Blanchfield v Johnston

[2007] NSWSC 143

CITATION:	Blanchfield v Johnston [2007] NSWSC 143
HEARING DATE(S):	26/02/07, 27/02/07
JUDGMENT DATE :	1 March 2007
JURISDICTION:	Equity Division
JUDGMENT OF:	Associate Justice Macready at 1
EX TEMPORE JUDGMENT DATE:	1 March 2007
DECISION:	Paragraph 63
CATCHWORDS:	Family Provision. Application under Family Provision Act by a daughter. Estate valued at $70,000. Costs incurred $74,000. Orders made capping plaintiff's costs.
PARTIES:	Beryl Dawn Blanchfield v Eric George Johnston & anor
FILE NUMBER(S):	SC 1678/06
COUNSEL:	Mr J Heazlewood for plaintiff Mr E. White for defendants
SOLICITORS:	Griffiths Tierney for plaintiff Clark Rideaux Solicitors for defendants

- 1 -

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

ASSOCIATE JUSTICE MACREADY

THURSDAY 1 MARCH 2007

1678/06 - BERYL DAWN BLANCHFIELD v ERIC GEORGE JOHNSTON and ANOR

JUDGMENT

1 HIS HONOUR: This is an application under the Family Provision Act in respect of the estate of the late Jessie Eileen Johnston who died on 13 July 2005 aged 95 years. The deceased was survived by some of her children, one of whom is the plaintiff, and another is the first defendant.

The last will of the deceased.

2 The deceased made her last will on 2 November 1979 under which she appointed the plaintiff and the first defendant as executors. The first defendant has taken out probate. Under the Will she left her estate to be shared between her children, of which there are four including the plaintiff Beryl and the defendant Eric.

Assets in the estate.

3 The only assets in the estate consisted of a loan to the first defendant of $54,000 and an amount in the bank of $5,156.39, a total of $59,156.39.

4 The loan and its associated mortgage arose out of the sale by the deceased to the first defendant of her home at 25 Peden Street Bega in 2002. The sale was for $60,000 with a deposit of $6,000 and the balance was secured by mortgage over the property. The loan carried interest at 7% reducible at 4.5%. The interest was from 30 October 2002 to 27 July 2007, an amount of $16,131. This makes the estate, after the allowance of some expenses including the cash in the estate, in the sum of $70,331.

5 Costs have been incurred in the matter. The defendant's costs are estimated at $25,000; the plaintiffs at $49,000. This totals $74,000. If all these costs are allowed in full there will be no actual estate.

6 Under the arrangement for the sale of her house the deceased was entitled to live in the house until she died, which is what she did. The first defendant was obliged to pay rates and insurance on the property, the costs of the sale, and to carry out necessary repairs, which he did up until the date of death.

Family history.

7 The plaintiff's father was born in 2001 and her mother, the deceased, was born in 1910. The son Gordon was born on 7 February 1930, the plaintiff on 27 November 1931, Norman on 30 March 1934 and the youngest, Eric, the first defendant, was born on 30 March 1938.

8 The plaintiff, after working on the property, moved in to the township of Bega in 1948 and she married in 1950. She had children, Barbara in 1952, Janelle in 1955 and her son, Ken in 1962. She and her husband purchased a house at 132 High St Bega in 1963. The plaintiff thereafter worked in Bega as a shop assistant.

9 The deceased's husband, George Leonard Johnson, died on 5 December, 1966. After that the deceased, after about five months, moved out of the family property in which she resided the most of her life.

10 Under the will of her husband the only thing she received was an annuity of $280 a quarter. This was charged on a loan due by Norman of $16,000 and that loan is still outstanding and was not repayable until after the deceased died.

11 As a consequence of having to move out the deceased purchased the property in Peden Street to which I have referred. I will come back to the debate about who paid for it, but it is plain that the plaintiff throughout this litigation has been under the misapprehension that the deceased herself paid for the property, whereas in fact the facts indicate that most of the purchase price was paid by the first defendant, her son Eric.

12 Eric and the deceased moved in and lived there for a while until Eric met his wife and married her in November 1969. It was on 2 November 1979 that deceased made her will, to which I have already referred. In 1980 the plaintiff and her husband sold their High Street home and purchased a home in Newtown Road, Bega where they still reside.

13 The plaintiff retired in 1993, as did her husband. He received $110,000 in superannuation at that stage. It was in the latter part of 2002 that the arrangements were made for the sale of the Peden Street property to the defendant. I will come back to the detail of that later.

14 The actual contract was dated 11 September 2002 and at that stage, according to the defendant, they paid a deposit of $6,000. The mortgage and the transfer were dated 30 October 2002 hand, and on 16 December 2002, the deceased's solicitor sent a cheque for $6,000 to the deceased.

15 There were some discussions in December 2002 between the plaintiff and the deceased which led to the rift between them. It also became apparent at that stage that the sale had gone through and the deceased mentioned it to the other children.

16 In early 2003, Norman, who had been paying the $280 per quarter amount to the deceased, started to make those payments into the deceased's account. There was another child, that was Lachlan, and he died in March 2003 and thus he did not share under the deceased's will.

17 The dispute with the plaintiff escalated in May 2003 when the deceased asked the plaintiff not to go to the house any more. She died on 13th of July 2005. Probate was granted and the proceedings were commenced within time.

Eligibility.

18 The plaintiff is an eligible person. The High Court in Singer v Berhouse (1994) 181 CLR 201 has set out the two-stage approached the Court must take. At page 209 it said:

“The final question is, was the provision (if any) made for the applicant ‘inadequate for (his or her) proper maintenance, education and advancement in life?’ The difference between ‘adequate’ and ‘proper’ and the interrelationship which exists between ‘ adequate provision’ and ‘proper maintenance’ etc were explained in Bosch v Perpetual Trustee Co Ltd. The determination of the first stage in the two-stage process calls for the assessment of whether the provision (if any) made was inadequate, or what, in all the circumstances, was the proper level of maintenance etc appropriate for the applicant having regard, amongst other things, to the applicant's financial position, the size and nature of the deceased's estate, the totality of the relationship between the applicant and seas, and the relationship between the deceased and other persons who have legitimate claims upon his or her bounty.

The determination of the second stage, should it arise, involves a similar consideration. Indeed, in the first stage of the process, the Court may need to arrive at an assessment of what is the proper level of maintenance and what is adequate provision, in which event, if it becomes necessary to embark upon the second stage of the process, that assessment will largely determine the order which should be made in favour of the applicant. In saying that, we are mindful that there may be some circumstances in which a Court could have refused to make an order notwithstanding that the applicant is found to have been left without an adequate provision for proper maintenance. Take, for example, a case like Ellis v Leeder where there were no assets from which an order could reasonably be made and making an order could disturb the testator's arrangements to pay creditors."

The plaintiff’s situation in life.

19 The plaintiff is 75 years of age and married. They have no dependent children. They own their own home, which is unencumbered, and have two cars valued at $5,000 and $3000. They have savings of $22,000. Both the plaintiff and her husband are pensioners and each receives a pension of $390 per fortnight which is used for their expenses.

20 The plaintiff had a good relationship with the deceased until an argument occurred on 21 December 2002. She and her husband did things for the deceased and the plaintiff had frequent contact with the deceased up until this time. The plaintiff’s affidavit evidence as to this discussion is somewhat elliptical to say the least. She says that on the 21 December 2002 she discussed with her mother the fact that the sale had gone through which fact was apparently mentioned Gordon. She also said that on 21 May when she was visiting her mother at her house her mother said she did not want her to come any more as Eric, now owns the house. Her mother said, “You will be trespassing and Eric will call the police." She says subsequently, she tried to go to the house and this was repeated. She said she was very upset about it.

21 The defendant's account, which relates what was said by the deceased about the matter, gives a somewhat different version of the matter. He says in May the deceased told him that Gordon had been and said the house was in bad repair, that she should sell the house and move into a nursing home. Apparently she said that she did not want the first defendant spending money on her house. The first defendant suggested that he could buy the house and then do the repairs and allow her to stay.

22 The first defendant also gave evidence of reports by the deceased of a meeting which occurred on Mothers Day 12 May 2002 in which Lachlan, Beryl, Norman and Heather Johnson had lunch with the deceased at the Merimbula Bowling club. She spoke to the first defendant and said:

”Beryl became abusive to me and said I was the cause of her heart problems. She said that Dad had left me $16,000 in his will.”

23 This apparently upset her. The deceased then decided to sell the house to the first defendant and she made an appointment with her solicitors to see them about the sale. The first defendant had separate solicitors acting in respect of that sale.

24 It seems that the truth of the dispute is probably what is said by the deceased when she reported it to the first defendant. Neither Norman nor George, who gave evidence in the proceedings, referred to it and the matter does not seem to have been further debated.

25 It seems to me that there was some dispute which, although probably caused by the plaintiff, was something that probably escalated around this and was blown up by the deceased because the deceased wanted to stay at home and not move out as was being suggested by some of the children. In the circumstances, in considering the plaintiffs claim I do not think it is such a serious matter that I would let it affect what claim the plaintiff might have. This is because she did in fact have a long and good relationship with the deceased and was a great help to her.

The defendant situation in life.

26 The first defendant is 68 years of age and is married. He does not put forward any financial information before the Court. The Court therefore assumes that he does not wish the Court to take his financial situation into account in deciding the questions which fall for determination.

27 Clearly the first defendant had a close and good relationship with the deceased throughout their lives. Although the plaintiff had some part to play in the purchase of the house by the deceased in 1966, he was the one who organised the loan which was necessary to purchase the home.

28 It is also necessary to consider the situation in life of anyone else having a claim on the bounty of the deceased. In this case the only two people are the sons, Norman and Gordon. There is no evidence of their circumstances put by them before the Court, although they gave some specific evidence touching on some matters before the Court. They also did not put before the Court anything concerning their relationship with the deceased.

29 In these circumstances the Court can assumed that they do not wish those factors to be taken into account in considering the plaintiffs claim, which is simply a claim by her, and with no one else putting any competing financial circumstances forward.

The purchase of the deceased's home.

30 The plaintiff's case on this aspect is that she went with her mother when her mother chose the house. Although not initially dealing with this in her earlier affidavits, she gave evidence in her affidavit of 19 December 2006 that she went with her mother to the Commonwealth Bank to draw out the $900 deposit which was paid to Mr Blomfield. She was given her mother's passbook and she said she looked in the passbook and saw a credit in excess of $16,000. The purchase price was $9,000 and it occurred to the plaintiff that obviously her mother had sufficient to pay the balance of the purchase price. She makes it plain she had no further involvement with the purchase and took no part in the settlement.

31 The bank passbook to which the plaintiff referred was not produced in evidence and was last seen in the deceased's house many years ago.

32 The first defendant could not remember about the $900 deposit and frankly conceded that it may have been paid by the deceased. Plainly, the first defendant introduced the deceased to the bank and there was a mortgage, which was an all moneys mortgage granted to the Bank of New South Wales on 6 April 1967 (Mortgage No K666832) which was registered simultaneously with the transfer to the deceased. Plainly, there was a bank loan.

33 From June 1967 to 18 August 1975 the first defendant paid approximately $80 per month on account of the principal and interest on the mortgage to the bank. The first defendant maintained a cash book in which he recorded all his expenditure and the original sheets from the cash book are in evidence before me.

34 It is plain that the amounts were paid and entered in the ordinary course in that cash book. There is an item on 18 August 1975 which is headed ‘final bank payment’ in the sum of $970.40. On that day when he paid it to the bank the first defendant drew a cheque for $19.00 for the registration fee for the discharge of the mortgage and the mortgage was discharged.

35 The total amount of the payments was $9,185.60. The balance of the purchase price was $8,100 and there would have been interest over the years which may have accounted for the difference. Plainly, however, apart from the deposit it seems, and I am satisfied, that the defendant paid the balance of the purchase price by repaying the bank loan.

36 Whether the plaintiff was in error in her recollection, or whether the deceased may have had those funds and disposed of them, does not appear in the evidence. However, it does seem that in the two years before the deceased husband died in his income tax returns he disclosed he made some payments to the deceased, one for $1,500 and one for $1,000. This would seem to be the only moneys the evidence discloses that were given to the deceased and the likelihood of her having a sum of $16,000 in the circumstances of this family is somewhat remote. In my view the inescapable inference from the evidence is that the first defendant paid the balance of the purchase price and the interest.

37 It is necessary to see how the plaintiff is left without adequate means for her proper maintenance, education and advancement in life. She put forward the following matters: renovations to her and her husband's house $66,886.02; new dentures and dentistry $8,140; a visit to Canada $13,714; a caravan and a four-wheel drive for a trip around Australia $92,949. This is a total of $186,617.

38 The premises have been detailed in a document which is exhibit A. I think the kitchen is something that needs renovations; she gave evidence of that and the charges do not seem to be excessive. She also gave evidence of the appliances which are necessary. There are vertical blinds, carpet and vinyl flooring which seem to need replacing, which is not surprising given that their age. Also the bathroom needs repairs; there is cracked glass, the toilet is unsteady on its foundations etc. The total of these charges, which I think are appropriate, are $63,082.04. Obviously the sum for dentures and dentistry is $1,840 and that is appropriate. These figures, of course, have to be seen in the context of the estate and the claims on the estate.

39 So far as the trip to Canada is concerned, this really is something which can be described as ‘a wish’, that it is not something which I would have thought is necessary in the context of the lifestyle of this plaintiff.

40 The four-wheel drive motor vehicle and its purchase with a caravan in the context of this estate, even allowing for some notional estate, also I think could hardly be described as something necessary for the plaintiff.

41 How much should be provided for the plaintiff depends on a number of factors. The plaintiff and her husband have $22,000 in the bank and will receive $4,000 from the father's estate. Under the provisions of the Will they would be likely to receive $16,000 as the plaintiff’s share of the estate. This is, of course, without factoring in costs. But even when not factoring in costs and showing them receiving this amount, it is plain on the figures that I think she has been left without adequate and proper provision for her advancement in life. In those circumstances some provision should be made for her.

42 Section 22(1) provides:

(1) A person shall be deemed to enter into a prescribed transaction if:
(a) on or after the appointed day the person does, directly or indirectly, or omits to do, any act, as a result of which:
(i) property becomes held by another person (whether or not as trustee), or
(ii) property becomes subject to a trust,
whether or not the property becomes in either case so held immediately, and
(b) full valuable consideration in money or money’s worth for the first mentioned person’s doing, or omitting to do, that act is not given.

43 Section 23 provides:

“Notional estate - prescribed transactions

On an application in relation to a deceased person made by or on behalf of an eligible person, if the Court is satisfied:

(a) that an order for provision ought to be made on the application, and

(b) that, at any time before death, the deceased person entered into a prescribed transaction:

(i) which took effect within the period of three years before death and was entered into with the intention, wholly or in part, of denying or limiting, wholly or in part, provision for the maintenance, education or advancement in life of that or any other eligible person out of the deceased person's estate or otherwise,

(ii) which took effect within the period of 1 year before death, and was entered into at a time when the deceased person had a moral obligation to make adequate provision, by will or otherwise, for the proper maintenance, education and advancement in life of that or any other eligible person which was substantially greater than any moral obligation of the deceased person to enter into the prescribed transaction, or

(iii) which took effect or is to take effect on or after the death of the deceased person,

The Court may, subject to sections 26, 27 and 28, make an order designating as notional estate of the deceased person such property as it may specify, being property which is held by, or on trust for the disponee, where there is more than one disponee, any of the disponees, whether or not the property was the subject of the prescribed transaction."

44 Thus, if the transfer in 2002 was given without full consideration in money or moneys worth there could be a prescribed transaction.

45 There are a number of undisputed facts in respect of that transaction. The sale price was $60,000 and the contract provided for a $6,000 deposit and the balance to be secured by a mortgage for $54,000, which in fact was secured.

46 There is some doubt raised about whether the $6,000 deposit was in fact paid to the deceased. Because the plaintiff's solicitor wrote out a cheque for cash ultimately there was a question which needed to be investigated and was investigated as a result of a complaint made to the Law Society. The Law Society investigated, talked to the various parties and concluded that there was no basis for a suggestion that the $6,000 had in some way come back to the first defendant.

47 The second defendant, who is the first defendant's wife, gave evidence of what happened about the cashing of the cheque. She went with the deceased to the bank and saw the deceased cash the cheque and receive the $6,000. What the deceased did with the money she did not know, she just went home with the money.

48 The second defendant I found to be a straight forward and careful witness. I also found the first defendant similar. They both in my view gave careful and accurate evidence to the Court and I accept their evidence.

49 I am satisfied that this $6,000 was paid to the deceased and that she retained it. Plainly she gave some amounts away to people and she even gave some to the first defendant's son for doing things for her but that was a matter for her.

50 The property was valued at $105,000 and that occurred because it was a related party’s transaction and a valuation was needed for stamp duty purposes. The contract of sale contained the following special conditions.

“35. This sale by vendor to purchasers of all interest in house and land at 25 Peden St Bega is subject to mother Jessie Eileen Johnston being permitted to reside free of charge during her life (right of residence) in premises conditional upon the purchasers in respect of that residence:

(i) paying all rates and taxes and other outgoings, including water usage, gas, electricity in respect of premises.

(ii) purchasers covenant and agree to keep the premises in a good and habitable state of repair and completing all repairs, maintenance and renovation required to maintain house in a fair and reasonable living condition for the benefit of mother Jessie Eileen Johnston.

(iii) purchasers covenant and agree to keep premises insured from replacement value against fire, tempest and for public liability and other insurer risks and pay all necessary premiums by the due date and produce to the vendor upon request evidence of current policies and payment of current premiums.

36. The purchaser shall be fully responsible for payment of stamp duty and any Government charges relating to transfer. This condition shall not merge on completion.

37. The purchasers shall be legally responsible for payment of professional vendor fees of acting on sale and proposed vendor mortgage including any valuation fees, disbursements and other vendor fees, expenses and disbursements.

This condition shall not merge on completion.

38. The purchasers covenant and agrees to carry out and have completed all repairs, maintenance and renovation required to maintain house being sold at 25 Peden Street, Bega in a fair and reasonable living condition for the benefit of mother Jessie Eileen Johnston.”

51 Some of these are repeated in the mortgage.

52 It is plain that the consideration includes not just the sale price but the special conditions creating a life estate for the deceased and the obligations on the first defendant in respect of repairs and expenses.

53 The life interest the deceased received under the estate has been valued by a valuer at $20,000. The defendant and his son did work on the property worth $12,000 and there were expenses incurred of $10,859, a total of $22,859. The vendor’s costs, which were also paid by the first defendant, were $1,732. It was plain therefore that the total consideration which was given was $104,599. This was close to the value of $105,000. I am satisfied that there was valuable consideration given and, accordingly, there is no prescribed transaction.

54 In those circumstances there can be no designation of notional estate. In case I am wrong on this point I will also deal with other aspects. The first of these is whether the deceased had the necessary intention as set out under section 23 (b) (1). That section I have set out earlier. The plaintiff's case was that the deceased had a property with Beryl and as a result she decided to sell the house. The matter was discussed by the deceased with her solicitor, Mr Blomfield but there is no evidence of that discussion. No doubt he could have been called if the plaintiff desired to do so.

55 What in fact happened was that the estate has missed out on the increase in the value from $105,000 in 2002 to $235,000 in 2006.

56 I have earlier set out the first defendant's evidence about what the deceased said to him once she came back from the Mothers Day meeting. The second defendant also had a discussion about the price with the deceased and she gave the following evidence.

“Q. Express it as though you are meeting her and as if you are talking together?
A. ‘I am charging $60,000 because Eric has also bought this house once before. There will be renovations to be done on this house that are expensive.’ That she would like to have money left over to divide between the four families in her estate.”

57 There is no evidence at all that the deceased turned her mind to the matter of the increase in value. Of concern to her were the repairs necessary. Gordon mentioned it to her and she mentioned it to the second defendant in the conversation I have set out above. I think what probably most motivated the deceased was the desire to stay and not go to a nursing home. The first defendant's offer made it possible. The fact she could still leave some assets to her children, which was what she wanted to do, militated against her having the necessary intention. In my view the relevant intention was not there.

58 If I had to consider it as part of the notional estate there are of course the factors under section 27. That section says:

“Designation of property as notional estate -- matters to be considered

(1) On an application in relation to a deceased person, the Court shall not make an order designating property as notional estate of the deceased person unless it has considered:
(a) the importance of not interfering with reasonable expectations in relation to property,
(b) the substantial justice and merits involved in making of refusing to make the order, and
(c) any other matter which it considers relevant in the circumstances.
(2) In determining what property should be designated as notional estate of the deceased person, the Court shall have regard to:

(a) the value in nature of property the subject of any relevant prescribed transaction or distribution from the estate of the deceased person,

(b) where, in relation to any prescribed transaction, consideration was given, the value and nature of the consideration,
(c) any changes over the time which has elapsed since any such prescribed transaction was entered into, any such distributional was made or any such consideration was given in the value of property of the same nature as the property the subject of the prescribed transaction, the distribution or the consideration, as the case may be,
(d) whether property of the same nature as the property the subject of any such prescribed transaction, any such distribution or any such consideration could, during that time which has elapsed since the prescribed transaction was entered into, the distribution was made or the consideration was given, as the case may be, have been applied so as to produce income, and
(e) any other matter which it considers relevant in the circumstances."

59 I turn to the question of the claim in the context of an estate that is $70,000 when the party's costs are estimated at $74,000.

60 This is a small estate and this problem is exactly that which is referred to in paragraph 57 and 58 of Practice Note SC Equity 1 58. Section 60 of the Civil Procedure Act is in the following terms:

“Proportionality of costs
In any proceedings, the practice and procedure of the Court should be implemented with the object of resolving the issues between the parties in such a way that the costs to the parties is proportionate to the importance and complexity of the subject-matter in dispute."

61 This is, as I have indicated, a small estate and even with notional estate if it had been available it is still a very modest estate. Careful thought once all the documents became available should have foreseen problems with the notional estate claim. The contract of sale clearly discloses the life estate and the obligation to do repairs. That became fairly clear early on in the first defendant's first affidavit. I would have thought that careful consideration would have indicated real problems with the notional estate claim.

62 In all of those circumstances what I propose to do is cap the plaintiff's costs at $25,000. I have been given an indication by the Solicitor for the plaintiff that if I do this they will not charge the plaintiff any more.

63 Accordingly, the orders I make are as follows:

(1) I order the plaintiff to receive a legacy out of the estate of the deceased and the sum of $20,000.
(2) The plaintiff's costs in the sum of $25,000 and the defendant's costs on an indemnity basis to be paid or retained out of the estate of the deceased.
(3) Interest on the legacy of $20,000 will be payable at the rate provided for under the Wills (Probate and Administration) Act 1898 if not paid within one month of today's date, and will run from that date.
(4) I order the exhibits be returned.

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