Heather Everingham died in Brisbane in November 2018 appointing the Public Trustee of Queensland as the executor of her estate by her last will.
The assets for distribution, other than some personal effects, were cash and investments held of about $662k.
Heather gifted her home at 39 Blackwood Rd, Geebung to her 3 stepchildren. The residue was left to Heather’s niece and 2 nephews.
Her mental state and memory capacity had by May 2015 deteriorated to point that she was unable to care for herself or make financial or personal decisions.
In consultation with nephew Peter Webster – her attorney under an Enduring Power of Attorney – she decided to move from the home of Peter and his wife with whom she had been residing, sell the Geebung property and take up residence at Cooinda Retirement Village & Care Facility at Gympie.
The sale was effected by Peter as attorney – in consultation with the stepchildren – in February 2016 at $570k. As it happened, no one was aware of the terms of the will at that time.
Because the Geebung property had been sold before she died, the gift of that property under Heather’s will failed and the cash received from its sale passed to the niece and nephews, bypassing the stepchildren in the will altogether.
The stepchildren sought relief under section 107 of the Powers of Attorney Act 1998 (Qld).
That section provides that anyone who loses a testamentary benefit because of the inter vivos sale of a deceased’s asset by an attorney can apply to the Supreme Court for compensation out of the estate. The compensation payable is whatever the court considers appropriate but cannot exceed the value of the lost benefit.
The stepchildren’s application – made out of time – came before Justice Susan Brown who accepted there was adequate explanation for the delay by reason of the extensive correspondence between the parties before time expired. Given also the estate had not been distributed and no beneficiary would be prejudiced, an extension of time was granted.
The substantive issue her honour had to decide was the amount of “appropriate compensation”. She noted that the loss being compensated was “not a loss based on need, but rather the loss of the benefit under the will”.
Justice Brown referred to the earlier Supreme Court decision of Neuendorf v Public Trustee of Queensland (Neuendorf) [2015] Qd R 513 in which it was stated that although the assessment of appropriate compensation would vary from case to case, the following issues would always be relevant:
- Size of the estate
- The nature of the gifts to other beneficiaries, and the proportion of the lost gift compared to the whole estate
- The actions of the attorney, including whether there was any default by the attorney
- What happened to the sale proceeds
- The costs incurred to the extent they were found payable from the estate
- If the property had not been sold, what would the position have been
This estate was small. The stepchildren’s father had married Heather after their mother had died. Any decision as to the appropriate compensation would affect all beneficiaries. The niece and nephews also enjoyed a close relationship with the deceased.
It was accepted that Peter had acted properly as attorney in selling the Geebung residence with the proceeds used to pay the Cooinda accommodation bond and the balance paid into Heather’s bank account.
The stepchildren sought compensation effectively to the value of the entire estate. Their claim pitched the “starting point” at $705k: the sale price achieved for the Geebung property by the new owners at the time its re-sale shortly prior to Heather’s death.
Her honour rejected that contention and held instead that – in the circumstances of this particular case – the “best evidence of the lost benefit” was the net sale proceeds achieved by the attorney in 2016 ie $552k.
Her honour also ordered the legal costs and testamentary expenses of the estate to be paid from the residue. Thus the compensation ordered in favour of the stepchildren was not diminished by these costs. This was a different outcome to that reached in Neuendorf.
Justice Brown is yet to make a final order as the parties are to make submissions as to the costs that should be paid from the estate. The amount of such costs will no doubt be a matter for close scrutiny.
This decision illustrates that although it will be important to consider prior court decisions regarding “appropriate compensation” for beneficiaries who have missed out under a will due to sale by an attorney, the amount of compensation will be decided by the facts of each particular case.
It is important also to note that had the deceased sold the property herself and left her will unchanged, the stepchildren would not have had the same recourse against the estate as occurred in this instance.
Outram v Public Trustee of Queensland [2020] QSC 80, Brown J, 17 April 2020