McCallum & v Johnston & Anor

NEW SOUTH WALES COURT OF APPEAL

CITATION: McCallum & Anor v Johnston & Anor [2005] NSWCA 400

FILE NUMBER(S):
40162/05

HEARING DATE(S): 10 October 2005

JUDGMENT DATE: 18/11/2005

PARTIES:
David Robert McCallum (Appl)
Stuart Alexander McCallum (Appl)
Joan Elizabeth Johnston (1R)
Helen Margaret Attwell (2R)

JUDGMENT OF: Mason P McColl JA McClellan CJ at CL

LOWER COURT JURISDICTION: Supreme Court

LOWER COURT FILE NUMBER(S): 3923/02

LOWER COURT JUDICIAL OFFICER: Macready AsJ

COUNSEL:
J W Wilson SC (Appls)
J S Drummond (Resp)

SOLICITORS:
Francis Kelly and Grant by their city agents
Turner Whelan (Appls)
Harris Lieberman Boyd (Resp)

CATCHWORDS:
APPEAL
will and estate
whether trial judge's discretion miscarried
whether failure to properly assess a beneficiary's income

LEGISLATION CITED:
Family Provision Act 1982

DECISION:
1. Appeals dismissed
2. Appellants to pay the respondents' costs

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

40162/05
MASON P
McCOLL JA
McCLELLAN CJ at CL
FRIDAY 18 NOVEMBER 2005

McCALLUM & ANOR v JOHNSTON & ATTWELL

Judgment

MASON P: I agree with McClellan CJ at CL.
McCOLL JA: I have had the benefit of reading McClellan CJ at CL’s judgment in draft. I agree with his Honour’s reasons and the orders he proposes.
McCLELLAN CJ at CL: This is an appeal from the decision of Macready AsJ under the Family Provision Act 1982 in relation to the Estate of Duncan David McCallum who died on 29 September 2001 at the age of eighty-six years. His wife had previously passed away. He was survived by their five children.
Macready AsJ made orders increasing the entitlement of the deceased’s two daughters, Joan Johnston and Helen Attwell, from that provided in the deceased’s will. His Honour provided an additional legacy for Joan of $250,000 and an additional legacy for Helen of $175,000. In this appeal two of the appellant’s three sons, David and Stuart, challenge those orders.
The deceased’s will
By the terms of his will the deceased disposed of his assets in the following manner:
(i)His property at 80 Hardinge Street, Deniliquin to Joan and Helen in equal shares.
(ii)His one third interest in a Case International 2188 Header to Stuart and his share of the one third share held with his grandson John McCallum, to John (John is the son of David).
(iii)His interest in jointly owned plant and equipment to the surviving joint owner.
(iv)His share in the DD and JD McCallum Partnership including plant, equipment, stock, rice equities, debentures and shares which are jointly owned to John McCallum.
(v)He established a testamentary trust in respect of his property “Oakleigh East”, his shares and water entitlements with Murray Irrigation and stock, together with the rest and residue of his estate, for a period of 10 years. In the event which occurred, namely the prior death of his wife, income from the trust was payable to David and Stuart.
(vi)His water entitlement with Murray Irrigation (acquired in 1996) to Joan upon the winding up of the trust.
(vii) The rest and residue of the trust on winding up to David and Stuart equally.
(viii)His shares in DD McCallum Constructions Pty Limited (“Constructions”) to David.
(ix) His plant and equipment to David and Stuart equally.
(x)His residuary estate in the event of the failure of any gift to Helen, Joan, David, Stuart and his grandson John.
Historical matters
The business of Constructions was initially, as the name suggests, a construction company known as “Constructions.” Although it was initially successful the business declined in the 1960s and was closed down by 1972.
In 1972 Constructions purchased a farming property known as “Sand Hills” which comprises approximately 270 hectares and is located 49 kilometres west of Deniliquin. Sand Hills had the benefit of 523 Class “M” Murray Irrigation shares and water entitlements which gave the property an allocation of 434 megalitres of water per annum from the Murray Irrigation channel. In addition it had a bore capable of producing 2 megalitres per day. The property contained 4 hectares of laser levelled contour irrigation land, 44 hectares of natural contour irrigation land and approximately 17 hectares of land with contour banks for irrigation. Part of the property was suitable for rice production and the unirrigated portion was suitable for dry land cropping and grazing.
From approximately 1972 to 1995 the deceased’s two sons, Ronald and David share farmed “Sand Hills” with Constructions.
On 27 May 1999 the deceased transferred to David, for no consideration, the 13,600 shares he held in Constructions thereby giving him sole ownership of the assets of Constructions including Sand Hills. On 25 July 1999 David sold the water entitlement of Sand Hills for the sum of $100,800. Sand Hills has an agreed value of $425,000.
The deceased also owned the property known as Oakleigh East. That property consists of approximately 399 hectares comprising 147 hectares of laser levelled irrigation land, 115 hectares water check and contour irrigation land and 137 hectares of dry land grazing.
From approximately 1968 to 1997 the deceased share-farmed Oakleigh East with his sons David and Stuart or his grandson John. In March 1997 the deceased and Stuart entered into a share farming agreement pursuant to which Stuart was to share farm Oakleigh East. That arrangement continued until the deceased’s death. Since 29 September 2001 Stuart has continued to share farm Oakleigh East.
Prior to 1962 the deceased lived on Oakleigh East. However, in that year he moved with his family to reside in a dwelling at 80 Hardinge Street, Deniliquin.
In about 1959 the deceased commenced a business known as Riverina Truck and Tractor Company Pty Ltd which was a machinery dealership holding a franchise from International Harvesting Co. That dealership operated from a site on the corner of Hardinge and George Streets, Deniliquin.
In the early 1970s the deceased retired from the day to day operations of the dealership to enable him to become more involved in the farming activities on Oakleigh East and Sand Hills. However, he maintained control of the business holding 7,020 ordinary shares which together with the shares held by Constructions (6,650 shares) amounted to 80% of the issued ordinary shares.
The deceased’s two daughters, Joan and Helen both worked in the dealership. Joan commenced employment in 1972 and Helen in 1974. Although they were paid, their rates of pay were less than would have been paid to employees who were not members of the family.
The profitability of the dealership declined due to the drought in the late 1980s and was finally closed on 24 December 1987. The land on which the business was situated was sold together with the remaining stock, the proceeds being used to retire debts.
The deceased’s principal activities in his later years were as a farmer and land owner on which share farming activities were undertaken. He was a partner in a rice growing partnership with John and he co-owned various items of plant and equipment with David and Stuart.
Assets of the Estate at the date of hearing
The estate assets at the date of hearing before Macready AsJ were as follows:

$
Oakleigh East	790,000.00
80 Hardinge Street	140,000.00
180 Murray Irrigation Limited shares attaching to
Oakleigh East	99,000.00
Total	1,029,000.00
[<br>]
Bank Account/Shares
Bank accounts (total)	43,694.88
174 Incitec shares	3,278.00
Murray Goulburn A Preference Shares	414.00
1,517 AWB shares	7,009.00
RCL shares	6,784.00
RCL bonds	16,443.00
RMB Equities	26,284.00
Debt owed by Constructions	80,111.00
TFN withholding tax	921.00
GST control account	4,171.00
Debt owed by David	317.00
Total	189,428.00
[<br>]
Machinery Plant and Equipment
Plant and equipment	42,000.00
Sundry plant and equipment	670.00
Utility	1,500.00
Rent to 13 October 2004	581.00
Total	44,751.00
Grand total	1,263,179.00
[<br>]
Liabilities
Trade creditors	64,042.00
Australian Taxation Office	20,993.00
Debt owed to Stuart McCallum	16,342.00
Debt owed to Joan Johnston	50.00
Deniliquin Council	1,614.00
D & I Refrigeration and Electrical	1,285.00
Total	104,326.00
[<br>]
Nett value of estate	1,159.753.00

At the time of his death the deceased owned the following assets jointly with the persons named:

RCL shares with JD McCallum (half share)	7,674.00
RCL bonds with JD McCallum (half share)	1,352.00
RCL Equities with JD McCallum (half share)	14,128.00
83 AWB shares Racecden (half share)	383.00
2,497 AWB shares with JD McCallum (half share)	23,072.00
Case 8940 Tractor with SA McCallum (half share)	90,500.00
Miscellaneous plant with DR McCallum (half share)	2,736.00
Debt owed by DD McCallum Constructions Pty Limited
With JD McCallum (half share)	7,526.00
Rice Pools with SA McCallum (half share)	47,073.00
New Holland TX64 Header with D McCallum
(one third share) only	92,964.00

The value of the deceased’s share of the jointly owned assets is $128,210.00.
The deceased and John were jointly indebted to the Commonwealth Bank of Australia in the sum of $10,293 at the date of his death.
At the hearing there was a dispute about a debt owed to Stuart in the sum of $16,342. This amount represented half of the money in the deceased’s account with Elders Limited at the date of his death. Stuart and the deceased were parties to a share farming arrangement on Oakleigh East at the time of the deceased’s death. Stuart claimed that moneys received from share farming were paid into the deceased’s account with Elders Limited and he was entitled to half of the money in this account.
The beneficiaries and their entitlements in the Estate in accordance with the terms of the Will are as follows:

Joan	$
Half interest in 80 Hardinge Street	70,000.00
Water entitlement on winding up of trust which, unless it is otherwise brought to an end will not occur until 2011	99,000.00
[<br>]
Helen
Half interest in 80 Hardinge Street	70,000.00
[<br>]
David
Miscellaneous plant	1,368.00
New Holland TX 64 Header	30,988.00
Half share of machinery	21,335.00
Interest in testamentary trust	395,000.00
[<br>]
Stuart
Case 8490 Tractor	30,166.00
Half share in machinery	21,335.00
Interest in testamentary trust	395,000.00
[<br>]
John
Case 8940 Tractor	15,083.00

John also became the absolute owner of shares, bonds and equities held jointly with the deceased.
Macready AsJ also ordered that the plaintiffs’ costs on a party party basis up to 1 August 2003 and thereafter on an indemnity basis and the defendants’ costs on an indemnity basis be paid or retained out of the estate of the deceased.
The evidence before Macready AsJ was that the costs of the parties totalled $206,126.59.
On this basis the nett value of the estate, after allowance is made for costs and on the assumption that the costs of the parties will be wholly or substantially recovered out of the estate, is $956.000.
The appeal
The sons, David and Stuart, have appealed and submit that his Honour’s discretion miscarried. Apart from errors which are said to be contained in his Honour’s determination of the financial circumstances of Stuart and his wife and in the interest that Stuart and David received from the testamentary trust, it is submitted that his Honour failed to properly assess David’s income from his farming activities. The errors are particularised as follows:
1.The Associate Judge omitted to refer to the debts of Stuart and his wife at the date of hearing when setting out Stuart’s financial circumstances.
2His Honour overstated the interest that David and Stuart would receive from the testamentary trust in each case by $49,500.
3.His Honour did not properly assess David’s income from his farming activities.
4.In the circumstances his Honour’s decision that the deceased failed to make adequate provision for the proper maintenance of Joan and Helen was erroneous and in the alternative the orders which his Honour made were unduly generous towards Joan and Helen and failed to have proper regard to the competing claims of David and Stuart.
General principles
An application under the Family Provision Act 1982 involves a two stage process of enquiry. The first stage calls for a determination of whether the applicant has been left without adequate provision for his or her proper maintenance, education and advancement in life (s 9(2)).
The second stage, which only arises if that determination has been made in favour of the applicant, requires the Court to decide what provision ought to be made out of the deceased’s estate: see Singer v Berghouse (1994) 181 CLR 201 at 208.
The approach followed in Singer has recently been endorsed by the High Court in Vigolo v Bostin (2005) 79 ALJR 731 at [5] and [74 and 75]. In Singer the High Court said the first stage in the two stage process “calls for an assessment of whether the provision (if any) made was inadequate for what, in all the circumstances, was the proper level of maintenance etc appropriate for the applicant, having regard, amongst other things, to the applicant’s financial position, the size and nature of the deceased’s estate the totality of the relationship to any applicant and the deceased, and the relationship between the deceased and other person who have legitimate claims upon his or her bounty”: p 210.
The second stage involves similar considerations to the first, and requires the Court to exercise a discretion. The Court may refuse to make an order even though the first question has been answered in the applicant’s favour.
The principles relevant to an appeal were also defined in Singer. In their joint judgment Mason CJ and Deane and McHugh JJ stated that the principles which govern the appellate review of discretionary decisions should apply stating that the approach adopted by Kirby P, in this Court in Golosky & Anor v Golosky (unreported, Court of Appeal, 5 October 1993 – see Mason and Handler, Wills Probate & Administration Services at [9497]) was correct when his Honour said:
“Unless appellate courts show restraint in disturbing the evaluative determinations of primary decision makers they will inevitably invite appeals to a different evaluation which, objectively speaking, may be no better than the first. Second opinions in such cases would be bought at the cost of diminishing the finality of litigation in a troublesome area, and sometimes at least, with a burden of costs upon the estate which should not be encouraged.” at pp 13-14
The findings of Macready AsJ
The Associate Judge made findings in relation to the financial circumstances of each of the appellants and respondents. There is no dispute in this appeal with respect to the findings in relation to the daughters. However, there are some problems with the findings with respect to the sons.
Associate Judge Macready determined that the interest of David and Stuart in the Trust was $444,500. That sum includes an amount which vests in Joan in relation to water rights and to this extent was an error. I have included the correct figure of $395,000 for each son in the statement of entitlements which I have set out above.
Macready AsJ also omitted to include findings with respect to the liabilities of Stuart. I have included a statement of Stuart’s complete position below.
The position of Joan Johnston
Joan was born on 27 November 1946. She is presently 58 years. She is unmarried and resides at 72 Butler Street, Deniliquin. She has been employed as a bookkeeper since August 1988. Due to ill health she is only able to work four days per week. She presently earns $33,600 gross per annum (ie $509 nett per week). Her expenses are $59,379 per annum. Her health makes it unlikely that she will be able to continue her present employment much longer.
Joan was employed by the dealership as its bookkeeper from 1972 to February 1988. Joan received no financial interest in either the dealership or Constructions other than the meagre wages which she received. From 1972 until the death of the deceased Joan also provided bookkeeping services to the deceased, Constructions and the various partnerships in which the deceased was a partner for minimal return (ie $2,500 per annum).
As at the date of trial Joan had the following assets:

$
72 Butler Street Deniliquin	250,000.00
Furniture and fittings	10,000.00
Vacant land on Decimus Street Deniliquin	20,000.00
1998 Hyundai Sonata sedan	10,000.00
Superannuation entitlements	23,000.00
Total	313,000.00
[<br>]
Less Liabilities:
[<br>]
Mortgage over 72 Butler Street Deniliquin	177,000.00
Loan from Anthony Johnston and Sandee Rush	20,000.00
Loan from GE Credit Line	6,215.03
Loan from GE Master Card	6,327.56
Loan – ANZ Visa	1,374.79
CBA Bank card	3,513.10
HSBC Visa Card	9,090.24
Total liabilities	223,520.00
Nett Assets	89,480.00

Under the Will Joan was to receive:

One half of 80 Hardinge Street	70,000
Water entitlements valued at	99,000
169,000

Macready AsJ ordered that Joan receive an additional legacy of $250,000 from the estate.
The position of Helen Atwell

Helen Atwell is presently 50 years of age.
She is employed part time by Treco International Pty Ltd, the employer of her husband. From that employment she receives approximately $5,400 pa.
Julian Atwell is the National Marketing Manager for Treco. From that employment he receives $50,000 nett pa. Their combined expenses total $56,000 pa.
Helen commenced part time work in the dealership in 1974. Shortly thereafter she commenced full time work performing clerical duties. In 1978 Julian took up the position of Sales Manager for the dealership. In July 1985 Julian left the dealership to take employment in Melbourne with Helen following in December 1985. Apart from a short period from November 1987 until February 1988 Helen did not perform any further work for the dealership prior to its sale in February 1988. In total she and her husband worked for the dealership for 18 years.
Macready AsJ found that Helen and her husband have the following assets:

$
Poitiers Street, Deniliquin	260,000
Motor vehicle	16,000
Savings	7,789
Telstra shares	4,820
House contents	124,000
AMP shares	3,700
$436,309
[<br>]
Less liabilities:
[<br>]
Mortgage	139,000
Westpac Visa card	1,400 140,400
Nett Assets:	295,909

Under the Will Helen Atwell was to receive one half of Hardinge Street valued at $70,000.
In March 2001 Joan and Helen set about restoring the Hardinge Street property. By their efforts they increased its value from $86,500 to $140,000.
Macready AsJ ordered that Helen receive an additional legacy of $175,000 from the estate.
The position of David McCallum
David was employed by Constructions from 1962 to 1966 driving machinery and constructing roads. In 1966 he commenced to share farm Oakleigh East and other properties with Stuart. In 1967 he commenced National Service being discharged in January 1969. In January 1972 David returned to his employment with Constructions. During the period January 1969 to 1972 the activities of Construction declined. During this period David continued to share farm with Stuart that activity becoming his principal activity due to the decline in the operations of Constructions. He was employed by Constructions for a total period of 7 years. Since 1972 he has not been employed by the deceased or Constructions. He was never employed by the dealership.
Macready AsJ made findings in relation to David. They included the following:
“Until recently David owned directly or by his majority shareholding in Construction, the following farming properties:
i.             Morland $800,000
ii.            Sand Hills $425,000
               Plant and equipment:
  Morland (wdv) $57,196
  Constructions (wdv) $328,591   Total   $1,610,787.
On 30 September 2003 David sold part of Morland for the sum of $763,411. He used the sale proceeds to pay off his debts and build a kit home on Sand Hills, where he now lives. He retains 254 acres of Morland, which is the subject to a contract of sale to his former second wife, Judith, for the sum of $264,000. That sale has not yet been completed despite it having been entered into in April 2003. It is part of a property settlement with her and she will not have to pay the consideration. She will also receive some part (not yet agreed) of the plant and equipment and 263 shares in Murray Irrigation Ltd.
Sand Hills is free of debt and has plant, equipment and stock. It is difficult to get a true picture of David’s income situation. Apart from a War Pension resulting from his Vietnam service of about $121 per week, his income has come in the past from Morland and Sand Hills. Following upon the split up with his second wife and the sale of a large part of Morland he has now become debt free and lives on Sand Hills. His former second wife lives on the remaining part of Morland which she has agreed to take under the property settlement. In recent years there have not been any operating profits and his remaining property will not be large enough to be a viable enterprise which will support him.”

David challenges his Honour’s findings in respect of both his capital position and his income. He contends that his true nett asset position is $382,000 but I am satisfied this underestimates his position.
Although the land at Morland has been sold, David maintains an interest in other assets of that entity although his ultimate share is uncertain. If you include those assets at their full value and make allowance for a loan provided by David which will presumably be repaid to him in full the asset position of David as at 30 June 2004 would appear to be as follows:

(i) Morland
$
Plant and Equipment (wdv)	57,196
Shares	59,563
Other	105,772
222,531
[<br>]
Less Liabilities:
[<br>]
Total liabilities ($138,911) including	(138,911)
Loan from David of ($99,892)	83,720
[<br>]
(ii) Constructions
[<br>]
Land – Sand Hills	425,000
Plant & Equipment (wdv)	138,886
Shares	23,645
Other	12,108
599,639
[<br>]
Less Liabilities
[<br>]
Total liabilities	(196,520)
403,119
Total Nett Assets	486,839

A significant component of David’s assets is comprised in plant and equipment which is included at its written down value for taxation purposes. The evidence indicates that the equipment may bring a significantly greater price if sold. However, its significance extends beyond its value in the balance sheet for it is available to David to use in his business both in operating Sand Hills and general contracting and share farming.
The trading results of Morland for the four years to 30 June 2004 were:

Year ended 30 June 2001	44,706.00 profit
Year ended 30 June 2002	1,474.00 profit
Year ended 30 June 2003	35,821.00 loss
Year ended 30 June 2004	63,786.00 loss

In the year ended 30 June 2004 when David sold part of Morland the company derived a profit on the sale of $588,517 resulting in a nett profit for that year of $477,165.00.
David is the de facto owner of Constructions. The trading results for that company for the four years to 30 June 2004 were:

Year ended 30 June 2001	6,930.00 profit
Year ended 30 June 2002	10,043.00 loss
Year ended 30 June 2003	5,452.00 profit
Year ended 30 June 2004	3,892.00 loss

Macready AsJ said that he had difficulty in establishing David’s income. His Honour found that he is entitled to a Vietnam Service Pension of about $121 per week. As the figures set out above reveal, his revenue from other sources has been inconsistent and it is difficult to obtain a reliable picture of his likely future earnings.
However, he will continue to own Sand Hills, on which he has a house, farming equipment from which he can derive income and will be free of debt. He will continue to receive his Vietnam pension. Although not affluent, his circumstances in life are secure.
Macready AsJ considered the relationship between David and the deceased and made the following findings:
“It is clear that the defendant, David, got on well with his father and he did assist him from time to time in his father’s grazing operations. Like his brother, Stuart, he was involved in many share farming ventures and in the operation of the property owned by Constructions which was ultimately for his benefit.
David received a number of benefits from the deceased during his life. They included the transfer of the majority shareholding in Constructions which passed to him, the property Sand Hills and its stock, plant and equipment. In 1999 the deceased gave him a header valued at $45,000 so that he could trade it in and buy better equipment. David also conceded that at times, when he bought equipment through the dealership as a family member, he got it a little above cost price. What benefit this amounted to is not really quantified.”
The position of Stuart McCallum
Macready AsJ made the following findings in relation to Stuart.
“Stuart is 55 years of age. He and Sandra own two properties, they being:
Willum Park and Fairfield (agreed value)        $847,500
Plant and equipment (wdv)  $457,724
In addition to the above, Stuart share farms “Oakleigh East”, which he has done since July 1997. The estate receives approximately one half of the nett profit from that arrangement, Stuart receiving the remaining 50%.
From May 1996 the deceased, his grandson John, together with Stuart and his wife operated what became known as McCallum Harvesting. At the commencement of the business there were a number of items purchased. These included:
A 2188 Header     $187,000
A shoreborn combine        $48,000
A ten ten header $31,976
A header trailer     $4,500
The last item was purchased outright and the others were purchased on finance. Apparently payments were made to the leasing company until August 1998, when the partnership was dissolved. This was with the consent of the deceased because apparently his grandson, John, had been away and was not available to help Stuart who was doing all the work in the partnership. Clearly the partnership did not involve the deceased doing anything. The partnership paid for the repayments on the equipment, except for the last couple of instalments which were paid for by Stuart after the dissolution of the partnership. It is clear that Stuart retained the benefit of the equipment after the dissolution without accounting either to the deceased or to the deceased’s grandson, John.
It was suggested that there was income due to the estate which had not been accounted for in the respect of McCallum Harvesting. That was for the year ended 30 June 1998, when there was a nett profit of $62,521. However, that does not take into account losses of $35,972 for 30 June 1997 and $15,618 for 30 June 1996. In these circumstances there would seem that up to the date of dissolution there were only minimal profits due to the deceased. However Stuart has had the benefit of the machinery, including its further depreciation after 1998. In the year ended 30 June 2004, Stuart’s partnership with his wife had an operating profit of $54,469. It is plain that his property will not support him so he, like his brother, David, share farms and harvest crops to get sufficient income.”
The appellant rightly complains that Macready AsJ did not bring the liabilities of Stuart into account. They amount to $752,249 making his nett assets $547,975.
Macready AsJ found that during the financial year ending 30 June 2004 Stuart and his wife Sandra made a nett profit from farming of $54,469. In addition they received from the sale of plant and equipment a profit of $214,000. Like David, Stuart’s depreciation schedule includes the written down value of the plant and equipment at figures which are likely to be below their true value. His nett assets are accordingly likely to be significantly greater than set out above.
Stuart also received benefits from the deceased in the form of plant and equipment including profit from the share farming or partnership agreements entered into with the deceased over the years since 1966.
Apart from the period 1963 to 1966 when Stuart was employed on Oakleigh East he has not otherwise been employed by the deceased, Constructions or the dealership since leaving school in 1963.
Macready AsJ also considered the relationship between Stuart and the deceased and made the following findings:
“Clearly the deceased and the defendant, Stuart, had a long relationship and they were involved in many ventures together. There was no criticism of that relationship.
In May 1998, some nine months after the commencement of the share farming agreement between the deceased and Stuart in respect of Oakleigh East, it was decided to purchase a new Case 8940 tractor for approximately $120,000. Although the purpose was to laser level the remaining part of Oakleigh East, it was in fact hardly used for this purpose and mostly used for other farming work. The deceased contributed his share of the payments on the finance for the tractor until his death amounting to $59,774.54. In due course Stuart used the tractor to trade in on another tractor which replaced it and he did not account to the estate for the estate’s share of the asset. In effect, he was anticipating his entitlement under the will. On these trade-ins, and the same applies to a number of other items, there were often substantial profits on sale shown in the accounts. This is because the written down value was substantially less than the actual value of the item. Of course these profits were not realisable profits and in fact led to more income and thus potential tax liabilities.
There was a matter that arose in respect of the stock, once share farming commenced between the deceased and Stuart, in July 1997 on Oakleigh. There was a problem with foot rot and the stock had to be disposed of. Precisely how Stuart became entitled to stock, as he has suggested in his evidence on the commencement of that share farming, is not clear. Given the distributions during the life time of the deceased to Stuart, it may well be that this was by some arrangement with the deceased. In the circumstances although there is a dispute about the entitlement to the remaining $16,000, I do not think that this is a matter of great consequence.
It is plain that contrary to his assertions, Stuart obtained substantial benefits from the deceased in his lifetime. Although there were many share farming agreements and joint enterprises undertaken by the deceased and Stuart, Stuart was only employed for three years by the deceased and Stuart also had his own properties which he had to manage and farm. This has to be taken into account when considering the extent of the help which Stuart gave to the deceased over his lifetime.”
Consideration of the appeal
In his reasons for judgment Macready AsJ identified some fundamental problems with the deceased’s approach to provision for his children as evidenced by his Will. He found that the deceased had a strong desire for his sons to have his farming property and it was for this reason that his sons received the majority of the assets in the Estate. The deceased had taken the view that the same level of provision should not be made for his daughters. The Associate Judge identified that although this may have been an appropriate approach to the matter in former times, this was no longer the case. His Honour said:
“The Act requires the Court to consider the individual circumstances of a child and what is the proper provision for that child without differentiating between children because of their sex.”[61].
Macready AsJ also found that the deceased may have thought he had given the girls their share of the estate in advance by employing them in the dealership. However, his Honour found that although they worked in the dealership, it was for a lesser wage than that paid to other employees and the dealership having been wound up, they did not receive any intended benefit from it by way of inheritance.
The true position is that by their efforts Joan and Helen have both provided a significant contribution to the acquisition or maintenance of the deceased’s estate. In return they received little or no additional reward for their labour other than the wages paid at less than market value. They did not share in any profit nor were they given any interest by way of shares in the dealership or Constructions as compensation for that work. Not only were David and Stuart self-employed and therefore able to work on their own account and for profit they have also over 40 years received significant financial assistance from the deceased.
With respect to Joan his Honour identified significant future needs. She will need monies to alleviate her debt, provide a suitable motor vehicle and carry out some renovations to her house. Although she has been working, her remaining working life will be short. She is 58 years of age, and although soon eligible to receive an aged pension, the Associate Judge formed the opinion that she should “have a sum to assist her cope with her reduced income in the future.”
With respect to Helen Macready AsJ identified a need to provide her with sufficient money to pay an existing mortgage together with a need to spend a sum of $79,299 on repairs to the family home. Given her age and that of her husband, they can continue to earn income. As they are presently living in Melbourne, where they are leasing, they will be able to rent their home in Deniliquin until they retire. Accordingly, his Honour, rightly in my opinion, determined that Helen’s need was less than that of Joan.
Both Stuart and David will continue to own rural properties although they would not be of sufficient size to provide a living. However, because they both have equipment which enables them to earn income from farming and other contracting they have sufficient resources to generate income for their future needs. They will both have dwellings and will be free of debt. Both of their financial positions are significantly better than Joan and Helen.
Notwithstanding that Macready AsJ did not accurately record the asset position of Stuart and David, I am not persuaded that these errors should result in a decision other than that which his Honour made. Although the evidence discloses that both David and Stuart have suffered a reduced income in recent years, it is apparent that this is as a result of the very severe drought which has occurred, particularly in the eastern parts of Australia during that time. When the drought passes it may be expected that their income will be restored. They will both be able to use their existing assets to provide a reasonable level of income.
Furthermore, even when provision is made in accordance with the Associate Judge’s orders for Joan and Helen, there will remain in the Estate, after payment of costs of the proceedings, $300,000 to be divided equally between David and Stuart.
To my mind, an analysis of the financial and personal circumstances of the appellants and respondents confirms that Macready AsJ was correct in determining that the Court should intervene in this matter. Although the need of Joan was more pressing, Helen’s financial position was such that she was entitled to share in the estate to a greater extent than provided in the deceased’s will. There is nothing in his Honour’s reasons which discloses error in the application of his discretion.
The relationship between the relevant members of the family and the deceased appear to be similar although, of course, by reason of the male members of the family pursuing common pursuits, there was a natural closeness between the deceased and his sons and grandson. However, the relationship between the deceased and his daughters was also close and they, of course, contributed to his business for many years.
Having regard to the approach which this Court should take when considering an appeal in relation to an application under the Family Provision Act, I am not persuaded that any error which would require the intervention of this Court has occurred.
In my opinion, the appeals should be dismissed. The appellants should be ordered to pay the costs of the respondents.

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LAST UPDATED: 25/11/2005

[2005] NSWCA 400

18 November 2005

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