1. INTRODUCTION
16.1 If a deceased estate has been wrongly distributed, persons with an interest in the correct distribution of the estate may have an interest in pursuing their share of the estate. In addition to non-legislative remedies which may be available to such people, administration and probate legislation or trustee legislation in the jurisdictions considered by the National Committee provides a right to follow distributed assets and, to a lesser extent, prioritises those against whom proceedings for recovery may be brought.
2. RIGHT TO FOLLOW ASSETS
| QLD1 | 67(4)(a), 107 | WA4 | 63(2), 65 |
| ACT | 67, 60(6)5 | NT | 99 |
| VIC2 | 33(3)(a) | TAS | 57, 25A(7)7 |
| NSW | 95, 60(6)6 | UK | 38 |
| SA3 | 29(3) | NZ | 49-51 |
16.2 Atherton and Vines describe the ability of beneficiaries and others to follow and recover property wrongly distributed during the course of the administration of a deceased estate:8
Beneficiaries under wills and those entitled on intestacy are able to utilise the equitable right to trace and recover property. The right to trace is expressly preserved to creditors, beneficiaries and others in the legislation. As an equitable claim it is vulnerable to extinguishment through the intervention of a bona fide purchaser for value without notice of the claim; or, in the case of Torrens title land, the indefeasibility of the registered proprietor. [notes omitted]
16.3 The Northern Territory includes a provision relating to the following of assets in its administration and probate legislation alone. Queensland, Victoria, South Australia and Tasmania have the equivalent provision in their trustee legislation. The Australian Capital Territory, New South Wales and Tasmania - overlap, with a “right to follow” provision in both the administration and probate and the trustee legislation.
16.4 By way of example, section 95 of the Wills, Probate and Administration Act 1898 (NSW) reads:
Right to follow assets
Nothing contained in section 92, 93 or 94 [protection of personal representatives from claims after notices given] prejudices the right of any beneficiary, creditor or other person who has a claim in respect of the assets of the estate of a testator or an intestate or the right of a lessor or grantor under a lease, agreement for a lease, conveyance or agreement for a conveyance referred to in section 94, or any person claiming under any such lessor or grantor, to follow those assets or any part of those assets into the hands of the persons or any of the persons among whom those assets or that part may have been distributed or who may have received those assets or that part. [emphasis added]
16.5 Section 25A(7) of the Trustee Act 1898 (Tas) includes a provision similar to that of New South Wales but provides that nothing “frees the trustee, executor, or administrator from any obligation to make searches similar to those which an intending purchaser would be advised to make”.
16.6 The administration and probate statutes of the United Kingdom and New Zealand not only detail the relevant powers and orders of the court in relation to the right to follow, but define and partially restrict the rights and remedies available to a claimant.
3. PROCEEDING AGAINST TRUSTEES AND PERSONAL REPRESENTATIVES BEFORE OTHER BENEFICIARIES
| QLD9 | 109 | WA | |
| ACT | | NT | |
| VIC | | TAS | |
| NSW | | UK | |
| SA | | NZ | |
16.7 Section 109 of the Trusts Act 1973 (Qld) sets out the manner in which a person who suffers loss through the wrongful distribution of property by a trustee or personal representative is to seek to recover compensation for that loss: firstly against the personal representative or trustee, and secondly against the person to whom the wrongful distribution was made.
16.8 Section 109 reads:
Remedies for wrongful distribution of trust property
(1) In any case where a trustee has wrongfully distributed trust property any person who has suffered loss by that distribution may enforce the same remedies against the trustee and against any person to whom the distribution has been made as in the case where a personal representative has wrongfully distributed the estate of a deceased person.
(2) Except by leave of the court, no person who has suffered loss by reason of the wrongful distribution of trust property or of the estate of a deceased person may enforce any remedy against any person to whom such property or estate has been wrongfully distributed until the person has first exhausted all remedies which may be available to the person against the trustee or personal representative.
(3) Where any remedy is sought to be enforced against a person to whom a wrongful distribution of trust property or the estate of a deceased person has been made and that person has received the distribution in good faith and has so altered the person’s position in reliance on the propriety of the distribution that, in the opinion of the court, it would be inequitable to enforce the remedy, the court may make such order as it considers to be just in all the circumstances. [emphasis added]
4. ISSUES CONSIDERED BY THE NATIONAL COMMITTEE
16.9 The National Committee considered whether:
(1) a provision to the effect of section 95 of the Wills, Probate and Administration Act 1898 (NSW) should be included in the model legislation;
(2) a provision to the effect of section 109 of the Trusts Act 1973 (Qld) should be included in the model legislation.
5. THE NATIONAL COMMITTEE’S PRELIMINARY VIEW
16.10 The National Committee was of the view that provisions which are designed to protect the personal representative who distributes in accordance with the requirements of the legislation should not prevent a beneficiary or creditor who cannot claim against the personal representative from following the assets into the hands of persons who may have received them. A provision to the effect of section 95 of the Wills, Probate and Administration Act 1898 (NSW) would address this concern.10 However, it was considered that that provision simply re-iterated the position in Re Diplock.11
Questions for discussion
16.1 Should a provision to the effect of section 109 of the Trusts Act 1973 (Qld) be included in the model legislation?
16.2 Should a person have to exhaust remedies against the trustees before following the beneficiaries?
Footnotes
1. Trusts Act 1973 (Qld).
2. Trustee Act 1958 (Vic).
3. Trustee Act 1936 (SA).
4. Trustees Act 1962 (WA).
5. Trustee Act 1925 (ACT).
6. Trustee Act 1925 (NSW).
7. Trustee Act 1898 (Tas).
8. R F Atherton and P Vines, Australian Succession Law: Commentary and Materials (1996) at para 18.9.16.
9. Trusts Act 1973 (Qld).
10. Section 95 of the Wills, Probate and Administration Act 1898 (NSW) is set out at para 16.4 of this Discussion Paper.
11. [1948] Ch 465. In that case, personal representatives distributed the deceased estate to a number of charitable institutions in the belief that they were following the testator’s directions in his will to apply his residuary estate “for such charitable institutions or other charitable or benevolent object or objects in England” as they should in their absolute discretion decide. Following a challenge to the distribution by the next of kin of the deceased, the House of Lords held that the bequest was invalidated by the use of the disjunctive “or benevolent”. Subsequently, in determining a related matter, the Court of Appeal held that a claim by an unpaid beneficiary to property wrongly distributed to another is subject to the qualification that since the wrong payment was due to the mistake of the personal representative, the beneficiary’s primary claim is against the personal representative, and the direct claim against those overpaid or wrongly paid must be limited to the amount irrecoverable for any reason from the party responsible.
