When a person passes away, family members often have to grapple with the matter of administering the estate of the deceased. In a situation where there is a will, there is some certainty as to the entitlement of each of the beneficiaries to particular assets in the estate of the deceased. However, where there is no will (i.e. the person dies intestate), the question arises as to what are the rights and entitlements of the beneficiaries in relation to the estate?
The Court of Appeal in Faustina Anne Sta Maria v Mary Patricia De Cruz [2023] 10 CLJ 863 considered the question of the rights of a beneficiary to the property in the estate where the deceased died intestate. In this case, the Court of Appeal also considered the Federal Court ruling in Chor Phaik Har v Farlim Properties Sdn Bhd [1997] 4 CLJ 393 which also dealt with a similar question.
What Did The Federal Court Rule In Chor Phaik Har?
This case concerned the sale of two pieces of land in the estate of one Chor Bah Say, deceased. The vendors (the Appellants) who were party to the sale and purchase agreements (the SPAs) were the beneficiaries of the estate of Chor Bah Say. The Appellants later refused to execute the SPAs on the grounds that they did not agree on the price and proceeded to lodge a caveat over the whole of the lands. The buyers (the Respondents) then applied to remove the caveat.
The Federal Court held in this case that “in law a beneficiary under an intestacy has no interest or property in the personal estate of a deceased person until the administration of the latter’s estate is complete and distribution made according to the law of distribution of the intestate estate”.
The conclusion of the case was that because the estate of Chor Bah Say had not been fully administered at the time of the execution of the SPAs, the Appellants had no interest or property in the estate as to give them any title to the lands. As a result, the Appellants could not have covenanted to convey any title to the Respondents.
What entitlement or rights do beneficiaries have then in relation to property in the estate of a deceased? The Federal Court quoted with agreement a passage from “Executors, Administrators and Probate (17 Edn), 1993” by Williams, Mortimer and Sunnecks which stated that the rights of a beneficiary claiming under total intestacy is firstly, a right to have the estate property administered and applied for his benefit when the administration is complete. Secondly, the beneficiary takes under a “statutory trust for sale and conversion”.
Statutory Trust For Sale And Conversion – Faustina Anne Sta Maria
The case of Faustina Anne Sta Maria arose from an application under Section 8 of the Small Estates (Distribution) Act 1955 (SEDA). The deceased in the case is one Eric De Cruz (the Deceased) who died intestate leaving a wife (Faustina Anne Sta Maria), his mother and four sisters. His mother died 11 months later survived by her four daughters, the Respondent among them.
The Respondent applied under Section 8 of SEDA for the distribution of the estate of Deceased. When the application came up for hearing, the wife (Appellant) informed the Land Administrator that the Respondent did not possess any right to make an application under Section 8 of SEDA and that the Appellant was the sole heir to the estate of the Deceased. The Land Administrator nevertheless appointed the Respondent as the administrator of the Deceased’s estate. The Appellant then applied to the High Court to set aside the Respondent’s appointment.
The High Court found in favour of the Respondent and the Appellant appealed to the Court of Appeal on the issue of whether the Respondent possessed sufficient locus to pursue the application under Section 8 of the SEDA.
The Court of Appeal held that the issue of determination was whether the mother’s share in the estate of her son devolved upon her death to her lawful heirs or whether her interest in the estate ceased and reverted to the Appellant. The Appellant argued that only if the estate had been completely administered and distributed would the mother have an interest in the estate.
The court held that while the Federal Court in Chor Phaik Har had ruled that beneficiaries under an unadministered estate were incapable of passing interest or property in the lands on the basis that they themselves did not have any interest or property in the lands, it “did not state that the beneficiaries under an unadministered estate had no rights at all”. The court stated that the Federal Court had recognised that the beneficiary under an intestacy takes under a statutory trust for sale and conversation.
What is a statutory trust for conversion? The Court of Appeal explained that the statutory trust is created by Section 6(1) of the Distribution Act 1958 (DA). In a trust for conversion, the beneficiary is entitled under the trust not to the assets comprised in the trust itself, but to the proceeds of the sale of such assets. This meant that beneficiaries under an intestacy have a right to require distribution to be effected in accordance with Section 6(1) of the DA and to future proceeds of sale of the properties comprised in the estate, but “they do not have any rights, title or interest in the specific properties themselves”.
The court added that if a beneficiary dies intestate, such rights to a trust for conversion devolve to his or her beneficiaries in the manner prescribed under Section 6(1) of the DA. Such rights were not extinguished upon death. Therefore, the mother of the Deceased’s share in the estate of her son devolved upon her death to her heirs, amongst whom was the Respondent and thus, the Respondent was entitled to petition for distribution under Section 8 of the SEDA in respect of the estate of Deceased.
Conclusion
From the analysis of these two cases, the following can be established:
1.The rights of beneficiaries under an intestacy exist under a trust for conversion, which is a trust constituted by statue pursuant to Section 6(1) of the DA. This means that the beneficiaries have rights to the future proceeds of sale of the properties comprised in the estate only.
2.Beneficiaries under a trust for conversion do not have any rights, title or interest in the specific assets comprised in the estate. Thus, they cannot covenant to convey title to the property which is still in the estate.
3.Where a beneficiary under an intestacy dies intestate before the estate is fully administered, the rights under the trust for conversion devolves to his or her beneficiaries, the identities of whom are determined in accordance with Section 6(1) of the DA.
6 November 2024