Barrister Despina Christofis, of Fourth Floor Selborne Chambers, discusses how to make applications for interim distributions in estates. She writes: “The helpful starting point for considering applications for interim distributions, under the old Part 68 of the Supreme Court Rules (the now equivalent Part 54 of the Uniform Civil Procedure Rules 2005 (NSW)) is Blackman v Permanent Trustee Co Ltd, in which the plaintiff was the widow of the deceased, who left a very substantial estate.”
Despina recently presented a seminar on this topic at the Legalwise Wills and Estates Symposium. She will also speak on “Bringing Urgent and/or Interlocutory Applications” at the 16th Annual Succession Law Symposium in March.
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In estate and trust law property is usually administered with a view to distribution at some point in time.
A final distribution of property occurs after assets have been collected, debts or claims on the estate called for, verified and paid.
An interim distribution is a provisional payment usually to meet some pressing or urgent exigency and, on the basis, that the payment will be taken into account in the final reckoning of accounts, and not exceed the final entitlement of the payee.
In deceased estates the focus of the legal personal representative is to administer the estate, with a view to a final distribution with a short period of time (e.g. the executor’s year) to the persons or entities entitled. Interim distributions whilst permissible are not the norm.
The matters that guide any given interim distribution, are the terms of the Will or trust instrument, statutory provisions and the general law.
There are statutory powers which permit interim distributions including under the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) and in family provision legislation and legislation affecting estates.
In making an interim distribution, a number of matters should be considered:
a. the source of the power to make any such distribution;
b. the conditions on the exercise of the power
c. communication with the beneficiaries and other interested parties;
d. the giving of notice of the intended distribution e.g. pursuant to s92, Probate and Administration Act1898.
e. the retaining of sufficient funds to cover all outstanding liabilities of the estate;
f. the recording of the distribution to adjust payments in final accounts.
In many cases executors and beneficiaries can and do, consensually “negotiate” an interim distribution. When executors and beneficiaries cannot agree on whether an interim distribution can be made, relief can be sought e.g. Part 54 UCPR.
Part 54 UCPR
The powers under Part 54 are broad and permit the Court to direct a trustee, executor or administrator “to do or abstain from doing any act” (r54.3(3)(d) UCPR). It deals with relief without general administration of the estate
Other sections
1. The executor or trustee may approach the Court for judicial advice pursuant to section 63 of theTrustee Act 1925.
2. Court’s power to make an interim family provision order and then if it makes such an order, requiring a court to proceed to finally determine the application for family provision order by confirming, revoking or varying the interim order: Section 62(1) and (2) Succession Act (NSW) 2006.
Cases
The helpful starting point for considering applications for interim distributions, under the old Part 68 of the Supreme Court Rules (“SCR”) (the now equivalent Part 54 of the UCPR) is Blackman v Permanent Trustee Co Ltd [2003] NSWSC 305.
The plaintiff was the widow of the deceased, who left a very substantial estate.
Under the will the plaintiff was entitled to the proceeds of an insurance policy, the income of the testator’s shares in publicly listed companies and the rest and residue of the estate.
Had distributions been made in accordance with the will, the plaintiff would have received over $200,000 by way of income. However, she did not receive much by way of income at all in twelve months prior to the application. Also, that the lifestyle that she was accustomed to adopt when the testator had been alive, has been drastically affected.
The widow was in want of immediate cash and saw no way of getting it other than approaching the court.
The summons sought relief by way of compelling an interim distribution, under Part 68 of the SCR.
Young CJ in Eq (as his Honour then was), approved the decision of the trustee to provide an unsecured loan to the plaintiff, and to be repaid after final orders are made.
Romano v Romano [2004] NSWSC 775
The estate was not fully administered. There was an application for interim distribution.
At the time of making his Will in 1988, the deceased had two sons, Edward and John. John died in 1995, leaving a widow and two daughters. One of the daughters, the present plaintiff, was named as executrix in John’s will which was admitted to probate in 1996.
By that Will, the whole of John’s estate was given to his widow.
John was named as a beneficiary in the Will of the deceased, giving John two properties and $200,000 in cash.
John died before the deceased, but left issue living at the deceased’s death, the gifts to John under the deceased’s Will did not lapse but took effect, as if John’s death had occurred immediately after the deceased’s death.
The real question was not whether the court had jurisdiction to make the orders sought by the plaintiff but whether, as the estate then stood, it should do so as a matter of discretion.
Barrett J came to the conclusion that the circumstances warranted a partial distribution.
Gonzales v Claridades
An application for a distribution was made at first instance and heard by Campbell J (Gonzales v Claridades(2003) 58 NSWLR 188; [2003] NSWSC 508). There was an appeal to the Court of Appeal which was dismissed (see Gonzales v Claridades (2003) 58 NSWLR 211; [2003] NSWCA 227).
The plaintiff was the son of the deceased, and had been charged with murdering his father, the deceased, his mother and sister. The son was the sole beneficiary under his parents’ joint will. The administration of the estate was incomplete.
The issue was whether the son was entitled to access funds from his father’s estate, to defend his committal proceedings and whether the court had power to make the orders under Part 68 of the SCR (now under Part 54 UCPR), under an “emergency” situation.
The court had no power to authorise or direct the executrix to pay estate funds to fund the defence costs of a beneficiary accused of the murder of his testator father, mother and sister.
Steiner v Strang [2017] NSWSC 132
Two children of the deceased had filed family provision claims. One of the children John had made several unsuccessful applications for interim provision and sought yet again interim provision order of $500,000 from the estate of his late mother.
The deceased left her son a specific bequest of $2,000,000 in her will. He already received interim distributions totalling $788,872.50.
John was liable to repay the estate an amount of $881,000, being a loan from the deceased.
The Court considered John’s financial circumstances and agreed that he was ill, unable to work, in debt and facing foreclosure on his home. However, the judge was not persuaded that John would be successful in his family provision claim for further provision.
His application was dismissed and no order for further interim distribution was made, since he could not provide adequate security to the estate.
Despina Christofis was called to the NSW Bar in October 2007, having practised as a solicitor since 1999. Her primary practice involves estate litigation, including family provision, wills and probate and equity. She has been involved in assisting the NSW Bar Practice Course and presented a number of seminars in estate litigation, including for the NSW Bar Association. Despina has written a variety of loose leaf titles for LexisNexis Halsbury’s Laws of Australia. She is a member of Fourth Floor Selborne Chambers. In 2017, Despina was selected by her peers as one of the most Recommended Junior Counsel in the area of Wills and Estates Litigation in the Doyle’s Guide. Contact Despina at christofis@4selborne.com.au or connect via LinkedIn.
