Quarantining of Funds - The Ademption Principle in Action

The principle of ademption provides that where a gift left to a person under a will is sold before a testator’s death, the gift is considered ‘addeemed’. That is, it has no effect and the person who was to receive the gift will no longer receive it. As always however, there are a number of exceptions which apply to this. JEB [2016] WASAT 65 is a recent decision from Western Australia which discussed an exception to the ademption principle in a review of an administrative order.

The Story

JEB was a woman in her 80’s who had two children, her daughter, WH and her son, GB. JEB suffered from a progressive dementing illness leaving her with ongoing incapacity. She therefore required her finances to be managed on a permanent basis. As such JEB had been subject of an administration order made pursuant to the Guardianship and Administration Act 1990 (WA)since late December 2009. JEB had previously had assistance from GB, her son under an enduring power of attorney.

The first administrative order appointed her children as joint plenary administrators and revoked the appointment of GB.

On 14 June 2013, the Public Trustee requested a review of the first order and made an alternative order appointing WH and LH (JEB’s son in law) as JEB’s joint plenary administrators.

Following the second order, JEB’s house was sold by her administrators who were unaware that these assets had been gifted to a represented person in JEB’s Will.

This matter was a review of the Tribunal’s second order. The Public Trustee sought the removal of WH and LH as joint administrators following their alleged misuse of JEB’s funds. The administrators did not seek to be reappointed. In addition, the Public Trustee sought directions as to the way in which funds from the sale of certain assets should be held.

The Issues

  • Who should be appointed as ongoing administrators for JEB?

  • Whether the Tribunal ought to make the directions proposed by the Public Trustee regarding the way the funds are to be held by any administrator ongoing. (at [16])

The Law of Ademption

As mentioned earlier, the principle of ademption provides that where a gift is left pursuant to a will and the subject matter of the gift is sold before death, the gift is considered adeemed or as having no effect.

In Queensland, s 60(1) of the Guardianship and Administration Act 2000 (Qld) allows the Supreme Court to award compensation to persons whose gifts are lost by the dealings of an administrator.

The common law exception to the ademption principle

The decision in Re Hartigan[1] is authority for the principle that:

‘…if real estate is sold by an administrator and the testator is not capable of changing his or her will, then the gift of real estate is not automatically addeemed. The devisee is instead entitled, at face value, to the proceeds of sale.

(JEB at [32])

One of the aims of this principle is to preserve a testator’s wishes from being defeated by the dealings of an administrator.

The Public Trustee’s position

The Public Trustee submitted that in light of their alleged misuse of JBE’s funds, that WH and LH were not suitable to continue as administrators (at [23]).

Relying on the exception outlined in Re Hartigan, the Public Trustee also argued that the proceeds of sale should be held for the person who was initially intended to receive it as a gift.

The Decision

The Tribunal ordered the removal of WH and LH as joint administrators and appointed the Public Trustee as the new plenary administrator.

The Tribunal agreed with the Public Trustee’s request that the proceeds of sale be quarantined from use by the administrators for the payment of JEB’s expenses. Referring to Campbell J in Re RL, the Tribunal held that where there is a choice between using proceeds of sale for payment of expenses, the longstanding practice of the court is to use funds which are not ‘subject to a specific legacy or devise’ until all other monies forming part of the estate have been exhausted. This is important to preserving the testator’s wishes provided for under their Will. Further a testator never intends their gift upon sale to be used instead for the payment of expenses.  The Tribunal held that that making an order reflective of the testator’s wishes constituted acting in JEB’s best interests, even if it represents a financial loss to the estate as a whole.

Therefore, the Tribunal ordered that the net proceeds from the sale of the property be retained in a separate bank account.


The case highlights that a Tribunal may where affordable, make an order which reflects the testamentary wishes in the Will, even if it may result in a financial loss to the person’s estate. In this case, the common law exception to the ademption principle allowed the Tribunal to preserve the wishes of JEB above the concern of payment of expenses of the estate.

Please note this is not legal advice but may help you understand the law. If you have a query regarding the quarantining of funds, contact our dedicated team at Kenmore Mediation and Law Centre on (07) 3378 4006

[1] Ex parte The Public Trustee in the State of Western Australia (unreported, Supreme Court of Western Australia, 9 December 1997, Library No. 970736.