Alabakis v Alabakis
[2012] VSC 437
•21 September 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
No. SCI 2010 3902
IN THE MATTER OF Part IV of the Administration and Probate Act1958
and
IN THE MATTER OF the Will and Estate of Theodoros ALABAKIS (Deceased)
B E T W E E N
| PAULINE ALABAKIS | Plaintiff |
| v | |
| THOMAS ALABAKIS (who is sued in his capacity as the Proving Executor and Trustee of the Will and Estate of the abovenamed Deceased) and ALEXANDER ALABAKIS | First Defendant Second Defendant |
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JUDGE: | MACAULAY J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27, 28, 29 February and 1 and 2 March 2012 | |
DATE OF JUDGMENT: | 21 September 2012 | |
CASE MAY BE CITED AS: | Alabakis v Alabakis & Anor | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 437 | |
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TESTATOR’S FAMILY MAINTENANCE – Deceased survived by second wife, three children of his first marriage, child of second marriage and two stepchildren – Claim of daughter of second marriage – Whether moral responsibility to provide for plaintiff – Whether plaintiff’s conduct towards deceased disentitled her from relief – Deceased’s will made no provision for plaintiff – Sons of first marriage dependent on certain estate assets for livelihood – Further provision out of estate assets already made to second wife and daughter of first marriage by compromise – Further provision ordered - Administration and Probate Act 1958 (Vic) s 91.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Ms K McMillan SC with Mr S Pitt | William Murray Solicitors |
For the First Defendant | Mr R Miller | GSM Lawyers |
For the Second Defendant | Mr M Goldblatt | Kempsons Hall & Thompson Lawyers |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
Background......................................................................................................................................... 2
Principles............................................................................................................................................. 4
The issues............................................................................................................................................ 5
Did Theo have a responsibility to make provision for Pauline?.............................................. 7
Disentitling behaviour................................................................................................................. 7
Land and business assets intertwined....................................................................................... 9
Competing moral obligation to provide for Thomas and Alex........................................... 13
Conclusion on responsibility to make provision................................................................... 13
What amount of provision should be ordered?......................................................................... 14
Pauline’s financial resources and needs.................................................................................. 14
Kathleen’s and Linda’s financial resources and needs......................................................... 16
Thomas’s and Alex’s financial resources and needs............................................................. 16
Estate debt to Thomas and Alex............................................................................................... 19
Conclusion......................................................................................................................................... 20
HIS HONOUR:
Introduction
Pauline Alabakis, the plaintiff, seeks further provision out of the estate of her late father, Theodoros (Theo) Alabakis. She was the only one of his children to receive nothing under his Will. A key question in this case is whether Pauline’s conduct toward her father disentitled her to any provision from his estate.
Theo, who died at the age of 75 on 4 October 2009, married twice during his lifetime. In 1956 he married Maria, who died in 1978, and then he married Kathleen, in 1982. With Maria he had three children – Linda, Thomas and Alexander (Alex). With Kathleen, who, when he married her, already had two children by an earlier marriage – Susan (then aged 14) and Peter (then aged 8) – he had one child, Pauline, born in November 1982.
Theo made his last Will in 1994. Under his Will, he provided for the various members of his family as follows:
(a)he gave Thomas and Alex, equally,
·his share (a one third interest) in a market garden partnership business conducted at 260 Diggers Road, Werribee South (valued at the date of death at $55,312);
·the 13.01 hectares[1] of land at 260 Diggers Road, Werribee South, subject to a life interest for Alex in the residence on that land (the house and land valued at $2,550,000); and
·his one-half interest in land at 1192-1218 Ryans Lane, Melton (which interest was valued at $675,000);
(b)he gave Kathleen 28.3 hectares of land at 90 Scouller Street, Birregurra (valued at $185,000), and the residue of the estate;
(c)he gave Linda a bequest of $10,000; and
(d) he gave nothing to Pauline.
[1]Approximately 30 acres.
Thomas, who is executor and trustee of his father’s estate, and his brother, Alex, are the defendants to Pauline’s claim. Alex was joined to the proceeding to protect personal interests that may not be advanced by the Executor.[2]
[2]One such interest involves a controversy whether a sum of $500,000 advanced to him by his father in 2009 was a gift or a loan.
Kathleen and Linda each made applications for further provision out of the Estate. Their claims were settled by Thomas, as executor, agreeing to pay them $420,000 and $435,000 respectively on the basis that Kathleen retained the Birregurra land, and Linda kept the $10,000 legacy.
In his Will, Theo stated that he had not made greater testamentary provision for his daughters because he had made adequate provision for each of them during his lifetime. The year before making his last Will he had settled 30 acres of unimproved land at Gordon upon trust for Pauline (then aged 11). Under that trust, Pauline was entitled to the land absolutely at 18 years of age.
Pauline’s claim is brought under s 91 of the Administration and Probate Act1958. In substance, the questions I have to decide are:
(a)At the date of his death, did Theo have a responsibility to make provision for the maintenance and support of Pauline?
(b)If so, does the Will make adequate provision for the proper maintenance and support of Pauline?
(c)If not, what is the amount of provision which the Court should order?
Background
Theo was a market gardener in Werribee most of his working life. Since 1968, the market garden business was conducted with the assistance of, and from 1981 in partnership with, his two sons, Thomas and Alex. To this day, Thomas and Alex continue to operate the business to sustain their respective families.
The most valuable asset of the estate is tied up in the land at 260 Diggers Road on which the business is conducted (the farm). Alex lives with his family in a house on that land. It is common ground that the area occupied by the house cannot be subdivided from the rest of the farm. Alex has a life interest in the house under the terms of his father’s Will. His brother, Thomas, lives on a separate piece of land which abuts the farm.
The sums required to pay out Linda and Kathleen have been raised by borrowings by Thomas and Alex, secured against their own assets. The money has not been drawn from the estate assets nor have any estate assets been encumbered to obtain that money. However, Thomas and Alex each claim to be creditors of the estate to the extent of the amounts they have each contributed to settle the two claims.
Pauline was nearly 27 years of age when her father died. By that time, she had completed a law degree and articles of clerkship. But because she had already had two children with her partner of several years, Jon Apostolides, she had been unable to work full-time as a solicitor. She has asserted that her financial circumstances at the present time are ’dire’.
It is common ground that for much of Pauline’s teenage and young adult life she and Theo had a poor relationship. The explanation why that was so, given by Pauline and her mother, Kathleen, on the one hand, and by Thomas, Alex and various members of their families, on the other, is very different. On Pauline’s account, that poor relationship was because her father was demeaning, abusive and had a low opinion of women. On the opposing side, it was said that from an early age, Pauline was abusive and disrespectful of her father and chose to estrange herself from him.
Pauline says that she repaired her relationship with her father when she partnered with Jon, and more especially after the birth of her two children in 2008 and 2009. The opposing view is that she never repaired that relationship.
Principles
I gratefully adopt the statement of some applicable principles set out recently by Hargrave J in McCann v Ward & Burgess. [3] I summarise these principles as follows.
[3]McCann v Ward & Burgess [2012] VSC 63 [21] – [34].
Section 91 of the Act gives the court the power to make an order for provision or further provision out of the estate of a deceased person. There are two jurisdictional requirements that enliven the power under s 91, namely that:
· the deceased had responsibility to make provision for the proper maintenance and support of the applicant;[4] and
· the court is of the opinion that the will of the deceased does not make adequate provision for the proper maintenance and support of the applicant for the order. [5]
[4]Section 91(1) of the Act.
[5]Section 91(3) of the Act.
The latter question is to be assessed ‘by a consideration of the facts existing and the eventualities which might reasonably have been foreseen at the date of the testator’s death’.[6]
[6]Prosser v Twiss [1970] VR 225, 232 as cited in McCann v Ward & Burgess [2012] VSC 63 [26].
The court must consider the matters specified in ss 91(4)(e) to (p) of the Act in considering both these jurisdictional questions and the amount of any order to be made for further provision.
Further, in determining these questions, the court must consider, in light of the specified matters, ‘what provision a wise and just testator would have thought it was his or her moral duty to make for the applicant’.[7] The testator is imputed to have been, at the time of death ‘fully aware of all the relevant circumstances, including reasonably foreseeable eventualities existing at the date of death, whether or not actually known to the testator’.[8]
[7]McCann v Ward & Burgess [2012] VSC 63 [25].
[8]McCann v Ward & Burgess [2012] VSC 63 [27].
Should the two jurisdictional requirements be made out, the court proceeds to consider what order for further provision should be made. This is to assessed by reference to the state of facts existing at the time of hearing by the court.[9]
[9]Prosser v Twiss [1970] VR 225, 232 as cited in McCann v Ward & Burgess [2012] VSC 63 [26].
The court should not transgress unnecessarily upon the testator’s freedom of testation but should proceed ‘rather carefully and conservatively according to current community perceptions of the provision which would be made by a wise and just’ testator.[10]
[10]Mckenzie v Topp [2005] VSC 90 [63] as cited in McCann v Ward & Burgess [2012] VSC 63 [29].
However, where an order for further provision will not unduly prejudice other beneficiaries for whom the deceased had a responsibility to make provision, the court adopts a reasonably generous approach.[11] As such, any further provision ‘should be sufficient to free the mind from any reasonable fear of any insufficiency as age increases and strength may gradually fail’.[12] Further, ‘where the size of the estate permits and there will be no serious prejudice to the rights of other beneficiaries, the court may order further provision beyond the immediate and likely future needs of the applicant’, providing a ‘nest egg’ to guard against unforseen events. [13]
[11]McCann v Ward & Burgess [2012] VSC 63 [30].
[12]Worladge v Doddridge (1957) 97 CLR 1, 12.
[13]McCann v Ward & Burgess [2012] VSC 63 [32].
No inflexible approach can be taken in assessing the two jurisdictional questions or the amount of any order to be made for further provision, as each case will depend on its own facts.[14]
[14]McCann v Ward & Burgess [2012] VSC 63 [28].
The issues
The question whether Theo had a responsibility to make provision for Pauline needs to be considered on the basis of what was known or reasonably foreseeable at the time of his death in 2009. This issue is contested. In contesting the issue the defendants particularly emphasised two of the principles that I have just mentioned, namely that I should approach the question with the mindset of the just and wise testator, and that I should give weight to the freedom of a testator to dispose of his or her property as he or she thinks fit.[15]
[15]Grey v Harrison [1997] 2 VR 359, 366 (Callaway JA).
Pauline was the youngest of Theo’s four children, and had been raised by and lived with Theo and Kathleen until her mid-twenties, including whilst she was undergoing tertiary study. At the date of Theo’s death, when she was nearly 27, she lived with her partner of several years, Jon, with whom she had two young children. She was not in full time employment and had a debt to the government of nearly $50,000 for her tertiary fees. Jon owned the house in which they lived, but it was subject to a large mortgage. He was not in full time work and their financial position was, at the very least, insecure.
The estate was valued for probate at $3,693,709, debts were $212,000, leaving a net value of nearly $3,500,000.
On the face of it, one might consider that Theo clearly had a moral responsibility to make proper and adequate provision for his daughter, Pauline.
But the executor, Thomas, raises three principal grounds for contesting Theo’s responsibility to provide for Pauline. First, he says that her behaviour towards Theo over many years disentitled her to such provision; secondly, that the bulk of the estate was tied up in one piece of land inextricably linked with the income yielding market garden business now fully owned by Thomas and Alex; and, thirdly, related to that point, there was a competing moral obligation to provide for his two sons, Alex and Thomas, who had devoted their whole working lives, since their early teens, to the development of the land and the business, and had no other practical means of earning their livelihood.
If, notwithstanding the executor’s arguments, Theo did have a responsibility to provide for Pauline, it is clear that the Will made inadequate provision, because nothing was provided for her. If I get to the point of considering what amount of provision should be ordered, I will need to take into account all the circumstances as they existed at the date of trial.
I will first, turn, my attention to the question of Theo’s responsibility to make provision for Pauline, principally focusing upon the arguments raised in opposition to that proposition.
Did Theo have a responsibility to make provision for Pauline?
Disentitling behaviour
There have been numerous cases that have considered the impact of conduct by the claimant toward the testator.[16] But essentially it comes down to the facts of each particular case.
[16]See for example: Brown v Brown (Unreported, Supreme Court of Victoria, Eames J, 7 July 1995); Rowley v Bouwmeester [2005] TASSC 34 [35]-[39]; In Re Harris (1918) 18 SR (NSW) 303, 308; McKenzie v Topp [2004] VSC 90 [45] and Curran v Duncan [2006] WASC 9 [57].
There is no dispute that the relationship between Pauline and her father, Theo, had been considerably strained from Pauline’s early teenage years. There was an incident, when Pauline was aged 12 or 13, when her stepbrother, Peter, had a violent confrontation with his stepfather, Theo, resulting in Peter leaving the home. Peter was then about 22 years of age. It does not seem to be disputed that the incident involved Theo producing a knife, then threatening to drive a forklift at Peter’s work van, and Alex being called to help bring calm. There may be debate about whether Peter’s behaviour provoked Theo’s reaction, but to a 13 year old girl I accept that to witness her father prepare to physically attack her brother, in such a manner, would have been a tumultuous and frightening experience.
From that time onwards Pauline’s relationship with Theo was, at best, strained. It is apparent that, for many years at least, Pauline and Theo had little to do with one another thereafter, except perhaps to argue. Abusive language and behaviour was attributed to both of them. Pauline felt that her father treated her mother badly and would, from time to time, tell him so saying, for example, that her mother ’wasn’t his slave‘. From her perspective, her father resented the fact that she expressed her opinion.
Kathleen was evidently uncomfortable with her somewhat conflicted position: on the one hand, wanting to be even handed about Theo but, on the other, wanting also to ’tell it as it was‘. She was accepted by the defendants as a witness of truth. She supported Pauline’s account of Theo’s abusive behaviour, especially when drunk (which was once or twice a week), the significance of the incident with Peter when Pauline was around 13 years of age, and its effect upon her. The picture of Theo that emerged from the evidence was that he was a domineering man, proud of his Greek heritage, intolerant of those who were not of his opinion, and somewhat dismissive of women. Undoubtedly, he was also an extremely hard working man, intensely loyal to his family and justly proud of his achievements.
When Pauline was about 16 years of age (around 1998) she had a confrontation with Theo about his lack of parental responsibilities toward her. According to Pauline, Theo broke down emotionally, confessing that he was unable to offer her affection, only financial support.
Unlike her brothers, Pauline continued her secondary education through to Year 12 and then attended university, completing a law degree. It was clear that Theo paid for Pauline’s primary and secondary schooling but beyond that, she financed her own way through tertiary studies. The extent to which this was due to her own insistence upon being independent, or Theo’s unwillingness to provide further support, was the subject of a good deal of debate and is difficult to resolve.
In any event, it is very difficult to see how the consequences of estrangement between a teenage girl and her father, particularly after an incident of the kind that Pauline witnessed involving her brother, can be visited upon the teenager as disentitling conduct for the purposes of testamentary support. Of course, the longer that estrangement extends into adulthood when the teenager gains maturity, the more the responsibility for such estrangement becomes shared. But, it is in the nature of these things, that the healing of hurt takes a good deal of time.
From Pauline’s point of view, once she met her partner Jon, whom she could see her father liked, and then had children, whom she knew her father loved, her relationship with her father thawed. In the last year or so of Theo’s life Pauline considered that their relationship was reconciled, particularly after the birth of her son, Diesel (in February 2008). She perceived that, through her son, her father was showing love to her. She felt her father was so much more receptive to her and it was as if he was trying to redeem himself. Nevertheless, her brothers saw little evidence of Pauline behaving any differently to Theo. Rather, from their perspective, Pauline would bring Diesel around for Theo to see him but she would still not talk to her father.
Doing the best I can, I think it likely that the truth lay somewhere in the middle. I am not so persuaded that Pauline had fully reconciled with her father before he died. I think it likely that she maintained her distance from Theo, but that contact between them became far more tolerable, and frequent, because of Theo’s affection for her partner Jon and his devotion to his grandson, Diesel.
It must not be forgotten however that, at the time of Theo’s death, Pauline herself was only a relatively young woman – 27 years of age – who was only still emerging from a difficult and strained relationship with her father, the principal responsibility for which must, naturally, lie more at the feet of the adult in the relationship rather than the child. And I feel more confident saying this given what I accept to be the more domineering, aggressive and abusive aspects of Theo’s character.
In those circumstances I place little, if any, weight upon the so called disentitling conduct on the part of Pauline on which reliance was placed by the defendants.
Land and business assets intertwined
In 1968, Theo and his first wife, Maria (Thomas’s and Alex’s mother) purchased 260 Diggers Road from Kathleen’s mother, on vendor terms. Thomas was then aged 8 and Alex was 4. Originally consisting of 36 acres, three acres of that land had by then been given to Kathleen, and her first husband, and so it was that Theo and Maria purchased the remaining 33 acres (13.01 hectares). Kathleen’s three acre block, situated very roughly in the middle of the whole allotment, was later subdivided into two parts: a one quarter acre house block (252 Diggers Road), and the remaining two and three quarter acres of vacant land (240 Diggers Road).
After purchasing 260 Diggers Road, Theo and Maria built a residence which became their family home in which Thomas, Alex and Linda were raised. Theo and his family worked assiduously, in difficult circumstances, to convert the somewhat unproductive former dairy farm into a viable market garden. It took many years of hard work. The three children all helped on the farm from an early age. Things became even more difficult when Maria became ill with leukaemia, and Theo himself became sick. As a consequence, first Thomas, and later Alex, left school at an early age to take on fulltime work on the farm, assisting the family market garden business: Thomas when aged 12, and Alex when aged 14.
Both Thomas and Alex have since devoted their teenage and then adult lives to building up the market garden business and developing the land for that purpose. Consequently, neither know any other work and are ill equipped for doing anything different. Their mother, Maria, died of leukaemia in 1978 (Thomas then 18, and Alex 14).
Theo and the children remained living in the family home at 260 Diggers Road. In 1982, Theo married Kathleen (then a divorcee) and moved in with her, and her two children, in her house at 252 Diggers Road, 100 metres away from Theo and Maria’s former home.
Theo, Thomas and Alex continued to work and develop the farm. In the year before Theo’s marriage to Kathleen, Thomas and Alex had become partners with Theo in the market garden business, although they did not share in the profits of the business with Theo but, rather, were paid a wage. In 1994, Theo retired from active work in the market garden business although, I gather, he remained an influence in its operation.
Although Pauline and her cousins each worked on the farm as children and teenagers, their contribution did not compare to what was made by Thomas and Alex. Their work was confined to after-school work, and some hours on Saturday mornings, and, even then, they were each paid an hourly rate. I do not regard Pauline’s contribution to the development of the farm and business assets as a significant factor to take into account in considering either Theo’s responsibility to make provision for her, or the amount of any such provision.
In 1983, Theo gave Thomas, and his wife Mary whom he married in 1981, a block of land subdivided off the south-east corner of 260 Diggers Road, on which Thomas and Mary built their family home (288 Diggers Road). Thomas says that, at that time, his father told him that he and Alex would inherit the farm, a statement that influenced Thomas’s decision to stay, build on the land, and continue to work on the farm rather than seek some other course.
Having continued to live in the former family home at 260 Diggers Road, after Theo left in 1982 and Thomas left in 1983, Alex married Maree in 1994 and the house became their family home. Alex has lived there since. I accept that, over time, Alex and Maree made considerable improvements to the house at 260 Diggers Road in the belief that it is, and will remain, their home. Those improvements, estimated to have cost between $200,000 and $250,000, included: a renovation to the bathroom in 1980; a double carport in the early 1990s; a pergola, veranda, landscaping, roof repairs and guttering in the late 1990s; internal re-wiring, new floor coverings and windows, and wall renovation in the early 2000s; and, some more kitchen renovations in 2007.
Kathleen agreed, and I accept, that Theo treated the house as Alex’s house with which Alex could do as he liked. Attempts were made to have the land on which the house was situated subdivided, so that ownership of it could be transferred to Alex. But that attempt failed. As I mentioned earlier, the grant of the 13.01 hectare of land at 260 Diggers Road to Thomas and Alex in equal shares, is subject to a life interest in the residence for Alex.
In the last year of his life, Theo provided Alex with the sum of $500,000 to enable him to purchase the remaining portion of the three acre lot, less the 252 Diggers Road house block, that had been carved out of the original 36 acre block before the sale to Theo and Maria in 1968. That land (240 Diggers Road) had become available for purchase, and Alex bought it as an investment. On it is a house, and some accommodation units that can be rented out as ‘farm stay’.
So the position in relation to the farm and business assets may be summarised like this:
•The principal asset of the estate is the land at 260 Diggers Road, valued at about $2,550,000;
●A related asset, the business, was already two-thirds owned by Thomas and Alex at the time of Theo’s death, and wholly owned afterwards, and its continuance and value entirely depended upon the continued use of the farm being available to the business owners;
•On that land is a residence which is, and has been, Alex’s family home since 1994, to which he has made significant capital improvements and in which he was left a life interest;
•The remaining portion of 260 Diggers Road is the farm on which is conducted the market garden business which sustains both Thomas’s and Alex’s families, and of which Thomas and Alex are now the proprietors;
•Thomas and Alex have given their teenage and adult lives to the building and maintenance of the farm, and the business conducted on it, in the belief that they will be able to do so for the remainder of their working lives;
•Aged 49 and 45 respectively at Theo’s death, neither Thomas nor Alex could seriously expect to turn their hands to anything other than market garden work, or other related business, and are unlikely to be able to acquire a like business, capable of sustaining the two families, with very much less than the assets they now hold.
Competing moral obligation to provide for Thomas and Alex
Building upon these facts, Thomas and Alex appeared to argue that the competing obligation to provide for Thomas and Alex, arising from them, contributed to the conclusion that there was no responsibility to make provision for Pauline.
To recognise those facts, however, does not compel any conclusion that Theo did not have a moral responsibility to make adequate provision for Pauline. In the circumstances, I accept that a wise and just testator, with freedom of testamentary disposition, may feel obliged to ensure that those family members who had devoted their lives to the development and maintenance of the principal estate asset, and whose livelihoods depend on it, should be able to continue to earn their livelihood from it.
But it would be wrong to consider that Theo’s responsibility to make provision in that way to Thomas and Alex was exclusive of his responsibility to make provision for Pauline, even taking into account the peculiar interrelationship between assets, and a consideration of relative contributions to the building of those assets. Not only was there another estate asset capable of disposition to Pauline, but the farm and business themselves were capable of yielding monetary provision (through borrowing) without necessarily disposing of them.
Conclusion on responsibility to make provision
I therefore reject the defendants’ argument that the three factors relied upon, alone or in combination, and taken with other considerations under s 91 of the Act, precludes a conclusion that Theo was responsible to make provision for Pauline. In my view, applying the principles I have outlined, Theo did have such a responsibility.
It follows from the fact that Theo made no provision at all, that the remaining question to be considered is what amount of provision should be ordered in favour of Pauline.
What amount of provision should be ordered?
I commence with a consideration of the financial resources and needs of Pauline, on the one hand, and the other beneficiaries of the estate, on the other.
Pauline’s financial resources and needs
As stated, Pauline received nothing from the estate itself. In Theo’s lifetime, she was given the Gordon land. The value of that land was in dispute, but I accept that it is now likely to be in the order of $289,000, that being the most recent valuation placed on it by council valuers for the purpose of rate assessment. For what it is worth, I do not accept Pauline’s evidence that she was only offered $20,000 for the land when she attempted to sell it when she was about 20 years of age; I prefer Maree’s evidence that it was passed in at a figure above $100,000 upon Maree’s advice that Pauline could do better.
Pauline is tertiary educated, having completed a law degree. But she is not currently employed. She graduated in law in 2007, completed her Articles, and was then employed as a solicitor in Geelong. Initially she was employed on a full-time basis, at an annual salary of $45,000 gross, but for the financial year ending 30 June 2011 she worked part-time and her taxable income for that year was only $26,366. She was made redundant from her job in July or August 2011 and, at the time of trial, had not been employed since. As already mentioned, she still carries a debt of nearly $50,000 for her university fees.
She had two young children (around three and four years of age) at the time of trial and was due to have a third child at the end of March 2012. With three children under five years of age, I accept that she is not likely to gain full-time employment any time soon, and possibly not for several years.
Her partner, Jon, owns the house in which they live, but it is subject to a mortgage of approximately $370,000, a high proportion of its value. There was some uncertainty about his income earning capacity, and consequently his capacity to support Pauline and the children. He was not called to give evidence, although it was conceded he was available to do so. Pauline’s evidence was that he only earns some $28,000 per annum working for a bin cleaning company, that he has had a back problem for ten years and can be bedridden for weeks at time. Company records were produced to demonstrate that Jon had some interests in or association with various companies about which Pauline was quite vague. Thomas and Alex gave evidence of previous expansive statements made by Jon about his business interests and high earning capacity.
Pauline said their mutual savings were depleted and they were having to re-draw from the mortgage. They had been forced to borrow money from Kathleen, and also from Jon’s father, to meet mortgage repayments and pay other bills. Her evidence was that she owed her mother $60,000 (for two separate loans of $50,000 and $10,000), and $10,000 to Jon’s father. Although it was put to her and Kathleen in cross-examination that the loans were really gifts, I accept Kathleen’s evidence (in connection with the $60,000) that it is expected that the money is repaid.
Pauline also said she had applied for a parenting payment from Centrelink at the time of trial and was waiting on the outcome.
In submissions, Thomas and Alex pointed out the apparent disconformity between Pauline’s and Jon’s monthly expenses, and their apparent monthly household income. The fact that Jon was not called leads me to wonder whether his evidence would not have assisted Pauline on the issue of his earning capacity. On the other hand, their lack of income would explain their mounting borrowings from their parents, and there was evidence, which I accept, of Jon having applied for a moratorium on paying interest to the bank.
Despite some misgivings about the detail of Pauline’s evidence, and some gaps in it, I am nevertheless prepared to accept the overall picture it presents. Objective facts, such as the mortgage balance, and her taxation returns, appear to corroborate main planks of her evidence. The fact that Jon’s name is associated with various companies or business names registered with ASIC tells me nothing about actual financial resources.
On the evidence that is before me, I accept that Pauline is in genuinely straitened financial circumstances, with three young children to care for. I also accept that her health has recently been compromised, there being evidence of severe stomach problems, causing her to be hospitalised on a number of occasions, for which she was on medication at the time of trial. The extent of her financial need, for these reasons, was either known or reasonably foreseeable by Theo at the time of his death.
I next turn to the financial resources of Kathleen and Linda.
Kathleen’s and Linda’s financial resources and needs
Upon Theo’s death, Kathleen became the sole proprietor of 252 Diggers Road (jointly owned by her and Theo as tenants in common). She received the Birregurra land (valued at $185,000) and, subsequently, a settlement of her claim for further provision from the estate in the sum of $420,000. It was not disputed that she had, in earlier years, also received bequests from her mother and a friend, in total, in the order of about $450,000.
Very little evidence was given about Linda. Under the Will she received a modest bequest of $10,000, but later her claim for further provision from the estate was settled in the sum of $435,000.
It is not suggested that any further provision to Pauline will impact the provisions already made in favour of Linda and Kathleen.
I then turn to the positions of Thomas and Alex.
Thomas’s and Alex’s financial resources and needs
Under the Will, Thomas received a half share in the farm (valued at approximately $1.25 million), a quarter share of the Melton land (valued now at $340,000) and a half share of Theo’s one third interest in the business. In Theo’s lifetime, Thomas was granted the one acre allotment upon which he and his wife built their home at 288 Diggers Road. In addition to Theo having given them land on which their house is built, two years after they borrowed from the bank to build their house, he also gave Thomas and Mary $10,000 to pay off the remaining half of their mortgage loan. Further, Theo gave him a one third share in the business, although it can rightly be said, in my view, that he earned that share through unpaid labour from an early age.
Neither the farm property (260 Diggers Road) nor the Ryans Lane property is mortgaged. Because Pauline’s claim for further provision has been on foot, Thomas (as executor) has agreed not to encumber estate property to pay out settlements of Kathleen’s and Linda’s claims. Those claims have been financed to date through personal borrowings made by Thomas and Alex (and their wives).
Thomas and Mary had $185,000 worth of savings at the time of Theo’s death. And their home was unencumbered. In order to meet the payment of settlements to Kathleen and Linda, Thomas and Mary drew upon their savings and mortgaged their house for $280,000. Their borrowings have since been consolidated with similar borrowings made by Alex and Maree, into one single loan from the NAB secured against their respective assets.
Mary (Thomas’ wife) had been working 25 to 30 hours a week as a catering assistant before Theo’s death. She was forced to get another job to help meet the repayments on the loans borrowed to pay out Kathleen and Linda, but has now reduced back to only one job. She herself is not in good health, having had spinal fusion in November 2005, and a number of other ailments.
Under Theo’s Will, Alex also received a one half share in the farm property ($1.25 million), including a life interest in the house on that land. Further, like Thomas, he received a one quarter share in the Melton land ($340,000) and a half share of Theo’s one third interest in the business.
In 1983 – the same year that Theo gave Thomas the land on which Thomas built his house – Theo and Alex became joint proprietors of the Melton land. Each half interest is now valued at $675,000. Alex claimed to have paid for his half interest, but could not say what he paid for it or how he paid for it. At that time he was being paid very little by way of wage from the business. I think it probable that his half interest was purchased for him by Theo.
Again, like Thomas, Alex was given a one third share in the market garden business by Theo, but, again like Thomas, in my view he earned it.
A particularly significant fact concerning Alex is that, in early 2009, Theo gave Alex $500,000 with which Alex purchased the 240 Diggers Road property (the original portion of Kathleen’s land from which 252 Diggers Road was subdivided). When the trial commenced, there was an issue whether that $500,000 was a gift to Alex (in which case it formed no part of the estate of Theo) or a loan to Alex (in which case it did form part of the estate). In the end, the contention that it was a loan, and ought to be included within the assets of the estate, was not pressed by Pauline. Whether it forms part of the estate or it is reckoned as an asset in Alex’s hand, probably makes little difference to the way in which I evaluate Pauline’s entitlements in the context of the impact of any such further provision upon Thomas and Alex.
In an affidavit sworn in 2010, Alex said the 240 Diggers Road property was valued at $600,000, encumbered by a $350,000 mortgage. He also said, at that stage, he had a quarter share of some units in Rowes Road, Werribee worth $90,000 encumbered by a mortgage of $30,000. Further, at that date, he had a credit balance in a farm management account of $145,000.
At trial, Alex said he had extended the mortgage over the 240 Diggers Road property by $160,000, sold his share in the Werribee units for a net $60,000, and drawn down on the farm management account, all to assist in paying out the settlements to Kathleen and Linda. In cross-examination, some doubt was cast upon the actual sale price of the Werribee units. Alex could not remember what the units were sold for – they was apparently sold to his brother-in-law, and his wife, who were the part owners of them with him and his wife, Maree. He agreed they were quite possibly sold for $230,000: the transfer of property indeed showed a consideration of that sum. It was not suggested in re-examination that the gross sale price was less than that sum. The probable explanation for the apparent difference in values is that Alex was speaking of the value of his own interest (a quarter share) whereas the sale price reflects both his and Maree’s interests (in total, a half share).
Alex’s current position therefore seems to be as follows: he has a half interest in the farm (with a life interest in the house on it) and sole ownership of the Melton land (neither of which property is mortgaged); and he also has sole ownership of 240 Diggers Road, mortgaged to $510,000.
Estate debt to Thomas and Alex
Thomas and Alex claim to be, jointly, creditors of the estate in the sum of $855,000 for the total amount paid to settle Kathleen’s and Linda’s claims, together with a further $24,000 interest incurred on necessary borrowings to meet those claims.
Pauline contends that they are not entitled to treat themselves as creditors or, at least, to have their loan positions taken into account for the purpose of assessing Pauline’s entitlement. The reasoning behind that submission is that Pauline had insisted that Thomas not encumber any estate asset to pay out Kathleen or Linda’s claims before Pauline’s position was determined by the court. Thomas, as executor, had agreed not to do so.
Accordingly, as mentioned, neither the 260 Diggers Rd land nor the Melton land has been sold or used as security to assist in meeting those claims. Such agreement allowed those claims to be compromised, and paid, without requiring further legal action or cost, but also preserving the assets of the estate, in specie, to meet Pauline’s claim should it be allowed.
But I do not accept that I should be blind to reality. Just as I will take into account the fact that Kathleen and Linda have been provided the sums that they have received, I should also acknowledge that those provisions have been made out of the estate. I can only do that by recognising the estate’s liability to pay those who have financed the payments – that is, Thomas and Alex. Of course, once I give judgment, the estate’s interest in the Melton land could be sold; alternatively it could be used as security for a loan, as could 260 Diggers Road.
Pauline also insisted that she does not intend to upset the farming business of her brothers, or deprive them of their livelihoods from the land. I too accept that this is an objective that fairness dictates, if at all possible, having regard to the dependency of the men on the land, and their longstanding contributions to the land and the business. Exactly how the estate might meet its debt to Thomas and Alex, and to make any further provision to Pauline, is not so much my concern. But if I am to take into account, as I think I should, Thomas’s and Alex’s need to preserve the farm and business as a going concern, it does have a bearing on the question of Pauline’s entitlement.
Conclusion
Taking into account the fact that Pauline already has land to the value of approximately $289,000, a wise and just testator would consider that she should receive provision out of the estate to give her and her children a measure of security for their accommodation, relief from her existing debt, and a modest fund to assist her onto her feet until she can begin to use her tertiary qualification to provide for her own financial security.
I bear in mind, for reasons I have explained, Theo’s countervailing obligation to provide for her two brothers. Having regard to all of the matters I have discussed, and in particular the size and nature of the estate, in my view Pauline is entitled to a further provision of $475,000.
I will hear the parties on the form of final orders and costs.
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