Federal Court Distributes Property Sale Proceeds After Joint Owner's Death

OUTCOME: Allowed

Federal Court of Australia

[NAME] of the Property of [NAME] ([NAME]); in the matter of [RESPONDENT] [NAME] ([NAME]) v [NAME] and [RESPONDENT] (No 2) [2023] FCA 206 File number(s): NSD 725 of 2019

Judgment of: GOODMAN J

Date of judgment: 8 March 2023

Date of publication of reasons: 10 March 2023

Catchwords: [NAME]'s joint interest in property with late wife – probate granted and property sold – order made for distribution of proceeds of sale

Legislation: Probate and Administration Act 1898 (NSW), ss 44, 61

Cases cited: Ex parte [COMPANY]; Re Kenniff (1955) 56 SR(NSW) 35 [NAME] of the Property of [NAME] ([NAME]); in the matter of [RESPONDENT] L [RESPONDENT] ([NAME]) v [NAME] and [RESPONDENT] [2019] FCA 1311

Division: General Division

Registry: New South Wales

National Practice Area: Commercial and Corporations

Sub-area: General and Personal Insolvency

Number of paragraphs: 16

Date of hearing: 8 March 2023

Solicitor for the Applicant: [redacted]

Solicitor for the Respondent: [redacted] IN THE MATTER OF [NAME] ([NAME]) BETWEEN: [NAME] OF THE PROPERTY OF [NAME] ([NAME]) Applicant

[RESPONDENT] Respondent

order made by: GOODMAN J DATE OF ORDER: 8 MARCH 2023

THE COURT ORDERS THAT:

1. Pursuant to rule 9.05 of the Federal Court Rules 2011 (Cth) ("the Rules"), [NAME] and [NAME] [NAME] as [NAME] of the Deceased Estate of [RESPONDENT] be joined as the second respondent.

2. Pursuant to rule 9.05 of the Rules, the [NAME] of the Property of [RESPONDENT], a [NAME] be joined as the third respondent. 3. [RESPONDENT] and [RESPONDENT] [NAME] as [NAME] of [ADDRESS], West Nowra, distribute the Net Proceeds held by them in an interest bearing account pursuant to Order 5(f)(ii) of the Orders made on 29 August 2019, as follows: (a) $34,080.25 to the [NAME] of the [NAME] Estate of [NAME]; and (b) the balance to the [NAME] of the Deceased Estate of [NAME]. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

GOODMAN J 1 On 8 March 2023, I made orders for the distribution of the net proceeds of the sale of a property at Nowra in New South Wales, which proceeds are held on trust by the [NAME]. I also made orders for the joinder of several parties as respondents. Set out below are my reasons for doing so. I refer below to members of the [NAME] family ([NAME], his late wife [NAME] and their four children – [NAME] and [NAME]) by their first names for convenience and without intending any disrespect.

BACKGROUND 2 As at February 2012, [NAME] and [NAME] owned the property jointly. 3 In February 2012, [NAME] became [NAME] and the [NAME] were appointed as [NAME] of his [NAME] estate. 4 On 6 July 2015, [NAME] passed away leaving a will. The beneficiaries under her will are her four children. Upon her passing, her estate was deemed to be vested in the respondent, the [NAME] and [RESPONDENT], pursuant to s 61 of the Probate and Administration Act 1898 (NSW). 5 In July 2016, [NAME] became [NAME]. The [NAME] were also appointed as [NAME] of his [NAME] estate. 6 On 9 May 2019, the [NAME] commenced this proceeding by originating application, seeking orders appointing themselves as [NAME] of the property and facilitating the corresponding sale and distribution of funds. 7 On 7 June 2019, the respondent notified the [NAME]' solicitor that as the respondent was not administering [COUNSEL] estate, and as the object of s 61 of the Act is to "… put the title in the Public Trustee and to hold the position in statu quo until a personal representative is appointed…" (citing Ex parte [COMPANY]; [NAME] (1955) 56 SR(NSW) 35 at 40 per Street CJ, Maxwell and Herron JJ), it proposed to take no active role in the proceeding. The respondent has not filed a notice of [RESPONDENT]. 8 On 29 August 2019, [RESPONDENT] J made a series of declarations and orders in this proceeding. Relevantly for present purposes his Honour appointed the [NAME] as [NAME] for the sale of the property and made orders for the distribution of the proceeds of sale of the property: [NAME] of the Property of [NAME] L [NAME] ([NAME]); in the matter of [RESPONDENT] [NAME] ([NAME]) v [NAME] and [RESPONDENT] [2019] FCA 1311 ([NAME] (No 1)). Order 5(f) was in the following terms:

5. Following completion of the sale of the Property by the [NAME], the settlement funds shall be distributed by the [NAME] in the following order: ... f. Finally, the remaining balance of the sale proceeds ("the Net Proceeds") be divided equally and distributed as follows: (i) one-half of the Net Proceeds be paid to the Applicant; and (ii) one-half of the Net Proceeds be paid into an interest bearing account to be held by the [NAME] on trust for the Deceased Estate of [NAME], pending further order of the Court. … 9 As [NAME] J noted at [2] of [NAME] (No 1), as at the date of his orders, no application for probate in respect of [NAME] will had been made. 10 On 10 November 2020, the [NAME] sold the property. The proceeds of sale have been held in an interest bearing account in accordance with order 5(f)(ii). 11 On 15 June 2022, probate was granted in respect of [NAME] will. [NAME] and [NAME] were appointed as the [NAME] of [NAME] deceased estate. Thus, the [NAME] are now in a position to seek the further order contemplated by order 5(f)(ii). 12 The [NAME] (in their various capacities) and the [NAME] have liaised and reached an agreement regarding a distribution of the proceeds from the sale of the property. In essence, they have agreed that [NAME[NAME] should receive $34,080.25 of the proceeds of sale, and the [NAME] receive the balance, to be distributed to the other beneficiaries under the will. 13 On 27 October 2022, the [NAME] wrote to the respondent enclosing a copy of orders they proposed to seek from the Court, and requesting that the respondent confirm whether there was any objection to the proposed orders and to indicate whether the respondent wished to be heard. No response was received from the respondent. 14 On 3 February 2023, the [NAME] filed an interlocutory application seeking orders for the joinder of (1) the [NAME] and (2) themselves, in their capacity as [NAME] of [NAME[NAME], together with the following order: An order that [NAME] and [NAME] [NAME] as [NAME] of [ADDRESS], West Nowra, distribute the Net Proceeds held by them in an interest bearing account pursuant to Order 5(f)(ii) of the Orders made on 29 August 2019, as follows: (a) $34,080.25 to the [NAME] of the [NAME] Estate of [NAME]; and (b) the balance to the [NAME] of the Deceased Estate of [NAME].

CONSIDERATION

Joinder 15 Both the [NAME] and the [NAME] (in their capacity as [NAME] of [NAME[NAME]) consented to their joinder as respondents. I was satisfied that each should be joined. In particular: (1) as probate has now been granted in respect of [NAME] estate, vesting her real and personal property in the [NAME] pursuant to s 44 of the Act, the [NAME] are now (and since the grant of probate have been) proper parties to this proceeding; and (2) the [NAME] in their capacity as [NAME] of [NAME[NAME] should be joined as they are persons directly affected by the orders proposed.

Distribution 16 I was satisfied that it was appropriate to make the distribution order sought in the following circumstances: (1) a further order is contemplated by order 5(1)(f)(ii) and is necessary to allow for the distribution of the proceeds of sale of the property which are currently held on trust by the [NAME] for the benefit of [NAME] estate; (2) by s 44 of the Act, [RESPONDENT] estate has vested in the [NAME] and the respondent has no role to play in the proceeding; (3) all interested parties consent to the proposed distribution; and (4) the respondent is aware of the proceeding and has elected not to participate in it. The respondent is also on notice of the present application. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Goodman.

Associate: Dated: 10 March 2023