibility of the LPR distributing an estate on the basis of negotiating an arrangement with beneficiaries to indemnify the LPR in respect of uncertain or contingent liabilities. If a consensual arrangement is able to be reached with beneficiaries, the LPR will have the benefit of the indemnity (for whatever the indemnity is worth). If the beneficiary declines to indemnify the LPR, the LPR may seek to be protected in other ways.

10. [171]

    The mere fact that a debt has not crystallised at the date of death (such as a potential liability under a guarantee given by a deceased) gives the LPR no defence to a subsequent claim in the event that the estate has been distributed: Les Handler & Richard Neal, Mason and Handler Succession Law and Practice New South Wales (LexisNexis) at [1469.1].

11. [172]

    Retaining a contingency fund to pay future claims is an option for LPRs: Re Yorke at 918. Some differences apply in different jurisdictions as to how retention of a fund is addressed.

12. [173]

    In New South Wales, as a practical matter, a LPR may for example make an interim (or partial) distribution of the net assets of the estate but, nonetheless, consider holding back a fund to deal with potential contingent liabilities. As with cases of indemnity, the LPR may seek to negotiate an arrangement with the beneficiaries to retain an appropriate fund to deal with a contingent liability but otherwise distribute the balance of the estate. If a consensual arrangement is reached, then the fund will be available to the LPR to address such contingent liability. If a consensual arrangement is not able to be reached the LPR may seek to be protected in other ways.

13. [174]

    In the United Kingdom, the remedy of retention of a fund was recognised as early as 1753 as a possible way of protecting executors against the risk of contingent debts maturing: see Re Yorke at 919.

14. [175]

    The procedure in England and later the United Kingdom was formalised by Court orders although, by the early 1940s, appears to have been phased out. Lindsay J noted orders being made as late as 1943: Re Yorke at 919.

15. [176]

    The principle on which the Master would act in fixing the amount or nature of the security or retention is not disclosed in the cases, but it appears that it was never suggested that the calculation had to be such that the security would necessarily and in all possible events suffice to meet in full whatever amounts an executor might have to pay creditors: Re Yorke at 919. The touchstone appeared to be flexible in what the Court would look to itself as being considered reasonable as sufficient security for the possible demands: Fletcher v Stevenson (1844) 3 Hare 360; 67 ER 420 at 425 per Sir James Wigram V-C.

16. [177]

    Contingent creditors had no strict right at law or in equity to insist upon a retention or upon a security. It appears that the Court, in fixing any such retention or security, nonetheless acted on the basis that creditors should to some extent be protected: Re Yorke at 920.

17. [178]

    It is said that in many cases the potential liability would be truly unascertainable perhaps even as to a theoretical maximum. It appears the Court looked in general at the reasonable probability of there being future claims against the estate and a practical view as to amount and any timing for retention of a fund would be taken: Re Yorke at 920.

18. [179]

    Where a distribution order is made by the Court, in general, the order, subject matters that I will come to, affords a complete protection to the LPR and the LPR need not and indeed should not look, for example, to a retention, for any protection beyond that: Re Yorke at 921. An order may be made on terms requiring a LPR to set aside a sum to cover any liability which might in any reasonable probability arise: Re Yorke at 920.

19. [180]

    Lindsay J noted that the effect of such an order was that a creditor with a late maturing contingent debt would, save in exceptional circumstances (such as fraud, misrepresentation or concealment) not be able to recover against the LPR but would only be able to recover, if at all, against the beneficiaries: Re Yorke at 921.

20. [181]

    It appears clear that where retention of a fund is proposed or an option, the determination of the amount of the fund and the length of retention ought be undertaken on the basis of a rational assessment: Re K (deceased) [2007] EWHC 622 (Ch); (2007) 9 ITELR 759 (Re K) at [68] per Richard Arnold QC, sitting as a Deputy Judge of the High Court (whom I will refer to as Arnold QC).

21. [182]

    In Re K, Arnold QC concluded that the administrators should have the Court’s sanction to pay the admitted creditors and then to distribute the estate without reference to the claims of potential creditors but subject to a retention in the sum of £50,000 to be kept in an interest-bearing account unless and until needed for a period of three years with regard to potential future litigation costs. A retention beyond that and for other purposes was rejected principally on the basis that it was virtually impossible to make any rational assessment of what sum should be retained and for how long: at [68].

22. [183]

    LPRs wishing to distribute an estate who wish to guard against a risk of a claim by a beneficiary or a creditor could consider obtaining insurance.

23. [184]

    Historically, insurance has been available to LPRs. This included missing beneficiary insurance and, conceivably, unknown creditor insurance.

24. [185]

    In Re Evans, the defendant administrator of her intestate father’s estate wound up his estate and distributed the property to herself, assuming that her brother was dead, not having heard from him for over thirty years. On her solicitor’s advice, she took out a missing beneficiary policy to cover half the estate.

25. [186]

    Four years later the defendant’s brother turned up. He took the proceeds of the policy covering his capital entitlement but sued for interest. The defendant was held liable to account for interest but was granted partial relief under s 61 Trustee Act 1925, 15 & 16 Geo, c 5 (Trustee Act (UK)) (the equivalent of s 85 Trustee Act) to the extent that the interest claimed could not be satisfied out of the proceeds of sale of the property derived from the deceased’s estate which was still at the defendant’s disposal. In giving relief Richard McCombe QC took account of the relatively small size of the estate, and the fact that the defendant being a lay person unaccustomed to problems of this nature was at all times willing to abide by the advice of solicitors, which advice led to some provision being made for the plaintiff’s claims: at [37] 789.

26. [187]

    However, self-evidently, protection afforded by insurance is only as good as the insurance policy itself and particularly in the case of any reinsurance the funds available or to become available to the insurer and the claims to be met: Re Yorke at 913 per Lindsay J.

27. [188]

    The prospect of insurance to protect a LPR was addressed in Re K. In that case, which I will refer to in more detail below, three prospective insurers were approached by a broker instructed by the administrators, but they all declined to offer cover. It appears the broker expressed the view that even if cover could be obtained the premium would be very expensive. Arnold QC concluded that insurance did not appear to be a practical proposition: at [70].

28. [189]

    Anecdotally, missing beneficiary insurance or unknown creditor insurance has not been readily available in New South Wales or at least not readily used as a mechanism by LPRs in New South Wales to obtain protection.

29. [190]

    Historically, in the United Kingdom, anyone interested in a residuary estate who instituted a suit to administer the estate had the right to require, and as a matter of course obtained, the full decree for the administration of the estate: In re Blake; Jones v Blake (1885) 29 Ch D 913 at 916 per Cotton LJ.

30. [191]

    The precise origins of the decree for general administration have been said to be not quite known: McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 (McLean) at 634D per Young J (as his Honour then was). It is not presently necessary to explore them. In any event, administration suits were often difficult, time-consuming and expensive procedures. Some of the difficulties were referred to by Young J in McLean at 634E-F. The slow-moving and vexed procedures of such suits satirised by Dickens in Bleak House in (the fictional probate case of) Jarndyce v Jarndyce were remedied during the 19th century with reforms described by Young J as a “three-pronged attack” not debasing the remedy but streamlining its procedures: McLean at 634G.

31. [192]

    Those reforms translated to New South Wales, and it is possible to obtain discrete orders relating to the administration of an estate in equity including the estate’s distribution without the whole estate being administered under the jurisdiction of the Court. This procedure is currently formalised in r 54 UCPR (and previously Pt 68 SCR).

32. [193]

    McLean appears to have been the last very notable attempt in New South Wales to obtain such an order. Although, it is still possible to find cases in which such an order has been sought. For example, in Wang v Cai (No 2) [2021] NSWSC 1268, there was an application for a general administration order listed before Ward CJ in Eq (as the President then was) in September 2021. However, the application was ultimately resolved by consent: at [4]. In Rosenbaum v Baidarman (No 2) [2021] NSWSC 574, an application for a general administration order was refused by Williams J: see at [81], [674].

33. [194]

    LPRs may bring an application for any relief which could be granted in administration proceedings: r 54.3 UCPR. The rules expressly provide for determination of discrete questions or claims: r 54.3(2)-(4). There is no requirement to seek a general administration order under the direction of the Court: r 54.3(6) UCPR.

34. [195]

    The r 54.3 procedure is similar to an application for judicial advice under s 63 Trustee Act. That is because each procedure is directed to the same end and a determination under each procedure if adopted, will not only protect a trustee from later complaint that he or she should have acted otherwise, but also protect the trustee from personal liability for costs incurred: Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42 (Macedonian Church Case) at [44]-[45] per Gummow A-CJ, Kirby, Hayne and Heydon JJ.

35. [196]

    The Court, in permitting distribution in an application by a LPR under r 54.3 UCPR, where there are factual uncertainties or remote contingencies which impact the administration of an estate, does so without determining the legal or equitable rights of the potentially affected parties. Rather, it acts in the convenient administration of the estate and trusts in which the Court, having assessed the competing interests, may favour an early distribution of property so that those apparently entitled can enjoy the benefits of such estate or trust rather than have the estate or trust being tied up for lengthy periods: see e.g. Macrae v Walsh (1927) 27 SR (NSW) 290 at 294-295 per Long Innes J; Wilcox v Poole [1974] 2 NSWLR 693 (Wilcox v Poole) at 697 per Mahoney J (as his Honour then was) citing Sydney Williams and Frank Guthrie-Smith, Daniell’s Chancery Practice (8th ed, 1914, Stevens & Sons Ltd) 1539-1540; Bullas v Public Trustee [1981] 1 NSWLR 641 at 643 per Kearney J; Gonzales v Claridades (2003) 58 NSWLR 188; [2003] NSWSC 508 (Gonzales v Claridades) at [75]-[76] per Campbell J (as his Honour then was), unaffected by the appeal which was dismissed in Gonzales v Claridades (2003) 58 NSWLR 211; [2003] NSWCA 227 (Gonzales v Claridades [NSWCA]); Simpson v Trust Company Fiduciary Services Limited [2009] NSWSC 912 (Simpson v Trust Company) at [27]-[32] per Ward J (as her Honour then was).

36. [197]

    The principle is a beneficial one which enables the Court, after assessing the relevant interests, to enable beneficiaries to have early enjoyment of property to which they will, as a matter of practical certainty, ultimately become entitled: Wilcox v Poole at 697F; Simpson v Trust Company at [29].

37. [198]

    Because the claim by the executors specifically raises the question of the extent of protection obtained by advertising and judicial advice, I deal with these matters in a degree more detail below.

Protection by advertising of claims

1. [199]

   There is provision pursuant to s 92 PA Act to obtain a type of protection consequent upon advertising by the LPR as a means of bringing forth any claims on an estate.

2. [200]

   The legislative history of s 92 was considered in some detail by Campbell J (as his Honour then was) in Ludwig. His Honour's decision is reported in part in relation to the provisions regarding ss 92 and 93 PA Act at (2006) 68 NSWLR 69. Ludwig also addressed powers of the police to retain property (banknotes) and is also reported in its entirety at (2006) 170 A Crim R 460. An appeal to the Court of Appeal from the decision of Campbell J in Ludwig was dismissed without any adverse comment regarding his Honour's commentary in relation to the workings of ss 92 and 93 PA Act: Ludwig v The Public Trustee [2008] NSWCA 115.

3. [201]

   Section 92 is based on s 29 of the Law of Property and Trustees Relief Amendment Act 1859, 22 & 23 Vict, c 35 (Lord St Leonards’ Act).

4. [202]

   It is not necessary to set out a detailed history. However, it is appropriate to mention some of the provisions as they applied in New South Wales.

5. [203]

   In 1862, the Trust Property Act 1862 (NSW) (Trust Property Act) was enacted (also referred to as 26 Vic No 12). It effectively applied the provisions of s 29 Lord St Leonards’ Act in New South Wales.

6. [204]

   Section 29 of the Trust Property Act was relevantly in the following terms:

7. [205]

   In 1898, the Wills Probate and Administration Act 1898 (NSW) (WPA Act) was enacted, and the provisions of s 29 Trust Property Act were relevantly repealed in sch 1 WPA Act.

8. [206]

   Section 92 WPA Act in its original form provided that:

9. [207]

   Section 92 has been amended on a number of occasions. The particular form of s 92 considered by Campbell J had been incorporated into the PA Act by amendments in 1977.

10. [208]

    His Honour noted that the 1977 amendments to s 92 had the effect of:

    1. (1)

       identifying the form of notice to be published by reference to a form prescribed by the rules of Court, rather than by reference to the practice of the Court in an administration suit;

    2. (2)

       identifying the class of people called upon to send in claims as being “beneficiaries (including children conceived but not yet born at the death of the testator …), creditors and other persons”, rather than merely “creditors and others”; and

    3. (3)

       identifying the claims required to be notified as claims “in respect of the assets of the estate”, rather than ones “against the estate”: at [268].

11. [209]

    The current provisions of s 92 PA Act are relevantly:

12. [210]

    Sections 92 and 93 PA Act are part of the one statutory scheme which enables LPRs to establish what claims are made on the estate by any relevant parties including beneficiaries and creditors: Ludwig at [276].

13. [211]

    The purpose of the provisions of s 29 of Lord St Leonards’ Act were considered in Newton v Sherry (1876) 1 CPD 246 (Newton v Sherry).

14. [212]

    In that case, Brett J observed that the title of Lord St Leonards’ Act contains reference to it being an Act to relieve trustees and observed that it was beyond doubt that where distribution followed advertisement of notices, absent notices of claims, that executors and administrators were intended to be protected against subsequent claims of which they had no notice: at 255.

15. [213]

    Similarly, Archibald J observed that the provisions were plainly intended for the protection of executors and administrators enabling them safely to make a distribution of the estate in a reasonable time: at 257.

16. [214]

    Lindley J (as his Lordship then was) observed that the real object of the section was not merely to secure an indemnity to executors and administrators, but for the benefit also of persons having claims against the estates of deceased persons, by enabling the executor or administrator to administer the estate without the expense and delay of a Chancery suit: at 257-258.

17. [215]

    The type of protection described in Newton v Sherry to LPRs under the provisions of Lord St Leonards’ Act persists as the purpose of s 92: Ludwig at [272]. Clearly, it also facilitates the due administration of an estate: English v Stewart [2022] NSWSC 268 at [48] per Hallen J.

18. [216]

    Despite its role within the current New South Wales statutory scheme, s 93 was not analogous to anything in the provisions of Lord St Leonards’ Act but, rather, a provision like s 93 was first introduced into New South Wales by s 24 Probate Act of 1890 Amendment Act 1893 (NSW): Ludwig at [269].

19. [217]

    Section 93 provides a procedure which enables a LPR to bring to a head any unresolved claims of which he has notice: Ludwig at [272].

20. [218]

    The procedure for publication of notices by LPRs and trustees has been conveniently reformed so that notices which an executor and/or trustee is required to publish in relation to distribution of an estate pursuant to s 92 PA Act, s 60 Trustee Act and s 93 Succession Act can be achieved by the use of one common form of document currently approved pursuant to s 17 Civil Procedure Act 2005 (NSW) (CPA). The approved form being UCPR Form 114.

21. [219]

    The particular requirements as to advertising for LPRs are addressed in Pt 78 r 93 SCR which provide for the notice to be published in a case in which the notice relates to the intended distribution of the deceased estate where a grant has been made or resealed by the Court on the New South Wales Online Registry website or, in any other case, in a Sydney daily newspaper.

22. [220]

    It is said that the advertisement must be placed promptly after the deceased’s death: In re Kay; Mosley v Kay [1897] 2 Ch 518 at 523 per Romer J.

23. [221]

    Whether the notice has been properly advertised or not is a question of degree and depends upon the circumstances of each particular case: Newton v Sherry at 257 per Archibald J.

24. [222]

    It is important that the estate should not be distributed without reasonable means being taken to give notice to all who may have claims whether as creditors or otherwise. Whilst it is usual to confine notices to what might be described as “local” newspapers, if there are any reasonable grounds for supposing that the claimant is residing in a foreign country notice should be advertised there: Newton v Sherry at 256 (Brett J), 257 (Archibald J). On the facts in Newton v Sherry, Brett and Archibald JJ determined that there was no necessity for advertising otherwise than in The London Gazette and some English newspapers: at 256, 257. Lindley J considered that the question of advertising should await the determination of the enquiry regarding knowledge (at 258) and subsequently confirmed the sufficiency of the advertising: at 258.

25. [223]

    That position regarding the extent of publication has been regarded in Australian texts as applicable in New South Wales: e.g. Stephen Janes, David Liebhold and Paul Studdert, Wills, Probate and Administration Law in New South Wales (2nd ed, 2020, Thomson Reuters) (Janes, Liebhold and Studdert) at 899 citing Newton v Sherry and Wood v Weightman (1872) LR 13 Eq 434.

26. [224]

    A LPR who distributes the assets or any part of the assets of the estate in accordance with s 92(1) PA Act is not liable in respect of those assets or that part of those assets to any person who has a claim in respect of those assets: s 92(2) PA Act.

27. [225]

    In deciding whether a claim is “in respect of the assets of the estate of the testator”, the task one is called on to carry out is to find out whether there is a type of connection between the claim, and the assets of the testator, that is within the scope of ss 92 and 93: Ludwig at [288]. Sections 92 and 93 PA Act relate to “claims” of the same type: Ludwig at [274]-[276].

28. [226]

    Clearly, notice of claims for the purpose of s 60 Trustee Act and s 92 PA Act is not restricted to claims received in response to any public notices seeking claims: Gonzales v Claridades at [74] per Campbell J (as his Honour then was). Those comments are unaffected by the appeal to the Court of Appeal: see Gonzales v Claridades [NSWCA].

29. [227]

    Further, if a LPR receives notice of a claim after the period in the advertisement expires but before distributing the estate, the LPR is not protected, if there is distribution without regard to the claim: National Westminster Bank plc v Lucas [2014] EWHC 653 (Ch); [2014] BPIR 551 at [12] per Sales J (an appeal from Sales J’s decision was rejected: see National Westminster Bank Plc v Lucas [2014] EWCA Civ 1632 at [126] per Patten LJ, Gloster and Bean LJJ agreeing).

30. [228]

    Publication of an advertisement by the LPR does not even protect a party receiving assets from the estate from being liable in equity to account for the property distributed: s 60(6) Trustee Act; Nowell v Palmer (1993) 32 NSWLR 574 (Nowell v Palmer) at 582E-F per Handley JA citing Ministry of Health v Simpson [1951] AC 251.

31. [229]

    There is a particular question as to what type or form of notice constitutes notice of a plaintiff's claim for the purpose of s 92.

32. [230]

    The Macquarie Dictionary gives a number of meanings of the noun “notice”. The meanings essentially focus on some information, intelligence, observation or perception held by or made by someone: Macquarie Dictionary, online ed.

33. [231]

    The phrase “on notice” is defined as “formally notified; forewarned”: Macquarie Dictionary, online ed.

34. [232]

    There are a series of cases relating to the notice provisions of ss 92 and 93 PA Act or their legislative equivalents.

35. [233]

    The essential facts of Newton v Sherry are summarised in the headnote:

36. [234]

    The plaintiff, being the daughter of the deceased and niece of the deceased’s sister (who was the LPR), after returning to England, obtained an order revoking letters of administration granted to the LPR and obtained a fresh grant of letters of administration to herself on the basis that she was the only next of kin. As the assets had been distributed the plaintiff obtained an assignment of the administration bond and brought an action against the sureties on the bond: at 251-252.

37. [235]

    In the proceedings in the Court below, Denman J directed a verdict for the plaintiff but reserved leave to the defendants to move to enter a verdict for them if the Court should be of the opinion that certain pleas were proved.

38. [236]

    There were various issues in the proceedings. Relevantly, there was a question as to whether the deceased’s sister as LPR had no notice that her niece was living: at 254. Neither party had left that question to the jury.

39. [237]

    Neither party was desirous of incurring the expense of a new trial and after some discussion between counsel and their Lordships it was arranged that the LPR should be examined and cross-examined before Lindley J in chambers as to whether or not she was aware of her niece’s existence at the time the assets were distributed by her, and that the decision of the rule and of the demurrers should abide the result of Lindley J’s report: at 254, 256.

40. [238]

    The report regarding the enquiry into the LPR’s notice is brief. Lindley J, in reasons delivered on 26 February 1876, simply states that “[t]hat examination and the documents which were produced before me satisfied me that she was not aware that her niece was then living”: at 258.

41. [239]

    In New South Wales, a LPR is not protected by s 92 advertising if there is distribution after actual notice of a claim: e.g. in Nowell v Palmer at 582E-F per Handley JA citing Guardian Trust and Executors Co of New Zealand Ltd v Public Trustee of New Zealand [1942] AC 115 (Guardian Trust). Guardian Trust involved a situation in which executors of a Will paid out certain legacies with notice that the next of kin intended on applying to revoke the grant of probate.

42. [240]

    In McGrath v Troy, the issue was whether the administratrix had notice at the time of distribution of the estate of a family provision claim made on behalf of the plaintiff (at the time of the hearing an infant aged three) based on the assertion that the plaintiff was the child of the deceased (the plaintiff’s mother having had a sexual relationship with the deceased at least within the year prior to the deceased's death): [2], [68].

43. [241]

    There was evidence in the proceedings that the plaintiff’s mother had telephoned the administratrix after the deceased’s death to ask about the funeral and in the context of that had informed her that the deceased had a son: at [71]. Although the administratrix denied the conversation, White J (as his Honour then was) rejected the denial. There was further evidence that the administratrix had consulted a solicitor and a file note referred to the possibility of performing testing to establish whether the deceased was the father of the plaintiff.

44. [242]

    White J rejected a submission that what were described as prior notifications were not notices of a claim within the meaning of s 92 but mere “assertions” or “conjectures”. His Honour referred to the dictionary meaning of “claim” in the Macquarie Dictionary noting that it included an assertion of a right or alleged right and includes the assertion of something as a fact. His Honour concluded that to make an assertion is to make a claim: at [92].

45. [243]

    His Honour further addressed the question of what amounts to or does not amount to notice of a claim. In that regard, his Honour referred to Robert Geddes, Charles Roland and Paul Studdert, Wills, Probate Administration Law in New South Wales (1st ed, 1996, LBC Information Services) referring to the fact that, under the analogous provision s 60(4) Trustee Act, the notice of claim submitted to an executor need not be formal, and that the fact that the executor does not receive particulars of the claim will not relieve the executor of the duty of providing for it: at [94]. Now see Janes, Liebhold and Studdert at 899 citing Re Land Credit Company of Ireland; Markwell’s Case (1872) 21 WR 135 (Markwell’s Case).

46. [244]

    White J referred to Markwell’s Case, Newton v Sherry and also Scottish Equitable Life Assurance Society v Beatty [1889] 29 LR Ir 290 at 298 per Fitzgibbon LJ.

47. [245]

    In Application of Valda Ann Haberfield [2014] NSWSC 1421 (Haberfield), White J dealt with an application for judicial advice as to whether the executors of a deceased’s estate would be justified in making a distribution to the beneficiaries on the basis of making an adjustment under a particular clause of the Will. The adjustment related to acquisition by the deceased’s son of a truck using monies lent by the deceased.

48. [246]

    White J noted that the beneficiaries’ entitlements depended upon objective facts not upon any discretion of the trustees: at [6].

49. [247]

    His Honour considered the interrelationship between ss 60 and 63 Trustee Act and ss 92 and 93 PA Act. His Honour observed that the statutory regimes provided two ways of proceeding in administering and distributing an estate. One way of the executors proceeding would be to give notice of an intention to distribute the estate pursuant to s 60 Trustee Act (his Honour noting that the executors presumably would also have given notice pursuant to s 92 – currently, I note that the same prescribed form of notice addresses both statutory provisions).

50. [248]

    If, having given such notice in that case of a proposed adjustment of a specific amount giving rise to a specified entitlement, the executors did not receive notice of a claim then, not having received such notice, they could distribute the estate and be protected against any later claim by force of s 60(5) Trustee Act: at [6]-[7].

51. [249]

    On the other hand, if the trustees did have notice of such a claim, if they were to distribute the estate without regard to the claim, they would be personally liable to make good any deficiency in the distribution if the affected beneficiary established the claim: at [8].

52. [250]

    The executors could obtain protection against such a claim by giving notice under s 93 PA Act requiring the claimant to institute proceedings within three months, failing which the claim would be barred: at [8].

53. [251]

    His Honour observed that an alternate course by proceeding on the basis of judicial advice could achieve much the same ends: [9].

54. [252]

    If the advice sought were given, the trustees, in accordance with the notice, would still be required before distributing to give notice to any person whose rights as beneficiary might be prejudiced by the distribution: s 63(8) Trustee Act.

55. [253]

    The effect of proceeding under s 63 would be, in substance, the same as if the executors proceeded by the giving of notices, including, if necessary, notice under s 93 PA Act, except that the time limits for a beneficiary to make a claim could be specifically fixed by the Court’s order under s 63(10): at [12]. In this regard, White J indicated that a greater flexibility is provided under s 63 and on the facts of that case indicated that that was the preferred mode of proceeding: [13].

56. [254]

    In Application of the NSW Trustee and Guardian; Estate of SGB [2015] NSWSC 398, White J referred to his decision in Haberfield and did not, in the context of an application for judicial advice, express any different view: at [19].

57. [255]

    Beyond what I have stated above, Australian texts do not deeply explore what is constituted by notice beyond actual notice.

58. [256]

    Janes, Liebhold and Studdert express the opinion that a LPR is not protected against a remote contingent liability of which they had knowledge before distributing citing Taylor v Taylor at 903. The learned authors indicate that in such a case the LPR can call on beneficiaries to refund: citing Jervis v Wolferstan (1874) LR 18 Eq 18; Wittaker v Kershaw (No 2) (1890) 45 ChD 320.

59. [257]

    Janes, Liebhold and Studdert do not cite Troy v McGrath.

60. [258]

    Ford and Lee: The Law of Trusts (Thomson Reuters) (Ford & Lee) refers to Newton v Sherry, In re Long (deceased) [1951] NZLR 661 (Re Long) and Ludwig: at [41.6030].

61. [259]

    In In the Will of Walker (1943) 43 SR (NSW) 305 (In the Will of Walker) the Will of the deceased provided for an annuity to a certain named person for her life.

62. [260]

    The executor, Perpetual Trustee Company Ltd, had published the s 92 notice and had served upon two respondents (who claimed to be the nominated person under the Will entitled to the annuity) s 93 notices calling upon them to take proceedings to enforce their claims within a period of six months. Neither of the respondents took any steps to prosecute their claim within that period and the executor moved for an order pursuant to s 93(2) barring the claims.

63. [261]

    Procedurally, whilst it appeared that the application before the Court had nominated the women as respondents, there was no appearance by the respondents on the application.

64. [262]

    Nicholas CJ in Eq took the view that the s 93 procedure could apply to persons claiming to be legatees as well as those claiming to be creditors or next of kin. On the facts a barring order was made.

65. [263]

    In Re Long, there was a motion brought by the Public Trustee as executor of an estate for an order barring a claim of a son of the deceased who had entered an arrangement with the Public Trustee to look after the deceased for a certain consideration. The son was paid for that arrangement. However, it appears that he put forward a further claim at a higher amount for having previously looked after the deceased for a period of eight years. That claim was disputed, and the Public Trustee called upon the son to take legal proceedings within three months. The son had not notified the Public Trustee of any such legal proceedings and, accordingly, the Public Trustee sought an order barring the claim.

66. [264]

    Relevantly, the son appears to have been served with the motion but did not appear. The matter was dealt with at first instance by Gresson J. His Honour held that the claim was not such a claim as could be barred and dismissed the motion.

67. [265]

    On appeal, the Court of Appeal held that an earlier decision of Myers CJ in In re Griffin (deceased) [1940] NZLR 174 (which advocated a restrictive view of what constituted a “claim against the estate”) ought to be overruled and the view of Nicholas CJ in Eq in In the Will of Walker was to be preferred. That is, a person who claims to be entitled to a portion of the assets of an estate is someone who is making a claim “against the estate”, regardless of whether the basis of the claim is a legacy under the Will or some other basis: at 670 per Stanton J for the Court.

68. [266]

    Thus, Re Long does not advance the issue of what types of notice constitute notice of the claim. It deals more particularly with the question of barring of claims.

69. [267]

    Dal Pont in the Law of Executors and Administrators refers to the decision of White J in McGrath v Troy but does not explore the question of constructive notice: at 434 n 239.

70. [268]

    Some consideration of the question of what constitutes notice was examined in detail in the UK in MCP Pension Trustees Ltd v AON Pension Trustees Ltd [2009] EWHC 1351 (Ch); [2010] 1 All ER (Comm) 323 (MCP [EWHC]), a decision of Jeremy Cousins QC sitting as a Deputy Judge of the High Court (whom I will refer to as “Cousins QC”). There was an appeal, and the Court of Appeal affirmed the decision of Cousins QC: MCP Pension Trustees Ltd v AON Pension Trustees Ltd [2010] EWCA Civ 377; [2011] 1 All ER (Comm) 228 (MCP [EWCA]).

71. [269]

    The case involved a claim by a plaintiff claiming damages in respect of loss alleged to have been suffered as a result of the defendant’s breach of contract or negligence in the provision of pension fund administration services.

72. [270]

    In essence, the plaintiff claimed that it retained the defendant to administer a scheme between certain years. During that time, some 32 persons were transferred into the scheme. The plaintiff alleged that at some point after the transfer the defendant incorrectly amended the records of the scheme so as to remove reference to the 32 transferred members. Those persons were overlooked when the scheme was wound up and, when it was subsequently discovered, provision had to be made for 15 of the transfer members at substantial cost. The defendant contended the claim was time-barred. The case involved consideration of s 27 Trustee Act (UK) (effectively the equivalent of s 92 PA Act and s 60 Trustee Act).

73. [271]

    The defendant made submissions in relation to what constituted notice for the purposes of s 27 by reference to the decision in Baden. The defendant submitted that notice in s 27 was limited to: (i) actual knowledge, (ii) wilfully shutting one’s eyes to the obvious, and (iii) wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make. The defendant submitted that on that basis the trustee had no notice of the transferred members’ claims at the time of distribution even though it had had such notice at an earlier time.

74. [272]

    At first instance, Cousins QC cited each of Markwell’s Case, Newton v Sherry and Guardian Trust for the proposition that a trustee who has “notice” of a claim will not be protected by the placing of an advertisement under the relevant statutory provision and the absence of a relevant response to the advertisement. However, his Lordship noted that those cases do not decide the extent of what constitutes such notice: [23]-[27].

75. [273]

    Cousins QC noted that s 27(2) is concerned with notice and not knowledge: [63]. His Lordship noted that the concepts of notice and knowledge have been developed for different purposes. In the context of some statutory provisions, such as dealing with the purchase of land, notice (to be relevant for the statutory purpose) had to be linked to what was the purchaser’s current knowledge (including knowledge to be derived from proper enquiry) at the time of the transaction under consideration: at [67].

76. [274]

    His Lordship, whilst noting the submissions based on Baden, considered that authorities such as Baden (concerned with categories of knowledge) were of little assistance in resolving what constitutes notice for the purposes of s 27: [68].

77. [275]

    Ultimately, in MPC [EWHC], Cousins QC found that because of a concession that the case involved actual notice that it was unnecessary to decide the question of whether imputed notice would be sufficient. However, his Lordship accepted a submission that knowledge of an agent would be imputed to the principal: at [72].

78. [276]

    On appeal, their Lordships (Arden, Dyson and Elias LJJ) made a number of observations regarding s 27. Those observations included that:

    1. (1)

       the section relieves trustees from liability only with respect to claims of which they did not have notice at the time of distribution;

    2. (2)

       there is no definition in the section or, indeed, elsewhere in the Trustee Act (UK) of what constitutes notice;

    3. (3)

       having regard to general concepts of equity, notice means actual or constructive notice and the trustee may have constructive notice of the claim even though he does not have actual knowledge of it: [8]-[9] per Elias LJ.

79. [277]

    The Court of Appeal’s judgment appears to accept that some form of constructive notice can constitute notice for the purposes of the section. However, Elias LJ considered that the appeal in the case could be resolved simply by focussing upon the concept of actual notice and, accordingly, did not consider it necessary to identify the scope of constructive notice for the purpose of the section: at [11], [19].

80. [278]

    Nonetheless, his Lordship did agree with Cousins QC that knowledge and notice are different things and observed that notice is not to be equated with knowledge. Thus, even if trustees forgot that notice had been given, that did not cause the notice to lapse or otherwise negate the notice: at [16]-[17].

81. [279]

    Dyson and Arden LJJ (as his Lordship and her Ladyship then were) agreed: at [21]-[22].

82. [280]

    The decisions in MCP at first instance and in the Court of Appeal do not appear to have been cited or applied in Australia.

83. [281]

    In the context of the question of knowledge for the second limb of Barnes v Addy (1874) LR 9 Ch App 244 (accessorial liability claims in equity), the High Court, in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2003) 230 CLR 89; [2007] HCA 22 at [174]-[179] per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ, accepted the view of Stephen J (Barwick CJ agreeing) in Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; [1975] HCA 8 at 412, that knowledge within the categories which were later identified as (i) to (iv) of Baden is sufficient for the purposes of the second limb in Barnes v Addy, but constructive knowledge within category (v) of Baden, that is, knowledge of circumstances which would put an honest and reasonable person on inquiry, is insufficient: see e.g. Cassaniti v Ball as liquidator of RCG CBD Pty Limited (in liq) [2022] NSWCA 161 at [130] per Gleeson, Leeming and Mitchelmore JJA.

84. [282]

    However, notice is not necessarily to be equated with knowledge. Further, even if one admits the possibility of s 92(2) PA Act not protecting a LPR in respect of some constructive notice, the law (in New South Wales) is not clear as to what form or degree of constructive notice might preclude reliance upon s 92(2).

85. [283]

    Another fundamental issue which arises in relation to advertising is that there will be certain types of contingent claims which will never be able to be effectively addressed by advertising.

86. [284]

    In Re Yorke, although Lindsay J did not consider specific statutory provisions concerning advertising as a means of protecting LPRs in distributing an estate in the context of potential claims on an insurance policy, his Lordship did state the following in relation to “advertising” (at 918):

87. [285]

    If one remembers that one of the objects of advertising is not merely to secure an indemnity to LPRs, but for the benefit also of persons having claims against the estates of deceased persons to give them a reasonable opportunity to bring forward such claims there must be questions as to whether an advertising procedure is entirely apt in some cases to fairly give persons (who have or might have claims which are contingent) notice of proposed distribution.

Protection by judicial advice

1. [286]

   It is possible for a LPR to obtain protection from claims in distributing an estate by applying to the Court to obtain advice as to whether the LPR is justified in distributing an estate.

2. [287]

   The Court has an inherent equitable jurisdiction to give advice: Macedonian Court Case at 81 n 47; Application of Macedonian Orthodox Community Church St Petka Inc (No 2) (2005) 63 NSWLR 441; [2005] NSWSC 558 (Macedonian No 2) at [23] per Palmer J.

3. [288]

   There is also statutory jurisdiction pursuant to s 63 Trustee Act.

4. [289]

   The High Court in the Macedonian Court Case at least expressly did not consider how far this Court may have jurisdiction to give judicial advice by reason of the inherent jurisdiction of a court of equity, or by reason of s 22 or s 23 Supreme Court Act 1970 (NSW): Cho-Poon at [172] citing Macedonian Court Case at 81 n 47, though cf Cho-Poon at [177]-[179].

5. [290]

   The jurisdictional power under s 63 is enlivened where there is a question respecting the management or administration of the trust property or respecting the interpretation of the trust instrument: Macedonian Church Case at [58].

6. [291]

   The inherent equitable jurisdiction allows for private advice to trustees. It is derived from the practice of the Court of Chancery under the general law in giving directions to those entrusted with the administration of property under the control of the Court – affording special assistance to those, such as trustees, who have no direct pecuniary interest in a fund but have assumed the onerous obligation of administering it for the benefit of others: Macedonian No 2 at [23].

7. [292]

   The Court in a s 63 application is not bound to give judicial advice merely because a trustee has a right to apply for it: Cho-Poon at [43] per Lindsay J citing Application of Perpetual at [8]-[9] per Young CJ in Eq. Ultimately, the Court in dealing with such applications whether as to the form of the application or in the decision as to whether to give advice or not must be guided by what it perceives to be in the best interests of the trust estate: Macedonian Church Case at [72]; Cho-Poon at [45] citing Application by Marilyn Joy Cottee [2003] NSWSC 47 at [35] per Hallen J.

8. [293]

   The primary purpose of judicial advice is to enable trustees to ascertain in advance whether particular conduct that they contemplate will be in accordance with their duties as trustees.

9. [294]

   Applications by LPRs for advice under s 63 Trustee Act lay a foundation for an application to the Court:

   1. (1)

      under s 85 Trustee Act, to be granted relief against liability for a breach of trust: Cho-Poon at [120] citing National Trustees Company of Australasia Limited v General Finance Company of Australasia Limited [1905] AC 373; Re Investa Properties Limited [2001] NSWSC 1089; 187 ALR 462 at [39]-[43]; and

   2. (2)

      as evidence persuasive of an absence of any “wilful default” on the part of the trustee personally that, if present, could expose the trustee to liability Cho-Poon at [120] citing Perpetual Trustee Co v Watson (No 2) (1927) 28 SR (NSW) 43 at 46-47; Ah Toy v Registrar of Companies (Northern Territory) (1986) 10 ACLR 630 at 646.

10. [295]

    In relation to the first matter, the High Court has indicated that it is desirable that trustees in doubt as to a course of action should not proceed with it and then seek s 85 relief, but rather seek s 63 relief first because one of the things which a trustee invoking s 85 requires to be excused from is his failure to seek s 63 advice: Macedonian Church Case at [36].

11. [296]

    If trustees then act on the advice, they will have discharged their responsibility, and subject to the proviso in s 63(2) will not be liable for breach of trust. See also Australian Legion of Ex-Servicemen & Women [2021] NSWSC 149 at [44] per Robb J.

12. [297]

    A related purpose concerns the right of a trustee to be indemnified from the trust fund for the trustee’s costs of performing the trustee’s duties.

13. [298]

    In many cases, a trustee can obtain effective protection by acting upon the opinion or advice of a lawyer: Cho-Poon at [110] per Lindsay J.

14. [299]

    Wills or trust provisions might provide a facility for the executor or trustee to rely upon counsel’s advice or even other exemptive provisions. However, absent such an exemptive provision in the trust instrument, even though a trustee may be assisted by the provision of the opinion or advice of a lawyer, the intervention of a lawyer in this respect provides no guarantee of protection if a Court subsequently perceives that the opinion or advice was wrong or it was unreasonable for the trustee to have acted upon it: Cho-Poon at [110].

15. [300]

    There is no precise form as to how an application for an order for judicial advice ought to be framed. A usual form of provision of advice is to the effect that the trustee “would be justified in [doing or omitting to do something] on the basis [assumption] that et cetera”: Cho-Poon at [31]; Perpetual Trustee Co Ltd v Attorney General (NSW) [2018] NSWSC 1456; (2018) 17 ASTLR 126 at [7(2)] per Leeming JA.

16. [301]

    The provisions of the Trustee Act do not mandate that the application be supported by an opinion: Cho-Poon at [109]. However, the practical reality is that the Court places considerable importance upon the availability of an opinion of counsel: Cho-Poon at [107]-[121].

17. [302]

    The procedural objectives of speed and efficiency served by judicial advice proceedings are facilitated by and in many cases cannot be achieved unless the Court is presented with the assistance of a memorandum of opinion by an independently-minded lawyer who, out of court, has studied the problem to be solved, examined the factual context critically, analysed competing contentions in a comprehensive legal context, and worked out a solution that commends itself to his or her professional judgement: Cho-Poon at [113].

18. [303]

    An application for judicial advice pursuant to s 63 Trustee Act is normally ex parte and not adversarial. However, subject to the nature of the question in issue the advice might impact beneficiaries’ rights. Thus, where the question is who the beneficiaries are or what their rights are as between themselves, the LPR before conveying or distributing any property in accordance with the opinion, advice or direction of the Court shall, unless the Court otherwise directs, give notice to any person whose rights as beneficiary may be prejudiced by the conveyance or distribution: s 63(8) Trustee Act.

19. [304]

    A beneficiary who claims he or she will be prejudiced by the conveyance or distribution may apply to the Court for such order or directions as the circumstances may require: s 63(10) Trustee Act. Any person on whom notice of any s 63 advice application is served, or to whom notice (under 63(9)) is given in accordance with s 63(8), is bound by any opinion, advice, direction or order given as if the opinion, advice, direction or order had been given or made in proceedings to which the person was a party: s 63(11) Trustee Act.

20. [305]

    The facts stated to the Court by the trustee are (ordinarily) untested by adversarial procedure and are assumed by the Court to be true only for the purpose of the application: Application of Macedonian Orthodox Community Church St Petka Inc (No 3) [2006] NSWSC 1247 (Macedonian No 3) at [69] per Palmer J. It is not the Court’s purpose to determine the rights of adversaries although that might sometimes occur as a necessary incident of determining what course ought to be followed in the best interests of the trust estate: Macedonian Church Case at [104]-[105]; Macedonian No 3 at [41] referring to Marley v Mutual Security Merchant Bank & Trust Co Ltd [1991] 3 All ER 198 (Marley) at 201g per Lord Oliver of Aylmerton for the Board.

21. [306]

    There is no finding by the Court that the facts stated by the trustee are accurate. It has been said that no person bound by the advice is prevented from litigating as to the accuracy of those facts in other proceedings: Macedonian No 3 at [70].

22. [307]

    However, that is not to say that the Court on judicial advice applications unquestioningly determines the application without some reflection on the materials presented.

23. [308]

    The Court is cautious where it is presented with statements of fact which refer to trustees’ (including LPRs’) beliefs and lack of awareness of matters, which invite the Court to proceed on the basis of an unexamined state of mind of the trustees potentially without elaboration of any objective, underlying facts and potentially without any assurance that the trustees have made inquiries, let alone reasonable inquiries, about facts which they implicitly invite the Court to assume to be true: Cho-Poon at [141]-[142].

24. [309]

    It is very easy to find broad statements regarding the protection afforded by distribution under an order for judicial advice.

25. [310]

    In the United Kingdom, there is no exact statutory equivalent to s 63 Trustee Act (after the demise of s 30 Lord St Leonards’ Act). There, Practice Direction 64B governs applications to the Court for Directions by Trustees in relation to the Administration of the Trust.

26. [311]

    Rules of the Supreme Court (RSC), 1883 O 55 r 39 (which is an alternative means by which trustees in England could obtain, in functional terms, judicial advice) was replaced by RSC 1965, O 85 r 2. The latter in turn was replaced by the Civil Procedure Rules 1998 (UK), Pt 64.2. These provisions do not include the terms “fraud or wilful concealment or misrepresentation” or anything similar.

27. [312]

    Nonetheless, the position in the United Kingdom regarding so called “Re Beddoe” applications (after In re Beddoe; Downes v Cottam [1893] 1 Ch 547 (Re Beddoe)) is that there is a requirement on the trustee or executor to make full disclosure of the material facts in any application for advice (failure to do which may threaten the protection afforded by the advice/directions). Accordingly, in Alsop Wilkinson (a firm) v Neary [1995] 1 All ER 431, Lightman J said (at 435):

28. [313]

    Additionally, Hoffmann LJ (as his Lordship then was), with whom Hirst and Balcombe LJJ agreed, said in McDonald v Horn [1995] 1 All ER 961 at 970:

29. [314]

    A further reminder of this principle was provided in Professional Trustees v Infant Prospective Beneficiary [2007] EWHC 1922 (Ch); [2007] WTLR 1631, where Lindsay J said (at [21]-[25]):

30. [315]

    In Australia, the notion that an executor or trustee is protected only if all material and relevant facts have been submitted to the Court appears in many texts. For example, see JD Heydon and MJ Leeming, Jacobs’ Law of Trusts in Australia (8th ed, 2016, LexisNexis) at 535 citing In re Grose, deceased [1949] SASR 55 (Re Grose) and Marley; Peter Young, Clyde Croft and Megan Smith, On Equity (2009, Thomson Reuters) at 489 citing Marley and Khoury v Zambena Pty Ltd (1997) 23 ACSR 344 (Khoury v Zambena) at 347 per Young J (as his Honour then was). Ford & Lee notes that protection is afforded provided all material and relevant facts are substantially as submitted on the application citing Re Grose at 60 per Mayo J: at [17.260].

31. [316]

    The Australian texts must be read in light of the fact that the commentary often is directed to addressing norms of trust law across different jurisdictions in Australia rather than New South Wales and the Trustee Act in particular.

32. [317]

    The position in New South Wales is that many cases predating the Macedonian Church Case have indicated that the utility of judicial advice is based upon the accuracy of the facts and if the facts are not accurate, and the trustee acts in accordance with the advice, the trustee is not protected by the statutory provisions in performing the act or relying upon the advice: Harrison v Mills [1976] 1 NSWLR 42 at 45E per Needham J. See also Khoury v Zambena, at 347 per Young J (as his Honour then was) citing Re Grose at 60 and Marley at 201 per Lord Oliver of Aylmerton for the Board; Application of Perpetual at [24] per Young CJ in Eq (as his Honour then was).

33. [318]

    The position in New South Wales, as observed by Lindsay J in Cho-Poon at [167]-[168], is that authoritative guidance on the construction and operation of s 63 is available in the judgment of the High Court of Australia in the Macedonian Church Case, and care needs to be taken in relying upon broad, normative statements made in texts and caselaw predating the Macedonian Church Case regarding s 63 and 63(2) in particular.

34. [319]

    Despite the large number of judicial advice applications that are made to Courts and, in particular, to this Court and the relative ease with which one can find statements to the effect that advices based on erroneous facts afford trustees and executors no protection, it is rare to find cases in which it has been held that a trustee is unable to rely upon advice that has been given or, alternatively, where an application has been made to set aside advice.

35. [320]

    In Re PILT Nominees Pty Ltd – Londish v Seller [2011] NSWSC 74 (PILT Nominees), the plaintiff applied to the Court to set aside judicial advice allegedly on the basis of material nondisclosure and for repayment of trust funds paid out to trustees in reliance upon such advice: [57]-[62].

36. [321]

    Ultimately, Ward J (as her Honour then was) was not satisfied that the interlocutory procedure seeking to set aside the orders was an appropriate mechanism to deal with the matter: at [88].

37. [322]

    In Re Rosewood Research Pty Ltd (No.2) [2014] NSWSC 1226, Darke J rejected a submission by objectors that the failure of the trustees to provide the Court with certain information about their taxation affairs amounted to a failure to discharge their obligation of disclosure: at [26].

38. [323]

    There is some tension between the wording of s 63(2) Trustee Act on the one hand and descriptions in textbooks and caselaw of protection afforded by advice on the other.

39. [324]

    For that reason, it is appropriate to consider the issue of the extent of protection afforded by the statutory jurisdiction under s 63(2) Trustee Act.

40. [325]

    In adversarial litigation, an applicant for ex parte orders must candidly disclose to the Court all matters material to the making or obtaining of the order or which as a real possibility may influence the Court’s determination, especially material matters that may be adverse to the applicant’s case: e.g. Thomas A Edison Ltd v Bullock (1912) 15 CLR 679; [1912] HCA 72 (Thomas A Edison v Bullock) at 681-682 per Isaacs J; International Finance Trust Co Ltd v NSW Crime Commission (2009) 240 CLR 319; [2009] HCA 49 (International Finance Trust) at [130]-[133] per Hayne, Crennan and Kiefel JJ.

41. [326]

    The obligation to make proper disclosure when seeking relief from a Court without notice to any opposite party applies not merely to applications for interlocutory injunctions but to a wide range of circumstances and is not confined to cases where equitable relief is sought: International Finance Trust at [132].

42. [327]

    For example, it applies in relation an ex parte application:

    1. (1)

       for a grant of letters of administration: Murakami v Murakami [2005] NSWSC 953 at [29]-[35] per Windeyer J;

    2. (2)

       under s 93 PA Act for a barring order: Ludwig at [273] per Campbell J (obiter).

43. [328]

    In adversarial settings, the source of the obligation is understood as lying in the very nature of the adversarial system coupled with the emphasis given to the desirability of finality in litigation: International Finance Trust at [133].

44. [329]

    In the Supreme Court of New South Wales, the obligation might be seen as rooted in the requirement of s 56 CPA that the overriding purpose of that Act and the UCPR is “to facilitate the just, quick and cheap resolution of the real issues” in proceedings: International Finance Trust at [133].

45. [330]

    It is said that any demonstrated breach of an ex parte applicant’s material disclosure obligation will generally lead to dissolution of any orders that have been obtained: e.g. Thomas A Edison v Bullock at 682; Garrard (t/as Arthur Anderson & Co) v Email Furniture Pty Ltd (1993) 32 NSWLR 662 at 676-677 per Mahoney A-P (Clarke JA agreeing).

46. [331]

    What is material will depend upon the nature of the proceedings, the nature of the right affected, the nature of the power being exercised and statutory provisions: Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd (2017) 94 NSWLR 606; [2017] NSWCA 53 (Fitz Jersey) at [75]-[77] per Basten JA (as his Honour then was) and at [109] per Leeming JA (Beazley A-CJ – as her Excellency then was – agreeing with both judgments at [2]).

47. [332]

    Critically, in approaching the question of what protection is afforded by s 63(2) Trustee Act, no assumption should be made based on general or normative statements made in texts and caselaw as to the content of what is required by way of disclosure. As the High Court stated in the Macedonian Church Case with respect to the jurisdictional question posed by s 63 (at [55]) (footnote omitted):

48. [333]

    As stated above, the requirements of disclosure to a Court on an application whether ex parte (or otherwise) and what is material will depend upon the precise nature and content of any applicable statutory regime: Fitz Jersey at [75]-[77], [109].

49. [334]

    Section 63(2) provides that:

50. [335]

    There is a broad uniformity regarding approaches to construction of legal instruments across a number of areas of the law: see e.g. Marley v Rawlings [2015] AC 129; [2014] UKSC 2 at [20]-[23] per Lord Neuberger of Abbotsbury PSC (as his Lordship then was) (Lord Clarke of Stone-cum-Ebony, Lord Sumption, Lord Carnwath and Lord Hodge JJSC agreeing); Al Dakhili v Al Kheurallah [2023] NSWSC 47 at [356].

51. [336]

    At least as far as legal principle is concerned, there is only one true construction of any legal instrument including a statutory provision: Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541; [2018] HCA 30 at [154] per Edelman J.

52. [337]

    Statutory construction and contractual construction involve the Court looking at text, context and purpose: see e.g. Zhang v ROC Services (NSW) Pty Ltd (2016) 93 NSWLR 561; [2016] NSWCA 370 (Zhang) at [86] per Leeming JA. See also Hackett (a pseudonym) v Secretary, Department of Communities and Justice [2020] NSWCA 83 at [35] per Leeming JA.

53. [338]

    A helpful way of considering the matter of construction of complex provisions within written instruments is guided by Leeming JA in Zhang.

54. [339]

    His Honour there noted that the construction of a complex (in that case contractual) provision involves the following considerations:

    1. (1)

       first, determine the literal or grammatical meaning or meanings of the clause.

    2. (2)

       secondly, determine the legal meaning of the clause.

    3. (3)

       thirdly, apply that legal meaning to the facts as found by the Court: at [53].

55. [340]

    Whilst those considerations are described in a sequential way as phases (Zhang at [54]), the actual process by which our minds work will in many cases involve some degree of crossover between those phases as those matters are assessed.

56. [341]

    There is not a sharp line dividing the threshold stage of ascertaining grammatical or literal meaning and the subsequent stage of determining legal meaning: Zhang at [77].

57. [342]

    Determining the literal or grammatical meaning is a matter of English, not a matter of law. It does not turn on evidence: Zhang at [54].

58. [343]

    The noun “misrepresentation” conveys something that has been represented in an incorrect way. The verb “misrepresent” is defined to mean “to represent incorrectly, improperly, or falsely”: Macquarie Dictionary, online ed.

59. [344]

    Essentially, for there to be a misrepresentation there must be some standard. A misrepresentation generally occurs if there is a discrepancy between true facts and the represented facts.

60. [345]

    The law applies the noun misrepresentation to a broad range of conduct. Depending upon the particular context, the law distinguishes between types of misrepresentation including innocent misrepresentation, negligent misrepresentation and fraudulent misrepresentation.

61. [346]

    An “innocent misrepresentation” is a false statement of a past or present fact made by words or conduct, that induces the representee party to act in a particular way (such as enter into a contract) but which is not made with an intention to deceive: Encyclopaedic Australian Legal Dictionary (LexisNexis) (Australian Legal Dictionary).

62. [347]

    It is distinguished from a “fraudulent misrepresentation” which is a false statement of fact, made by a person who does not believe the truth of the statement or is recklessly indifferent to whether it is true, to another with the intention that the other person will rely on it: Australian Legal Dictionary citing Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676; [1912] HCA 9; Commercial Banking Co of Sydney Ltd v RH Brown & Co (1972) 126 CLR 337; [1972] HCA 24.

63. [348]

    “Fraud” is an intentional dishonest act or an omission done with the purpose of deceiving: Australian Legal Dictionary.

64. [349]

    “Wilful concealment” depending on context has various meanings. The adjective “wilful” refers to intentional, deliberate conduct. Concealment in the context of a Court application will often refer to nondisclosure of evidence or, in particular, suppression of evidence. Where the expression is used it is generally in the context of there being a duty on the relevant party to disclose that information to the Court.

65. [350]

    At first blush, the text of s 63(2) suggests by the grouping of the word “misrepresentation” with “fraud or wilful concealment” conduct that appears to be closer to “fraudulent misrepresentation” than “innocent misrepresentation”. Such a reading is supported by the maxim noscitur a sociis (“a thing is known by its associates” or, in this context, “the meaning of a word is known by the company it keeps”). The rationale of the maxim is that the interpretation or meaning of a word can be gleaned from its associated words: Perry Herzfeld and Thomas Prince, Interpretation (2nd ed, 2020, Thomson Reuters) (Herzfeld and Prince) at [6.20] n 7 citing Lend Lease Real Estate Investments Ltd v GPT RE Ltd [2006] NSWCA 207 at [30] per Spigelman CJ (McColl and Basten JJA agreeing).

66. [351]

    The maxim has a number of sub-principles including the rule ejusdem generis (“of the same kind”) and the rule copulatio verborum indicat acceptationem in eodem sensu (“the linking of words indicates that they should be understood in the same sense”): Deputy Commissioner of Taxation v Dick [2007] NSWCA 190; (2007) 242 ALR 152 at [13] per Spigelman CJ. In that case, Spigelman CJ used the latter sub-principle to construe the words “negligence” and “breach of trust”, which appeared in a statutory provision referring to “civil proceedings … for negligence, default, breach of trust or breach of duty”, as limited to obligations under the general law only (and not statutory obligations): at [11].

67. [352]

    The sub-principle ejusdem generis provides that “where there is a list of things that are specific instances (species) of a class or category (genus), general words following the list are restricted to species of that genus”: Hertzfield and Prince at [6.50] citing R v Regos (1947) 74 CLR 613; [1947] HCA 19 at 623 per Latham CJ (McTiernan J agreeing). It has been said that “[f]or the purposes of that canon you must first find in your particular instances which precede the general words some common attributes or characteristics which enable you to formulate a category or description: Cody v JH Nelson Pty Ltd (1947) 74 CLR 629; [1947] HCA 17 at 648 per Dixon J.

68. [353]

    A reading of the text which interprets “misrepresentation” as being conduct closer to “fraudulent misrepresentation” than “innocent misrepresentation” appears reinforced by use of the word “guilty”.

69. [354]

    The word “guilty” can be used as a noun or adjective. As a noun it essentially names or represents a plea or a verdict on conduct. As an adjective it tends to describe types of actions.

70. [355]

    Leaving aside the specific legal context in which being guilty conveys being legally responsibility for a criminal offence, the word in its plain meaning conveys a seriousness or gravity regarding culpability.

71. [356]

    However, it can be acknowledged that the word is also commonly used in less serious contexts such as determining whether a party is “guilty of postponing conduct” where there is a priority dispute between holders of equitable interests in land: see e.g. Champion Homes Sales Pty Ltd v JKAM Investments Pty Ltd [2014] NSWSC 952 at [119] per Darke J.

72. [357]

    The origins of s 63 were referred to by the High Court in the Macedonian Court Case at [37].

73. [358]

    Section 63 has effectively two limbs. The first relating to questions regarding management or administration of trust property and second relating to interpretation of trust instruments.

74. [359]

    The genesis of the first limb of the Trustee Act is s 30 Lord St Leonards’ Act.

75. [360]

    Section 30 Lord St Leonards’ Act provided as follows:

76. [361]

    Section 30 Lord St Leonards’ Act was amended, shortly after its commencement, by s 9 of the Law of Property Amendment Act 1860, 23 & 24 Vict, c 38, in a manner not materially relevant for the purposes of this judgment.

77. [362]

    These provisions were enacted in New South Wales as s 30 Trust Property Act which provided:

78. [363]

    Section 30 Lord St Leonards’ Act was repealed by s 51 (Sch) of the Trustee Act 1893, 56 & 57 Vict, c 53 (Trustee Act 1893).

79. [364]

    In New South Wales s 30 Trust Property Act was replaced by s 20 Trustee Act 1898 (NSW) (Trustee Act 1898) which provided

80. [365]

    I pause to observe that the marginal note in relation to s 20(2) Trustee Act 1898 was:

81. [366]

    Section 20 Trustee Act 1898 was in turn replaced in 1925 by s 63 Trustee Act in the following form:

82. [367]

    The enactment of s 63 in 1925 went beyond merely re-enacting s 20 Trustee Act 1898. In addition, three major innovations were made. First, advice on questions about “the interpretation of the trust instrument” could be given. Secondly, s 63(4) made it plain that it was possible for evidence to be adduced by affidavit or otherwise. Thirdly, s 63(11) recognised that an express right of appeal might be created: Macedonian Church Case at [39]-[40].

83. [368]

    The High Court observed that in England another means by which judicial advice could be given to trustees without an administration order was developed making reference to an alternative jurisdiction alongside s 30 Lord St Leonards’ Act, namely, RSC, 1883 O 55 r 39(e)-(g) – see Macedonian Church Case at [41]. This jurisdiction was more concerned with the Court’s discretion of whether to allow a trustee or executor’s costs to be paid out of the trust fund or estate. The RSC, 1883 O 55 r 39 provisions did not include the phrase “fraud or wilful concealment or misrepresentation”.

84. [369]

    Many of the authoritative cases in England, including Re Beddoe, were decided pursuant to O 55 r 39 (and not s 30 Lord St Leonards’ Act) – see Macedonian Church Case at [44], and therefore did not involve consideration of a statutory provision with the phrase “fraud or wilful concealment or misrepresentation”.

85. [370]

    In New South Wales, Lindsay J elaborated on the origins of s 30 Lord St Leonards’ Act and its eventual phasing out in his paper “An Application for Judicial Advice: Text, Context and Functional Purpose”, The Blue Mountains Law Society Succession Law Conference, 18 November 2021 (BMLS Paper): at [66]-[79].

86. [371]

    Such was the recourse by practitioners to the RSC that, eventually, s 30 came to be regarded as “obsolete”: see BMLS Paper at [78].

87. [372]

    The High Court has observed that the possibility that the rights of beneficiaries under private trusts could be affected by judicial advice led the New South Wales Parliament in 1925 to introduce the protections given by s 63(8)-(11) and in that sense to strike a compromise between the purpose of affording protection to trustees and need for affected persons to be given a hearing in some cases, albeit that such persons are not strictly speaking “parties” to “proceedings” by reason of the closing words of s 63(11): Macedonian Church Case at [65].

88. [373]

    In construing the provisions of s 63 Trustee Act the High Court in the Macedonian Church Case made reference (at [43]) to the text of HS Nicholas and HE Harrington, Trustee Acts of New South Wales (1st ed, 1926, Butterworth & Co (Australia Ltd)), produced within a year after the Trustee Act was enacted in New South Wales (as was highlighted there, HS Nicholas was a judge and later Chief Judge in Equity in the NSW Supreme Court from 1935 to 1946).

89. [374]

    The annotation to s 63(2) provides helpful contextual insight to the statutory purpose.

90. [375]

    The learned authors state at 101:

91. [376]

    That commentary is reiterated in the second edition in 1939: HS Nicholas and JD Evans, The Trustee Acts of New South Wales (2nd ed, 1939, Butterworth & Co (Australia Ltd)) at 112.

92. [377]

    Innocent misrepresentation per se in life is not necessarily actionable. Generally, what causes misrepresentation to be actionable is whether it has induced action in another causing that other to do something or to incur loss or damage. Different areas of the law, specifically statutory jurisdictions, equity and common law have different responses to the effects of an innocent misrepresentation.

93. [378]

    The above suggests the wisdom of addressing the requirements of disclosure to the Court on a s 63 judicial advice application by reference to the precise nature and content of the statutory regime: Fitz Jersey at [75]-[77] per Basten JA (as his Honour then was) and at [109] per Leeming JA (Beazley A-CJ – as her Excellency then was – agreeing with both judgments at [2]).

94. [379]

    The purpose of the statutory provision providing protection to trustees must be considered as indicated by the High Court. The operative mechanism by which any fraud, wilful concealment or misrepresentation referred to in s 63(2) precludes a discharge of the trustee’s responsibility is that it has arisen in the “obtaining” of the opinion, advice, or direction of the Court (being wording sourced from s 30 Lord St Leonards’ Act) rather than “induced” such advice.

95. [380]

    Qualification on the protection that is afforded to a trustee who acts in accordance with s 63 advice is best expressed in the statutory language as being effective so long as the proviso to s 63(2) is satisfied: Macedonian Church Case at [65]; PILT Nominees at [74] per Ward J (as her Honour then was).

96. [381]

    The protection afforded to trustees under s 63(2) is qualified by a proviso that focuses attention on the state of mind of a trustee: Cho-Poon at [142].

97. [382]

    The text, context and purpose of the statutory provisions indicate that the nature of any conduct of the LPR in obtaining s 63 advice which precludes protection is of a graver nature than mere innocent misrepresentation or omission of some facts.

98. [383]

    Put another way, protection is seemingly afforded by s 63(2) to a LPR who seeks judicial advice pursuant to s 63, notwithstanding some form of innocent misrepresentation or innocent omission of the facts.

99. [384]

    Thus, there would appear to be at least some greater degree of tolerance for the accuracy or completeness of factual material placed before the Court afforded by the terms of s 63(2), than some pre-Macedonian Church Case descriptions of the advice jurisdiction, which suggest that any misdescription or incompleteness of facts placed before the Court will render the advice useless or preclude a LPR relying upon such advice.

100. [385]

     Other than making that observation, this judgment is not the occasion to explore the extent of tolerance afforded by s 63(2) in LPRs obtaining advice as there is not the slightest suggestion that the plaintiffs have at each stage of this application attempted to act other than in a careful manner in progressing the application for advice.

101. [386]

     What can be said is that as a practical matter what the above discussion and analysis point to is that some degree of rigour and care should be taken by LPRs (for their own sake and the sake of those who will be affected by Court advice acted upon by LPRs) in providing to the Court a sufficiently satisfactory base of stated facts (whether by statement evidence or other materials) which thus enables the Court to properly exercise the statutory jurisdiction with a degree of confidence.

102. [387]

     Noting as I have that the terms of the judicial advice jurisdiction will vary as between jurisdictions, it has been said that an absence of information, if it is as a result of a matter which is unknown or of a speculative nature, will not necessarily amount to a breach of the obligation to place information before the Court: Ryan v The Public Trustee of Queensland [1998] 1 Qd R 679 at 685 per Williams J (Fitzgerald P and McKenzie J agreeing).

103. [388]

     If the Court is requested to act upon incomplete information, an available and proper course for the Court is to adjourn the matter until such information is provided: see Estate L H Hall [1999] NSWSC 1297 (Estate Hall) at [12] per Austin J; see also Marley at 201.

Cases dealing with contingent liabilities

1. [389]

   Having considered the principles regarding protective options available to LPRs I briefly address the cases of Re Yorke and Thompson v Gamble referred to by Dr Birch SC in his Opinion and several other cases.

2. [390]

   Re Yorke involved an issue regarding contingent liabilities of an estate.

3. [391]

   In Re Yorke, the plaintiffs were the executors of the estate of Richard Michael Yorke QC, the deceased, being a former underwriting member of Lloyd’s. At the time of the application, the deceased’s estate had been administered to a significant, but not a full, extent. All the inheritance tax liabilities had been discharged subject only to minimal adjustments. Further, all debts and liabilities other than particular unascertained or contingent liabilities, had, with minor exceptions, been met. The estate had net assets of approximately $620,000 almost exclusively in cash on deposit available for distribution.

4. [392]

   The deceased had been a “name” at Lloyd’s of London Insurance Market from 1983 until his death in 1991.

5. [393]

   There was evidence from the chairman of Lloyd’s Underwriting Agents Association explaining that each individual member of a syndicate (“names” such as the deceased) agrees to assume a proportion of the risks underwritten by that syndicate. The liability of an individual for that agreed part is unlimited, but there is no liability on the individual for the failure of any fellow member of the syndicate to bear that other’s proportion: at 911.

6. [394]

   Relevantly, on becoming a name at Lloyd’s each individual signs a general undertaking to the effect that he and his personal representative shall be bound by the rules of Lloyd’s. Whilst each syndicate in a sense was an annual venture, the syndicates were accounted under a three-year accounting system in which the syndicate’s profit or loss was calculated only at the end of the three years. At the end of that period, there were likely to be unsettled claims and the possibility of future ones. In order to achieve finality in respect of any accounting period there was a system called “reinsurance to close”: at 911. The nature of the reinsurance system and reinsurance methods was described by Lindsay J in the judgment.

7. [395]

   In the period 1988 to 1992, Lloyd’s suffered enormous losses. A reinsurance group Equitas was formed into which all liabilities for 1992 and earlier years were to be reinsured. The deceased’s estate had acquired the benefit of reinsurance into Equitas in respect of every possible Lloyd’s risk to which it would or might otherwise be vulnerable: at 913. However, as Lindsay J noted, reinsurance is only as good as the relationship between the funds available or to become available to the reinsurer and the claims it has to meet: at 913.

8. [396]

   The reasons for judgment detail certain of the risks facing the estate in respect of claims based on detailed evidence: at 914-916.

9. [397]

   Lindsay J held that, on the facts of the particular case, the executors could distribute without retaining out of the estate a fund or any particular security beyond the personal security of the recipients in support of an indemnity from the beneficiaries to the executors should it transpire that they had been overpaid by reason of there being emerging debts in respect of the deceased’s “open years” which were unsatisfied by the Equitas arrangements: at 922-923.

10. [398]

    In Estate Hall, the deceased was also a name of Lloyd’s. The executors wished to finalise the administration of the estate and to distribute it to the relevant beneficiaries but were concerned because of the existence of possible contingent claims against the estate arising out of the deceased’s underwriting activities and their consequent risk of personal liability. The executors believed that the interests of any claimant against the estate had been reasonably secured by virtue of reinsurance arrangements made for names through the Equitas group (as was the case in Re Yorke) but nonetheless sought advice regarding distribution.

11. [399]

    Austin J accepted and adopted the reasoning and conclusion of Lindsay J in Re Yorke.

12. [400]

    The particular issue in Estate Hall was the question as to whether there was sufficient evidence adduced on the application to enable his Honour to apply the principle in Re Yorke: at [9]. There was no direct evidence adduced as to the general contractual position of Lloyd’s names and the overall arrangements which were negotiated with the Equitas Group. However, his Honour considered that he was able to rely upon the details which emerged in the reasons for judgment in Re Yorke: at [9]-[10].

13. [401]

    That was not the only issue regarding evidence. When the matter initially came before Austin J, there was no evidence that the relevant insurance premium had been paid and, whilst financial statements for the Equitas Group for the relevant 1999 year were put in evidence, his Honour found it difficult to relate those statements to the financial picture described by Lindsay J in Re Yorke. Given the (then) recent turbulence in the financial performance of reinsurance companies his Honour was concerned there was no evidence updating the financial position of the Equitas Group after March 1999. His Honour adjourned the hearing to give the executors the opportunity to obtain and adduce further evidence: at [12].

14. [402]

    Subsequently, additional evidence was adduced – including of financial statements and a letter from Jardine (Lloyd’s Underwriting Agents) Ltd, the members’ agent for the deceased – more particularly addressing the deceased’s “Finality Statement” and the arrangements regarding Equitas. On the basis of the additional evidence, his Honour concluded that the Equitas reinsurance arrangements were in full force and effect with respect to the deceased’s estate and provided reasonable protection to the estate with respect to any contingent liability of his as a name: at [18].

15. [403]

    His Honour proceeded to make an order similar to the order made by Lindsay J in Re Yorke in respect of the matter.

16. [404]

    The extent to which Austin J could rely upon the decision in Re Yorke regarding the contractual position of Lloyd’s names and the overall arrangements negotiated with the Equitas Group was, however, limited. His Honour referred to a number of findings of Lindsay J in Re Yorke which were critical to his Lordship’s decision. Those matters on which there would need to be specific evidence were:

    1. (1)

       the current financial statements for the Equitas Group;

    2. (2)

       whether there was any syndicate in which the deceased participated which had been left outside the Equitas arrangement;

    3. (3)

       that the Equitas reinsurance arrangements, so far as they affected the deceased, were still in force; and

    4. (4)

       that the two Equitas companies which had been granted authorisation to operate as reinsurers still had the benefit of that authorisation and that there was no basis for apprehending that it would be withdrawn: at [11].

17. [405]

    Re K (which I have referred to above) addressed a slightly different issue to a contingent liability. It involved a series of disputed and stale claims against the estate. Arnold QC in principle indicated that in such a case a similar approach should be adopted: at [24].

18. [406]

    Arnold QC noted that whilst the Court will be sympathetic both to the desire of administrators to be immunised from personal liability and to the desire of beneficiaries not be kept out of their inheritance longer than is necessary, the Court should consider whether any, and if so what, protection should be afforded to the potential creditors: at [24].

19. [407]

    Arnold QC endorsed the notion that the Court should take a practical view. It may be that in an appropriate case it is concluded that no protection beyond the personal liability of the beneficiaries is needed. Even if the Court concluded that a greater degree of protection is required, it is not necessarily bound to protect the potential creditors in respect of the full value of their claims: at [24].

20. [408]

    In Thompson v Gamble, the deceased was also a name at Lloyd’s. He left a substantial estate with a net distributable value in excess of $5.6 million. There were several applications before the Court. One related to a family provision claim. The second related to advice sought by trustees pursuant to s 63 Trustee Act as to whether they were at liberty to distribute the deceased’s estate without making any retention or security on account of the estate’s contingent liabilities for the deceased’s role as a name at Lloyd’s. Slattery J referred at length to the decision of Lindsay J in Re Yorke: at [15]-[16].

21. [409]

    His Honour explained the particular dilemma of the “stark choice” faced by executors between retaining the entire estate indefinitely which would be unfair to the beneficiaries or distributing on the basis the creditors have no right to expect the trustees to make such an indefinite retention when the creditors have protection which has been assessed to be commercially appropriate: at [19].

22. [410]

    His Honour considered the possibility of a future claim by a Lloyd’s policyholder in a relevant syndicate year against the deceased’s estate was so remote as to not prevent a distribution: at [19].

23. [411]

    In Thompson v Gamble, Slattery J, after outlining the evidence, referred, in particular, to the above-mentioned factors identified by Austin J and focussed on three of those four factors: at [29]-[30]. His Honour found that those factors were relevantly established on the evidence: at [30]. His Honour also referred to the fact that the evidence established that the executors had advertised an intention to distribute pursuant to the provisions of s 60 Trustee Act and that no notice of any other liability had been given to the trustees: at [45].

24. [412]

    Although there was a remote possibility that, in the event that the overall reinsurance arrangements failed, a further claim may be made against the estate, Slattery J was satisfied in light of the assessments of the position that Lindsay J had made in 1997 and Austin J in 1999, and, on the basis of events since that time, that the possibility was sufficiently remote that it should not prevent the trustees from distributing the whole estate and, accordingly, gave advice to that effect pursuant to s 63: at [47].

25. [413]

    In Ingrey v King [2015] EWHC 2137 (Ch); [2016] WTLR 131 (Ingrey v King), the deceased entered into three film partnership investment schemes with a view to those schemes being tax efficient and operating to mitigate his income tax liability: at [5]. However, as a result of litigation a serious question arose in relation to the effectiveness of those schemes. The nature of the various liabilities was described in the judgment. Apart from one of the partnerships, certain loans were not due to be repaid or at least fully repaid for a period of at least six years. There were also potential liabilities in respect of historic tax as well as tax upon future income from the partnerships: at [5]-[7], [13], [15].

26. [414]

    Judge Walden-Smith (sitting as a judge of the High Court) stated that what the Court has to do in circumstances such as addressing possibilities of contingent debt is to seek to achieve a fair balance between the beneficiaries, who would otherwise be kept out of the benefit they are entitled to as a result of liabilities not being quantified or quantifiable, which liabilities may nonetheless not come to anything as against the risk of there being further creditors finding debts met, and the Court has to look at the reasonable probability of future demands against the estate: at [12].

27. [415]

    In Barr v Rockman [2017] VSC 581 (Barr), there was an application to the Court for directions by the (remaining) executors of an estate. The nature of their concern related to a potential contingent liability arising out of a motor vehicle accident where a tenant of a property owned by the trustee of the deceased’s family trust suffered serious but not critical injuries. The trustee held certain insurance cover which was detailed in the reasons for judgment. There was a risk that the accident might give rise to a contingent liability to the estate as the deceased had managed the property and the tenant personally (with some assistance from her daughter and a bookkeeper) in circumstances where the deceased had indemnified the director of the trustee: at [24].

28. [416]

    McMillan J noted that there was a risk that the accident may give rise to a contingent liability to the family trust: at [25].

29. [417]

    Her Honour observed that, generally, where trustees know of or reasonably anticipate an outstanding claim, a sufficient sum must be retained to satisfy the claim before distribution of trust assets: at [31].

30. [418]

    Detailed evidence in respect of the potential contingent claim was adduced: at [34].

31. [419]

    Her Honour concluded that the possibility of a future claim was so remote as to not prevent the final distribution of the estate and the trust: at [34].

32. [420]

    The particular considerations that supported that conclusion included (1) the fact that the tenant had received compensation for the injuries sustained; (2) the description of events prima facie did not establish negligence in failing to repair the driveway before the accident or were not otherwise causal of the accident; (3) the two insurers were notified of the accident and the policies covered a liability for personal injury up to $30 million in total, providing reasonable protection to the estate, the trust and to contingent creditors; and (4) that the executors of the estate and trust had advertised their intentions to distribute and no notice had been given to them of any other liabilities: at [35].

33. [421]

    In Barr, McMillan J referred to the decision of Slattery J in Thompson v Gamble and summarised by reference to his Honour’s decision factors that should be taken into account in relation to advice regarding distribution in the face of a potential contingent liability as including:

    1. (1)

       the risk of a possible claim being made in the future by a creditor;

    2. (2)

       whether protection could be achieved by the taking out of adequate insurance that has been assessed as commercially appropriate to cover the contingency; and

    3. (3)

       whether the trustee has advertised the intention to distribute the estate: at [33].

Issue 1: What is the likelihood of potentially negligent conduct and risk of the contingent liability concern being realised?

1. [422]

   No particular submissions were put regarding the likelihood of the deceased during the course of his practice having engaged in potentially negligent conduct.

2. [423]

   Dr Birch SC expressed the opinion that:

   1. (1)

      it was difficult to identify with any precision any particular matter in which the deceased acted that might give rise to a claim;

   2. (2)

      it would be extremely burdensome to the estate to make any form of audit of the deceased’s files, assuming a substantial number can be found to add any level of precision to the estimate of risk; and

   3. (3)

      it was nonetheless not likely that a claim would eventuate against the plaintiffs as executors: Opinion at [54].

3. [424]

   Based on the SF, Dr Birch SC submitted that:

   1. (1)

      there is a real chance albeit unlikely that a claim could be made against the deceased’s estate for damages arising out of the deceased’s conduct of his practice as a solicitor: Submissions at [12];

   2. (2)

      in the deceased’s case the nature of his practice in family law, in drafting and securing execution of financial agreements, carried a special risk that action could be taken against him if such financial agreements failed to achieve their intended effect in consequence of any negligent conduct by him: Submissions at [12]; and

   3. (3)

      the basis for the submission of a “special risk” is not that the deceased was more prone than any other solicitor to professional negligence but, rather, that financial agreements in family law have proved a fertile ground for claims against solicitors: Submissions at [13].

4. [425]

   The submission of there being a real chance albeit unlikely that a claim could be made against the estate begs a number of questions.

5. [426]

   There is no evidence or proved factual basis for concluding that the deceased acted negligently.

6. [427]

   On the initial hearing of the application, I raised with Dr Birch SC the fact that there was no particular evidence regarding the number of matters in which the deceased acted, nor detail about claims made or circumstances that might give rise to a claim.

7. [428]

   In the absence of any such evidence, the most that can be said is that simply by dint of human experience it is conceivably possible that in one or more of the matters that the deceased was involved in during the course of his practice as a solicitor that he acted or failed to act in such a way as to give rise to potential negligent conduct.

8. [429]

   One possibility is to provide the Court with some information in relation to the number of matters in respect of which the deceased acted regarding financial agreements and some information in relation to the claims history of the deceased.

9. [430]

   That has some limitations which are inherent in any legal proceedings with the nature of any form of “tendency evidence”. The fact that any deceased legal practitioner has had many claims made against him does not necessarily mean that such deceased was prone to acting negligently.

10. [431]

    On the other hand, the fact that the deceased has had no claims does not necessarily mean that the deceased was exemplary in practice.

11. [432]

    However, there are some possible ways that the matter might be considered without necessarily “looking for a fight” or “boxing at shadows”.

12. [433]

    The premise on which the application is made is based on the fact that the most likely area of potential risk of the deceased’s practice arose out of advising in relation to prenuptial or cohabitation agreements.

13. [434]

    The Opinion referred to legislative and caselaw provisions bearing upon this.

14. [435]

    Following my discussion with Dr Birch SC regarding searches that might be carried out the plaintiffs, as noted above, availed themselves of the opportunity of providing further factual material supplementing the material in the SF and initial affidavits.

15. [436]

    Whilst it is not the role of the Court on a judicial advice application to make any specific finding or determination in respect of whether the deceased during the course of his practice engaged in potentially negligent conduct, the further factual material has assisted the Court in making a determination as to whether the executors would be justified in distributing the entirety of the net estate.

16. [437]

    The following factors combine to provide a sound basis for thinking that it is not likely and indeed remote that the deceased engaged in negligent conduct such that the contingent liability concern might be realised. Namely:

    1. (1)

       some clarity (albeit not complete precision) has been given to the number of matters that the firm and indeed the deceased acted upon relating to financial agreements;

    2. (2)

       the deceased was a careful and meticulous lawyer;

    3. (3)

       the precedents that the deceased used, to the extent that the plaintiffs are aware, did not exhibit any issues that had been raised by cases dealing with financial agreement legislative provisions;

    4. (4)

       the financial agreement precedents were constantly revised by reference to considered input from a number of different sources; and

    5. (5)

       the deceased has no history of any claims being made against him and the only potential claim notified did not reveal any negligent conduct and was not ultimately pursued.

Issue 2: What executors’ enquiries have been made and what is the executors’ knowledge of the risk of the contingent liability concern?

1. [438]

   Dr Birch SC submits that if a claim would be made against the estate and crystallised in a verdict, it could be a claim of a sort of which it could be said that the executors had notice at the time of distribution and hence would not be protected by publication of the notice pursuant to s 92 PA Act: Submissions at [14].

2. [439]

   That submission was put on the basis that the executors are not presently aware of any specific claim (Submissions at [15], [21(ii)]) but there is a possibility that they might have knowledge of circumstances that might give rise to a claim): Submissions at [15].

3. [440]

   It is clear that the executors have no actual knowledge of a claim.

4. [441]

   The supplementary evidence adduced by the plaintiffs suggests to me that it is possible that the executors would be able to identify and potentially examine a number of files in which the deceased drafted and/or advised upon financial agreements.

5. [442]

   However, the further evidence adduced by the plaintiffs shows that a type of audit process such as I postulated in discussion with Dr Birch SC would at best produce only qualified answers because there may be a number of files that are not actually able to be identified because of descriptions of the files and there may be some files which have been destroyed and others which even if the files were obtained and examined might not provide clarity as to whether drafts of agreements were ever finalised or signed.

What (if any) advice should be given to the executors?

1. [443]

   Dr Birch SC submits that the executors are concerned that if they distribute the whole of the estate and were to be served with a claim for damages they could be exposed to legal liability: Submissions at [10].

2. [444]

   The provisions of s 63 Trustee Act contemplate that the way that an executor obtains advice and is protected is by the provision of either evidence or other material placed before the Court referable to a “statement” of facts: s 63(3).

3. [445]

   Ultimately, the statement relied upon by the executors included some facts in the sense of providing some clarity of numbers of files in which the deceased and the firm acted and advised in relation to financial agreements, some details bearing upon the deceased’s claim history on the one hand and a number of possibilities on the other.

4. [446]

   Dr Birch SC submitted (Submissions at [22]) that the matters relevant to whether a fund to cover claims should be retained and the size of any such fund were:

   1. (1)

      the indefinite time horizon within which a claim might arise;

   2. (2)

      the impracticability of measuring the real likelihood of a future claim;

   3. (3)

      the deprivation of the beneficiaries of the benefit of their inheritance during such time horizon; and

   4. (4)

      the retention of a small portion of the estate would be relatively immaterial to covering claims within the existing cover threshold but on the other hand the size of the estate would only add a limited additional layer of indemnity of about 30% of the existing cover (to large claims beyond the threshold).

5. [447]

   Dr Birch SC submitted that the above factors were sufficient to enable the Court to advise the executors they would be justified in distributing the whole of the estate after payment of those debts and expenses of which the executors are presently aware: Submissions at [23].

6. [448]

   The inherent uncertainty of a matter in the administration of a trust might in some cases mean that a question is not ripe for determination. Nonetheless, uncertainty per se does not preclude a LPR from availing itself of the advice procedure. Indeed, the legislative scheme is such that it is desirable that trustees in doubt as to a course of action should not proceed with it and seek relief under s 85 afterwards, but rather seek s 63 advice first: Macedonian Church Case at [36]; Mills v Mills [2018] NSWSC 363 at [22] per Sackar J.

7. [449]

   Senior counsel is of the opinion, which I accept, that there is at least a possibility of a contingent claim against the deceased’s estate arising from his legal practice which, if there was such a claim, would most probably arise from his conduct in regard to advising upon and facilitating the execution of financial agreements by clients: Opinion at [34].

8. [450]

   The question arises as to whether the plaintiffs might have notice of any claim having advertised pursuant to s 92 PA Act.

9. [451]

   Specifically, the issue is whether for the purposes of s 92(2) PA Act the plaintiffs might have notice of circumstances which would:

   1. (1)

      indicate the facts to an honest and reasonable executor that a claim of a contingent liability existed and would be made; or

   2. (2)

      put an honest and reasonable executor on inquiry that a claim of a contingent liability existed and would be made: Opinion at [43]-[44].

10. [452]

    The Opinion acknowledges that the plaintiffs are in a position where they know that there is at least a possibility that previous clients of the deceased my find themselves in the situation where a financial agreement, prepared on their behalf by the deceased, is found to be unenforceable and a claim is consequently made against the estate: Opinion at [47].

11. [453]

    Further, Dr Birch SC is of the opinion that it is at least arguable that a Court might find such a potential contingent claim is one of a sort of which the plaintiffs as executors presently have sufficient knowledge such that they are not protected by publication of the s 92(2) PA Act notice: Opinion at [47]. Subject to what I note below, I accept that proposition.

12. [454]

    The issue in relation to advertising is essentially twofold.

13. [455]

    First, there is the conundrum that even if one admits the possibility of s 92(2) PA Act not protecting a LPR in respect of some form of constructive notice, the law (in New South Wales) is not clear as to what form or degree of constructive notice might preclude reliance upon s 92(2).

14. [456]

    Secondly, the comments of Lindsay J in Re Yorke point up the fact that there are some types of contingent claims for which an advertising procedure as a means of protecting LPRs is not entirely apt because such advertising might not also give fair notice to potential claimants and a reasonable opportunity to bring forward their claims.

15. [457]

    In relation to the seeking of judicial advice, the Opinion addresses some remarks to whether the possibility of a claim being made against the deceased is greater than the possibility of a claim against the deceased’s estate considered by Slattery J in Thompson v Gamble: Opinion at [48].

16. [458]

    I doubt the utility of comparison of possibilities. However, I do agree that the uncertainty regarding the possibility of claims made by potential former clients of the deceased provides the basis for the Court to consider whether or not to give the advice sought.

17. [459]

    Dr Birch SC is of the opinion that it is not likely that the sort of claim that he has described will eventuate against the plaintiffs as executors: Opinion at [54].

18. [460]

    It seems to me that the possibility of a claim being made by a client against the deceased’s estate in respect of negligence arising out of the deceased’s legal practice and, in particular, that part of the deceased’s practice involving work in relation to financial agreements which would not be covered by a cap on professional indemnity insurance is remote.

19. [461]

    In particular, I note:

    1. (1)

       the Firm and the deceased undertook a very small percentage of work with respect to advising in relation to financial agreements;

    2. (2)

       the deceased was a capable, careful and meticulous lawyer who with other partners of the firm took steps to mitigate risks arising out of advising in relation to financial agreements;

    3. (3)

       the plaintiffs as executors have no notice of any actual claim in respect of conduct by the deceased in respect of his legal practice;

    4. (4)

       there is nothing about the deceased’s claim history which suggests that any claim against the deceased is likely;

    5. (5)

       the period for which there is no indemnity cap was at least 15 years ago;

    6. (6)

       there is doubt as to the extent of protection afforded to the plaintiffs as executors consequent upon the advertising of the notice of distribution pursuant to s 92 PA Act specifically as to whether protection is afforded from notice of circumstances which would (a) indicate the facts to an honest and reasonable executor that a claim of a contingent liability existed and would be made; or (b) put an honest and reasonable executor on inquiry that a claim of a contingent liability existed and would be made; and

    7. (7)

       if a fund were to be set aside or retained by the executors there are obvious difficulties in determining what if any amount should be retained and for what period of time.

20. [462]

    In light of the above it seems to me that it is appropriate to enable beneficiaries to have early enjoyment of property to which they will, as a matter of practical certainty, ultimately become entitled and accordingly to give to the plaintiffs the advice that the plaintiffs seek.

Conclusion

1. [463]

   I make the following orders:

   1. (1)

      the Court advises and directs pursuant to s 63 Trustee Act that the plaintiffs would be justified in distributing the entirety of the estate of the late John Barkus, without retaining any amount by way of provision or security notwithstanding the potential contingent liability arising from the deceased’s legal practice or a claim for which his estate may become liable; and

   2. (2)

      the Court orders that the plaintiffs’ costs of and incidental to the application for judicial advice, calculated on the indemnity basis, be paid out of the estate.