IMO the Will and Estate of Owen Charles Brown, deceased
[2016] VSC 258
•20 May 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2014 06637
IN THE MATTER of the Will and Estate of OWEN CHARLES BROWN
BETWEEN:
| GAIL ROBIN HAWKING | Plaintiff |
| v | |
| CAROLYN MAREE VENTURA AND KAYLEEN MARY LIVINGSTONE (who are sued in their capacity as executors of the Will and Estate of Owen Charles Brown, deceased) | Defendants |
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JUDGE: | Ierodiaconou AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 20 and 21 April 2016 |
DATE OF JUDGMENT: | 20 May 2016 |
CASE MAY BE CITED AS: | IMO the Will and Estate of Owen Charles Brown, deceased |
MEDIUM NEUTRAL CITATION: | [2016] VSC 258 |
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SUCCESSION LAW – Family Provision - Testator’s Family Maintenance – Application by domestic partner of deceased – Whether life interest in property and income from capital sum adequate provision – Where no evidence of competing claims – Failure to make adequate provision – Administration and Probate Act 1958 (Vic) s 91(1),(2),(3) and(4).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Wells | Hicks Oakley Chessell Williams |
| For the Defendant | Mr A Flower, solicitor | Flower Lawyers |
HER HONOUR:
Introduction
The plaintiff claims that she is a person to whom the deceased, Mr Owen Brown, had a responsibility to make adequate provision for her proper maintenance and support. Her claim is made pursuant to Part IV of the Administration and Probate Act 1958. She was the partner of Mr Brown. The defendants are the executors of the Will of Mr Brown and also his adult daughters. Their mother is the wife of Mr Brown and was not part of these proceedings.
The defendants concede that Mr Brown had a responsibility to make adequate provision for the plaintiff’s proper maintenance and support. It is agreed that she was his domestic partner at the time of his death. Accordingly, the only questions for determination in this proceeding are as follows:
(a) does the Will of Mr Brown make adequate provision for the plaintiff?
(b) if not, what family provision order should be made applying the factors set out in s 91 of the Administration and Probate Act 1958?
At the time of the hearing of this proceeding, Mr Brown’s estate was valued at approximately $1.7 million.[1]
[1]Affidavit of Carolyn Ventura sworn 14 April 2016, Affidavit in In the Matter of the Estate of Owen Charles Brown, deceased, SCI 201406637, 20 and 21 April 2016, (‘the second Ventura affidavit’). Ms Ventura deposes that there are assets of $1,756,956.64 and liabilities (currently quantifiable) of $21,875.00 as at the date of the affidavit.
The Will of Mr Brown left the plaintiff with a life interest in the property in which they resided together situated at [address] Cowes (‘the property’) and income from an investment of $500,000.
The plaintiff seeks provision from the estate to the extent of an absolute interest in the property and $500,000 from Mr Brown’s estate. Alternatively, the plaintiff seeks $700,000.
Summary
The Court does not consider that the Will makes adequate provision for the proper maintenance and support of the plaintiff. It will make orders to effect the ownership of the property being transferred to the plaintiff, and an order that the plaintiff be given $500,000 from the estate.
Background
The background facts were largely agreed between the parties.[2] They are as follows:
[2]They are evident from the agreed facts by consent in the pre-trial directions dated 3 August 2015, the affidavits of each party, and their oral evidence.
14 February 1959
Mr Brown marries his wife, Margaret. Together, they go on to have seven children.
1997
The plaintiff commences her role at the Victorian Automobile Chamber of Commerce (‘VACC’) and meets Mr Brown, who is chairman of the VACC Board.
1999
The plaintiff and Mr Brown commence their relationship.
November 1999
Mr Brown first leaves his wife. He returns to her and leaves her multiple times during 1999 and 2000.
2000
The plaintiff leaves the VACC because of her relationship with Mr Brown.
2001
Mr Brown leaves his wife and begins an exclusive relationship with the plaintiff.
March 2004
The plaintiff has a stroke and is off work for three months.
May 2004
Mr Brown has a heart attack. The plaintiff moves into his apartment and they commence cohabitation.
June 2004
Mr Brown and plaintiff begin looking for an apartment together. They subsequently find an apartment and move in together.
2005
The plaintiff leaves her permanent position for contract work so that she and Mr Brown can travel together.
2006
The plaintiff ceases her career so she can spend time with Mr Brown.
2006
Mr Brown pays off the plaintiff’s debts. She starts a part‑time counselling practice.
October 2007
Mr Brown purchases the property from his brother. Mr Brown retires. The plaintiff and Mr Brown move to reside in the property.
2008
Mr Brown is diagnosed with idiopathic pulmonary fibrosis. He is given a life expectancy of three to five years.
2008 (approx.)
The first Will of Mr Brown is made, giving the plaintiff an income of $300 per week.
March 2012
Mr Brown purchases [address of property], Cowes (‘the rental property’) as a rental property.
2012
The health of Mr Brown deteriorates. He begins a 12 month clinical trial.
2012/2013
Mr Brown is hospitalised.
14 January 2014
Mr Brown makes his Will (‘the Will’).[3]
Early 2014
Mr Brown returns home and the plaintiff is his full-time carer.
May 2014
Mr Brown and the plaintiff fly to Darwin for a holiday.
8 August 2014
Mr Brown dies in Darwin.
10 November 2014
Probate is granted to the defendants.
[3]Exhibit P5 is a copy of the Will.
The Will of Mr Brown appoints two of his daughters, who are the defendants in this proceeding, to be the executors and trustees of his Will and estate. In addition to the interests left to the plaintiff, the Will establishes seven testamentary trusts, the primary beneficiaries of which are Mr Brown’s seven adult children. The Will includes the following clauses:
5. Executors to Hold on Trust
My executors will hold the rest of my estate on trust and, subject to the powers set out in this Will, after the selling, calling in or converting into money any part of my estate and the payment of all or any debts and testamentary expenses associated with my death or the administration of my estate, will hold and dispose of the balance of my estate as provided hereafter.
…
8. Creation of Life Interest with my Partner as Primary Life Tenant
8.1My Executors shall hold my principal place of residence on trust and if GAIL ROBIN HAWKING (“my Partner”) survives me, to carry out the directions in this part of this will:
a)Subject to the succeeding provisions of my Will my executors must allow my Partner to live in the residence at my death as long as she wishes, if she:
i)pays the rates, taxes and other outgoings in respect of the residence;
ii)pays the premiums on any insurance policies taken out by my executors on the residence; and
iii)keeps it in repair to the reasonable satisfaction of my executors;
b)My executors must give the household chattels in the residence to my Partner;
“household chattels” means all furniture, curtains, drapes, carpets, linen, china, glassware, ornaments, domestic appliances and utensils, garden appliances, utensils and effects and other chattels of ordinary household use or decoration, which, immediately before my death, were owned by me and includes any original painting, clothing, jewellery or other chattel of a personal nature which was so owned by me or in which I held such an interest.
8.2It is my wish that my executors use their powers to ensure that my Partner is provided with comfortable and appropriate accommodation out of the assets which I have set aside for that purpose. In doing so my executors must, as far as is practical, consult with my Partner and, so far as is consistent with the general interest of the trust, give effect to her wishes.
8.3At the written request of my Partner or her Power of Attorney my executors must sell the residence.
8.4If in the opinion of my executors my Partner is incapable of making a request of the kind referred to in clause 8.3 above my executors may sell of [sic] the residence.
8.5If in the opinion of my executors my Partner has ceased to reside permanently in the residence, or to comply with the conditions of her right of occupation, my executors may give her notice in writing:
a)specifying that she has ceased to reside permanently in the residence or specifying some precise breach of a condition of occupation;
b)requesting her to rectify the matter specified; and
c)setting out their powers under this will.
8.6If my Partner has failed to comply with that notice for six months, my executors may, without the consent of my Partner sell all of my equity in the residence and the sale proceeds shall form part of my residual estate with the balance of the sale of the residence being paid to my executors and form part of my residual estate and be dealt with in accordance with the provisions of my estate;
8.7If my Partner requests my executors so to do they shall in concert with her sell the residence and my executors may do all or any of the following:
a)use all of the proceeds to purchase another residence to which the provisions of my Will as to the residence shall also apply as if this other residence were the residence;
b)register any new residence in the name or names of my executors or any of them and my Partner in the same proportions as we are currently registered in my current principal place of residence;
c)invest all of the proceeds and pay all of the income or profit to my Partner;
d)invest all of the proceeds and pay all of the income or profit to provide accommodation for my Partner;
e)determine in their absolute discretion (in the event of my executors disposing of or being deemed to have disposed of an asset) what part or parts of the capital or income will be resorted to in payment of any income tax liability flowing from the disposal or deemed disposal.
8.8In addition to the powers given to them in my Will my executors may exercise the powers given to them by law and the rest of this will.
8.9In the event of the sale of my principal place of residence in accordance with the provisions of this clause 8 of this my will and there are any net sale proceeds remaining from such sale these shall be paid to and form part of the capital of the Capital Protective Trust for the benefit of my Partner as provided in clause 9 hereof.
9. Creation of Capital Protective Trust for my Partner
9.1If GAIL ROBIN HAWKING of [address] (‘my Partner’) survives me by thirty (30) days my executors shall hold the fund on trust in accordance with this clause.
9.2In this clause, ‘the fund’ shall consist of Five Hundred Thousand Dollars ($500,000.00).
9.3My executors shall invest the capital of the fund for the purpose of generating an annual income stream exclusively for my Partner during her life time.
9.4The income stream to be paid to my Partner as referred to in Clause 9.3 of this my Will shall be paid to her on a quarterly basis in arrears.
9.5My executors shall not in any circumstances whatsoever pay any capital to my Partner from the fund during her lifetime.
9.6During the lifetime of my wife my executors shall each financial year apply all of the net income, allocated net income to my Partner exclusively.
9.7I require that the interests of my Partner are, for the purposes of the fund created by this clause only, to take precedence over any interest or expectancy as to net income or capital of any other beneficiaries of this Will.
9.8In administering the fund, my executors:
a)shall consider my Partner to be a nominated primary beneficiary only for the purposes of the adjustment provisions in Part B of this Will;
b)shall not consider my Partner to be a primary beneficiary for any other provisions of this Will;
c)shall have regard to any entitlements that my Partner may otherwise have to any means tested pension or other entitlements that may be available at the time;
9.9On the death of my Partner, my executors shall hold the whole of the balance of the net income and capital of the fund on trust in accordance with the remaining clauses of Part A.[4]
[4]The Will consists of Part A and Part B. Part A of the Will is titled ‘General Provisions’ and contains clauses 1-12. These provisions include Mr Brown’s wishes as to how his estate should be distributed. Part B is titled ‘Administrative Provisions’ and contains clauses 13-22.
9.10For the purposes of the preceding subclause only, the words “survive me” and “my death” wherever they appear in those remaining clauses are to be read for the purposes of that subclause as referring to “survive” and “my Partner’s death”.
…
10. Creation of Beneficiary Testamentary Trusts
My executors will divide the balance of my estate into seven or more parts, sections or portions and will hold on trust and dispose of such parts, sections or portions as follows:
10.1Each of my children who survive me by thirty (30) days will be the primary beneficiary of a trust for one such part;
10.2If any of my children does not survive to become the primary beneficiary of a trust under this Will, but leave children who:
a)survive me by thirty (30) days or are born after my death; and
b)attain the age of twenty five (25) years;
(“the survivors”) then the part that otherwise would have been held on trust will be divided into equal sections and such sections will be held on trust with each of the survivors being the primary beneficiary of a trust for one such section; [sic]
…
15.General Powers of Executors and Trustees
My executors and the trustees of any trusts established by the terms of my Will:
15.1 Will have all the powers authorities and discretions of a natural person, including but not limited to the power to invest and change investments freely as if they were beneficially entitled to them, together with the specific powers set out in the succeeding clauses; and
15.2 In their exercise of their general and specific powers, will not be restricted or obligated by provisions relating to trustees contained in any legislation of the Commonwealth of Australia or any of its States or Territories;
and the specific powers set out in the succeeding clauses will be in addition to, and will not limit the generality of, the general powers set out in this clause.
[underline added]
Submissions
The plaintiff relies on s 91 of the Administration and Probate Act 1958 (‘the Act’). The plaintiff and the defendants are largely in agreement as to the applicable legal principles, which are discussed further below.
The plaintiff’s submissions may be summarised as follows:
(a) The claim of a second spouse/widow will take priority over the claim of children from the first marriage. During the hearing, both parties referred to the plaintiff as a widow, as well as a domestic partner.
(b) The duty of Mr Brown was to provide the plaintiff with security in her home, to ensure she has an income sufficient to permit her to live in the style to which she was accustomed, and to provide her with a nest egg to enable her to meet any unforeseen contingencies.
(c) The Will does not authorise the trustees to pay a nursing home bond in the event that the plaintiff needs to move into a nursing home. This is because payment of such a bond is not a capital investment and capital must be preserved.
(d) Ownership of the property would provide the plaintiff with the independence and autonomy to provide for her future capacity to meet the uncertainties and challenges of life.
(e) If the plaintiff is not awarded the fee simple in the property, then it is open to the Court to award her an extended portable life interest in the property – a ‘Crisp order’.
(f) Where the size of the estate permits, and there is no serious prejudice to the rights of other beneficiaries, the Court should order provision beyond immediate needs and should consider contingencies of life and provide a nest egg to guard against unforeseen events. The plaintiff should have a capital sum in the amount of $500,000 if she is given the fee simple in the property, or alternatively, $700,000 if she is not. This capital sum is necessary to give her a nest egg on which to live, and to live in the lifestyle to which she was accustomed with Mr Brown.
(g) There is no evidence by the defendants or any other beneficiaries of the estate as to their financial position. Accordingly, the Court can assume that the beneficiaries have adequate resources upon which to live.
(h) Quantum is a matter in the discretion of the trial judge.
The defendants’ submissions may be summarised as follows.
(a) The Will adequately provides for the plaintiff. It gives her a life interest in the property and an income from a fund invested in the amount of $500,000.
(b) Mr Brown has structured his Will in the way he has due to his desire not to have his estate ‘migrate’ to the plaintiff’s ultimate beneficiaries. The structure of the Will points to his clear intention in this regard.
(c) The Will provides a balance between Mr Brown’s obligations to his first family and the plaintiff.
(d) The estate must be assessed in light of the numerous residual beneficiaries. That is, Mr Brown’s seven adult children.
(e) The claim of the plaintiff amounts to 60% of the estate and, in the context of the seven residual beneficiaries, leaves little for them.
(f) The residual beneficiaries contributed to the estate by working in the Brown’s Motors business, being a significant contribution totalling over 50 years ‘combined service’. Being a family, these employment relationships went far beyond the ordinary paid master/servant relationship. The children were frequently used as sounding boards for business decisions out of hours and on the trip into work.
(g) The relationship between the plaintiff and Mr Brown commenced at the end of Mr Brown’s career, when he was on the verge of retirement. He had already made most of his fortune in the operation of the Brown’s Motors business.
(h) The plaintiff made little contribution to Mr Brown’s estate. Indeed, she brought significant debt, which Mr Brown paid out. It is conceded that the plaintiff made contribution to the welfare of Mr Brown up until the time of his death and that this is a significant factor to be taken into account.
(i) The plaintiff received significant benefits from Mr Brown by way of gifts of jewellery, holidays and a motor vehicle. In addition to having her loans paid out she received a fortnightly allowance.
(j) The plaintiff is a young widow aged 62 years and has considerable earning capacity. She has worked as an executive secretary, probate clerk and runs her own business as a personal counsellor. She is in receipt of a pension and will be in receipt of the old age pension in due course. She also has superannuation.
(k) The relationship between Mr Brown and the plaintiff was approximately 13 years. This can be contrasted to the lengthy marriages in cases such Poole v Barrow[5] (32 years) and Downing v Downing[6] (30 years).
(l) The life interest granted in the property is completely portable.
(m)From a practical perspective the claim made by the plaintiff has the same effect as the current Will, save that she will be able to bequeath the property and what is left of the cash on her death.
[5]Poole v Barrow [2014] VSC 576 (24 November 2014) (‘Poole v Barrow’).
[6]Downing v Downing [2003] VSC 28 (24 February 2003) (‘Downing v Downing’).
Applicable law
The parties were in agreement that at the relevant time, namely at the time of the death of Mr Brown, s 91 of the Act applied. Although s 91 of the Act has subsequently been amended, at the relevant time it provided as follows:
Power of the Court to make maintenance order
(1)Despite anything in this Act to the contrary, the Court may order that provision be made out of the estate of a deceased person for the proper maintenance and support of a person for whom the deceased had responsibility to make provision.
(2)The Court must not make an order under subsection (1) in favour of a person unless –
(a)that person has applied for the order; or
(b)another person has applied for the order on behalf of that person.
(3)The Court must not make an order under subsection (1) in favour of a person unless the Court is of the opinion that the distribution of the estate of the deceased person effected by –
(a)his or her will (if any); or
(b)the operation of the provisions of Part I, Division 6; or
(c)both the will and the operation of the provisions –
does not make adequate provision for the proper maintenance and support of the person.
(4)The Court in determining –
(a)whether or not the deceased had responsibility to make provision for a person; and
(b)whether or not the distribution of the estate of the deceased person as effected by –
(i)the deceased’s will; or
(ii)the operation of the provisions of Part I, Division 6; or
(iii)both the will and the operation of the provisions –
makes adequate provision for the proper maintenance and support of the person; and
(c)the amount of provision (if any) which the Court may order for the person; and
(d)any other matter related to an application for an order under subsection (1) –
must have regard to –
(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;
(f)any obligations or responsibilities of the deceased person to the applicant, any other applicant and the beneficiaries of the estate;
(g)the size and nature of the estate of the deceased person and any charges and liabilities to which the estate is subject;
(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;
(i)any physical, mental or intellectual disability of any applicant or any beneficiary of the estate;
(j)the age of the applicant;
(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;
(l)any benefits previously given by the deceased person to any applicant or to any beneficiary;
(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;
(n)the liability of any other person to maintain the applicant;
(o)the character and conduct of the applicant or any other person;
(p)any other matter the Court considers relevant.
The following principles are relevant to this proceeding:
(a) The Court places itself in the position of the testator. The applicable test is of a wise and just testator, rather than a fond and foolish one.[7] The wise and just testator is to be judged according to ‘current community standards’.[8]
[7]Bosch v Perpetual Trustee Company [1938] AC 463, 478.
[8]McKenzie v Topp [2004] VSC 90 (30 March 2004) [58] (‘McKenzie v Topp’); Poole v Barrow, above n5, [16] and [17].
(b) The Court must give due consideration to the intention of the executor as expressed in the Will. It is not for the Court to rewrite the Will ‘by reference to abstract considerations of fairness’.[9] As noted by the High Court:
[9]Downing v Downing, above n6, [42], citing Worladge v Doddridge (1957) 97 CLR 1, 20.
All authorities agree that it was never meant that the Court should re-write the will of a testator. Nor was it ever intended that the freedom of testamentary disposition should be so encroached upon that a testator’s decisions expressed in his will have only a prima facie effect, the real dispositive power being vested in the Court.[10]
[10]Pontifical Society for the Propagation of the Faith and St Charles Seminary, Perth v Scales (1962) 107 CLR 9, 19.
(c) A widow has a higher moral claim on the estate than others, in the absence of special circumstances:
It is, I believe generally recognised that a widow has a higher moral claim on the estate than anyone else. In this case, that view is all the more potent because in my opinion there was and is no-one else with any moral claim on the deceased testator’s bounty.[11]
[11]King v White [1992] 2 VR 417, 423.
(d) Other things being equal, the claims of the widow will take priority over those of the claims of the children from the first marriage, although this is a question of fact.[12]
[12]McKenzie v Topp, above n8, [58]; Moore v Moore [2005] VSC 95 (8 April 2005) (‘Moore v Moore’); Madden v Singvongsa [2003] VSCA 62 (15 May 2003).
(e) The testator owes an obligation to his widow, in the absence of special circumstances, to ensure she may live in the style to which she was accustomed prior to his death. As stated in Luciano v Rosenblum:
It seems to me that, as a broad general rule, and in the absence of special circumstances, the duty of a testator to his widow is, to the extent to which his assets permit him to do so, to ensure that she is secure in her home, to ensure that she has an income sufficient to permit her to live in the style to which she is accustomed, and to provide her with a fund to enable her to meet any unforeseen contingencies.[13]
[13]Luciano v Rosenblum (1985) 2 NSWLR 65, 69; See also: Anslow v Journeaux [2009] VSC 250 (23 June 2009); Borebor v Keane [2013] VSC 35 (19 February 2013) [63] and [64].
(f) Residuary beneficiaries are under no burden to prove their entitlement under a will. The burden is on a plaintiff to show that the benefit she has under the will is not adequate and proper provision for her:
It must be remembered in applications such as this claim that, although the defendant advanced no competing need, it is not for defendant beneficiaries to establish a moral obligation on the part of the deceased for their provision. The defendant received provision and has no case to establish. In this case, it is for the plaintiff to establish the deceased’s moral obligations to her and the need for provision.[14]
[14]Poole v Barrow, above n5, [80].
(g) Widows are entitled to independence, self-respect and autonomy. In appropriate circumstances, provision should be made for that. As enunciated in Downing v Downing:
Concern as to the capacity of the plaintiff to maintain her or himself independently and autonomously may also bear upon the notion of what is a proper provision.[15]
[15]Downing v Downing above n6, [44] citing Richard v AXA Trustees [2000] VSC 241.
Further, as in Moore v Moore:
Counsel referred to cases where the adequacy and appropriateness of a provision for a widow of a residence and a nest egg (or a fund for contingencies) were conceded, and to judicial statements about a widow’s need for a degree of independence, self-respect and autonomy. Further reference is made to judicial statements about the difficulties and inflexibility inherent in the provision of a life estate or interest to a widow.
…
In my opinion it would not be adequate or proper provision for the plaintiff merely to grant her further provision by way of a life interest in the whole of the residue of the estate. I agree with the submissions made on her behalf that such a provision would not be sufficiently flexible and would unduly restrict her independence, having regard to her age and future needs.
I consider that further provision should be made for the plaintiff by way of an absolute entitlement to three-quarters of the residue of the estate, together with a life interest in the remaining one-quarter, as was specifically sought on her behalf.[16]
[16]Moore v Moore, above n12, [26] and [44] (citations omitted) cf; Downing v Downing, above n6, [44]; cf Richard v AXARichard v AXA Trustees [2000] VSC 241 (1 September 2000).
(h) ‘The provision of a capital asset to the plaintiff may be appropriate as part of a package of measures intended to provide accommodation, income and a nest egg’.[17]
[17]Downing v Downing, above n6, [44] citing Luciano v Rosenblum (1985) 2 NSWLR 65, 69 (citation omitted); See also: Richard and AXA Trustees Limited [2000] VSC 241 (1 September 2000).; King v White (1992) 2 VR 417; White v Barron (1980) 144 CLR 431; Shah v Perpetual Trustee Company (1981) 7 FAMLR 97.
(i) ‘Concern as to the capacity of a plaintiff to meet the vicissitudes and uncertainties of life may favour the provision of a capital asset to the plaintiff.’[18]
[18]Downing v Downing, above n5, [44] citing King v White (1992) 2 VR 417 (citation omitted); Anslow v Journeaux [2009] VSC 250.
(j) ‘The fact that the provision of a capital asset to a plaintiff may incidentally enable a plaintiff in due course to pass that asset on to children or family contrary to the deceased’s wishes is not determinative of the propriety of such a provision’.[19]
[19]Downing v Downing, above n6, [44] citing Worladge v Doddridge (1957) 97 CLR 1, 9 (citation omitted); Downing v Downing, above n6, [45] citing White v Barron (1985) 2 NSWLR 65, 69 (citation omitted).
(k) A fee simple rather than life interest will provide more flexibility and greater security.
Once it is accepted that adequate provision for her proper maintenance and advancement in life required secure accommodation for life as well as a capital sum to meet exigencies, this need is not met by giving her only a life interest in the home unit. Commonly people in the community need to move from their own home into a unit in a retirement village and then into nursing accommodation and then into total care accommodation. See Young J in Christie v Christie. That need may be met if the respondent is given the home unit absolutely. She then has a greater flexibility as well as greater security.[20]
[20]Permanent Trustee v Fraser (1995) 36 NSWLR 24, 47.
(l) In certain circumstances, the Court may find appropriate provision is provided by an extended portable life interest in a property in the form of a ‘Crisp order’:
A Crisp order is an order of the kind made by Holland J in Crisp v Byrnes Philip Trustee Company Limited (NSWSC, 18 December 1979, unreported). Generally speaking such an order gives a plaintiff an interest for life in real property or an interest in the property, with the right to it (should the need arise) for the purposes of securing, for the plaintiff’s benefit, more appropriate accommodation. In Court v Hunt (NSWSC, 14 September 1987, unreported) Young J (as he then was) said that a Crisp order was intended to provide flexibility, by way of a life estate, the terms of which could be changed to ‘cover the situation of the plaintiff moving from her own home to retirement village to nursing home to hospital’.
Thus, for example, a Crisp order may entitle a plaintiff, from time to time, to require the executor of a will to sell a home devised by a will, or otherwise owned by the estate, and to use the proceeds for purposes that may include purchasing another home for the plaintiff’s use and occupation, or providing accommodation for the plaintiff in a retirement village or similar institution, or in like accommodation providing hospitalisation and nursing care. The flexibility provided by such an order underlies the notion that a Crisp order confers a ‘portable life interest’.[21]
[21]Milillo v Konnecke [2009] NSWCA 109 (15 May 2009), [47]-[48]; see also Thompson v Thompson [2015] VSC 706 (11 December 2015), [13] and [73] for an example of a Crisp order being made in Victoria.
(m)The Court may assume beneficiaries have adequate resources if they do not provide evidence as to their financial position or other claims on the testator’s bounty:
It has been accepted over many years that, if a beneficiary says nothing as to his or her financial position or other claims on the testator’s bounty, then the court is fairly entitled to assume that the beneficiary has no special claim other than relationship and, in particular, he or she has adequate resources upon which to live.[22]
[22]Anderson v Teboneras (1990) VR 527, 535; Czapp v Cassar and Caldwell [2015] VSC 111 (27 March 2015), [8]; Borebor v Keane [2013] VSC 35 (11 February 2013), [65]; Ciric v Ciric [2015] NSWSC 313 (31 March 2015) [204] citing Sammut v Kleeman [2012] NSWSC 1030; Tobin v Ezekiel [2012] NSWSA 285 (13 September 2012) [94].
(n) Trustees are under a duty to invest trust monies in accordance with the terms of the trust instrument and law.[23]The duty extends to ensuring that capital is preserved and proper income generated.[24] This reflects the broader obligation that trustees have to preserve and protect the trust property.[25]
[23]Adamson v Reid (1880) 6 VLR 164; In the Will of Sherriff [1971] 2 NSWLR 438; Fry v Fry (1859) 27 Beav 144; 54 ER 56; Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 4, 498; see KS Jacobs, RP Meagher, and WMC Gummow, ‘Jacobs’ Law of Trust in Australia’ (Butterworths, 7th ed, 2000) (‘Jacobs’ Law of Trust in Australia’) [1712].
[24]Re Fairbairn, deceased [1967] VR 633; (1861) 3 De G.F. & J. 170; see Jacobs’ Law of Trust in Australia, above n23, 439.
[25]Re Fairbairn, deceased [1967] VR 633, 637; see Lexis Nexis, Halsbury’s Laws of Australia (as at 28 July 2015), 430 Trusts, ‘Duty to preserve and protect trust property’ [430 4155].
(o) In the context of will clauses, ‘invest’ has been defined as ‘to apply money in the purchase of some property from which profit or interest is expected and which property is purchased in order to be held for the sake of the income which it will yield’.[26] Purchase of property that does not produce income will not be considered an investment.[27] The Trustee Act 1958 provides however, that subject to the trust instrument, trustees may purchase a ‘dwelling house’.[28]
[26]Re Wragg [1919] 2 Ch 58; In the Will of Sherriff [1971] 2 NSWLR 438,442.
[27]In the Will of Sherriff [1971] 2 NSWLR 438, 442; Re Graham [2009] SASC 278 (4 September 2009), [37].
[28]Trustee Act 1958 (Vic) s 11(1).
11 Power to purchase dwelling house as residence for beneficiary
(1) Subject to the instrument creating the trust, a trustee may—
(a)invest any trust funds in the purchase of a dwelling house for a beneficiary to use as a residence; or
(b)enter into any other agreement or arrangement to secure for a beneficiary a right to use a dwelling house as a residence.
….
(5) In this section—
dwelling house includes—
(a)any building or part of a building designed, or converted or capable of being converted, for use as a residence;
and
(b)any amenities or facilities for use in connection with the use of a dwelling house.[29]
[29]Trustee Act 1958 (Vic) s 11.
(p) The ability of trustees to invest trust monies in a depreciating or non-income bearing asset is additionally limited by their duties to act prudently,[30] in the best interests of all of the beneficiaries and impartially.[31] Such duties exist in addition to the paramount duty of observing the terms of the trust,[32] and are also recognised in the Trustee Act 1958.[33]
[30]Speight v Gaunt (1883) 9 App Cas 1 as applied in Austin v Austin (1906) 12 ALR 159; Learoyd v Whiteley (1887) 12 App Cas 727; Knox v Mackinnon (1888) 13 App Cas 753 as cited in Australian Securities v AS Nominees (1995) 133 ALR 1, 12.
[31]Cowan v Scargill [1984] 2 All ER 750; Re Mulligan (deceased) [1988] 1 NZLR 481; Nestle v National Westminster Bank plc (29 June 1988).
[32]see Jacobs’ Law of Trust in Australia, above n23, [1709]; Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 4, 498.
[33]Trustee Act 1958 (Vic) ss 6 and 8.
(q) The Settled Land Act 1958 is relevant to life tenants. Section 38 enables a life tenant to sell or exchange the land with the consent of the trustees or Court order. Application of that Act is excluded in the context of trusts for sale.[34] A trust for sale is considered ‘an immediate binding trust for sale, whether or not exercisable at the request or with the consent of any person, and with or without a power at discretion to postpone the sale’.[35] In Re Hoppe [1961] VR 381 a right to have the land unconverted until an authority arose to sell did not create an immediate binding trust for sale.[36]
[34]Settled Land Act 1958 (Vic) s 9.
[35]Ibid s 3; Property Law Act 1958 (Vic) s 18.
[36]Re Hoppe [1961] VR 381; see Re Jacobson [1970] VR 180; Bothmann v White [2015] VSC 247 (3 June 2015) [13].
(r) When exercising power under the Settled Land Act 1958, a life tenant is to have regard to the interests of all parties entitled under the settlement, and is deemed to be in a position of trustee for those parties.[37]
[37]Settled Land Act 1958 (Vic) s 107.
(s) The Court has a wide discretion to make appropriate provision where necessary:
There is no single provision of which it may be said that that is the provision that a wise and just testator would have made. There is instead a range of appropriate provisions, in much the same way as there is a range of awards for pain and suffering or a range of available sentences. Minds may legitimately differ as to the provision that should be made. Furthermore, it is not at all clear that reasons for an appropriate provision need to be fully articulated. To borrow again from the analogy of sentencing, what is required is an instinctive synthesis that takes into account all the relevant factors and gives them due weight. The word ‘due’ is chosen, mindful of what Kitto J said in Lovell v Lovell (1950) 81 CLR 513 at 533.[38]
[38]Grey v Harrison [1997] 2 VR 359, 366.
(t) Ultimately, each Part IV application needs to be decided on its facts:
It is a dangerous exercise, in Part IV cases, for counsel to draw out quotes and specific facts from previous trial and even appellate decisions and apply them to the facts at hand. Cases in this jurisdiction inevitably rely upon complex matrices of relationships and responsibilities, which cannot easily be reduced to a few short sentences.[39]
[39]Poole v Barrow, above n5, [66] (citation omitted).
Application
The three parties each gave credible evidence, and the evidence regarding the background to this proceeding was largely consistent.
The Court has regard to the following factors in s 91(1)(e)-(p) of the Act:
(e) The plaintiff and Mr Brown cohabited in a domestic partnership of approximately 13 years. The uncontested evidence was that this was a close relationship and was continuing at the time of Mr Brown’s death.
(f) The defendants concede that Mr Brown had a responsibility towards the plaintiff. There was no evidence of any obligation or responsibility in respect of other persons. The other beneficiaries to the estate are his seven adult children. As discussed below, there was no evidence of any financial need. The defendants and their father, Mr Brown, had a loving relationship. Although the defendants and the other residuary beneficiaries are the children of Mr Brown, it does not follow that Mr Brown necessarily owed them a moral obligation. Importantly, Mr Brown did not have a financial obligation towards his adult children.
(g) The estate is sizeable. The inventory of assets and liabilities dated 23 October 2014 lists real estate comprising of the property, which is valued at $480,000, and property across the road, namely the rental property, valued at $497,500.[40] The inventory also lists personal estate valued at $890,614.50, with the key item being a superannuation account of $730,454.84. As at 23 October 2014, the total inventory of assets was $1,868,115, and liabilities were minimal. The rental property has now been sold. At the time of the hearing, the value of the estate is approximately $1.7 million.[41]
[40]Affidavit of Gail Hawking sworn 17 April 2015, In the Matter of the Estate of Owen Charles Brown, deceased, SCI 201406637, 20 and 21 April 2016, (‘Hawking affidavit’), Exhibit ‘GRH-2’.
[41]The second Ventura affidavit, above n1, [2].
(h) It was conceded by the defendants that there was no evidence of any financial need of the seven adult children[42] and that the plaintiff has limited financial resources.[43] The evidence given of the plaintiff’s financial position, namely her income tax assessment for the last financial year and print-outs of her bank and superannuation accounts, was not disputed.[44] It indicates a poor financial position. She has approximately $65,000 in superannuation and approximately $1,500 in her bank accounts. The plaintiff’s taxable income for the financial year ending 30 June 2015 is $15,934. Her income (less expenses) from her counselling practice for the current financial year is about $6,000 to date.[45] She receives a widow’s pension of $582 per fortnight.[46] Her net income, including her $1,500 monthly drawing from her superannuation is approximately $45,000 per annum. Her superannuation will run out in less than four years if she continues to draw from it at the current rate. The plaintiff owns no significant assets.[47] She has a four year old Mazda vehicle, some jewellery and furniture.
[42]Transcript of proceedings, In the Matter of the Estate of Owen Charles Brown, deceased (Supreme Court of Victoria, SCI 201406637, Ierodiaconou AsJ, 21 April 2016) (‘T2’), 85.
[43]Ibid, 88.
[44]Exhibit ‘P-1’ is a superannuation statement dated 11 April 2016. Exhibit ‘P-2’ is an ANZ bank statement dated 11 April 2016. Exhibit ‘P-4’ is a Notice of Assessment from the ATO for the year ending 30 June 2015.
[45]Transcript of proceedings, In the Matter of the Estate of Owen Charles Brown, deceased (Supreme Court of Victoria, SCI 201406637, Ierodiaconou AsJ, 20 April 2016) (‘T1’), 23.
[46]Ibid, 21.
[47]Hawking affidavit, above n41, 50.
The defendants submit that the plaintiff is a ‘young widow’, skilled and with considerable earning capacity.[48] Although the plaintiff is skilled, it has been more than decade since she has worked as an employee. Having skills and gaining employment are not the same. She has no current references. At 62 years old it may be difficult for her to return to the workforce as an employee. A wise and just testator in these circumstances would not require that the 62 year old plaintiff, having been encouraged by him to leave paid employment, be required to re-enter paid employment following his death. The plaintiff left employment at the request of the deceased, and cared for him.[49] His estate is sizeable. There are no competing claims to it. There was no evidence to indicate that the beneficiaries had not already been compensated for any work they have done in respect of the family business. There was no evidence, for instance from an employment or labour hire agency, indicating that someone in the plaintiff’s position should be able to secure employment. Although the plaintiff used her skills in relation to the rental property, this would not necessarily translate into readiness to work as an employee. Working at her own pace is different to working as an employee, and the skills that she used in relation to the rental property may not be those in demand by an employer.
[48]T1, above n46, 89.
[49]Hawking affidavit, above n41, 27; T1, above n46, 12-15.
(i) The plaintiff has had some health issues, however her evidence was that this did not impact on her current ability to work. She indicated that she may find it difficult to work at the high level she previously had.[50] The Court assesses the plaintiff’s health as a neutral factor.
[50]T1 above n46, 24 3-10,26-27, 46-50.
(j) The plaintiff is almost 63 years old.
(k) It was conceded by the plaintiff that she did not financially contribute to the estate. It was conceded by the defendants that the plaintiff made a contribution to the welfare of Mr Brown right up to his death and that this should be given significant weight.[51]
[51]T2, above n 43, 93.
(l) It was conceded the plaintiff was being maintained by Mr Brown prior to his death and received significant benefits from him.[52] It is not known what benefits have already been given to the beneficiaries, including with respect to their work at the family business.
[52]Ibid, 94.
(m) As discussed above, it was conceded that the plaintiff was being maintained by Mr Brown at the time of his death.[53] He paid her an allowance of $1,100 per fortnight, and paid for all significant expenses.[54] An allowance of $1,100 per fortnight equates to a weekly amount of $550, or approximately $28,600 per annum.
[53]Ibid.
[54]Hawking affidavit, above n41, 34.
(n) There are no other persons liable to support the plaintiff.
(o) No issue arises as to the character and conduct of the plaintiff or any other person.
(p) The defendants say the residuary beneficiaries contributed to the building up of Mr Brown’s estate by working in their father’s business. As discussed above, there is no evidence as to whether or not they have already benefitted from that. Indeed the evidence was, at least in respect of some, that they were employees of the business. It was conceded they were paid a commercial wage for the work.[55] There was no evidence as to whether or not the beneficiaries received further benefits from the business after Mr Brown retired from it. Accordingly, the Court does not draw any inferences from that other than to restate that there is no financial evidence from any of them. The defendants also state that the life interest is portable. Whilst this is correct in the sense that the will does enable the plaintiff to direct the executors to sell the property and purchase another one, it is, as was conceded by the defendants, ambiguous as to whether this would be available to provide for a nursing home bond.
[55]T2, above n43, 95.
The provisions of the Will indicate that Mr Brown wished the majority of his estate to ultimately reside with his adult children. For instance, clause 9.5 provides that the executors shall not, in any circumstances, pay out the capital of the $500,000 to the plaintiff. Her entitlement with respect to that sum is limited to income from investment of it.
Does the life interest adequately provide for the plaintiff?
The life interest does not adequately provide for the plaintiff as she ages, or if she becomes infirm. Clauses 8.2 and 8.7 of the Will do not expressly allow for sale proceeds from the property to be used as a bond for nursing home accommodation. The trustees cannot ‘invest’ the sale proceeds in a nursing home bond as a profit or interest could not reasonably be expected. The legislative exception in s 11(1) of the Trustee Act 1958 is subject to the Will. Further, clause 15.2 of the Will indicates that in the exercise of their powers, the executors and trustees will not be restricted or obligated by statutory provisions relating to trustees.
Additionally, the duties to act in the best interests of all of the beneficiaries and impartially, will also limit the ability of the trustees to invest in a non-income bearing asset for the benefit of the life tenant. The duty to act impartially attempts to balance the competing interests of life tenants and remainder beneficiaries. It may be reasonably argued that using capital funds to secure nursing home accommodation unduly benefits the life tenant at the expense of the remainder beneficiaries.
As to the Settled Land Act 1958, even if it applies, the power to sell or exchange property under s 38 requires the consent of the trustees or Court order. Further, it is unlikely that this power extends to allowing the settled land to be sold and converted into a nursing home bond, as the interests of the remainder beneficiaries may be significantly compromised.[56] Of note, none of the prescribed modes of investment under the Settled Land Act 1958, such as purchase of fee simple or a leasehold for 60 years or more,[57] appear appropriate in the context of securing nursing home accommodation.
[56]See Lexis Nexis, Wills Probate & Administration Service Victoria, Estate Planning, ‘Specific Types of Gift. Life Interests’ [65,375].
[57]Settled Land Act 1958 (Vic) s 73(1)(f)
In construing the Will, there is ambiguity as to how the proceeds of sale of the property may be used pursuant to clause 8.7. Certainly, a power exists to purchase a different residence in clause 8.7(a). While the funds may also be invested in accordance with clause 8.7(c) or 8.7(d), it is not clear that this extends to investment of the capital directly towards nursing home accommodation. Overall, clause 8.7 appears to limit use of the capital sum unless it is used to pay income tax liability, generate income, or purchase a property which would then be held on trust for the benefit of the remainder beneficiaries. Practically, this would appear to exclude purchase of a nursing home arrangement.
Ultimately, the trustees are limited in their ability to apply the proceeds of sale toward a depreciating, non-income bearing asset such as a nursing home bond, due to lack of an express power. This is compounded by the ordinary position at common law that ‘invest’ will be interpreted narrowly, requiring any property purchased to generate profit or income. Even if the trustees were able to point to a power allowing them to invest the proceeds of sale in a nursing home bond, exercise of such a power needs to be prudent, in the interests of all the beneficiaries and impartial, which may prove difficult to demonstrate.
Whilst Mr Brown clearly attempted to balance the needs between his first and second families, the Will does not adequately provide for the plaintiff. In particular, as she ages, she may become infirm and require nursing home accommodation.
A second reason that the Will does not adequately provide for the plaintiff is that the life interest does not provide her with a capacity to maintain herself independently and autonomously. The executors could, for instance, on six months’ notice, sell the property if she cannot keep it in repair to their reasonable satisfaction: clauses 8.1(a)(iii), 8.5, 8.6. If the plaintiff requested the executors to sell the property, she would need to act “in concert” with them, before they “may” decide to purchase another property or to invest all the proceeds and pay all the income or profit to provide her with accommodation. The practical effect of such a clause is that she remains beholden to the executors.
Is a Crisp order is appropriate, particularly in circumstances where the Will indicates that Mr Brown’s intention was to give the residuary beneficiaries ownership of the property or the sale proceeds from it? The Court considers that outright ownership is the appropriate order. A Crisp order will not provide the plaintiff with the appropriate independence, self-respect and autonomy. Ownership will provide more flexibility and greater security. A wise and just testator in the circumstances, and bearing in mind current community attitudes, would provide the plaintiff with ownership in the property.
The Will provides for the plaintiff to have income from a $500,000 investment. Clause 9.4 of the Will stipulates that the plaintiff should be paid the income on a quarterly basis in arrears. The plaintiff has not received any income from the estate to date. The defendants indicated that this was because of legal advice received in respect of the proceedings.[58] The Court does not draw any adverse inference from that as these proceedings have been on foot and no formal claim was made by the plaintiff in that respect. However, as no income has been paid, it is not known exactly what income the plaintiff is owed by the estate to date, and the evidence of what it would be going forward is vague. Ms Livingstone, an executor defendant in these proceedings, gave evidence that one adviser said he would possibly be starting to get a return between $20,000 and $26,000 per annum.[59] This would equate to a return of 4 to 5% per annum. Ms Ventura gave evidence that this would be for an investment that was not a high risk investment nor was it a low risk investment like a term deposit.[60]
[58]T1, above n46, 62 and 71.
[59]Ibid, 64.
[60]Ibid, 65.
A wise and just testator in these circumstances, and bearing in mind current community attitudes, would recognise the plaintiff’s entitlement to self-respect, independence and autonomy in the form of a lump sum. The plaintiff and Mr Brown lived together in a loving domestic partnership for 13 years. The plaintiff made a significant contribution to Mr Brown’s welfare during that time. The plaintiff was financially dependent on Mr Brown. He paid household expenses and provided her with approximately $28,600 per annum. She has no significant assets, and is in a poor financial position. She does not suggest her current income of $40,000 - $45,000 per annum is inadequate.[61] However, the plaintiff will be in an even poorer position once her superannuation fund is exhausted. Her drawings from it are a significant part of her current income, equating to $18,000 per annum (calculated on the basis of $1,500 per month). There is no provision for life’s vicissitudes.
[61]T2, above n43, 129.
As discussed above, a wise and just testator in the circumstances of the relationship between the plaintiff and Mr Brown, and the age of the plaintiff, would not require her to obtain employment. The plaintiff is almost 63 years old. There is no evidence as to her life expectancy.
The average life expectancy for an Australian woman is 84 years.[62] The plaintiff may or may not reach that age, or live beyond it. Her life expectancy based on the average, will be another 21 years. The estate is sizable. There are no competing claims. The plaintiff is entitled to enjoy a standard of living to which she was accustomed. The income from the $500,000, even when coupled with ownership of the property is inadequate. Even in the event that $500,000 invested in a medium risk investment returns 5% per annum, this would be $25,000 per year. It was conceded that the Will was not adequate to provide for the level of financial support for the plaintiff that Mr Brown provided to her during his life.[63] Critically, it will not adequately provide for the plaintiff to meet any of life’s vicissitudes.
[62]Australian Bureau of Statistics, ‘Life Tables, States, Territories and Australia 2012 – 2014’ (Table No 3302.0.55.001, 12 November 2015).
[63]T1, above n46, 73 (Cross-examination of Ms Ventura).
The Court considers that the plaintiff should receive a capital sum of $500,000 from the estate. This will provide her with the autonomy to invest it as she sees fit. It will enable her to draw upon the capital sum to meet the vicissitudes of life and provide her with some independence.
For completion, it is noted that in the absence of financial evidence from the residuary beneficiaries, the Court has assumed they have adequate resources. On the other hand, the plaintiff has proven that the Will does not provide adequate provision for her.
Conclusion
The Court will make orders to effect the ownership of the property being transferred to the plaintiff, and an order that the plaintiff be given $500,000 from the estate. The estate will also need to pay the plaintiff the amounts owed in respect of any income from the $500,000 to date.
The parties are requested to confer as to the appropriate form of orders to be made after consideration of these reasons for judgment. The Court will hear the parties on the payment of the costs out of the estate.
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