Brougham v Moore
[2012] VCC 46
•29 February 2012
| IN THE COUNTY COURT OF VICTORIA | Revised Not Restricted |
AT MELBOURNE
CIVIL DIVISION
DAMAGES AND COMPENSATION LIST
THE FAMILY PROPERTY DIVISION
Case No. CI-11-01182
IN A MATTER OF Part IV of the Administration and Probate Act 1958 AND IN THE MATTER of the Estate of MARIE LILLIAN BROUGHAM, widow, Deceased
| ROBERT LESLIE BROUGHAM | Plaintiff |
| v | |
| BILLEE JEAN MOORE ( As Executrix of the Estate of MARIE LILLIAN BROUGHAM) | Defendant |
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JUDGE: | His Honour Judge Misso | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 13 & 14 February 2012 | |
DATE OF JUDGMENT: | 29 February 2012 | |
CASE MAY BE CITED AS: | Brougham v Moore | |
MEDIUM NEUTRAL CITATION: | [2012] VCC 46 | |
REASONS FOR JUDGMENT
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SUBJECT: TESTATOR'S FAMILY MAINTENANCE
CATCHWORDS: stepson of the deceased - deceased inherited the whole of the estate of the claimant’s father - whether the deceased had the responsibility to make provision for the claimant - relationship between the deceased and the claimant - composition of the estate of the deceased - calculation of provision for the claimant
LEGISLATION CITED: Administration and Probate Act 1958, s.91
CASES CITED: Boyd v State Trustees Ltd [2008] VSC 18; Robertson v Koska [2010] VSC 134; Blair v Blair [2004] 10 VR 69; Grey v Harrison [1997] 2 VR 359; Henderson v Rowden [2001] VSC 267; McKenzie v Topp [2004] VSC 90; Petersen v Micevski [2007] VSC 280; James v Day [2004] VSC 290; Keets v Marks [2005] VSC 172; Worladge v Doddridge (1957) 97 CLR 1 and Vigolo v Bostin (2005) 221 CLR 191
RULING: provision be made for the proper maintenance and support of the plaintiff in the sum of $489,924.50 .
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Isles | M P Lanza, Lawyers |
| For the Defendant | Mr R Waddell | Rush & Failla, Solicitors |
HIS HONOUR:
Introduction
1 By an Originating Motion filed 18 March 2011 the plaintiff seeks provision for his proper maintenance and support from the estate of the deceased, Marie Lillian Brougham, pursuant to the provisions of the Administration and Probate Act 1958 ("the Act ").
2 Mr J Isles of counsel appeared for the plaintiff, and Mr R Waddell appeared for the defendant.
3 The following evidence was adduced at the trial:
· the plaintiff gave evidence and was cross-examined.
· the defendant gave evidence and was cross-examined.
· Mrs Barbara Jean Anne Wilding gave evidence and was cross-examined.
· the plaintiff tendered his Court Book ("PCB") pages 9-188: Exhibit A
· the plaintiff tendered a real estate valuation of 4/18 Burwood Road, Hawthorn: Exhibit B
· the plaintiff tendered an ASIC search of L J Brougham Proprietary Limited; Walars Acceptance Proprietary Limited; Lejabro Holdings Proprietary Limited, and a company flowchart: Exhibit C
· the plaintiff tendered financial statements of Pennant Acceptance (Vic) Pty Ltd: Exhibit D
· the plaintiff tendered financial statements of Rolbro Nominees Pty Ltd: Exhibit E
· the plaintiff tendered financial statements of Jelbro Nominees Pty Ltd: Exhibit F
· the plaintiff tendered the affidavit of Barbara Jean Anne Wilding sworn 26 May 2011 in proceeding SCI 2011 01208: Exhibit G
Background
4 The plaintiff was born on 15 December 1950. He is now 61 years of age. He is the only child of Leslie James Brougham ("Leslie"), and Nella Joyce Brougham ("Nella"). Leslie was born on 17 August 1912. He died on 11 May 1993. Nella was born on 27 April 1916. She died on 11 April 1999.
5 Leslie conducted a hire car business until about 1971. He was also a very successful punter. Leslie and Nella's marriage showed signs of failing in 1966-67. It would appear that their marriage failed not long after 1966-67. They divorced in 1972.
6 Leslie met Maurice Johnson ("Maurice") when they were both in the army during World War II. After returning from military service, Maurice took on the lease of the Oxford Hotel in Swanston Street, Melbourne and became its licensee. Maurice met and married the deceased ("Marie"). Leslie and Nella became firm friends with Maurice and Marie.
7 In about 1965-66 Maurice was diagnosed with diabetes. His health declined rapidly. His ill-health was either partly or wholly responsible for a decline in the profitability of the Oxford Hotel which resulted in receivers being appointed. Maurice and Marie subsequently lost the lease and licence. It would appear that Maurice died not long after contracting diabetes.
8 The plaintiff recalls that Maurice and Marie were part of his life when he was very young. He referred to Marie as "aunty". Leslie and Nella probably separated in about 1967. The plaintiff recalls Leslie and Marie socialising with each other by about 1969. Their friendship became more intense resulting in their marriage in 1974.
Marie's Business Interests
9 At some time prior to the marriage of Leslie and Marie in 1974, Marie had purchased the freehold of premises at 1353 Burke Road, East Camberwell from where she conducted a retail clothing business known as "Casualair".
10 In about May 1968 Marie purchased an apartment in Power Street, Hawthorn for about $11,800. The plaintiff said that Leslie paid the purchase price of the apartment. The defendant and Mrs Wilding said that they had many conversations with Marie during which she told then that she had purchased the apartment with her own money.
11 The plaintiff said that he was aware of Marie's business interests. At the time when Marie was working with Maurice at the Oxford Hotel; pursuing her retail clothing business, and when she came into possession of the apartment, the plaintiff was a teenager. Despite his youth he was adamant that Leslie had purchased the apartment for Marie.
12 Both the defendant and Mrs Wilding were equally adamant that Marie told them aspects of her life during which she said to them that she purchased the apartment with her own money.
13 Whilst I consider that the plaintiff gave all of his evidence fairly, I was equally impressed by the evidence of the defendant and Mrs Wilding who seemed to me to have struck up quite a friendship with Marie. They both said that on occasions when they met Marie when dining at the Oxford Hotel, and in later years, their conversations often turned to their early lives. It was during such conversations that Marie re-stated that she had purchased the apartment with her own money.
14 Both the defendant and Mrs Wilding recounted their visits to the Oxford Hotel, and their friendly interaction with Maurice, and later with Leslie. The conversations regarding Marie's early life occurred in the presence of Maurice, and I infer that after Maurice died and Leslie came on the scene that he was present during similar conversations. It seems to me that it was something which left a real impression on the defendant and Mrs Wilding. Indeed, I gained the impression from the description given by the defendant and Mrs Wilding of Marie, that Marie was a headstrong, assertive woman who seemed to be proud of her independence as a businesswoman. I prefer the evidence of the defendant and Mrs Wilding to that of the plaintiff in relation to who provided the money for the purchase of the apartment.
15 Marie sold the freehold of the premises at 1353 Burke Road in February 1971 for $20,350. It is unclear to me whether she also sold the business known as Casualair, and if she did, the amount she sold it for. In about 1974 she sold the apartment in Power Street for $23,000. It is also unclear whether Marie had any other money at the time when she married Leslie except for the sums just referred to.
Burwood Road Hawthorn
16 Leslie purchased a property at 18 Burwood Road, Hawthorn in March 1973 four $63,000. Marie did not contribute to the purchase price. Leslie undertook renovations of the house at 18 Burwood Road. He engaged an architect who designed the renovation. The actual building work was undertaken through "Lewis Brougham Constructions" which was a business conducted by the plaintiff and his business partner, Glyn Lewis. Leslie paid for all the renovations which were at a cost of about $80,000 to $85,000. The plaintiff and Lewis undertook the renovations but did not claim a builders margin which the plaintiff estimated was about $24,000 over and above the cost of the renovations. Marie did not contribute to the purchase price nor to the cost of the renovations.
17 The renovations took about 18 months. It would appear that by the time they were completed Leslie and Marie were married. The defendant said that she had a conversation with Marie relevant to her marriage to Leslie and the purchase of Burwood Road, Hawthorn. She said that Marie told her that she had agreed to marry Leslie on condition that he purchased Burwood Road, Hawthorn and would pay for its renovation. She also said that Marie told her that she had contributed to the cost of the renovations, the cost of the installation of a swimming pool of $10,000, and the cost of soft furnishings throughout the house.
18 Mrs Wilding gave somewhat different evidence regarding the surrounding circumstances of the marriage and the purchase of Burwood Road, Hawthorn. She said that Marie told her that Leslie wanted her to give up her business. What is clear is that the sale of her business coincided with the purchase of Burwood Road, Hawthorn and their marriage. Mrs Wilding said that Marie told her that she chose Burwood Road, Hawthorn as their matrimonial home.
Other Income and Property Transactions
19 The defendant and Mrs Wilding gave evidence about Marie's other sources of income. Their knowledge of those other sources of income was based upon conversations they had with Marie over the years.
20 The defendant said that Marie told her that during her marriage to Maurice she had earned sufficient income to buy a block of flats in Brighton and to set up a business known as "Hunts of Windsor", which was a retail outlet selling men's clothing. It was managed by Marie's brother, Alan. Mrs Wilding said that Marie told her that she and Leslie had undertaken a real estate investment in Hampton. They purchased two units which Marie told her they later sold with the proceeds of sale then being put into the purchase of Burwood Road, Hawthorn.
21 The plaintiff said that he had laboriously undertaken searches of records relevant to the purchase and sale of blocks of flats in Brighton and in Hampton and came up with no records pointing to the purchase of a block of flats in the name of Leslie and/or Marie.
22 All I am able to take from the evidence of the defendant and Mrs Wilding is that Leslie and Marie may well have engaged in some level of property speculation, but what it was and what it netted them is impossible to say.
23 Mrs Wilding said that Marie told her that she came from a racing family; that Leslie was an SP bookmaker who ran his book from the Oxford Hotel; that when Marie worked for Snows Department Store during World War II she ran a book with some connection to the bookmaking activities of Leslie, and that she ran bets for Leslie at race tracks.
24 The plaintiff denied that Leslie was an SP bookmaker. He said that Leslie was a well-known punter who derived the majority of his income from punting at race tracks. He was so well-known in racing circles that in a book written by Bill Waterhouse known as "What Are the Odds?", Leslie was described as follows:
"Melbourne man Les Brougham - known as ‘Possum’, since no one saw him during the daytime - was one of the best form judges I knew, and a professional punter who never lost over a period. I viewed his opinion very highly and so would accept his pre-post bets without limitation, which gave him an extra edge. He was sensible, bet modestly and was a great help to me in Melbourne."
25 The plaintiff also denied that Marie came from a well-known racing family. It must be remembered that the plaintiff knew Marie from a very early age. I accept that he must have learnt something of Marie's background, and is probably in a position to say something about her background. Equally, I suppose, that Mrs Wilding was in a similar position because of her obvious friendship with Marie.
26 I think all I can conclude is that Leslie was obviously, if not a professional punter, then very close to being one. Marie would no doubt have been exposed to his punting activities. She probably approved of them because she developed not just a friendship with Leslie following the death of Maurice, but eventually married Leslie and lived with him as his wife for 19 years. If his punting activities were as productive as described by the plaintiff then no doubt Marie obtained the financial benefit of his wins at the track.
27 In the late 1960s the plaintiff and Marie purchased a property at Ferntree Gully Road, Ferntree Gully. It was purchased, renovated and sold within about three months from which the plaintiff and Marie netted a profit of $2500 which they divided equally between themselves.
28 Leslie and Marie purchased an apartment at Surfers Paradise known as "Edgewater Gardens" for $120,000 in 1982. The plaintiff said that the deposit was paid by the L J Brougham Trust, otherwise Leslie borrowed the whole of the purchase moneys. It was sold in September 1991 for $170,000. Marie received $70,452. Although she did not contribute to the purchase price a fiction was created by which it was assumed that she had contributed to the purchase price, so that after account was taken of expenses associated with the apartment the $70,452 represented a half share.
29 The plaintiff said that Leslie told him not to seek reimbursement from Marie for the payment of $70,452 because it was Leslie's view that the plaintiff would be the sole beneficiary of Marie's estate, and would receive that sum as part of her estate.
30 Mrs Wilding said that she and her husband engaged in a property development in Sebastopol, Ballarat in about 1985-86. Marie lent her $40,000 as an interest only loan. The loan was repaid.
31 Both the defendant and Mrs Wilding repeatedly described Marie as not only a headstrong, assertive woman who seemed to be proud of her independence as a businesswoman, but a woman who would not take money from a man. Additionally, they and Ms MaryRose Rojo, described the domestic arrangements of Leslie and Marie as if they were living together, but independently in a financial sense. Leslie would be responsible for some expenses and Marie for other expenses, which the defendant, Mrs Wilding and Mrs Rojo said were well defined in the sense of which expenses each would pay.
32 Mrs Wilding said that Marie told her that she regretted selling her business and the premises from which she ran the business, with the inference being that she had lost a degree of independence.
33 It is very difficult for me to be certain of precisely what the financial arrangements were between Leslie and Marie. The only evidence, and indeed the best evidence, of their financial wherewithal and the financial arrangements between them, came from the plaintiff, the defendant, Mrs Wilding and Mrs Rojo. Although the plaintiff was able to give direct evidence of various financial transactions directly relevant to the defendant, most of the evidence was based upon conversations had by the defendant, Mrs Wilding and Mrs Rojo.
34 Mr Isles essentially submitted that the bulk of the estate left by Marie was derived from Leslie. Mr Waddell essentially submitted that Marie was not only an independently minded woman, but one who showed financial independence by her capacity to acquire money which enabled her to purchase freehold properties and to establish businesses.
35 The conclusions I have reached from the foregoing summary of the evidence of the source of Marie's assets and income is rather more general than specific which is entirely due to the sources from which the evidence was adduced and the reliability of that evidence.
36 I do not doubt that Marie was the type of woman described by the defendant and Mrs Wilding. I do not doubt that her industry enabled her to acquire a property at Burke Road and to establish a retail business from the premises. I do not doubt that the income which he derived from that business enabled her to purchase the apartment at Power Street. I also do not doubt that when she sold both properties and the business that she came into significant funds when judged by the value of money in the 1970s.
37 However, it is very apparent that Leslie was a businessman with significant business acumen. He established and conducted a hire car business, and otherwise it would appear that he spent a considerable amount of time punting with great success. Punting appeared to be the major source of income which came into his hands. It occurs to me that it is highly probable that the only sources of income which came into the hands of Leslie and Marie until about 1976 was generated by Leslie. However, it is obvious that Marie had capital which I can only presume that she invested in some manner and from which she derived some income.
38 What is tolerably clear to me is that the property at Burwood Road was purchased by Leslie from funds at his disposal as were the renovations, and that Marie’s contribution was limited to furnishing the house and paying for the installation of a swimming pool.
39 I do not accept that the overseas trips taken by Leslie and Marie and the general lifestyle was contributed to by Marie in any material way. It seems to me that she could not have had the capital to have been as independent financially as the defendant and Mrs Wilding suggest that she was. I think she was largely dependent upon Leslie, but that is not to say that she did not contribute to the payment of various domestic expenses.
40 Apart from the capital which she had prior to marrying Leslie the other capital she came into was the $70,452 she was given from the sale of the apartment in Surfers Paradise.
41 The plaintiff said that he paid Marie $1200 per month toward her living expenses from the time of Leslie's death on 11 May 1993 and up until the sale of Burwood Road on 20 to June 1994. The plaintiff conceded that the $1200 he paid was interest to which Marie was entitled on an investment made with the business interests then conducted by the plaintiff. It stands as a matter of simple logic that if the Marie was entitled to $1200 interest that it must have been derived from a capital sum, but the evidence did not disclose the quantum of the that capital sum.
42 The plaintiff exhibited Marie's taxation returns for the year ending 30 June 1990. The only assets it discloses are liquid assets being $14,400 in the L J Brougham Trust; $4683 deposited in the Challenge Bank; and $4927 deposited in the Bank of Melbourne. It is difficult to reconcile the paucity of income disclosed in that tax return with the evidence of the defendant and Mrs Wilding which gave the impression that Marie was a woman of independent means. To make matters worse it is clear that Marie had an investment with Pennant for which she was entitled to a payment of $1200 interest from Pennant. It is not clear to me whether that income was interest on the $14,400 in the L J Brougham Trust because if it was then it was being invested at an enormous rate of interest, and in fact, it demonstrates a 100 percent return. It may be that there were other monies in the possession of Marie which were not disclosed in the tax return. In any event, it is difficult to understand how it is said that she was in effect a woman of independent means of the magnitude suggested by the defendant and Mrs Wilding before Leslie died.
43 In any event what is clear is that at the date of the death of Marie she left an estate comprising an apartment at 7/286 Toorak Road, South Yarra which was sold by public auction by the defendant and which netted the estate $780,000. In addition, she left a term deposit with the balance of $135,000; a cheque account with a balance of $16,337.25, and a second term deposit with a balance of $10,525.88. In total the cash assets amounted to $161,863.13.
44 The evidence does not disclose the source of the cash assets. I presume the total sum was derived partly from monies she earned, and from monies earned by Leslie. I think it highly probable that the majority of those monies were initially derived from Leslie because he had sources of income from punting and his business interests which Marie did not have.
Pennant Finance
45 The plaintiff entered Swinburne Technical College to study for a diploma in business studies. It is not clear when he started that course, whether he finished it, and if so, when. While studying he worked for Leslie assisting him with his business activities. Whilst he did not describe what business activities they were I presume they were connected to the car hire business and Leslie's punting.
46 In 1971 the plaintiff commenced the construction business with Mr Lewis. In May 1974 the plaintiff, a family friend and that friend’s accountant commenced a finance business known as "Pennant Acceptance (Vic) Pty Ltd" ("Pennant"). It was described by the plaintiff as a source of last resort finance which I understood to mean that if a person requiring finance was unable to satisfy the requirements of a traditional provider of finance, Pennant would provide the finance at a higher rate of interest to accommodate the higher level of risk involved.
47 In late 1976 Leslie purchased the share of Pennant from the accountant and joined in the business of Pennant as a non-active investor. In other words, the plaintiff and his family friend operated that business.
48 The plaintiff gave evidence that Pennant, and its associated corporate and trust entities, suffered dramatic losses at around the time of the stock market crash in 1987 resulting in debtors owed $925,000. It would appear that there was some payment out to the debtors, but it needed to be supplemented by the plaintiff borrowing $300,000 using his home at Wonga Park as security. The plaintiff said that the fortunes of Pennant were disastrous to the point that despite what was shown in the financial records as the total assets and the beneficiaries loan accounts in the trading accounts of one of the associated companies of Pennant, that there were no assets of any significance in Pennant or in any of the associated corporate and trusts entities.
49 I found it very difficult to understand the relationship between Pennant and its associated corporate entities and trusts. I was provided with a diagram which was only marginally helpful. It demonstrated that:
· Pennant was the trustee of "The Brougham Trust". The trust ceased trading in about 1993.
· Pennant had two interrelated corporate entities, one was, Rolbro Nominees Pty Ltd ("Rolbro") was the trustee of R L Brougham Family Settlement. The trust ceased trading in about 1997.
· The other interrelated corporate entity was Jelbro Nominees Pty Ltd ("Jelbro") was the trustee of the R L Brougham Family Settlement as was Rolbro.
· Pennant was the trustee of the Feathertop Unit Trust and the Pennant Trust.
· There were three other companies known as L J Brougham Pty Ltd, Walars Acceptance Pty Ltd and Lejabro Holdings Pty Rolbro Nominees Pty Ltd. All were deregistered before 2001.
50 Some financial records of Pennant, Rolbro and Jelbro were tendered in evidence. The records were financial statements for year ending 30 June 1997 with respect to Pennant and Jelbro and for the year ending 30 June 1998 with respect to Rolbro. The financial records are hardly edifying. They constitute, among other things, accounting records which document total assets and beneficiaries loan accounts, but when the accounting records are broken down the plaintiff said that there were no assets of any value in any of the corporate entities or trusts, and that was the evidence of Mr White, accountant.
51 Mr White was the accountant for Leslie and Marie from about 1977. He attended to the preparation of Marie's personal tax returns until about 2002. During his evidence I asked him whether the financial records of the various companies and trusts demonstrated that the plaintiff was entitled to any distributions of capital and income. Whilst he said there were some assets in the business which generated income which was distributed to the plaintiff, the very strong impression I was left with was that the corporate and trusts entities had no significant assets and produced no significant income.
52 Mr Waddell referred to the last will of Leslie and referred specifically to the clauses in the will which left part of Leslie's estate to the plaintiff which Mr Waddell submitted comprised Leslie's interest in Pennant and its associated corporate and trusts entities. He pointed to the assets and beneficiaries loans as evidence of what the plaintiff inherited. In the end I am not persuaded that an examination of the financial records of Pennant and the other corporate and trusts entities point to any of those entities having assets of any material worth.
53 One of the serious obstacles in me being able to understand the workings of the corporate and trust structure of Pennant is the paucity of materials to fully illustrate how Pennant operated in connection with the other entities. Despite that flaw I think the evidence of Mr White was more than adequate to persuade me that the original thesis proposed by Mr Waddell that the plaintiff inherited a corporate and trust structure of some wealth has no substance.
The Plaintiff Circumstances
54 The plaintiff married Judith Mary Cook on 14 December 1974. They have three children - Amy was born on 11 April 1978; James was born on 19 March 1981, and Joshua was born on 28 December 1985. The plaintiff and his wife separated on 14 November 2004. They remain separated.
55 The plaintiff and his wife owned a property at 210 Jumping Creek Road, Wonga Park. On Christmas Day 2000 it was destroyed by fire. It was not insured.
56 The plaintiff said that the only asset which he has is cash of $140,000. It is invested in Jelbro which is the trustee of the L J Brougham Trust. It is invested with a further sum of $110,000 which is held in trust for the plaintiff’s three children.
57 The plaintiff continues to invest his money and that of the trust (totalling $250,000) in the traditional business of Pennant, that is, finance of last resort. He has recorded returns of income of $50,000 per annum, but he runs the risk that Pennant always ran that the high returns are accompanied by a high risk of bad debts. He has no other assets. He rents a home where he lives with his youngest son.
Marie’s Estate
58 Mr Failla, solicitor was the solicitor engaged by the defendant to represent the interests of the estate of Marie in this proceeding. He swore an affidavit on 8 February 2012 in which he described the administration of the estate of Marie which he was instructed to undertake by the defendant. Mr Failla deposed to the balance of the estate held in both his trust account and in a term deposit as amounting to $654,924.
59 Mr Failla also deposed to two payments, among others, by the estate of the sum of $105,000 to meet a claim by Mrs Wilding brought under Part IV of the Act, and the claim by Jelbro filed in this court alleging that the estate was indebted to Jelbro to the tune of $140,000.
60 Mr Isles submitted that I should add back into the estate the settlement of Mrs Wilding's claim. I will not do that. Whether the claim made by Mrs Wilding as a carer for Marie was a viable one or not required the defendant to make an assessment, on advice, of the risks to which the estate was exposed in relation to that claim. Advice was given and action taken on that advice which resulted in a settlement of that claim. I cannot go behind that settlement.
61 Mr Waddell submitted that the claim by Jelbro was ultimately to the benefit of the plaintiff, and therefore, must constitute part of the plaintiff's inheritance from the estate of Leslie under Leslie's last will. However, I think that suffers from two serious flaws. Firstly, the debt was owed to a company not to the plaintiff. Secondly, the plaintiff said those monies are held in trust for his children. It is unclear to me whether he has a direct and unassailable entitlement to those monies. It would appear from what I can gather from the corporate and trust structure that the plaintiff's children and the plaintiff are beneficiaries which means that an exercise of the discretion by the trustee might not favour the plaintiff over and above his children. The only conclusion I can reach is that the plaintiff is a beneficiary and if the trustee exercises the discretion under the trust reasonably that he will be entitled to something, but not necessarily all of that sum.
62 Mr Isles also submitted that Marie’s personal jewellery valued at $121,265 should be added back into the estate even though it has been distributed to the beneficiaries under Marie’s will. Mr Failla deposed to the fact that the defendant has distributed the personal jewellery in accordance with Marie’s will. I do not know how I can notionally add the value of the jewellery back into the estate. If, contrary to what Mr Failla has deposed to, that the distribution occurred with the assent of the plaintiff, then some steps could have been taken to bring a proceeding against the defendant to reconstitute the estate or to make good its loss.
63 Mr Isles informed me that the plaintiff's costs are $85,000 and the defendant's costs are $80,000, totalling $165,000. For present purposes I will assume that those costs are to be borne by Marie's estate. The estate stands at $654,924.50. Less costs brings it down to $489,924.50.
The Legal Principles
64 Section 91(4) of the Act requires me to undertake a three stage approach in determining this proceeding. Firstly, I am to determine whether Marie had a responsibility to make provision for the proper maintenance and support of the plaintiff. Secondly, whether the distribution of Marie's estate makes adequate provision for the proper maintenance and support of the plaintiff. Thirdly, I am to determine the amount of the provision, if any, that should be made.[1]
[1]That approach was applied by Robson J in Boyd v State Trustees Ltd [2008] VSC 18 at paragraphs 44-49, and by Vickery J in Robertson v Koska [2010] VSC 134 at paragraph 77
65 In undertaking that three stage approach I must have regard to the considerations found in paragraphs (e) to (p) of subsection (4). In the process of answering each of the questions raised by paragraphs (e) to (p) I must apply the test or standard whether and if so what provision Marie as a wise and just testatrix would have thought it her moral duty to make in the interest of the plaintiff.[2] However, I must be constrained by the undoubted freedom which Marie had to dispose of her estate as she wished, a freedom described in the authorities as the freedom testation.[3]
[2]Blair v Blair [2004] 10 VR 69 per Nettle JA at 84
[3]Grey v Harrison [1997] 2 VR 359 at 363
66 One of the central questions agitated in this proceeding is whether a responsibility, as referred to in section 94(1) of the Act, was owed by Marie to the plaintiff.
67 Mr Isles referred me to McKenzie v Topp [4] in which Nettle J (as he was then) considered a claim by an adult child against a stepmother. He said:
“I turn therefore to the significance of the plaintiff’s father’s estate. Counsel for the plaintiff submitted that because the plaintiff’s father left all of his estate to the deceased there arose a moral obligation or responsibility upon the deceased to continue the arrangements set in place in her latter years whereby the plaintiff was provided with accommodation. The argument was that where a man who has children from an earlier marriage leaves to his second wife the entirety of his estate, and thereby deprives the children of his first marriage of the provision which they might otherwise have expected, it falls to the second wife as a matter of moral responsibility to make adequate testamentary provision for those children. More specifically, it was said, because it is often the case that a husband cannot know with certainty the extent of the support that his widow will require, and in those circumstances it may be that anything less than the entire estate would be inadequate provision for the widow’s proper maintenance and support, the children of the first marriage must forgo the provision which they might otherwise have received in order that their stepmother receive adequate provision. But if then later when the stepmother dies there is sufficient in her estate to make good some or all of the provision of which the stepchildren were earlier deprived, it is her responsibility to make it good.
The proposition is novel. It is only recently that the legislation was amended to allow stepchildren to make claims under Pt IV and so far nothing of this kind has been considered in any of the cases. There are a number of cases in New South Wales that have dealt with the entitlements of stepchildren, but they have been concerned with questions of whether stepchildren were sufficiently accepted as part of the testator’s family to have a claim upon his bounty. In Henderson v Rowden. Beach J dealt with a claim by a stepson for provision out of the estate of his stepmother, but in that case there was no evidence that the plaintiff’s father made any financial contribution to the purchase of the property. Nor is there anything analogous in the decided cases to serve as much guidance. The question only arises because of the way in which the class of possible plaintiffs is now defined in Pt IV: in terms of people to whom the testatrix had responsibility to make provision. It does not arise under other States’ legislation in which the class of plaintiffs is exhaustively defined in terms of relationships.
Be that as it may, however, it appears to me that the proposition should be accepted, up to a point. For just as community attitudes are the touchstone of adequate provision, so too are they the criterion of responsibility to provide. Other things being equal, right thinking members of society are likely to accept that the needs of the widow of a second marriage should rank in priority ahead of the claims of the children of a first marriage; although of course it is always a question of fact. But equally, upon the death of the widow, and as it were in the event of a surplus, most would surely say that the children of the first marriage should rank for their fair share. For once the widow is gone, and therefore no longer in need of provision, her needs no longer warrant that the children rank behind her or thus her chosen successors."[5]
[4][2004] VSC 90
[5]paragraphs 56-58
68 Mr Waddell submitted that I should not apply the reasoning of Nettle J. He submitted that I should apply the reasoning in Henderson v Rowden [6] in which Beach J concluded that the stepmother in the case before him owed no responsibility to make provision for the maintenance and support of her stepson. However, Beach J dealt with a claim where the father of the stepson was found not to have made any financial contribution to the purchase of the property which was the subject of the claim. It is entirely understandable, therefore, why Beach J dismissed the claim.
[6][2001] VSC 267
69 The reasoning of Nettle J has been followed in a number of subsequent decisions of the Supreme Court - James v Day,[7] and Keets v Marks.[8]
[7][2004] VSC 290
[8][2005] VSC 172
70 In Petersen v Micevski [9] Hansen J considered the position of a father of four adopted daughters who made a gift of the proceeds of sale of his house to one of them. She used the proceeds of sale to buy land and build a home in which she and her father lived until he died. The daughter died shortly thereafter. She left the property to one of her sisters. The other two sisters claimed against the estate. Hansen J distinguished the reasoning of Nettle J and its application in James v Day and Keets v Marks observing:
“It is to be noted that in the present case, unlike McKenzie, James and Keets, the property was given to a child and by gift inter vivos, rather than by will to a spouse who was a step-parent of the plaintiff child. Further, the consideration of the children of the first marriage “standing aside” is not present, as the gift inter vivos was not amenable to being affected under Pt IV and there is nothing in the facts that indicates a basis otherwise for setting aside the transaction. Finally, it is to be noted that even if the limited principle stated by Nettle J applied, the result is that the amount left by the father to the widow “may” be relevant to the question of whether the stepmother was responsible to provide for the children. As his Honour made clear, it was a factor to be considered along with facts pertaining to the relationship between the plaintiff and the testatrix and whether the plaintiff had a need for provision. In the particular circumstances Nettle J concluded that the plaintiff had established both that he had given the testatrix assistance worthy of recognition and that he had a need for maintenance and support.
Counsel for the plaintiffs submitted that the principle in McKenzie may be recast and, as recast, applied in the present case. It was to be recast as follows: Where a substantial part of a deceased estate has been derived from a person who in the ordinary course of events would have made provision therefrom for family members who, but for some intervening event, would have been persons for whom the person being the source of funds would have a responsibility to provide, then the recipient of those funds will be found to have an obligation or responsibility to similarly provide for those family members. Counsel submitted that the passing by Jack to Amanda of all of his property was of the same character as the provision by will of a remarried man for his second wife. There was thus provided a sound basis on which to hold that Amanda’s receipt of Jack’s property carried a moral obligation to provide for those for whom Jack would have had responsibility to provide.
A matter to be noted about counsel’s recast formulation is that the consequence of a responsibility to make provision follows automatically on the establishment of the factual premises. That was not the approach of Nettle J, nor could it be, bearing in mind the factual nature of the inquiry under s 91.[10]
[9][2007] VSC 280
[10]paragraphs 135-137. In Robertson v Koska [2010] VSC 134 applied the reason of Hansen J in Petersen v Micevski
71 I propose to apply the reasoning of Nettle J, cognisant of the cautionary note regarding the extent of its application which resonates in the reasoning of Hansen J in Petersen v Micevski .
Marie's Will
72 Marie made a will on 14 March 1977 in which she made two specific bequests; she left her estate on trust for the benefit of her brother, Alan Hunt, and upon his death or failure to survive her, upon trust for Leslie, and upon the termination of the trusts to pay the residue to the plaintiff.
73 Leslie suffered a heart attack at the offices of Pennant which resulted in his death on 11 May 1993 at the age of 80 years. The circumstances of his death led to a dramatic fall out between Marie and the plaintiff. The plaintiff understood that Marie blamed him for the death of Leslie. The defendant and Mrs Wilding said that Marie told them that she blamed the plaintiff for the death of Leslie, and they each said that Marie spoke poorly about the plaintiff clearly evidencing seeing a dislike for him. Up until the death of Leslie the relationship between the plaintiff and Marie was close.
74 The reasons for the dramatic fallout are unclear. I infer that the fact that Leslie was working for Pennant at the age of 80 years occurred because of a necessity for Leslie to contribute to the survival of Pennant and to draw an income for himself and for Marie. I infer, as well, that Marie considered that Pennant's demise was rather more the fault of the plaintiff.
75 The dramatic fallout was never resolved. Neither the plaintiff nor Marie had anything to do with one another from the date when Leslie died. Marie made another will which excluded the plaintiff entirely.
76 I accept the plaintiff's evidence that he knew Marie from when he was very young and had a close relationship with her throughout his life until the dramatic fallout occurred. I accept his evidence that he, his wife and their children interacted with Leslie and Marie without any evidence of discord, and indeed, it would appear from the plaintiff's evidence that the plaintiff and his family and Leslie and Marie behaved toward one another in a very family-oriented manner.
77 I accept the plaintiff's evidence that one source of funds upon which Leslie and Marie drew was the income produced by Pennant. I accept his evidence that all manner of expenses were paid from the income of Pennant for the benefit of Leslie and Marie. For example, payment of their Diners club card; payment of a cab charge account; payment of the first mortgage on the apartment at Surfers Paradise; payment of local and overseas travel, and payment of Telecom and Optus accounts. It would appear that Pennant paid for each of those accounts and benefits up until the time of the dramatic fallout.
78 I accept the plaintiff's evidence that initially Pennant, and its evolution into what it became, was initially a business which he set up with two others, and was then effectively run by he and Leslie until Leslie died. Thereafter, the plaintiff continued to run that business on his own account through a myriad of corporate and trust entities.
79 If the corporate veil is pulled aside then what I perceive from the evidence is a business which the plaintiff and Leslie conducted which has been described as a last resort lending service where the interest rate was high, but so was the risk of default and loss of the capital investment. It would appear that they treated the capital and income of Pennant as their own and drew upon it to meet their expenses. It cannot be denied that the income earned by Pennant was contributed to substantially by the plaintiff through his efforts.
80 The fortunes of Pennant took a dramatic downturn at around the time of the stock market crash in 1987, and although the evidence on this matter was rather lean the impression I was left with was that it took some time for Pennant to be revived to some extent. There were losses of significant magnitude. I have summarised the nature and extent of those losses in paragraph 47 above. Just as the plaintiff effectively took over the running of the business of Pennant, he also absorbed its losses. He paid off some of the debts from the capital and assets of Pennant, and obtained a personal borrowing in order to make good those debts in the absence of sufficient funds in Pennant to achieve that end.
81 I accept the plaintiff's evidence that it was Marie who caused the dramatic fallout. I accept his evidence that had she not reacted to him, in the manner which is so apparent, that he would have continued having a relationship with her consistent with what it had been like before hand. To the extent that there was a suggestion of some fault on the plaintiff’s part for the death of his father and the failing fortunes of Pennant, I find that there is no substance to such a suggestion.
82 Furthermore, the suggestion in the evidence of the defendant and Mrs Wilding that Marie had a low opinion of the plaintiff based upon the plaintiff's conduct likewise has no substance. That is, there is no evidence to support the conclusion that the plaintiff was guilty of any misconduct in relation to Leslie or Marie.
83 The exercise which I have endeavoured to undertake in unpicking the corporate and trust entities in order to determine whether the plaintiff inherited assets of any substance has been a difficult one. I am not satisfied that at the time when Leslie died that the corporate or trust entities had any significant worth. It would appear that after the stock market crash in 1987 Pennant became indebted to a number of its clients. It would also appear that it did not recover from the degree of the debt it incurred.
84 I accept the evidence of the plaintiff that the assets in trust amount to $110,000 which he intends to ensure is held on trust for his three children, and otherwise he has invested $140,000 of his own monies which presently gross him about $50,000 per annum in high interest, high risk investments in the market of loans of last resort.
85 I will now turn to the considerations found in paragraphs (e) to (p) of subsection (4):
(e) - any family or other relationship between the deceased person and the applicant, including the nature of the relationship and, where relevant, the length of the relationship;
Marie had known the plaintiff since he was a little boy. Her relationship with him was close until Leslie died. She was, in effect, his stepmother. Consistent with my findings thus far it was Marie who caused the dramatic fallout which essentially ended her relationship with the plaintiff following the death of Leslie.
(f) - any obligations or responsibilities of the deceased person to the applicant, any other applicant and the beneficiaries of the estate;
The marriage between Marie and Leslie did not produce any children. The plaintiff was, in effect, their only child. Certainly Leslie owed the plaintiff a responsibility, and even given the cautionary note of Nettle JA in McKenzie v Topp it seems to me that it is fair that the plaintiff should receive what he would have expected to receive from Leslie once Marie died.
(g) - the size and nature of the estate of the deceased person and any charges and liabilities to which the estate is subject;
The size of the estate was described by Mr Isles and Mr Waddell as amounting to a modest estate. It seemed to me that the premise upon which that submission was made was by looking at the cost of modest housing at today's prices. However, it is rather more moderate in its size because it is capable of being used to buy a flat and to provide a sum for contingencies. There are no charges and liabilities to which the estate is subject which have not already been met.
(h) - the financial resources (including earning capacity) and the financial needs of the applicant, of any other applicant and of any beneficiary of the estate at the time of the hearing and for the foreseeable future;
86 The plaintiff's financial resources are modest. All he has is $140,000 and perhaps some call upon the $110,000 in a trust. Whilst his income is $50,000 gross per annum it is based upon high risk investments. The prospect that he will lose money is high, and if that were to occur as it has in the past, then he will have nothing. He is in need of a place to live and a sum for contingencies. There are no other claimant’s whose claims have not yet been met, and it is important to note that the defendant has distributed the chattels as directed by Marie in her will, so many of those she intended to benefit have indeed benefited.
(i) - any physical, mental or intellectual disability of any applicant or any beneficiary of the estate;
Although, the plaintiff gave evidence that he suffers from hypertension, arthritis, depression and suffers from a bipolar disorder there was no evidence adduced to confirm that he suffers from those disorders nor any evidence disclosing the gravity of those disorders. I found the plaintiff to be truthful witness. Whilst I do not doubt he suffers from those conditions, which must impair his mental and physical capacities to some degree, I am not satisfied that the evidence demonstrates that he is impaired to any significant degree.
(j) - the age of the applicant;
The plaintiff is 61 years of age.
(k) - any contribution (not for adequate consideration) of the applicant to building up the estate or to the welfare of the deceased or the family of the deceased;
I find that the plaintiff made significant contributions to the building up of the estate of Marie. Firstly, he undertook the renovations to Burwood Road foregoing his builders margin. Secondly, he initiated the business of Pennant with two others. It was some time later that Leslie bought into the business. The efforts of both the plaintiff and Leslie produce the income through the business of Pennant which were drawn upon by Leslie and Marie as their source of income and pay for their expenses. Marie also benefited by having finance available to her, and receiving a lump sum from the sale of the apartment in surfers paradise. All of the foregoing, as it seems to me, were derived from the business of Pennant, in other words, the business carried on by the plaintiff with Leslie, and after Leslie died.
(l) - any benefits previously given by the deceased person to any applicant or to any beneficiary;
The evidence does not disclose that the plaintiff was the recipient of any benefits from Marie.
(m) - whether the applicant was being maintained by the deceased person before that person's death either wholly or partly and, where the Court considers it relevant, the extent to which and the basis upon which the deceased had assumed that responsibility;
Marie was being maintained by the plaintiff to the extent referred to in subparagraph (k) above.
(n) - the liability of any other person to maintain the applicant;
This consideration does not apply.
(o) - the character and conduct of the applicant or any other person;
Although there was some evidence from the defendant and Mrs Wilding relevant to Marie’s view of the plaintiff I do not accept that he was a person who was guilty of any misconduct in relation to her. It seems to me on the evidence that he did not behave in a manner which could possibly disentitle him.
(p) - any other matter that Court considers relevant
There does not seem to me to be any other matter which I need consider which I have not already dealt with in the body of these reasons.
Disposition
87 On the basis of the foregoing findings and consideration of paragraphs (e) to (p) subsection 4 the conclusion I have reached on the first question is that Marie had a responsibility to make provision for the proper maintenance and support of the plaintiff.
88 Secondly, that Marie did not make any provision for proper maintenance and support of the plaintiff, and indeed, excluded him altogether by her second will.
89 Thirdly, I find that the plaintiff is in need, and indeed, is in a parlous financial state. I now turn to the determination of the amount of the provision that should be made.
90 The net estate, after reducing it by the costs incurred by the parties in this proceeding, amounts to $489,924.50. I have had regard to the following:
· proper maintenance and support must be more than provision which keeps "the wolf from the door", and should be sufficient to free the plaintiff's mind from the reasonable fear of insufficiency as he grows older and his health and bodily strength gradually fail.[11]
· I should consider the plaintiff’s station in life and the expectations to which that has given rise, and how the plaintiff might reasonably expect to live in the future.[12]
[11]Worladge v Doddridge (1957) 97 CLR 1 at 12
[12]Vigolo v Bostin (2005) 191 at 228
91 The plaintiff was raised in a middle-class family environment. He was educated at a private school. He apparently obtained a tertiary qualification before entering into what seems to me to be a sophisticated and complex commercial field of activity. His expectation was no doubt to live in some comfort, and I do not consider that to be, by any stretch of the imagination, an unreasonable expectation.
92 Although, I have disagreed to some minor degree with the description given by Mr Isles and Mr Waddell that the estate is modest, it seems to me that for the plaintiff to put a roof over his head in modest and basic accommodation and to have something to meet contingencies in the future will require the whole of the net estate as I have estimated it to be standing at $489,924.50. A sum of that order will permit him to achieve the modest results which I have just referred to.
Orders
93 I order that for provision be made for the proper maintenance and support of the plaintiff in the sum of $489,924.50 .
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