The End of the Re Viertel exception?

1. The End of the Re Viertel exception? North Queensland Law Association Conference Making a Difference Townsville 2013

2. Ademption • “Where the subject matter of a specific gift in a will ceases to exist, or is sold by the testator, or so changes its form that it cannot be regarded as comprised in the description of the gift contained in the will. The specific legacy or devise is said to have been adeemed, that is , taken out of the will.” • Paragraph 10.520 AA Preece “Lee’s Manual of Queensland Succession Law” 7th Edition Lawbook Co 2013.

3. Intention • “Ademption is a doctrine that causes special bequests to fail. …… it depends not on the intention of the testator but on the existence of the thing bequeathed.” Roderick Paisley “Ademption and Powers of Attorney”The Journal of the Law Society of Scotland 12 April 2012

4. Legislation • Section 45(4) Succession Act (Qld) 1981 “The title of any administrator appointed under this Act to any property which devolves to and vests in the administrator shall relate back to and be deemed to have arisen upon the death of the deceased as if there had been no interval of time between the death and the appointment.

5. Section 33E Succession Act • (1) A will takes effect, in relation to the property disposed of by the will, as if it had been executed immediately before the testator’s death. (2) Subsection (1) does not apply if a contrary intention appears in the will

6. Re Blake (deceased) (2009) 25 VR 27 • Forrest J held at: [45] To determine whether the principle of ademption has application to the gift, two questions must be answered by the court. First, what is it that has been bequeathed by the specific gift and, secondly, having identified the nature of the gift, does the subject matter of the bequest exist as at the death of the testator

7. Exceptions to the rule of ademption • In Power v Power[2011] NSWSC 288 Gzell J indentified exceptions to the rule of ademption including: 1. Where the gift has been removed by fraud or by a tortuous act unknown to the testator as recognised in Earl of Shaftsbury –v- Countess of Shaftsbury[1716] 23 ER 1089. 2. Where an agent disposed of the gift the subject of the bequest outside of the terms of the agency and without the knowledge of the testator as in Basan –v- Brandon [1836] 59 ER 68 3. Where the gift is still in the estate in substance although changed in name and form as in Oakes –v-Oakes [1852] 68 ER 680

8. Intention of the testator • “It seems to me that when a testator’s asset is altered by a third party, the question whether the testator had notice or knowledge of the facts is a relevant factor on the question of ademption. This was the view of Neuberger QC in Re Dorman deceased [1994] 1 W.L.R 282 288 the reason mentioned by the learned Deputy judge being ‘presumably because in the absence of such knowledge the testator would not have had an opportunity of altering his will’”. • ReViertel (1997) 1 Qd.R. 110

9. Simpson v Cunning [2011] VSC 466 • [39] It was contended for the defendant that an exception which depends on the Court’s assessment of a testator’s mental capacity and likely intent would involve the Court and the parties in wide-ranging factual enquiries on incomplete evidence. It was submitted that an identity based approach based on a strict application of the ademption principle was preferable, as it would lead to a certain result which would reduce costs to the estate and avoid the use of Court resources. I do not accept these submissions. As stated above, the exceptions for fraudulent, tortious or unauthorised dispositions of the relevant property already require the Court to consider the likely wishes of the testator at relevant times. Further, the Court is routinely called upon to examine testamentary capacity in determining disputes about wills

10. Re Viertel • A summons issued by the Public Trustee pursuant to Section 134 of the Public Trustee Act 1978 seeking the Court’s answer to question whether MrsViertel’s “…primary devise of her Vulture Street house property together with furniture and effects to Mr And Mrs McCallum has been adeemed”.

11. The issue in Re Viertel • “…. whether or not an ademption is effected when a sale is lawfully made by an attorney who is ignorant of the terms of the will when the testatrix is likewise ignorant of the action of the attorney, and when the intention of the testatrix to benefit the devisee never alters.”

12. Thomas J’s interpretation of Jones v Jenkins (1866) L.R.2 Eq 323 • One case which seems very close to the present one is Jenkins v. Jones(1866) L.R. 2 Eq. 323. The testator was a farmer on yearly tenancy who bequeathed to his son all his farming stock ‘‘which shall be in my possession at my decease’’. He appointed his son and his wife as executors. Two years before his death he suffered a fit of ‘‘apoplexy’’ and was thereafter of unsound mind and unable to manage his affairs. Inconsequence of the testator’s disability his wife gave up possession of the farm and she and the son sold the farming stock and deposited the proceeds in a bank account where it remained until after the death of the testator when it was paid to the separate account of the son. Some of the next of kin brought an administration summons seeking to charge the son with the amount received by him. Stuart V.C. stated the general principle of ademption, followed by an exception. ‘‘[I]f there be a specific legacy of a chattel or of anything else, and if at the time of the testator’s death the specific thing cannot be found, the subject matter of the bequest having been extinguished, the gift cannot take effect ¼ But quite another consideration arises, where, 20 after the testator has given a specific thing, and without his knowledge, perhaps against his wishes, or tortiously, another person has sold it or has done enough to wholly alter its character.’’

13. A note of caution • “It would be preferable that a point of this importance be determined by a court of greater authority. That seems unlikely in the present case, as no adverse party is opposing the relief which Mr and Mrs McCallum seek. With some hesitation I express the view that the rule recognised by Stuart VC in Jenkins v. Jones above is an historical exception to the consequence of ademption and that the present circumstances fall within that exception.”

14. Johnstone v Maclaren [2001] NSWSC 932 • [18] In Jenkins v Jones (1866) LR 2 Eq 323, 328, Stuart VC considered that there was an exception to the ademption rule where the annihilation had taken place without the testator’s knowledge, even if it had occurred with implied authority. He based himself on Shaftsbury v Shaftsbury (1716) 2 Vern 747; 23 ER 1089 ... [19] Although, it is a tad difficult to reconcile these cases with principle, see In re Slater [1907] 1 Ch 665, 671, they remain good law. This was the conclusion reached by Justice Thomas in Re Viertel [1997] 1 Qd R 110 after reviewing all the authorities including American and Canadian cases and texts.

15. Section 107 Powers of Attorney Act 1998 • 107 Power to apply to court for compensation for loss of benefit in estate (1) This section applies if a person's benefit in a principal's estate under the principal's will, on intestacy, or by another disposition taking effect on the principal's death, is lost because of a sale or other dealing with the principal's property by an attorney of the principal. (1A) This section applies even if the person whose benefit is lost is the attorney by whose dealing the benefit is lost. (2) The person, or the person's personal representative, may apply to the Supreme Court for compensation out of the principal's estate. (3) The court may order that the person, or the person's estate, be compensated out of the principal's estate as the court considers appropriate but the compensation must not exceed the value of the lost benefit

16. Ensor v Frisby [2010] 1 Qd. R 146 • [19] The main difficulty in all of this is in seeing any justification for ignoring the words used in the will. If they are incapable of meaning anything other than a gift of specific property and not also of its proceeds of sale, then as Young CJ in Eq has said, it is “a tad difficult” to reconcile any exception with the principle. But once an exception is recognised for an unauthorised act of which the testatrix was unaware, it is a relatively smaller step to recognise, as Justice Thomas did, an exception where the act was done under the authority of an enduring power of attorney. Ultimately I am persuaded to follow Re Viertel, followed as it has been in two other Australian jurisdictions.

17. Simpson V Cunning [2011] VSC 466 • [45] In my opinion, the statements in Jenkins v Jones were not intended to create a new exception to the ademption principle. Rather, as held in Banks v National Westminister Bank, Jenkins v Jones was an application of the existing exception for unauthorised dispositions of the relevant asset without the knowledge or consent of the testator. However, I am nevertheless of the view that a further exception to the ademption principle, to the effect expressed in Re Viertel, constitutes a justified extension of the common law to reflect current circumstances. People are living longer than in the past and their physical health is outlasting their mental capacity. It is commonplace for properties owned by incapacitated persons to be sold under the authority of enduring powers of attorney, to fund accommodation bonds and other necessities and comforts for an aging population. Further, as noted, there is no good reason why the position should be different if, in the absence of an applicable enduring power of attorney, it is necessary to appoint an administrator under the Guardianship and Administration Act to sell property of an incapacitated person for such purposes

18. Legal authority v the intention of the testator • [152] Jenkins v Jones, on which the decision in Re Viertal (sic) purported to be based, was a case where a farmer had made a will that appointed his wife and son as executors. The will gave a specific bequest to his son of certain of his farming stock. The farmer became incapable, following which his wife and son sold the farming stock. However, they did not have any authority to deal with his estate at that time. That lack of authority would have amply justified the court's conclusion that the legacy had not been adeemed. By contrast, in Re Viertelthe attorneys had full legal authority to sell the house.

19. RL v NSW Trustee and Guardian [2012] NSWCA 39 • [183] Absent matters such as dishonest dealings, a principal is bound by the acts of his attorney within the scope of the authority conferred, even if the principal has no intention to carry out the specific act that the attorney has carried out. This is no different to the way in which an incapable person is bound by acts, performed with proper legal authority, of whoever is administering his or her affairs, whether that administration is occurring under a court or Guardianship Tribunal management order or an enduring power of attorney.

20. Justice Hargraves unanswered • [39] In support of the third submission, that the further exception was inconsistent with the testator’s testamentary intent, counsel contended that the exception would require the Court to compare the testator’s asset position at the date of the will, the date of the disposition and the date of death; and to consider the testator’s likely wishes if competent to decide what course to follow at these times. I do not accept those submissions. The further exception requires the Court to give effect to the testator’s presumed wishes in circumstances where he or she no longer has the capacity to decide what should be done. That does not involve supplanting the testator’s wishes with those of the attorney or the Court. Rather, it involves the Court in an assessment of the testator’s likely wishes if given the choice, when mentally competent, to alter his or her will in circumstances where the relevant property must be sold to further his or her interests

21. Fundamental injustice [40] Moreover, as rightly acknowledged by counsel for the defendant, there are many circumstances where the strict application of the ademption principle will lead to an unjust result which is obviously against the testator’s wishes. For example, a husband and wife have three children, a daughter and two sons. They jointly own three properties of approximately equal value – the family home and two investment properties. They make mutual wills providing that the surviving spouse leaves the family home to the daughter and one investment property to each son; with the residuary estate being left to a favourite niece. In circumstances such as the present, an attorney sells the family home to pay an accommodation bond. The daughter survives the parents. If the ademption principle is strictly applied, the niece receives the balance of the sale proceeds as part of the residuary estate; leaving the daughter to make a claim for further provision out of the estate under testator’s family maintenance provisions of applicable legislation if there are grounds to do so. Such a result is clearly unjust, and not in accordance with the parents’ obvious intent

22. A reasonable or an unfortunate result? • [31] In re Viertelhas been followed by judges in a number of other Australian states; the various decisions are summarised in the judgment of Gzell J in Power v Power [2011] NSWSC 288. For present purposes I wish only to refer to an observation by Hargrave J in the Supreme Court of Victoria in the case of Simpson v Cunning [2011] VSC 466 at paragraph 45 that Re Viertel"...constitutes a justified extension of the common law to reflect current circumstances". My impression of the Australian case law is that at least some of the judges who have addressed the issue have been inclined to regard ademption as an unjust result, and have accordingly focused upon awareness of the testator, rather than authorisation, as the basis of the Jenkins v Jones exception to ademption. Power v Power also provides an interesting illustration of a sale by an attorney that was held not to be ademptive because it did not fall within the scope of the attorney's authority. [32] In the end, however, a choice between the English and Australian approaches is not before me, as Scots law has adopted neither authority nor awareness as the criterion for determining whether the act of a representative such as an attorney has ademptive effect. It is, though, of some reassurance that the approach which I consider that I am bound to adopt on the basis of the Scottish jurisprudence produces a result which has generally been regarded in the Australian cases as a reasonable one and not the result which was regarded as unfortunate in Banks v National Westminster Bank plc Lord Tyre in Turner(Gordon’s executor) v Turner [2012] CSOH 41