Poche v Poche

[2020] NSWSC 835

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Poche v Poche [2020] NSWSC 835

Hearing dates:

29, 30 and 31 July 2019. Last written submissions dated 12 August 2019.

Date of orders:

30 June 2020

Decision date:

30 June 2020

Jurisdiction:

Equity

Before:

Henry J

Decision:

See paragraph [353]

Catchwords:

SUCCESSION – Family provision – claim by adult son – whether adequate and proper provision made for plaintiff by modest provision in will – where plaintiff’s financial situation deteriorated after deceased made her will – where defendant, the other adult son, had a strong competing claim to deceased’s estate – extent of provision made by deceased to plaintiff and defendant during lifetime – where plaintiff took over the family business – where plaintiff and defendant provided with property – where defendant had legitimate expectations to bulk of estate comprising 50% interest in property – where plaintiff’s income significantly reduced and unable to service debt and expenses – where value of remaining cash assets in deceased’s estate not small – further provision ordered

COSTS – Family provision – excessive costs – where legal costs disproportionate and exceed claim for provision – where total legal costs far exceed the value of cash assets available for distribution – where probate and other claims made and abandoned prior to and at hearing – whether costs capping order should be made – family provision costs capped at $125,000 – other costs orders made

Legislation Cited:

Civil Procedure Act 2005 (NSW), ss 60, 98

Succession Act 2006 (NSW), ss 59, 60

Uniform Civil Procedure Rules 2005 (NSW), r 42.1, 42.19(2), 42.4

Cases Cited:

Askew v Askew [2015] NSWSC 192

Bates v Cooke [2015] NSWCA 278

Baychek v Baychek [2010] NSWSC 987

Blendell v Byrne [2019] NSWSC 583

Brown v Grosfeld [2011] NSWSC 1429

Chan v Chan [2016] NSWCA 222

Chapple v Wilcox (2014) 87 NSWLR 646; [2014] NSWCA 392

Cringle v Cringle [2018] NSWSC 1558

Drivas v Jakopovic [2018] NSWSC 1803

Gorton v Parks (1989) 17 NSWLR 1

Grant v Roberts; Smith v Smith; Roberts v Smith; Curtis v Smith [2019] NSWSC 843

Hampson v Hampson [2010] NSWCA 359

Harris v Harris [2018] NSWSC 552

Lloyd-Williams v Mayfield (2005) 63 NSWLR 1; [2005] NSWCA 189

McCosker v McCosker (1957) 97 CLR 566; [1957] HCA 82

Meres v Meres [2017] NSWSC 285

Nudd v Mannix [2009] NSWCA 327

Perpetual Trustee Co Ltd v Baker [1999] NSWCA 244

Re the Estate of Hodges; Shorter v Hodges (1988) 14 NSWLR 698

Rogers v Rogers [2018] NSWSC 1982

Sgro v Thompson [2017] NSWCA 326

Shorten v Shorten (No 2) [2003] NSWCA 60

Singer v Berghouse (1993) 114 ALR 521; [1993] HCA 35

Slack v Rogan; Palffy v Rogan (2013) 85 NSWLR 253; [2013] NSWSC 522

Squire v Squire [2019] NSWCA 90

Steinmetz v Shannon (2019) 99 NSWLR 687; [2019] NSWCA 114

Steinmetz v Shannon [2019] NSWCA 114

Stone v Stone [2019] NSWSC 233

Vigolo v Bostin (2005) 221 CLR 191; [2005] HCA 11

Walker v Harwood [2017] NSWCA 228

Whisprun Pty Ltd v Dixon (2003) 200 ALR 447; [2003] HCA 48

Wilson v Porada; The Estate of Peter Wolfgang Porada, late of Pericoe (No. 2) [2017] NSWSC 1362

Texts Cited:

Nil

Category:

Principal judgment

Parties:

Adam Poche (Plaintiff)
Wayne Poche (Defendant)

Representation:

Counsel:
C Birch SC (Plaintiff)
L Ellison SC (Defendant)

Solicitors:
Yates Beaggi Lawyers (Plaintiff)
Glass Goodwin Solicitors (Defendant)

File Number(s):

2016/322373

Publication restriction:

Nil

Judgment

1. In these proceedings, the plaintiff, Adam Poche, claims provision from the estate of his late mother, Brenda Poche, who died in 2016 at the age of 74 (deceased).

2. The defendant, Wayne Poche, is the plaintiff’s brother and the only other child of the deceased and her late husband. Wayne is the sole executor and trustee under the deceased’s last will made on 10 May 2015.

3. The deceased left an estate valued at approximately $2.3 million. The bulk of her estate was left to Wayne and only a small proportion to Adam.

4. Adam commenced these proceedings by summons filed on 28 October 2016 seeking an order for provision pursuant to s 59 of the Succession Act 2006 (NSW). It is not in dispute that he is an eligible person under the Succession Act and that the proceedings were commenced within time.

5. Without intending any disrespect, in these reasons I refer to the parties and their family members by their first names.

Background

6. The deceased was born on 2 September 1942 and died on 4 July 2016. Her husband, Frederick Poche (known as Fred), predeceased her in 2006. Adam was born on 1 April 1968. Wayne was born on 26 January 1971.

7. Of significance in this case is the Poche family tool making and engineering services business, which I refer to in these reasons as the Poche Engineering business, and the extent of provision made to Adam over the deceased’s life and the gifts received by Wayne.

8. The Poche Engineering business was founded by Fred’s father. From the late 1980’s, Adam and Wayne worked in the business with Fred.

9. In 2008, the deceased transferred the Poche Engineering business and assets to Adam and Wayne ceased working there. Adam claims that he paid for the assets, that the business had little value at the time of transfer and that he had to sell it in 2017 as a consequence of the difficult economic environment, leaving him with significant debts and current needs.

10. Also of relevance are other property assets, including property located on Bay Parade, Malabar (Bay Pde property) and on Dacre Street, Malabar (Dacre St property).

11. Adam and his family have lived at the Bay Pde property since 1995. It was given to Adam by Fred and the deceased in 2000 as part of a “property swap” involving Wayne.

12. The Dacre St property was the Poche family home. The deceased inherited it on Fred’s death and remained living there until she died in 2016.

13. Wayne and his family also lived in the Dacre St property, having moved there in 2009. In December 2008, the deceased gave Wayne and his wife a 50% interest in the property and has bequeathed to Wayne the remaining 50% interest under her will.

14. In addition to the issue about the extent of provision, Adam claims to have needs as he is unemployed, has health issues which make him unfit for work and presently has to support himself by borrowings against the equity in property.

15. Wayne has put his own financial and other personal circumstances in issue in the proceedings. It is not in dispute that he has concerns about his future employment and has had serious health issues in the past.

16. At the hearing, Adam’s Senior Counsel accepted that Wayne has a reasonable expectation that the Dacre St property will remain his home and contends that Adam’s claim for provision, which is for the amount of $600,000 plus some costs, could be met by Wayne without the necessity for a sale of the Dacre St property.

17. A complicating factor in this case is the amount of legal costs incurred by the parties in these proceedings. Together, Adam and Wayne’s actual legal costs are more than $1 million, exceed Adam’s claim for provision and the amount of available cash assets in the estate. Unfortunately for both parties, it is inevitable that they will both have to bear a costs burden, irrespective of the outcome of Adam’s claim for provision.

The deceased’s last will

18. By her last will made on 10 March 2015, the deceased left:

1. a legacy of $20,000 to her cousin, Judith Hartwig;

2. 15% of her cash, shares and deposits (cash assets) to Adam; and

3. 85% of her cash assets, her 50% interest in the Dacre St property and the residue of her estate to Wayne.

19. The will includes, at paragraph 5, a statement as to the reason the deceased had not bequeathed any further of her estate to Adam which is, in summary, because the deceased had, in her lifetime, given or procured the transfer of eight identified classes of assets to Adam, most of which relate to the Poche Engineering business.

20. In paragraph 6 of the will, the deceased sets out further reasons in which she acknowledges that Adam was given the identified assets with an associated $2.4 million loan, asserts that the value of the assets he received outweighed the loan and more than Wayne has received, and makes statements critical of Adam and his conduct towards her.

21. Adam disputes the accuracy of the deceased’s statements in clauses 5 and 6 of the will. I return to that issue later in these reasons.

The deceased’s estate

22. Probate of the deceased’s last will was granted to Wayne on 13 October 2016.

23. The deceased left an estate with an estimated value, for probate purposes, of $2,035,530, comprising the deceased’s 50% interest in the Dacre St property (then valued at $1.15 million), cash assets, which included superannuation ($862,530) and a Volkswagen Tiguan motor vehicle ($23,000). At the time of probate, Adam’s 15% entitlement under the will was valued at around $129,379.50.

24. The legacy to Judith Hartwig has been paid out by the estate, amounting to $21,350 (including interest). The estate has paid other expenses since the deceased’s death, including $59,710.24 in legal fees relating to these proceedings, probate fees totalling $9,916, funeral expenses in the amount of $17,750 and accounting fees totalling $10,989. It has also sold the deceased’s motor vehicle for $17,000 which was deposited into the estate’s bank account.

25. The gross estate (excluding legal costs) is currently valued at $2,371,927.04, as follows:    

Assets	Value
50% share of Dacre St property (agreed value $3.35 million)	$1,675,000.00
CBA Complete Access account	$170.00
Netbank Saver account	$596.00
Westpac Choice account	$14,967.52
Westpac Business Transaction account (superannuation)	$750,618.28
Tax refund	$6,800.00
Add back legal costs	$59,710.24
Sub-total	$2,507,862.04
Less anticipated expenses (excl legal costs)
Accounting, audit, ASIC and ATO fees	$9,000.00
Tax in superannuation benefit [1]	$126,935.00
Sub-total	$135,935.00
TOTAL	$2,371,927.04

1. Updated figure provided at hearing by Senior Counsel for Wayne at T19.30.

26. In his executor’s affidavit dated 2 July 2019, Wayne makes a claim of $10,000 for commission as executor of the deceased’s estate, at a rate of 0.05% of the value of the estate, and $10,000 for the costs of completing administration of the estate, including the passing of accounts and claiming commission. As these amounts are not agreed by Adam and were not included in the supplementary submissions received from Wayne’s Senior Counsel on 12 August 2019, I have not included them in my calculations.

27. Based on the above, I calculate the total estate to be $2,371,927.04 and the value of the cash assets [2] available for distribution to be $696,927.04. Based on Adam’s entitlement under the deceased’s last will to 15% of the cash assets, I calculate his existing entitlement to be $104,539.06, and Wayne’s total entitlement to be $2,267,387.98 .

    2. The gross investments amount is calculated as the gross distributable estate less the value of the Dacre St property interest and the anticipated expenses.

28. This calculation does not take into account legal costs, which I deal with in more detail later in these reasons.

Further facts

The Poche family and the Poche Engineering business

29. Adam started working in the Poche Engineering business when he was 19 years old. He started as a salesman and has been mainly involved in dealing with customers and the management of the business.

30. During 1998 to 2003, and while working for the Poche Engineering business, Adam completed a Diploma in Financial Advising from the Securities Institute of Australia.

31. Wayne began working at the Poche Engineering business in 1989, when he was 18, initially as an apprentice fitter and turner. He completed his apprenticeship in about 1993.

Poche family property transactions: 1995 to 2003

32. In 1995, Adam and his wife, Melissa, moved into the Bay Pde property. At the time it was owned by Poche Engineering Pty Ltd (PE), one of the Poche Engineering business corporate entities. Fred had inherited the Bay Pde property from the estate of John Stepanoff, known to the Poche family as Uncle Jack.

33. After moving into the Bay Pde property, Adam and Melissa spent approximately $60,000 to $80,000 in maintenance and repair costs. Between 1995 and 2000 (when title was transferred to them), Adam and Melissa did not pay any rent to PE or Fred.

34. In 1995, Adam and Melissa bought an investment property at Mendos Place, Engadine (Engadine property) for $215,000. They paid $40,000 deposit and obtained a loan and mortgage for the balance.

35. On 28 February 1998, Poche Engineering Services Pty Ltd (PES) (another Poche Engineering business entity) and Wayne purchased a property at Banksia Street, Botany (Banksia St property) for $291,000 as tenants in common in equal shares. PES paid the deposit of $29,100 and a loan and mortgage was obtained from the ING bank for the balance

36. On or around 6 October 2000, PES transferred its half share in the Banksia St property to Kim and the ING bank mortgage on the property was discharged. By that time, PES had made mortgage payments to the ING Bank totalling $62,133.17.

37. On discharge of the ING mortgage, Wayne and Kim refinanced and obtained a loan and mortgage on the Banksia St property from the State Bank, which they paid. The State Bank mortgage was discharged when Wayne and Kim sold the Banksia property in 2003. (T204:32-205:6; Ex 11)

38. Sometime in 2000, following a discussion with Fred, Adam agreed to transfer the Engadine property to Wayne and Kim. In exchange, Fred agreed to give the Bay Pde property to Adam and Melissa.

39. On 6 September 2000, the Bay Pde property was transferred from PE to Adam and Melissa. Adam and Melissa paid the stamp duty on the transfer. At the time, the Bay Pde property was valued at $580,000, had no mortgage but was held as collateral security for PE’s business.

40. On or about 23 October 2000, Adam and Melissa transferred the Engadine property to Wayne and Kim. Wayne and Kim paid the stamp duty on the transfer. At the time, the Engadine property was valued at $300,000, Adam and Melissa had paid $25,000 towards the mortgage (in addition to the $40,000 deposit) and a mortgage of $150,000 remained.

41. In 2003, Wayne was diagnosed with cancer, lymphoblastic lymphoma. He started chemotherapy treatment in August 2003, which lasted for two and half years.

42. That year, Wayne and Kim sold the Engadine property for $410,000 and the Banksia St property for $410,000. They purchased a property in Chifley for approximately $710,000 which had a mortgage of $340,000 which they paid.

Events leading to transfer of Poche Engineering business to Adam: 2005 to 2008

43. By 2005, Adam and Wayne were handling the day-to-day operations of the business and Fred was considering retirement. Adam focussed on the finances, customers and back office and Wayne managed the manufacturing processes as the factory floor manager.

44. At this time, the Poche Engineering business comprised three entities.

45. The main trading entity was PES. Since around 2002, PES had operated from a factory located at Broadhurst Road, Ingleburn (Ingleburn property), which was owned by another Poche Engineering business entity. In the 2005 financial year, PES had sales of $2,673,941, total assets valued at $541,366, total liabilities of $505,457 and total equity of $35,909 (CB1183-7).

46. PE was the other trading entity. It owned a factory located at Sir Joseph Banks Street, Botany (Botany property) that was rented to a third party. The business had operated out of the Botany property from around 1985 to 2002. In the 2005 financial year, PE had total assets of $1,052,406, total liabilities of $674,843, and total equity of $377,563 (CB1164-1173).

47. The third entity was Poche and Sons Pty Ltd (Poche and Sons), the trustee of the Poche Family Trust. Poche and Sons owned the Ingleburn property. In the 2005 financial year, the Poche Family Trust had total assets of $2,012,842, liabilities of $2,016,508 (the bulk of which was a bank loan of around $1.99 million) and net assets of -$3,665 (CB1202).

48. In addition, the deceased and Fred were members and beneficiaries of the Poche Superannuation and the FAP Superannuation funds which, for the 2005 financial year, had member balances totalling $931,515. According to Adam’s evidence, the money in the superannuation funds had been accumulated by Fred taking around $150,000 to $180,000 from the Poche Engineering businesses over a six year period (Affidavit, Adam Poche, 2 February 2018 at [75]).

49. Sometime in 2005, Wayne, Adam and Fred, together with a business consultant, Rick Manietta, met and discussed options to enable Fred to retire and gradually withdraw from the Poche Engineering business.

50. Mr Manietta had prepared a written proposal that detailed a refinance structure which relevantly referred to borrowing $1.5 million to go towards the payout of debt, PES borrowing $250,000 to purchase Telstra share options from the Poche Family Trust, and Fred and the deceased borrowing $187,000 to purchase the 38ft Mariner boat from their superannuation fund (and thereby make the fund compliant). Fred had purchased the Mariner boat in around 2000 and it had been used by the family since that time.

51. Mr Manietta’s proposal also recommended that Fred and the deceased sell 100% of their shareholding in PES to Adam and Wayne for $1 million, with Fred and the deceased investing the sale proceeds into their superannuation fund.

52. Wayne’s evidence about that meeting, which was to the effect that he felt ambushed by it and was asked to put in the proceeds of his Chifley house and, with Adam, borrow the balance of $2 million to buy the Poche Engineering business, was challenged in cross-examination. Wayne did not have a clear recollection of everything that was discussed at the meeting or about the proposed structures. He accepted that, at the time, he did not want to go into debt, believed that he would not have to purchase the business from Fred on his retirement and understood that the family companies carried significant debt of around $2.3 million in around 2006 to 2008 (T174:20-32; T177:44-47).

53. The evidence indicates that nothing was done to progress the sale by Fred and the deceased of the Poche Engineering business to Adam and Wayne following the meeting with Mr Manietta. Although, presumably acting on Mr Manietta’s advice, in late 2005, Fred purchased the Mariner boat in his name and took out a loan from the National Australia Bank (NAB) in the amount of $187,000 which was secured by a mortgage over the Dacre St property (CB 673).

54. When Fred died in 2006, the deceased inherited his estate, which relevantly included the Dacre St property, the Mariner boat, shares in the Poche Engineering business and his interest in the Poche Superannuation and the FAP Superannuation funds. She also became responsible for existing NAB liabilities, of around $2.3 million.

55. On 22 May 2006, just after Fred died, Wayne and Kim purchased a property at Lucas Avenue, Malabar (Lucas Ave property) for $900,000, with a mortgage of $600,000. They paid the deposit of around $360,000 after selling their Chifley property. It is not in dispute that PES contributed towards the mortgage payments on the Lucas Ave property, paying around $28,800.

56. Wayne’s evidence is that Adam told him not to worry about PES paying the mortgage repayments as he had a “share portfolio funded by the company” and they were getting “looked after equally as well” (Affidavit, Wayne Poche, 26 March 2017 at [42]; Affidavit, Wayne Poche, 5 September 2018 at [27]-[29]). Adam denies the conversation with Wayne relating to a share portfolio paid by the family business but does not dispute that he said that he was being looked after equally as well (Affidavit, Adam Poche, 2 November 2018 at [40]).

57. Adam and Wayne continued to work at the Poche Engineering business after Fred’s death. It is not in dispute that they did not get along. According to Adam’s evidence, it was untenable for him to work with Wayne so his offer was always either to acquire the business or simply leave (Affidavit, Adam Poche, 2 February 2018 at [35]).

43. In around March 2008, Adam, the deceased and Wayne attended a meeting with Philip Passaro, the accountant for PES and related entities, to discuss the future of the Poche Engineering business.

44. Although there is conflicting evidence as to who initiated the meeting and why, I am satisfied that the differences between Wayne and Adam and their working styles and the challenges faced by PES as a consequence of the global financial crisis and loss of a customer were key factors.

45. At the meeting, Adam, the deceased and Wayne discussed a range of options and reached agreement on what would happen with the Poche Engineering business going forward. While there is also conflicting evidence as to what was discussed and all that was agreed, it is not in dispute and accords with Adam’s contemporaneous diary note and a letter written by Adam in July 2009, that Adam, the deceased and Wayne agreed that:

1. Adam would take ownership of the Poche Engineering business with all assets and debts, thereby leaving the deceased debt-free;

2. Wayne would build onto the Dacre St property and would be given the house when the deceased died; and

3. Wayne would leave the Poche Engineering business but receive $1,500 per week adjusted to CPI every end of financial year and keep one of the two company cars with all other expenses paid by the company ceasing. There is a dispute as to how long Wayne was to be paid $1,500, which is not now necessary to resolve.

61. According to Adam, it was also agreed that he would receive the remainder of the deceased’s estate when she died and the Poche Engineering business would pay half of Wayne’s rent if he opted to build.

Transfer of the Poche Engineering business to Adam: July 2008

62. In July 2008, the deceased transferred her interests and shares in, and Adam became the owner of, the Poche Engineering business entities and associated assets.

63. The unaudited 2008 financial year statements and other documents in evidence disclose that, at around the time of the transfer of the Poche Engineering business to Adam:

1. PES had sales of $4,193,982, profit after tax of $73,968 and retained profits of $296,686. It had total assets of $1,362,241, made up principally of trade debtors of $515,505, inter-company loans of $232,971, stock of $127,500 and plant and equipment valued at just over $630,000. It also had total liabilities of just over $1 million, the bulk of which were employee entitlements of $524,038 and hire purchase charges relating to the plant and equipment of $247,158, leaving it with overall net assets and equity of $297,686 (CB682-8);

2. PE owned the Botany property which was, as at 1 April 2008, valued at between $650,000 and $750,000 and subject to a mortgage in favour of NAB. It was leased to a third party and generated income of around $42,000. PE’s financial statements show that PE had total assets of $311,129 (the Botany property was valued at cost at $270,387), total liabilities of $334,332 (the bulk of which were loans to PES and the Poche Family Trust) leaving it with a negative net assets and equity of -$23,203 (CB1374-5);

3. Poche and Sons, as trustee of the Poche Family Trust, owned the Ingleburn property which was, as at 2 April 2008, valued at $1.8 million and subject to a mortgage in favour of NAB. The financial statements show total assets of $1,861,489, the bulk of which was buildings at cost of $1.37 million, “shares in other companies” of $251,331 and a loan from PE of $190,255. It had total liabilities of $1,877,042, made up of loans from the deceased of $1,746,851 and PES of $103,847, leaving an overall negative net assets and equity of -$15,553 (CB1409-10); and

4. there were existing NAB liabilities totalling $2,307,661.34, which comprised, at the time, a PES overdraft facility in the amount of $150,000 (which was guaranteed by PE, Poche and Sons and the deceased); an outstanding bill facility in the amount of $1,963,000 in the deceased’s name; and a flexi-plus mortgage loan in the deceased’s name which, at 9 July 2008, had a debit balance of $194,661.34 and related to the Mariner boat (NAB liabilities) (CB663-5; CB676).

64. The transfer of the Poche Engineering business to Adam and assumption of the deceased’s debts were affected by the following transactions.

65. On or around 16 July 2008, PES transferred the goodwill, plant and equipment to Poche Engineering Australia Pty Limited (PEA), the General Partner in the Poche Engineering Australia Limited Partnership (PEALP). PEA did not pay any consideration for the transfer of the PES business but assumed the liabilities for employee entitlements and the hire purchase charges for the plant and equipment.

66. On the same day, Poche and Sons was appointed trustee for the Poche Property Trust, a new trust vehicle set up by Adam. The Botany property was transferred from PE to Poche and Sons for $700,000. The Ingleburn property was transferred from the Poche Family Trust to the Poche Property Trust for $1,500,000.

67. On or around 17 July 2008, Westpac Banking Corporation approved a commercial bill line in the sum of $2,245,000 and an overdraft facility in the sum of $150,000 (Westpac loans) to enable Adam and his associated entities to pay out the existing outstanding NAB liabilities totalling $2,307,661.34. The Westpac loans were secured by mortgages over the Botany property, the Ingleburn property and the Bay Pde property.

68. As a consequence of the transactions, the NAB liabilities were fully discharged, the Dacre St property was unencumbered and the deceased was left debt free.

69. In around July 2008, Wayne ceased working for the Poche Engineering business. While he was not paid out for any long service leave or holiday entitlements, PEA commenced paying him $1,500 per week and for expenses relating to a company car. Those payments ceased in August 2009 following a dispute between Adam, the deceased and Wayne to which I refer below.

Renovations to Dacre St property and transfer of 50% interest to Wayne

70. During late 2008 and early 2009, Wayne and his wife Kim built onto the Dacre St property. During the renovations works, the deceased moved out of the Dacre St property for approximately nine months. It is not in dispute that Adam and Wayne each paid 50% of her rent, of around $19,500.

71. In December 2008, the deceased transferred a 50% interest in the Dacre St property to Wayne and Kim which was recorded, for stamp duty purposes, at $550,000. The Dacre St property had been valued, as at June 2008, at $1.1 million.

72. Wayne’s evidence, which was not challenged in cross-examination and I accept, is that the deceased transferred the 50% interest to him in recognition that he and Kim were paying for the renovations.

73. There is a conflict between Adam and Wayne’s evidence as to the extent and cost of the renovations and whether the deceased also contributed to the cost and, and if so, in what amount. Given the passage of time and the deceased being unavailable to corroborate some of the assertions made, it is not now possible to resolve those disputes. In any event, I accept that Wayne and Kim contributed somewhere between $450,000 and $500,000 to the cost of renovations undertaken to the Dacre St Property in 2008/2009 and in 2011 using the net proceeds from the sale of their Lucas Ave property (of around $391,000), a loan from Westpac (of $65,000) and other available funds.

74. Wayne and Kim moved into the Dacre St property with the deceased in 2009. The deceased lived upstairs and Wayne and his family lived downstairs. After they moved in, Wayne and Kim paid for all council and water rates and charges, electricity and gas charges. The deceased paid for her own telephone and internet charges.

Disputes between Adam, the deceased and Wayne: July and August 2009

75. The transfer to Wayne and Kim of the 50% interest in the Dacre St property led to increased tension between Adam on the one hand, and the deceased and Wayne on the other.

76. On or about 12 July 2009, Adam sent a letter to the deceased, Wayne and Kim marked “without prejudice”. It was written after Adam had done a search on the title of the Dacre St property and found out that the deceased had transferred the 50% interest in the Dacre St property to Wayne and Kim. The letter is four and a half pages long and, in my view, instructive as it provides an insight into the family dynamics at the time.

77. In the letter, Adam refers to the “growing issues within our family” and that he had chosen to write rather than “everyone having a screaming match”. He refers to the unequal treatment of he and Wayne over the years and that he considered that the agreement reached at the March 2008 meeting was now “blown… out of the water” as Wayne and Kim had been given half of the Dacre St property. Adam refers to the support given to Wayne and Kim over the past year by the Poche Engineering business, which he estimates to be worth $130,000, including wages of $78,000. The letter ends by stating that he will not tolerate Wayne and Kim relying on him to provide them with an income.

78. Sometime in late July or early August 2009, Adam, Wayne, the deceased and Melissa met at the Dacre St property. It is not in dispute that Adam and Wayne discussed Wayne coming back to work with Adam at the Poche Engineering business with Adam, which Wayne refused. It is also not in dispute that Adam told Wayne that he was unable to continue paying Wayne $1,500 per week. Around this time, PES’s payments to Wayne of $1,500 per week ceased.

79. On 19 August 2009, the deceased sent a letter to Adam. She states her reason for writing to be because she finds it “very difficult talking to [him] on the phone or in person” as he “becomes aggressive and dominating as soon as [she] says something [he] does not agree with”.

80. In her letter, the deceased expresses disappointment that Adam has stopped paying Wayne $1,500 per week with CPI for life, which she asserts was the option agreed in return for Wayne leaving the business. The deceased explains that she gave Wayne 50% of the Dacre St property because he had spent $500,000 on the house. She also refers to Wayne and Kim being “extremely helpful and kind… since Fred died” and that she had been invited to their home at least once a week and they took time to call in, whereas Adam drove past “at least 14 times a week” and never called in.

81. At the end of the letter, the deceased refers to Adam as her son and states that she loves him very much and adores his boys. She also states that it looks like everything is going in a “devastating way and the whole family in tatters… [so] please just you and me try to work this all out”.

The dispute about the Mariner boat

82. The deceased’s 19 August 2009 letter to Adam also refers to the Mariner boat. In the letter, the deceased states that, at the March meeting, they decided that she would keep the boat, Adam would maintain it with the help of Wayne and that “the factory” could pay off the $180,000 that Fred had left. The deceased refers to the prospect of selling the boat as she has not had a holiday for ten years and would like to travel.

83. On or around 25 August 2009, Adam sent a letter to the deceased headed “letter of demand”. It is stated to be written “in response to written accusations of abuse (for which I absolutely deny) and an attack on my overall character”.

84. In his letter, Adam demands that the deceased sign over to him ownership of the Mariner boat by no later than 31 August 2009 because his business has paid all expenses. The letter asserts that Adam has been trying to negotiate a solution regarding Wayne’s financial future, that Adam is “astonished” that the deceased can oppose him “so bitterly” and asserts that Wayne has little regard for his own disputes. The letter concludes by inviting the deceased and Wayne to list any items for which Adam’s business is funding that they intend to sell or have little use for and he will take it off their hands.

85. On 26 November 2010, Adam sent another letter to the deceased about the Mariner boat demanding that she immediately transfer ownership to him by providing him with a signed copy of the registration papers. He threatens to cease making any further payments and to engage lawyers to seek reimbursement of all the moneys he has expended on the boat if she does not agree to do so.

86. The lawyers then got involved; Philip Monardo, at Monardo Solicitors, for the deceased and Patrick Lim, at Patrick Lim & Associates, for Adam. Over the course of about nine months, [3] they exchange correspondence about the Mariner boat. Ultimately, the dispute was resolved and the Mariner boat was transferred to Adam, in return for which Adam agreed to waive all claims in respect of the boat.

    3. Calculated on the basis the first email from Monardo to Lim was in December 2010 (see CB2704) and according to Wayne, the deceased told Wayne in August 2011 and that she had given Adam the boat (CB 369, Affidavit, Wayne Poche, 5 September 18).

87. Wayne’s evidence is that, other than an exchange of correspondence in December 2011 and two discussions with Adam in February 2012 and August 2012, he did not have any further conversations with Adam except for exchange of pleasantries when they saw each other at functions until shortly before his mother passed away.

Correspondence between Adam and Wayne after the deceased’s death

88. On 19 July 2016, Wayne wrote to Adam about the deceased’s will (CB 2721). The letter sets out the details of the will and attaches a copy. In the letter, Wayne offers to compromise “this break-up” by giving Adam 40% and Wayne taking 60% of the deceased’s investments, which Wayne estimates would give Adam a distribution of around $334,000. The last paragraph states that the letter is “without prejudice”, is “by no means a legal letter” and hopes that they “can work this out ourselves”.

89. On 27 July 2016, Adam responded to Wayne’s letter by email, copied to Adam’s solicitor in these proceedings. In his email, Adam refers to his disappointment with the will and that it was drawn at a time when there were concerns about the deceased’s onset of “Alzheimers”.

90. In his email, Adam rejects Wayne’s offer and asserts that a proper and fair distribution would be 50% of the entire estate, including 50% of the Dacre St property. He responds to the reasons set out in the deceased’s will, asserting that he did not receive assets and value of the nature described, that the total value of the assets received were $2.85 million with a debt of over $2.4 million, and that he provided the deceased with a fully maintained car, fuel and a fully paid mobile phone. Adam contends that he only received a value of $109,240 “for taking responsibility for all debts and exposures faced by [the deceased] that eventually cost him and Melissa over $1 million in ongoing business losses”. Adam’s letter refers to Wayne and Kim receiving 50% of the Dacre St property without his knowledge, which he describes as “an injustice”.

91. Adam’s email also states that, unless they agree to a position where he receives half of the estate, he will instruct his lawyers to lodge a caveat on probate and file a claim for provision, noting that his lawyers had already given him an estimate ranging between $175,000 and $200,000 for his fees alone.

92. As noted earlier, Adam commenced these proceedings by summons seeking provision under the Succession Act filed on 28 October 2016.

Legal principles

93. The Court may make an order for Adam’s provision out of the deceased’s estate if it is satisfied, at the time when the Court is considering the application, that adequate provision for his proper maintenance, education or advancement in life has not been made by the deceased’s will: s 59(1) of the Succession Act.

94. If the Court is satisfied, then it may make such order for provision out of the deceased’s estate as the Court thinks ought to be made for the maintenance, education or advancement in Adam’s life, having regard to the facts known to the Court at the time the order is made: s 59(2) of the Succession Act.

95. Section 60(1)(b) of the Succession Act provides that the Court may have regard to a range of matters set out in sub-section (2) for the purposes of determining whether to make a provision order and the nature of such an order.

96. The Succession Act does not prescribe the circumstances that constitute adequate provision for the proper maintenance, education or advancement in life, nor does it give greater or lesser weight to any of the various matters set out in s 60(2) to which the Court may have regard for the purpose of determining whether to make a provision order and the nature of any such order. Thus, the Court evaluates the provision actually made in the deceased’s will against the requirement for adequate provision for the maintenance, education or advancement in Adam’s life.

97. A multifaceted evaluative approach that takes account of all the factual circumstances relevant to the application is required in order to determine whether adequate provision was made for the proper maintenance, education or advancement in the plaintiff’s life: Sgro v Thompson [2017] NSWCA 326 at [6] and [66]-[67]; Harris v Harris [2018] NSWSC 552 at [30]-[31].

98. The relevant circumstances will include a consideration of the plaintiff’s needs, although there is a distinction between needs and adequate provision. Whether or not adequate provision has been made is not to be determined simply by a calculation of financial needs. Any consideration of the plaintiff’s needs also requires consideration of the size the estate and the claims of others on it: Chan v Chan [2016] NSWCA 222 at [22].

99. The words “maintenance”, “support” and “advancement” are not defined in the Act, but the concept of advancement can extend (in appropriate circumstances) to the provision of a sum of money to enable improvement of a person’s prospects in life: Vigolo v Bostin (2005) 221 CLR 191; [2005] HCA 11 at 228-229 (Callinan and Heydon JJ).

100. The question is not just whether the provision is “adequate” but whether adequate provision for the “proper” maintenance, support and advancement of the plaintiff has been made. This requires consideration of all the circumstances of the case: McCosker v McCosker (1957) 97 CLR 566; [1957] HCA 82 at 571-572 (Dixon CJ, Williams J).

101. The determination of what is adequate provision for the proper maintenance, education and advancement in life of a plaintiff is to be guided by applying the Court’s assessment of what is considered to be right and proper according to contemporary accepted community standards (Squire v Squire [2019] NSWCA 90 at [10]) or what is considered to be the moral duty of the deceased (Steinmetz v Shannon (2019) 99 NSWLR 687; [2019] NSWCA 114 at [44], [109]).

102. In appropriate cases, if the deceased was capable of, and did, give due consideration as to what provision for a plaintiff’s maintenance, education or advancement is proper, considerable weight may be given to the deceased’s testamentary wishes. This approach recognises that a testator is in a better position than the Court to make such an assessment. But the application of s 59 of the Succession Act is “not confined by notions of reluctance to interfere with freedom of testation”, although the Court’s assessment as to what is proper provision must be made when the Court is considering the application, rather than at the time of the deceased’s death or will: Steinmetz v Shannon (2019) 99 NSWLR 687; [2019] NSWCA 114 at [96]; Sgro v Thompson [2017] NSWCA 326 at [86]; Slack v Rogan; Palffy v Rogan (2013) 85 NSWLR 253; [2013] NSWSC 522 at [127].

103. Adam makes his claim as an adult child of the deceased. As there is no predisposition for or against the making of orders for provision for adult children, Adam’s application must be dealt with on its merits based on the evidence before the Court: Grant v Roberts; Smith v Smith; Roberts v Smith; Curtis v Smith [2019] NSWSC 843 at [166]-[169]; Steinmetz v Shannon (2019) 99 NSWLR 687; [2019] NSWCA 114 at [37].

93. Guidelines in relation to claims by adult children have developed in the authorities. They provide a “useful touchstone” and give assistance because they constitute a reflection of community values which assists with decision-making: Chapple v Wilcox (2014) 87 NSWLR 646; [2014] NSWCA 392 at [19] and [67], quoted with approval by Brereton JA in Steinmetz v Shannon (2019) 99 NSWLR 687; [2019] NSWCA 114 at [106]-[108].

94. The guidelines relevant to an application for an adult child are set out by Hallen J in Rogers v Rogers [2018] NSWSC 1982 at [207]. I respectfully adopt his Honour’s reasons set out there as follows:

(a)    The relationship between parent and child changes when the child attains adulthood. However, a child does not cease to be a natural recipient of parental ties, affection or support, as the bonds of childhood are relaxed.

(b)   It is impossible to describe, in terms of universal application, the moral obligation, or community expectation, of a parent in respect of an adult child. It can be said that, “ordinarily, the community expects parents to raise and educate their children to the very best of their ability while they remain children; probably to assist them with a tertiary education, where that is feasible; where funds allow, to provide them with a start in life, such as a deposit on a home, although it might well take a different form. The community does not expect a parent, in ordinary circumstances, to provide an unencumbered house, or to set [their] child up in a position where [they] can acquire a house unencumbered, although in a particular case, where assets permit and the relationship between the parties is such as to justify it, there might be such an obligation”: Taylor v Farrugia [2009] NSWSC 801 at [57]; McGrath v Eves [2005] NSWSC 1006; Kohari v Snow [2013] NSWSC 452 at [121]; Salmon v Osmond [2015] NSWCA 42 at [109].

(c)    Generally, also, “the community does not expect a parent to look after [their] children for the rest of [the child’s life] and into retirement, especially when there is someone else, such as a spouse, who has a prime obligation to do so. Plainly, if an adult child remains a dependent of a parent, the community usually expects the parent to make provision to fulfil that ongoing dependency after death. But where a child, even an adult child, falls on hard times and where there are assets available, then the community may expect parents to provide a buffer against contingencies; and where a child has been unable to accumulate superannuation or make other provision for their retirement, something to assist in retirement where otherwise they would be left destitute”: Taylor v Farrugia at [58].

(d)    There is no need for an applicant adult child to show some special need or some special claim: McCosker v McCosker; Kleinig v Neal (No 2) at 545; Bondelmonte v Blanckensee [1989] WAR 305; Hawkins v Prestage (1989) 1 WAR 37 at 45; Taylor v Farrugia at [58].

(e)    The adult child’s lack of reserves to meet demands, particularly of ill health, which become more likely with advancing years, is a relevant consideration: MacGregor v MacGregor [2003] WASC 169 at [179]-[182];Crossman v Riedel [2004] ACTSC 127 at [49]. Likewise, the need for financial security and a fund to protect against the ordinary vicissitudes of life are relevant: Marks v Marks [2003] WASCA 297 at [43]. In addition, if the applicant is unable to earn, or has a limited means of earning, an income, this could give rise to an increased call on the estate of the deceased: Christie v Manera [2006] WASC 287; Butcher v Craig [2009] WASC 164 at [17].

(f)    The applicant has the onus of satisfying the Court, on the balance of probabilities, of the justification for the claim: Hughes v National Trustees, Executors and Agency Co of Australasia Ltd (1979) 143 CLR 134 at 149; [1979] HCA 2.

Additional facts and matters: s 60(2) of the Succession Act.

The relationship between Adam and the deceased: s 60(2)(a)

106. The evidence establishes that the relationship between the deceased and Adam, particularly in the years after Fred died, was somewhat turbulent and marked by disagreements between them. Adam’s own evidence refers to his relationship with the deceased as “difficult” since adolescence, “volatile” during his life and “disastrous” over the last ten years since the death of Fred. Adam’s explanation is that the deceased was closer to and favoured Wayne which led to tension between Adam and the deceased.

107. The tension between Adam and the deceased is made clear by the terms of their correspondence in 2009 relating to the transfer of the 50% interest in the Dacre St property to Wayne and the dispute about the Mariner boat. The nature and content of that correspondence also make clear that Adam considered that the deceased treated him unfairly, as compared to Wayne, something which the deceased rejected.

108. In my view, the contents of the deceased’s August 2009 letter and the changes made to her testamentary wishes as recorded in her final will, reflect the deceased’s disappointment in Adam, particularly his decision to cease paying Wayne what she considered had been agreed in March 2008 and his demand for the Mariner boat. That said, the deceased’s letter also refers to her love for Adam, as her son.

109. There was no submission that there was a complete or irretrievable breakdown in their relationship or that Adam and the deceased were estranged during later years, although there is disagreement about the closeness of their relationship and extent of contact after Fred died.

110. No doubt the disagreements and tense relationship between the deceased and Adam led to periods of little contact between 2008 and 2016.

111. Adam explained in cross-examination that he did not visit the deceased at the Dacre St property, which he said was due to his dispute with Wayne. He also gave evidence that the deceased would come to his house, he spoke to her on the telephone at least twice a week in the last five years prior to her death and that he also saw her on special occasions, such as on Mother’s Day and Christmas (T62:47-63:16).

112. Wayne contends that Adam had little contact with the deceased after Fred died but accepts they saw each other for occasional dinners and for lunch on Mother’s Day and at Christmas. There are photographs in evidence of the deceased, Adam and his family at different events, such as Christmas and his son’s graduation.

113. In addition to keeping in contact with the deceased, Adam also gives evidence that he contributed to her welfare by paying for certain expenses, such as a holiday, her phone and a car. There is no evidence that Adam provided other forms of care and assistance to the deceased on a routine or daily basis, such as that provided by Wayne and Kim.

114. The conclusion I draw from the evidence is that there was a continuing and familial relationship between Adam and the deceased, although I would describe it as strained and much less close than the deceased’s relationship with Wayne, and also marked by periods of significant disagreement and less contact after Fred’s death.

The nature and extent of any obligations or responsibilities owed by the deceased to Adam and to Wayne: s 60(2)(b)

115. Adam’s evidence is that the deceased did not have any obligations or responsibilities towards him because he had assumed all her liabilities and indebtedness by taking over the Poche Engineering business (Affidavit, Adam Poche, 10 February 2017, para [29]).

116. Nevertheless, as her son, Adam was a natural object of the deceased’s testamentary bounty. The same, of course, can be said about Wayne. The deceased’s last will, and her earlier wills, recognise Adam and Wayne as competing claimants on her estate and that she had some continuing moral obligation to each of them.

117. Over the years, the deceased (with Fred) provided support to both Adam and Wayne, although there is a debate as the value of the financial support provided to each of them.

118. In final submissions, Adam’s Senior Counsel accepted that Wayne had a legitimate expectation to the deceased’s 50% interest in the Dacre St property and Adam accepted in cross-examination that he was not surprised and expected that the deceased would leave it to Wayne (T33:3-10).

The deceased’s estate: s 60(2)(c)

119. I have already outlined the nature and extent of the deceased’s estate.

120. The value of the estate available for distribution is not insignificant, around $2.3 million if the 50% interest in the Dacre St property is included.

121. The value of the estate’s cash assets which are available for distribution is around $696,000, and would be much less, around $398,000, if Wayne’s costs of the proceedings were to be deducted.

Adam and Melissa’s personal and financial circumstances and needs: ss 60(2)(d), (e), (f) and (g)

122. At the date of the hearing, Adam was 51. He lives with Melissa, aged 52, and their three sons, Max, Jack and Charlie (aged 20 and 18) at the Bay Pde property, which they own.

123. Before turning to Adam and Melissa’s current circumstances, it is necessary to say something about the sale of the Poche Engineering business in 2017 and other matters which impact on their present financial position.

Poche Engineering business: post 2008 and sale in 2017

124. Adam’s evidence is that, after he took over the Poche Engineering business, it suffered a downturn in business and recorded losses, which ultimately led to what he describes as its “demise”.

125. He says that the difficulties facing the business were caused, in part, by the effects of the global financial crisis in 2008/2009 and the loss in 2009 of a major customer, Hitachi Construction Machinery Co Limited (HCM), which led to litigation concerning alleged copyright infringement.

126. The financial statements in evidence identify a nearly $2 million reduction in sales in the two years after Adam took over the business; from around $4.2 million by PES in the 2008 financial year down to around $2.4 million by PEA in the 2010 financial year. The evidence also confirms that HCM and PEA were involved in ongoing disputes that led to PEA commencing legal proceedings against HCM in 2009 which were resolved in 2011 with PEA paying out to HCM the sum of $30,000.

127. Adam also says that losses were incurred after he spent over $1 million redesigning the Ingleburn property to make it fit to take on work after a request in 2012 from an important customer, Sandvik AB, to take over their manufacturing business in Newcastle. Adam’s evidence is that this work did not eventuate in any significant amount due to the drop in coal prices. It is not possible to assess the cost of this work or the impact on the business as there are no financial statements in evidence relating to the Poche Engineering business after the 2010 financial year or other documents in evidence relating to the works undertaken at the Ingleburn property.

128. Adam’s evidence is that, in 2014, he undertook a restructure of the Poche Engineering business to try and manage the issues it faced. PEA sold the goodwill, plant and equipment to Poche Engineering Holdings Pty Limited; a new company also named Poche Engineering Australia Pty Ltd was incorporated and started trading the business; and PEA and another related company that provided labour to PEA were both placed into voluntary liquidation.

129. Adam’s evidence is that by late 2016, he concluded that he should try and sell the business as the cost base was too high, demand from customers was low and many were not paying within 30 days. There were also ongoing costs associated with short-term finance of $300,000 related to the business and it could no longer meet expenses which gave rise to a risk of insolvent trading. Adam also gives evidence that he expected to receive a “fair entitlement” from the deceased’s estate and use the proceeds to meet the financial difficulties faced by the business.

130. Contracts were exchanged on 28 March 2017 for the sale of the Poche Engineering business and assets and the Ingleburn property for a total purchase price of $3,850,000. The business and assets were sold for $1.4 million. The Ingleburn property was sold for $2,450,000, with the sale completing on 24 May 2017.

131. The Business and Asset Sale Agreement includes a non-compete clause that prohibits Adam from working in any business in competition with the sold business for a maximum period of three years. I note that Adam’s evidence was that it prohibited him from working for five years (Affidavit, Adam Poche, 10 April 2018, para [64]).

132. Some months after the sale of the business, the newly established company, Poche Engineering Australia Pty Ltd, was placed into liquidation.

133. Adam’s evidence is that, after paying secured and other creditors (including the ING bank which, at the time, held mortgages over the Ingleburn and Botany properties (CB447 and 449)), he received $1,172,452.68 and continued to have other liabilities from the liquidator of one of the family companies and the ATO of $496,904.84, according to documents in evidence (CB1741 and 1742).

134. Adam’s evidence is that he dispersed the $1,172,452.68 he received from the sale of the business as follows:

1. $170,000 was placed into Adams and Melissa’s superannuation fund, known as the Adliss Superannuation Fund;

2. $50,000 was paid to the ATO to meet personal income tax liability for the financial year ended 30 June 2017;

3. $300,000 was spent buying shares in Comet Ridge Limited;

4. $265,000 was paid towards legal expenses; and

5. the balance of $387,452.68 was placed into an account to meet his family’s expenses and the costs of these proceedings. Adam’s evidence is that this amount was consumed within a short time to meet mortgage repayments, living expenses and to pay some legal costs.

135. According to Adam’s 10 February 2017 affidavit, prior to the sale of the business, he and Melissa had no monthly income because the business could not afford to pay them and they met their monthly expenses, estimated at that time to be $11,000 per month, on credit facilities secured against assets and repayment of loans made by them to the Poche Engineering business.

136. Adam was cross-examined on this evidence and said that he and Melissa were receiving amounts from the business equivalent to “our weekly wages” of around $87,000 each on which no tax was paid because they were categorised as loan repayments (T53:18-44). Their income tax returns also demonstrate that Adam and Melissa had combined taxable income of $202,048 and $95,181 in the 2016 and 2017 financial years.

137. I also note that, in his February 2017 affidavit, Adam estimates the value of his total assets to be $5,910,000 based on a valuation of the Ingleburn property at $1.8 million and the Poche Engineering business of only $250,000, yet those assets were sold for a combined value of $3.85 million only six weeks later.

138. In those circumstances, I do not accept Adam’s February 2017 estimate of the value of his assets and liabilities or his evidence that he had no monthly income to be an accurate reflection of his financial position at that time.

Financial position in 2018

139. Adam’s evidence is that, as at April 2018, he and Melissa were unemployed and their only income was the rental from the Botany property, which they had retained after the business was sold.

140. According to his summary of assets and liabilities, he had assets valued at $4,194,670, which included the Botany property valued at $1.3 million (which was not subject to any encumbrance) and the Bay Pde property valued at $2.2 million subject to a home loan of $1,515,000. They had other estimated liabilities of $1,230,500, of which $1.1 million was attributed to “liquidators and creditors”. As noted above, the documents in evidence identify $496,904.83 relating to claims by a liquidator and the ATO. It is not clear what the balance of the claimed liabilities, around $600,000, comprises. As noted at [134], Adam’s evidence is that he did not use the funds received from the sale of the business to pay down his home loan or those other liabilities.

141. In April 2018, Adam estimated his monthly expenditure to be $38,316, of which $26,000 was for legal fees.

142. In addition to the legal costs of around $640,000 which Adam has paid in these proceedings, Adam’s evidence is that he has spent a further $210,000 on legal fees incurred in pursuing legal proceedings to recover $418,000 which he and Melissa advanced to acquire shares in a company, referred to in this case as the Shilkin proceedings.

143. According to Adam, he and Melissa advanced the $418,000 in 2012 and 2014 using funds from their superannuation account and commenced the Shilkin proceedings in March 2018. Documents in evidence indicate that Adam and Melissa advanced the funds from 2011 to 2016.

144. Adam’s evidence is that he has asked his solicitor to discontinue his and Melissa’s claim in the Shilkin proceedings because of doubts about the ability to recover from the named defendants and no longer having the financial resources to maintain the proceedings. In other words, and as was put to and accepted by him in cross-examination, $630,000 of Adam’s “hard‑earned money has been waved goodbye” (T78:36-37).

Current employment and financial position

145. Adam has not worked since he sold the Poche Engineering business in mid-2017. He suffered from some health issues in 2019 and claims that he is unfit to work for 12 months from July 2019, to which I refer below.

146. Melissa commenced full-time work as a Client Service Officer in late November 2018. She has a net monthly income of $3,670, which increases to $4,438 if she does overtime.

147. Adam and Melissa estimate that their combined monthly income, after tax, is $11,063. In addition to Melissa’s income, they receive $4,588 per month in rent from the Botany property and approximately $2,500 in return from their racehorse activities.

148. Two of Adam and Melissa’s sons (aged 20 and 18) are at university. They occasionally work part-time but do not contribute to household expenses.

149. Adam’s evidence is that his other son (aged 18), has a strain of Autism (Asperger’s syndrome) and requires ongoing support as he has difficulties maintaining employment or study.

150. Adam and Melissa support their sons by paying for their car and health insurance, petrol and mobile phone charges.

151. Adam and Melissa estimate their monthly expenditure to be $21,327, which is almost double their current monthly income. Adam’s evidence in his affidavit of July 2019 was that he and Melissa are reliant on their credit cards to pay their monthly expenses and borrowing against the equity in property.

152. Adam and Melissa’s monthly expenses include $6,066 in mortgage repayments on the Bay Pde property, $2,000 on groceries, $2,130 on life insurance policies, around $1,300 on membership fees to yacht, golf and turf clubs, just under $1,000 for five mobile phones, internet and Foxtel, around $2,400 on maintaining and training their racehorses and $2,125 on other expenses, including hobbies, gifts, clothes and shoes.

153. At the hearing, the Bay Pde property was valued at $1.9 million. It is subject to a Macquarie Bank home loan and mortgage of $1,590,174.

154. According to a building inspection report prepared by Mr Weeks from Jim’s Building Inspections dated 27 June 2019, the Bay Pde property is in a fair condition, although considerable remediation works are required due to subsistence within the subfloor structure and further maintenance of the property is required to rectify three minor defects. Mr Perigo, a building consultant, examined Mr Weeks’s report and provided what was described as a “guesstimate” to Adam’s lawyer of the likely cost to rectify the structural damage to be $116,500.

155. As at the date of the hearing, Adam and Melissa’s assets and liabilities were identified as follows:

Assets	Estimated Value
Bay Pde property (agreed value)	$1,900,000.00
Botany property	$1,500,000.00
Interest in horses	$26,000.00
Mariner boat	$130,000.00
Bank accounts	$34,377.00
2005 Toyota Hilux vehicle	$2,000.00
2005 KIA Carnival vehicle	$525.00
Jewellery	$12,000.00
Superannuation	$99,511.00
Balance of MCM loan	$124,309.12
Total assets	$3,828,722.12
Liabilities
Home loan: Bay Pde property	$1,590,174.00
MCM loan: mortgage over Botany property	$650,000.00
Credit cards	$15,662.00
Legal fees: Horton Rhodes Legal (Shilkin proceedings)	$34,116.00
Invoices: P J Passaro & Co	$9,460.00
NSW Revenue Land Tax	$15,365.00
PAYG withholding obligations	$263,805.00
Total liabilities	$2,578,582.00
TOTAL	$1,250,140.12

313. Wayne also abandoned his cross-claim during oral closing submissions on the last day of the hearing.

314. Estimates were provided by the parties that sought to identify the costs attributable to the different claims. As with the quantum of costs, there was a significant disparity in approach to outcomes.

315. Of the $641,400.80 of legal costs that Adam has paid, his solicitor estimates that $76,235.07 (12%) is attributable to the probate claims, $39,561.16 (6%) to the cross-claim and the balance, which equates to $525,604.57 (82%), to the provision claim. This breakdown does not deal with the costs attributable to Adam’s contributions claim or the costs that he had not been paid as at the date of the hearing, of $119,419. I assume that similar proportions apply to the unpaid costs, and have allocated 85% to the provision claim and 15% to the cross-claim and the contribution claim. Accordingly, I calculate Adam’s costs in relation to the family provision claims to be around $627,110.72.

316. As to Wayne’s legal costs of $298,405.60, the breakdown provided by his solicitor attributes $102,687.09 (34%) to the probate claims and $82,341.26 (28%) to the provision claim. This breakdown does not deal with the costs attributable to the contribution claim or cross-claim, the disbursements of $85,000 (including Senior Counsel’s fees), or the balance of the solicitor fees of $28,377.25. I have calculated Wayne’s costs of the family provision claim to be around $145,000, based on the solicitor’s costs of $82,314.26, a proportion of $55,000 of the disbursements and a proportion of just over $7,500 in respect of the balance of the solicitor’s fees.

Legal principles

323. Ordinarily, costs follow the event unless it appears to the Court that some other order should be made: Uniform Civil Procedure Rules 2005 (NSW), r 42.1 (UCPR). Where a party discontinues or abandons a claim the usual rule is that the party must pay the other party’s costs in respect of those costs: UCPR, r 42.19(2).

324. While these rules apply to family provision proceedings, the award of costs is a matter in the exercise of the Court's discretion, which is unfettered other than to exercise it judicially: Civil Procedure Act2005 (NSW), s 98(1).

325. The Court recognises that it may be appropriate to make costs orders in family provision proceedings which deviate from the usual approach in accordance with the rules particularly as a feature of family provision cases is that they are concerned with the distribution of a fixed pool of assets and parties are often more concerned to vindicate their position than to resolve the dispute in an efficient and cost effective manner such that the Court is willing to consider the overall justice of the case in making a costs order: Singer v Berghouse (1993) 114 ALR 521; [1993] HCA 35 at 521-522; Baychek v Baychek [2010] NSWSC 987 at [21]-[25] (Baychek).

326. The Court has the power to make an order capping costs in family provision proceedings retrospectively at the end of a hearing and in cases where the value of the estate is greater than $500,000: UCPR, r 42.4; Civil Procedure Act2005 (NSW), ss 60 and 98; Nudd v Mannix [2009] NSWCA 327 at [26], [27]; Baychek at [17]; Wilson v Porada; The Estate of Peter Wolfgang Porada, late of Pericoe (No. 2) [2017] NSWSC 1362 at [33]-[39] (Wilson); Askew v Askew [2015] NSWSC 192 at [126].

327. Factors relevant to determining whether to make a capping order and the amount of a cap include whether the costs are excessive having regard to the nature of the case, the size of the estate and the amount claimed. The Court may also have regard to the costs incurred by another party in determining the amount that could reasonably be expected to be recovered where the work required to be done by the plaintiff and the defendant are approximately equal: Baychek at [25], [31]; Brown v Grosfeld [2011] NSWSC 1429 at [23].

328. The general rules applicable to the award of costs also apply to probate proceedings, as they do to other contested litigation. This means that the Court has a broad discretion to award costs and, ordinarily, orders for costs should “follow the event”, with the consequence that the unsuccessful party is ordered to pay the successful party’s costs: Civil Procedure Act 2005 (NSW), s 98; UCPR, r 42.1; Walker v Harwood [2017] NSWCA 228 at [52].

329. Two exceptions to the general rule that costs follow the event have been recognised to apply in probate litigation, being:

1. where the testator has, or those interested in the residue have, been the cause of litigation, the costs of the party who unsuccessfully challenged the will may be paid out of the estate; and

2. if the circumstances reasonably called for an investigation of the will, the costs may be left to be borne by those who incurred them.

See: Re the Estate of Hodges; Shorter v Hodges (1988) 14 NSWLR 698 at 709; Perpetual Trustee Co Ltd v Baker [1999] NSWCA 244 at [13]-[14]; Shorten v Shorten (No 2) [2003] NSWCA 60 at [14]-[15].

What costs order(s) should be made?

Family provision claim

330. In relation to the family provision claim, Adam’s Senior Counsel submits that, if provision was ordered, an appropriate order or “reasonable allowance” should be made for Adam’s costs, noting that he would only be entitled to a party-party order in the usual event and accepting that the Court has the power to limit any order to be made.

331. Wayne’s Senior Counsel did not advance any submission on the costs of the family provision claim in the event Adam obtained provision, other than to say that Wayne was not in a position to service a mortgage of $700,000 if that was the impact of any provision and cost orders made in favour of Adam together with Wayne’s costs.

332. As Adam has had some success, I consider it to be appropriate to make an order that Wayne pay Adam’s costs of the family provision claim but capped at the amount of $125,000. I have come to that view for the following reasons.

333. First, I am satisfied that the costs incurred by Adam in relation to the family provision claim are disproportionate to the success he has had. His costs are around $627,000, significantly more than the provision of $350,000. His costs are also in an amount that is relatively close to the value of the available cash assets in the estate, from which he accepted an order for provision should be made.

334. Second, Adam’s costs attributable to the family provision claim are significantly, more than four times, greater than the family provision claim costs incurred by Wayne of $145,000 (on an indemnity basis).

335. The significant disparity between the costs incurred on behalf of Adam compared to Wayne is inexplicable, even allowing for the scope of the notices to produce issued to Adam. While that notice was extensive, many of the paragraphs sought the same documents just for different years and companies. Costs were also incurred by Adam on affidavits that had to be updated on more than one occasion and contained evidence that was, in parts, objectionable and unread, and of marginal relevance having regard to the nature and size of the provision claim.

336. Third, I have also had regard to the estimates referred to by Slattery J in Wilson at [43]. His Honour referred to a standard family provision case conducted over two days with a handful of witnesses on each side costing around $70,000 to $80,000 and a complex four day case incurring costs of $120,000 to $140,000. This case completed in two and a half days with only four witnesses. Even allowing for some inflation cost since October 2017, the recovery of costs capped at $125,000 does not seem unreasonable.

337. I accept that this involves a broad brush approach and that it involves some heavy cost capping but, in the circumstances of this case, I consider it appropriate.

Probate claims

338. In relation to the probate claims, Adam’s Senior Counsel submits that there should be no order as to costs as it was reasonable for Adam to investigate the deceased’s will in circumstances where both sides of the family had serious concerns about the deceased’s memory and the conclusions in Associate Professor Caplan’s report, notwithstanding he was ultimately unable to confirm the deceased had capacity at the time she made her wills. Adam also submits that it was reasonable to commence proceedings because it was quicker, cheaper and reasonable to utilise the Court’s processes in circumstances where Adam had already made a claim for provision.

339. Wayne’s Senior Counsel submits that the usual rule that costs follow the event should apply. That is, as Adam abandoned the probate claims, an order should be made for Adam to pay Wayne’s costs. He submits that this case does not fall with the recognised probate exception because the deceased was not the cause of the litigation. He also argues that it is difficult for Adam to contend that the deceased lacked the capacity to make wills from 2009 to 2015 when she had had the capacity to transfer to Adam the Poche Engineering business in 2008.

340. I am not persuaded by Adam’s submission and consider it is appropriate in this case for an order to be made that Adam pay Wayne’s costs of the probate claim.

341. While Associate Professor Caplan’s report indicates that Wayne and Kim had concerns about the deceased’s memory and that she undertook tests in 2011, the concerns raised by Kim, which are recorded in the report, relate to the deceased’s forgetfulness, such as forgetting what people said on occasion, as well as well as depression, rather than concerns about the deceased’s lack of capacity to consider and make decisions relating to her assets or claims on her estate. The report notes that, in 2011, the deceased was independent in her daily activities, and while she had trouble “remembering recent events”, managed her own investments, dispensed her own medication without problem and scored on average to high on a range of tests relating to cognitive function.

342. Associate Professor Caplan’s report refers to the deceased being diagnosed with Mild Cognitive Impairment or mild cognitive problems in 2011 but relevantly notes that Mild Cognitive Impairment is defined as a condition with evidence of “modest cognitive decline which does not interfere with capacity for independence in activities of daily living, even complex ones …”. The report also notes that the deceased’s cognitive deficits in 2011 were not severe and could be consistent with depression and anxiety. It also refers to evidence in medical reports in 2016 which indicate an absence of evidence of cognitive decline and absence of irrational thinking and delusions, the existence of which might be suggestive of some lack of testamentary capacity.

343. In those circumstances, and in the absence of other evidence, I am not satisfied that the information contained in Associate Professor Caplan’s report is sufficient to conclude that the deceased’s conduct, habits or mode of life in 2011 or later gave real ground for Adam to question her testamentary capacity at the time she made her wills, particularly the ones she made in 2009 and 2010: Shorten v Shorten (No 2) [2003] NSWCA 60 at [19]-[20]; Perpetual Trustee Co Ltd v Baker [1999] NSWCA 244 at [14].

344. I am also not persuaded that Wayne should have to bear the burden of the costs relating to the probate claims because Adam considered it quicker, cheaper and reasonable to utilise the Court’s processes, to commence them at the time he did. Wayne’s costs in relation to the probate claims are not insignificant and have been wasted as a result of Adam’s claims, which have now been abandoned. As this is, in effect, inter partes litigation between beneficiaries, I consider it appropriate that Wayne recovers costs, rather than having to personally bear the impost on his testamentary bounty.

345. Accordingly, I will make an order for Adam to pay Wayne’s costs in relation to the probate claims on an ordinary basis.

Contribution claim and cross-claim

346. As Adam and Wayne abandoned their respective contribution claim and cross-claim on the last day of the hearing, the usual approach would be to order Adam and Wayne to pay the other party’s costs. At the hearing, their Senior Counsel did not advance any submission that the usual approach should not apply to these claims.

347. The contribution claim and cross-claim appear to have been very much secondary to the other claims advanced by Adam in the proceedings. Adam and Wayne’s Senior Counsel did not refer to their respective claims in opening submissions and there was little evidence adduced on the issues raised.

348. Based on the limited information available to me, I consider it open to infer that the costs incurred by Adam and Wayne in advancing and responding to each of these claims were minimal compared to the costs they incurred in relation to the family provision and probate claims. I also consider it open to infer that Wayne and Adam have incurred costs of a similar amount in defending the claim advanced by the other, given the less than $40,000 attributed to the cross-claim by Adam’s lawyer, and because the factual disputes raised by each claim were limited in nature

349. In those circumstances, I consider that it seems to me that it would be more consistent with case management principles and the overall justice of this case to make no order as to costs in relation to these claims, with the intent that each party is to bear their own costs.

Other matters

350. I note that no submission was made that costs that have been paid by Wayne at the date of the hearing should be paid by him personally and not by the estate, despite orders being made by Hallen J on 7 May 2019 that reserved Adam’s right to make such a submission.

351. In any event, Wayne is the only other beneficiary of the deceased’s estate, as well as the executor, and the provision order is by way of a lump sum payment. Wayne is entitled to any residue cash after payment of Adam’s provision and costs and other expenses from the estate. In those circumstances, I do not consider it necessary to make an order that Wayne is entitled to indemnity out of the estate for his costs of the proceedings.

352. Finally, if either party considers that some other costs order should be made, they are to confer with the other party and, within 14 days, notify my Associate that a variation to the costs order is sought. They should also provide an agreed timetable for the exchange of short written submissions and advise whether they are content for the issue of costs to be determined on the papers.

Orders

353. For these reasons, I make the following orders:

1. In lieu of the provision made for the plaintiff by the deceased’s will made on 10 March 2015, the plaintiff is to receive provision of a lump sum payment in the amount of $350,000 out of the deceased’s estate.

2. Order that no interest is to be paid on the lump sum if it is paid within 28 days of the making of these orders; otherwise, interest calculated at the rate prescribed by s 84A(3) of the Probate and Administration Act 1898, on unpaid legacies, is to be paid from that date until the date of payment of the lump sum.

3. The plaintiff’s costs of the claim in these proceedings for an order for provision pursuant to s 59 of the Succession Act 2006 (NSW) be paid out of the deceased’s estate on an ordinary basis and capped in the sum of $125,000.

4. The defendant’s costs of the claims made in paragraphs 1, 2, 3, 6 and 7 of the further amended statement of claim filed on 29 July 2019 be paid by the plaintiff on an ordinary basis.

5. Make no order as to costs in relation to the plaintiff’s claim for contribution, as contained in paragraph 9 of the further amended statement of claim filed on 29 July 2019, and the defendant’s amended cross-claim filed on 1 July 2017, with the intent that each party is to pay their own costs of those claims.

6. Direct that any application to vary the costs orders in 3 to 5 above be made by no later than 14 July 2020 by arrangement with my Associate.

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Endnotes

Amendments

01 July 2020 - [340] Amend "Wayne" to "Adam".

[341] Amend "deceased" to "deceased's".

02 July 2020 - Catchwords – In the tenth sentence, “50%” amended to “50% interest”.

[63](b) In the third sentence, “Poche Property Trust” amended to “Poche Family Trust”.

[63](d) In the first sentence, “in the name deceased’s name” amended to “in the deceased’s name”.

[84] Extra space and extra full stop after the second sentence deleted.

[140] In the fifth sentence, the cross-reference from “paragraph [136]” amended to “paragraph [134]”.

[154] In the second sentence, “Mr Week’s” amended to “Mr Weeks’s”.

[186] In the second sentence, “major depressive order” amended to “major depressive disorder”

[209](e) The full stop after “and” deleted.

[253] In the first sentence, “PES” amended to “PES’s”.

[327] In the first sentence, “capping under” amended to “capping order and …” .

[341] In the second sentence, “mediation” amended to “medication”.

[347] In the second sentence, “or” amended to “and …”.

Decision last updated: 02 July 2020