Mitchell Aaron Johnston v Janelle Ann Brown

[2002] NSWSC 1116

CITATION:	Mitchell Aaron JOHNSTON v Janelle Ann BROWN; Estate of the late Darryl Alexander Johnston, deceased. [2002] NSWSC 1116
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 2255/99
HEARING DATE(S):	19/11/2002
JUDGMENT DATE:	25 November 2002
PARTIES :	Mitchell Aaron JOHNSTON - Plaintiff Janelle Ann BROWN - Defendant
JUDGMENT OF:	Acting Master Berecry at 1

COUNSEL :	Ms M Bridger - Plaintiff Mr M Pesman - Defendant
SOLICITORS:	Hardman & Company - Plaintiff Blessington Judd - Defendant
CATCHWORDS:	Family Provision Act - intestacy - son - whether need established - competing needs of defendant - factors mitigating against further provision.
LEGISLATION CITED:	Family Provision Act Wills Probate & Administration Act, 1898
CASES CITED:	Singer v Berghouse (1994) 181 CLR 201 Shearer v The Public Trustee, unreported, 21 April 1998, Young J
DECISION:	1. The proceedings be dismissed.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

ACTING MASTER BERECRY

MONDAY, 25 NOVEMBER 2002

JUDGMENT

1 MASTER: On 6 May 1999 the plaintiff filed a summons seeking provision pursuant to s 7 of the Family Provisions Act 1982 out of the estate or the notional estate of the deceased.

2 The plaintiff is the son of the deceased. The plaintiff was born on 15 November 1982. The deceased died on 21 November 1996. The plaintiff is the only child of the deceased. The defendant was the de facto partner of the deceased at the date of death. She and the deceased had been living in a de facto relationship since late 1989. There is no issue that the plaintiff and the deceased had a loving father and son relationship. In fact the plaintiff was in regular contact with the deceased over most of his life and in the last few months of the deceased’s life he lived with the deceased and the defendant. There is no evidence to suggest that the relationship between the defendant and the deceased was anything but a happy and harmonious relationship.

3 The deceased was a professional golfer who conducted his business at the Monash Golf Club. His financial affairs were controlled by two companies and two trusts. In 1980 he and his father registered a company called Vimearn Pty Limited. Each held one share in the company. The company was the trustee for the Darryl Johnston Family Trust. Through the trusts the company operated the Pro Shop business from Monash Golf Club. The company was also the trustee for the D & J Superannuation Fund. The superannuation fund in turn had 107,000 units in the Johnston Unit Trust.

4 The trustee of the Johnston Unit Trust was DAJ Properties Pty Limited. The only major asset of the trust was the property at 3 Heckenberg Close, Glenorie. It would appear that the funds used to acquire the Glenorie property came from two major sources, namely the proceeds of sale of a property that the deceased had at Telopea and a mortgage with the National Australia Bank. The Glenorie property was purchased in 1995 for $460,000.00. Three months prior to the purchase of that property the deceased sold his Telopea property for $175,000.00. Therefore, a significant portion of the purchase price was contributed by the deceased.

5 The defendant’s evidence is, however, that she also contributed to the purchase price of the property and the parties pooled their resources to meet mortgage repayments. Her initial contribution was $20,000.00 towards the purchase. Her evidence was that she made contributions of approximately $500 a month towards the mortgage repayments as well as paying for the food, household needs and their clothing. At the time the Glenorie property was purchased she was working as a book-keeper earning approximately $32,000.00 per annum. Shortly after the purchase of the property she left her current employment and sometime in 1996 worked as an office manager at Aboraglen Nurseries earning an income of approximately $28,000.00 per annum. She continued in that employment until August 1996 when she sustained a back injury as a result of a riding accident. Thereafter, she was supported by the deceased until October 1996 when she secured a job as an accounts payable clerk earning $31,000.00 per annum. However, this occurred approximately two weeks before the deceased’s death. Because of the death of the deceased she was unable to continue to work.

6 The plaintiff was not required for cross-examination. The plaintiff’s evidence is that he found it extremely hard after his father’s death. At the time of his father’s death he was in Year 8 at Normanhurst Boys’ High School. His evidence is that that is a selective school. This was not contradicted by the defendant. However, because of his father’s death he was unsettled and in 1997 he transferred to Muirfield High School and then subsequently to Carlingford High School. He did not complete his schooling as he left school in 1998. In 1999 he attended the first semester of The Institute of Music. He was able to attend the Institute because of a trust fund that had been set up by Monash Golf Club for his benefit. The reason he gave for discontinuing his education at the Institute was that he wanted to get out into the world and get a job. After leaving the Institute he applied for a retail traineeship but was unsuccessful.

7 In late November 1999 he commenced an apprenticeship as a motor mechanic. Between 1999 and May 2002 he has been employed by a number of motor mechanic businesses. However, he has not been able to hold down regular employment. At the hearing of these proceedings he had completed the first year of a four year course. It would seem that his prospects are perhaps not all that strong as it has taken him just over two years to complete his first year of the apprenticeship. His evidence is that since May of this year he has been unemployed and has had to rely on funds that he received from the estate and from his Workers’ Compensation Claim in respect of his father’s death.

8 The plaintiff’s evidence is that he is uncertain about his future career. He would like to complete his apprenticeship but he has also had time to reflect on the direction in which he would like his future to take. His evidence is that he would like to complete his education. To do that he desires to attend TAFE to complete the last two years of Higher School Certificate. He has also expressed a desire to purchase his own accommodation. Since June 1998 the plaintiff has lived with friends. He would like to have a place of his own as he is missing the privacy that that would give to him.

9 As a result of the deceased’s fatal accident proceedings were commenced on behalf of the plaintiff and the defendant in the Compensation Court. On 20 August 1998 they were awarded the sum of $230,200.00. $85,000.00 was apportioned to the plaintiff and invested with the Public Trustee. On 17 February 1999 the sum of $92,754.69 was paid to the Public Trustee on behalf of the plaintiff, this sum representing the plaintiff’s entitlement from the deceased’s Estate on intestacy. On 2 March 2001 he received a cheque from the Public Trustee in the sum of $180,762.96 representing the monies held by the Public Trustee in respect of the Compensation Court proceedings and his entitlement from his father’s Estate together with interest. This money was deposited in an account with the National Australia Bank. Shortly thereafter the plaintiff lent his mother and her partner the sum of $40,000.00 to assist with the purchase of a home at Cheltenham. At the date of hearing of the proceedings the plaintiff has available to him from that account an amount of $120,000.00 together with $40,000.00 loaned to his mother. His other assets consist of two motor vehicles worth valued at approximately $11,500.00, a guitar, amplifier and accessories at $2,500.00 and then various other items amounting to approximately $1,500.00. He is currently living with friends at Merrylands. His weekly expenses total $238.00.

10 The defendant’s partner is currently approximately $14,000.00 a year. The defendant evidence is that her income is $360.00 per week. She has recently recommenced full-time work.

11 The assets of the Estate have been distributed. There is an issue over what assets constituted assets of the Estate. It is submitted on behalf of the plaintiff that the assets of DAJ Properties Pty Limited should be included as assets in the Estate. In effect what is submitted by the plaintiff is that the Glenorie property should be included as an asset of the Estate.

12 The Glenorie property was purchased for $460,000.00. The evidence is not clear as to the exact contribution made by the deceased nor the amount borrowed which was subject to the National Australia Bank mortgage. However, it was conceded that all the purchase monies, with the exception of $20,000.00 provided by the defendant, were provided by either the National Australia Bank or the deceased. It is suggested that the deceased’s contribution towards the purchase of Glenorie came from the net proceeds of sale of the Telopea property. Once again the evidence is unclear in respect of the sale of the Telopea property. Whilst it is not in issue that the property sold for $175,000.00, it is not known what amount the deceased received by way of net proceeds of sale of that property.

13 DAJ Properties Pty Limited is the trustee for the Johnston Unit Trust. The shareholders in DAJ Properties Pty Limited were the deceased and the defendant. The plaintiff submits that as the deceased was the major shareholder and the controlling party of both the Trust and DAJ Properties Pty Limited he entered into a prescribed transaction namely using his personal funds to acquire the Glenorie property through the Johnston Unit Trust. Therefore, as it is a prescribed transaction it is subject to Pt 2 Div 2 of the Family Provision Act.

14 As the child of the deceased the plaintiff is an eligible person pursuant to s 6(1)(d) of the Act and therefore is entitled to bring an application pursuant to s 7 of the Act. Section 7 provides that the court may make an order for such provision out of the estate or the notional estate or both of a deceased person as, in the opinion of the court, ought, having regard to the circumstances at the time the order is made, to be made for the maintenance, education or advancement in life of the eligible person.

15 The Court’s power is, however, constrained by s 9(2) which states that an order under s 7 may not be made unless the Court is satisfied that the provision (if any) made in favour of the eligible person by the deceased person, either during the person’s lifetime or out of the person’s estate is, at the time the Court is determining whether or not to make such an order, inadequate for the proper maintenance, education and advancement in life of the eligible person.

16 In Singer v Berghouse (1994) 181 CLR 201, the Court said:-

“It is clear that, under the provisions, the court is required to carry out a two stage process. 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. The second stage, which only arises if a determination is made in favour of the applicant, requires the court to decide what provision ought to be made out of the deceased’s Estate for the applicant. The first stage has been described as a “jurisdictional question”. That description means no more than that the court’s power to make an order in favour of an applicant under s 7 is conditional upon the court being satisfied as to the state of affairs predicated in s 9(2)(a).”

17 Later on the Court said:-

“The determination of the first stage in a two stage process calls for the assessment of whether the provision (if any) made was inadequate for what in all the circumstances, was the proper level of maintenance etcetera appropriate for the applicant having regard, amongst other things, to the applicant’s financial position, size and nature of the deceased’s Estate, totality of the relationship between the applicant and the deceased, and the relationship between the deceased and other persons who have ligitamant claims upon his or her bounty.”

18 The deceased died intestate. Therefore, the provisions of s 61B(3B) of the Wills Probate and Administration Act, 1898 apply to the deceased’s Estate. Provision has been made out of the Estate for the plaintiff in the sum of $92,754.68. During the deceased’s lifetime he had regular contact with the plaintiff. There was no issue concerning the issue and quality of the relationship between the plaintiff and the deceased. It was regarded by all as a good and loving relationship. After the plaintiff’s mother and deceased separated the deceased paid maintenance each week of $30.00 until 1994 when he increased the maintenance to $100.00 each week. The affidavit evidence of the plaintiff’s mother was that the deceased provided other financial support for the plaintiff. This support extended to providing funds for the plaintiff to purchase a guitar and have music lessons, provide outfits, uniforms and fees for his sporting events and payment of sports camps during the school holidays. There was also payment of fees for mathematics tuition. All education fees were paid by the deceased and lunch money was provided to him on a regular basis. The deceased stopped paying maintenance towards the end of 1995. The reason for the cessation of the maintenance payment was because of the amount of time that the plaintiff was now spending with the deceased. Subsequently, in 1996 the plaintiff resided with the deceased until his death.

19 There were no extra-ordinary payments made by the deceased during his lifetime to the plaintiff. The expenditure by the deceased on the plaintiff was no more, no less than the type of financial outlay made by any loving parent to a child which is within the financial capacity of the parent. There has been no additional provision made beyond those payments to the plaintiff. The deceased died intestate. Therefore, of course, it cannot be said that the deceased made provision out of his estate for the plaintiff. However, the statutory regime set out in s 61B of the Wills Probate and Administration Act means that on the defendant’s assessment of the value of the assets of the deceased’s estate, the plaintiff received the sum of $92,754.68. The revised estimate of the estate by the defendant meant that the net value of the estate was $336,000.00. When the statutory formula is applied to that, the figure that I have mentioned is the entitlement of the plaintiff in respect of his father’s estate. It is submitted on behalf of the plaintiff, however, that the estate’s true value is arrived at by including the Glenorie property. For the purpose of quantifying the estate, it is submitted on behalf of the plaintiff that an amount of $480,000.00 should be ascribed to the Glenorie property. Therefore, the total assets of the Estate come to $918,178.00. The liabilities total $441,160.24. It is submitted on behalf of the plaintiff that to get to a true value of the assets of the estate there should be deducted a further amount of $92,755.00 being, in rounded figures, the amount that the plaintiff received out of the estate. Therefore, the net value of the estate is $384,263.00. Therefore, using the statutory formula under s 61B of the Wills Probate and Administration Act, the plaintiff would have been entitled to $117,131.50 from the estate.

20 Currently the plaintiff’s assets stand at $160,000.00 plus two motor vehicles valued in total at $11,500.00 plus other items whose value is not significant. The plaintiff is a twenty-one year old man who is single and has no liabilities. He has $120,000.00 available to him immediately and has at call a loan of $40,000.00 to his mother. He therefore has a pool of assets worth $160,000.00. These assets have been created as a result of the tragic death of his father. His evidence is not particularly clear on what he regards as his need for the future. There is, rather belatedly, some evidence that he would like to attend TAFE in order to obtain the Higher School Certificate. However, there was no evidence before me which indicated that he had actually taken steps to enrol in a course, although, I think having regard to the age of the plaintiff and having regard to the uncontested evidence and the level of support given to him by the deceased, it is my view that but for the tragic death of the deceased, the plaintiff may well have continued at a selective high school and achieved a result which would have enabled him to go on to tertiary education. There is also some evidence that he wishes to become a motor mechanic and have his own garage. Once again, there is no evidence put on by the plaintiff in this regard. It would seem to me that if he is serious about this career path there would have been some material put on concerning the cost of setting up in business and something more concrete than his involvement in that industry to date. There is no guarantee that he will continue as an apprentice motor mechanic.

21 The plaintiff also seeks provision from the Estate to enable him to purchase a property. He has given evidence of enquiries he has made in the Wentworthville area of townhouses and villas. The range of prices is $285,000.00 to $360,000.00. The plaintiff has annexed to his affidavit of 13 November 2002 property profiles of two properties in the Wentworthville area.

22 In Shearer v The Public Trustee, unreported, 21 April 1998, Young J said:-

“Where the applicant is a spouse it is now a days usually thought to leave a spouse with a mere right of residence is insufficient provision. However, that is not the case with children, and as far as I am aware it has never been said by any court that it is an obligation that the community expects a mother will leave a child in a position where the child has a house of his or her own.”

23 It would seem to me that at best the only obligation that may be imposed by the Court on the estate would be to provide an amount of money which would give the plaintiff a sufficient amount to put down as a deposit on a property. The plaintiff, however, asserts that because he is unemployed the fund of money that he has is being reduced because he is not entitled to Centrelink benefits. In my view, that is not an appropriate reason to make additional provision for the plaintiff in respect to the acquisition of a home. The plaintiff is a twenty-one year old man with no physical impediments or health problems. He has not worked since May of this year and there has been no reason given why he has not been able to continue in the workforce. It seems to me that the plaintiff is in a position where he could obtain employment and thus have access to loans through either building societies, mortgage brokers or banks.

24 In the plaintiff’s evidence he talks about future dreams. It seems to me, however, that what is required to be considered under the terms of the Act are needs as at the time the proceedings are heard rather than dreams of what the plaintiff may wish to do with his life at some stage in the future. By his own admission, his career as a motor mechanic has not been very successful. In the absence of any evidence supporting a genuine intention by the plaintiff to continue in that career path and to one day be in a position to own his own business, I give his evidence very little weight.

25 Leaving aside the question of whether there is notional estate, the plaintiff as to date received approximately 27% of the value of the estate according to the evidence of the defendant. Even taking into account the submissions by the plaintiff, the plaintiff has received a significant amount from the estate, namely 24% of the net value of the estate.

26 The defendant’s evidence is that she has discharged all debts of the estate and has used monies she has received from various proceedings to pay out the loans on the Glenorie property. She has received $281,300.24. From that total she has paid out $199,168.91 in respect of fees and mortgages in relation to the Glenorie property. Therefore, it seems to me that she has made a significant contribution to that asset. It is submitted on behalf of the plaintiff that the property should be declared notional estate. However, having regard to the factors set out in s 27 of the Act, it would be inappropriate to declare as notional estate the Glenorie property. In my view, having regard to the fact that the relationship between the defendant and the deceased ran for seven years with no suggestion that it was an unhappy relationship or that neither party worked in that relationship as equal partners in their different roles and of the significant contribution the defendant has made to the Glenorie property since the death of the deceased, it would not be appropriate to make an order and declaring the Glenorie property as notional estate of the deceased.

27 The defendant’s evidence is that she has only recently resumed employment. Her evidence is that because of the traumatic circumstances surrounding the tragic death of the deceased, she was unable to resume work for a lengthy period of time. Prior to the death of the deceased the defendant had been forced to give up full-time work because of a riding accident. Therefore, the defendant is left in a position where, although she is now back in full-time employment she only earns $360.00 per week. She has entered into another de facto relationship. However, her evidence was that her de facto partner only earns $14,000.00 a year as a part-time bus driver. Her evidence was that he was a builder. However, because of physical disabilities he is unable to continue in that trade. Therefore, the likelihood is that he will not be able to resume work on a full-time basis and may be dependent on casual or part-time work for the foreseeable future. Therefore, the position is that the defendant is the major income earner in that relationship. However, her income could not be regarded as a high income. Her evidence is that she has had to take out another loan to enable her to defend these proceedings. Her weekly expenses amount to $333.00 thus leaving from her own income a surplus of only $27.00 a week. She is not in a position, should anything major be required in respect of maintenance or renovations on the house or any unforeseen expense arises, to meet those expenses. To make provision for the plaintiff it would require the defendant to either sell the Glenorie property or use it as security to obtain a loan to pay out the plaintiff. The defendant does not appear to be in a position where she has the financial capacity to extend the existing loan to encompass any payment that may be awarded from the estate.

28 Conversely, the plaintiff is in a position where he has realisable assets of $160,00.00. He is young, healthy and has the opportunity to obtain employment or to further his education. He has as a buffer the assets to fall back on if he seeks to retrain or continue with his education. Alternatively, he has sufficient capital to enable him to put a sizeable deposit on a villa or townhouse which would leave him with a mortgage, on the figures that he has provided of somewhere in the vicinity of $150,000.00 to $200,000.00. In this day and age a mortgage of that size is not unusual.

29 Therefore, in all the circumstances, I am not persuaded that the plaintiff has made out a case that additional provision should be made for him pursuant to s 7 of the Act. The orderI make therefore is:-

1. The proceedings be dismissed.

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Last Modified: 11/26/2002