Schmidt v Walter

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

TESTATORS FAMILY MAINTENANCE LIST

S CI 2016 04134

IN THE MATTER of Part IV of the Administration and Probate Act 1958

- and –

IN THE MATTER of the Will and Estate of KLAUS RICHARD SCHMIDT (a pseudonym), deceased

BETWEEN:

BERNHARD SCHMIDT (a pseudonym) (who brings this proceeding by his Administrator, State Trustees Limited)	First Plaintiff
JENS SCHMIDT (a pseudonym) (who brings this proceeding by his Administrator, State Trustees Limited)	Second Plaintiff
v
MICHAEL WALTER (who is sued as one of the Executors of the Estate of Klaus Richard Schmidt, deceased)	First Defendant
KLAUS HORST SCHMIDT (a pseudonym) (who is sued as one of the Executors of the Estate of Klaus Richard Schmidt, deceased)	Second Defendant
MARCUS SCHMIDT (a pseudonym)	Third Defendant

AND BETWEEN:

S CI 2016 04980

ANNA WAGNER (a pseudonym)	Plaintiff
v
MICHAEL WALTER (who is sued as one of the Executors of the Estate of Klaus Richard Schmidt, deceased)	First Defendant
KLAUS HORST SCHMIDT (a pseudonym) (who is sued as one of the Executors of the Estate of Klaus Richard Schmidt, deceased)	Second Defendant
MARCUS SCHMIDT (a pseudonym)	Third Defendant

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JUDGE:	Daly AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	20, 21, 22 and 25 February 2019, 6 and 13 March 2019
DATE OF JUDGMENT:	21 June 2019 (revised version published 23 September 2019)*
CASE MAY BE CITED AS:	Schmidt (a pseudonym) & Anor v Walter & ors; Wagner (a pseudonym) v Walter & ors
MEDIUM NEUTRAL CITATION:	[2019] VSC 385

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TESTATORS FAMILY MAINTENANCE – Application for a family provision order out of the deceased’s estate under Part IV of the Administration and Probate Act 1958 (Vic) (‘Act’) by State Trustees on behalf of two sons with intellectual disabilities and, separately, by the deceased’s de facto partner – Whether the deceased had met his obligation to make adequate provision for the plaintiffs – Personal estate substantially smaller than shown in the inventory of assets by reason of most assets being speculative shares – Personal estate insufficient to satisfy pecuniary legacies and provide further support for disabled sons – Whether family household is to be sold with part of the proceeds of sale to be used to provide the de facto partner with secure accommodation for life and the remainder be utilised to meet the claims of the deceased’s children – Relevance of the factors under s 91(4) of the Act – Testator’s primary moral obligation to his surviving spouse – Re Marsella; Marsella v Wareham [2018] VSC 312, referred to – Consideration of disabled sons’ entitlement to National Disability Insurance Scheme (NDIS) funding – King v White [992] 2 VR 417, Shah v Perpetual Trustee Company (1981) 7 Fam LR 97, Coller v Coller [1998] VSC 80, referred to – Unclear how much of the diminution of the value of the estate since the deceased’s death can be sheeted home to the executor beneficiary – Principle of freedom of testation – Testamentary intention of the deceased to retain the property for the plaintiffs and the executor beneficiary with his children to live in – Grey v Harrison [1997] 2 VR 359, considered and applied – Property retained with proposed framework for distribution of proceeds in the event the property is sold.

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*On 23 September 2019, orders were made to the effect that the names of the deceased, family members of the deceased, and companies associated with the deceased would be anonymised, in order give effect to the privacy provisions of the National Disability Insurance Scheme Act (Cth) 2013.

S CI 2016 04134

APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr P Pascoe	State Trustees Limited Legal Branch
For the First and Second Defendants	Mr R Wells	Pearce Webster Dugdales
For the Third Defendant	Mr S Pitt	McDonald Slater & Lay

S CI 2016 04980

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr S Gannon	KHQ Lawyers
For the First and Second Defendants	Mr R Wells	Pearce Webster Dugdales
For the Third Defendant	Mr S Pitt	McDonald Slater & Lay

TABLE OF CONTENTS

Introduction and background..................................................................................................... 1
Anna, the Schmidt family, and the Donvale property........................................................... 12
Jens and Bernhard and the National Disability Insurance Scheme..................................... 17
The position and conduct of Klaus Jr...................................................................................... 25
The position of Marcus.............................................................................................................. 31
The relevance of costs................................................................................................................. 34
Relevant legal principles........................................................................................................... 34
Section 91(4) factors..................................................................................................................... 40
Resolution.................................................................................................................................... 48

HER HONOUR:

Introduction and background

Klaus Richard Schmidt (‘deceased’) died on 30 November 2013, at the age of 76. He was born in Germany in 1935, and migrated to Australia in 1958. He had a successful business career, becoming the finance director and part owner of a company which held the exclusive distribution licence for AEG power tools in Australia. He retired in the late 1980s, and afterwards devoted his time and (at that time) considerable financial resources[1] to investing in the share market, primarily in speculative mining and energy stocks, with the assistance of his son, Klaus Horst Schmidt (‘Klaus Jr’).
[1]His initial injection of funds into the family trust through which much of the family’s investment activities was conducted was $1.2 million.

Klaus Jr is the eldest son of the deceased. He was born in 1970, and is now 49 years of age. The deceased and his ex‑wife, Marie, had three further sons, Jens, now aged 47, Marcus, now aged 44, and Bernhard, now aged 41. Both Jens and Bernhard are profoundly intellectually disabled, with Bernhard’s situation also compounded by additional chronic physical health issues, including epilepsy and tuberous sclerosis.

The deceased and Marie separated in 1984, and divorced in 1987. Klaus Jr and Marcus stayed with their father at the family home, a one acre property in Donvale (‘Donvale property’). There was a family law dispute between the deceased and Marie, which resulted in Marie having sole custody of Jens and Bernhard, and the deceased making a substantial cash payment to Marie.[2] Thereafter, Jens and Bernhard stayed with the deceased at the Donvale property on a regular basis until 2003, attending a five day a week program for people with intellectual disabilities during the school year.
[2]On 13 July 1988 an agreement was reached whereby the deceased paid Marie $568,648.00 and forgave a loan to her of $68,648.00.

After 2003, the deceased and Marie shared the care of Jens and Bernhard on a week about basis until the death of the deceased. From time to time there were disputes between the deceased and Marie, and subsequently Klaus Jr and Marie, regarding the residency and access arrangements for Jens and Bernhard. After the death of the deceased, Marie obtained a guardianship order in relation to Jens and Bernhard. State Trustees Limited (‘State Trustees’) was appointed as the administrator of each of Jens and Bernhard, and has control over their financial affairs. State Trustees has brought the first of the two proceedings concerning the estate of the deceased (‘estate’) on behalf of Jens and Bernhard, seeking further provision from the estate pursuant to Part IV of the Administration and Probate Act 1958 (Vic) (‘Act’).

The plaintiff in the second proceeding concerning the estate, Ms Anna Wagner, is the former domestic partner of the deceased. Anna is 64 years of age, and was born, and lived most of her adult life in the former German Democratic Republic (‘East Germany’). She first met the deceased in 1999, having been put in touch with the deceased by the deceased’s sister, who also lives in Germany. She and the deceased spoke regularly by telephone, and she first visited Australia in May 1999, staying with the deceased and his family at the Donvale property.

Anna was an engineer by occupation, spending her working life in a waste conversion facility in East Germany. However, it became apparent during the course of the trial that her role was more that of a technical assistant rather than as a professional engineer, as would be understood in Australia. She lived in modest circumstances, owned no real estate, and had no dependents.

The long distance relationship between the deceased and Anna continued, with each party visiting the other in their home countries until September 2002, when Anna was retrenched by her employer. Between December 2002 and March 2006, Anna stayed with the deceased at the Donvale property on a series of visitor visas. She was granted permanent residency in March 2006 by reason of being the deceased’s partner, and has lived permanently in Australia since then. The quality and strength of the relationship between Anna and the deceased is undisputed, and is evidenced by, among other things, a letter from the deceased to the then Department of Immigration and Multicultural and Indigenous Affairs dated 14 November 2005, where the deceased was almost gushing in his praise for Anna and her commitment to him and his family.

In 2006, Anna was 52. While her English is now quite good for someone who migrated to Australia as a mature adult, no doubt at the time she migrated to Australia it was of an insufficient standard to pursue a career in her field of expertise. She was wholly dependent upon the deceased for accommodation and financial support, and she had no other family or friends in Australia. She became a fulltime home maker, caring for the deceased and his family, including Jens and Bernhard, and Klaus Jr’s children, who she treats as her own grandchildren. She brought with her to Australia approximately $30,000.00 to $40,000.00 in savings from her redundancy package, which she invested in the share market, on the advice of the deceased. Those savings have been eroded over time. She currently receives Centrelink benefits of $587.60 per fortnight, and also relies upon Klaus Jr for financial support. From April 2020, she will receive a pension from the German government of 1222 euros per month (approximately $2,000.00 per month at the current exchange rate). It is unclear what impact Anna’s receipt of a pension from Germany will have upon her entitlement to Centrelink benefits, noting that Anna becomes eligible for the Australian aged pension (which is subject to an income test) in late 2020. While her physical health is quite good, she suffers from quite serious mental health problems, being depression and anxiety.

As noted above, Klaus Jr is 49 years of age. He was very close to his father, and is estranged from his mother. He has lived at the Donvale property with the deceased for much of his life after the divorce of his parents, and continues to live there with Anna and one of his children. Klaus Jr graduated from Deakin University in 1992, with a double degree in accounting, marketing and economics. After he graduated, he worked with his father on a full time basis at the Donvale property, assisting him with his share trading activities. He received no salary, but the deceased paid for all of his living expenses. This continued until the death of the deceased. Since then, share trading has continued to be his fulltime occupation, utilising the resources of the Schmidt family trust (‘family trust’),[3] the family investment company, Tinnid Pty Ltd (‘Tinnid‘), and his own resources. Save for the years between 2005 and 2014, when he lived with his then domestic partner and their two young children in a property purchased by the family trust at Wantirna (‘Wantirna property’), he has lived at the Donvale property. Since 2015, he has been the primary carer for his two children (now aged fourteen and twelve), although by the time of the trial of these proceedings, his teenage daughter had gone to live with her mother. He has never been engaged in any formal employment.
[3]The trustee of the family trust is Tenedo Pty Ltd (‘Tenedo’).

Marcus also lived with his father after the divorce of his parents, but moved to live with his mother during his university studies. This caused a temporary estrangement between him and his father. He graduated with a Bachelor of Computing (Hons) at Monash University in 1997. He commenced work as a software developer after graduation, has been continuously employed in that field since that time, and now earns approximately $150,000.00 per year (including superannuation contributions). He lives with his wife and children at a property in Mont Albert North inherited from his wife’s mother, upon which they have built a new home using funds borrowed by them. They have two children, both of whom have been diagnosed with high functioning autism. As a consequence, his wife is unable to return to regular employment, and is now a fulltime homemaker. Marcus was a director of and is a shareholder in the family investment company, Tinnid, but apart from a series of motor vehicles, some furniture and white goods, some dividends from Tinnid and a contribution to the cost of landscaping of his new home, he has received no financial benefits from the deceased or the family trust since finishing university. He had occasional contact with the deceased, Anna and the rest of his family during the lifetime of the deceased, mainly at Christmas and other special occasions, but very limited contact since then, being busy with his work and his own family. He has very little contact with Jens and Bernhard, generally on occasions when he visits his mother.

The deceased left a will dated 30 September 1997 (‘original will’), which was prepared by a solicitor, along with two codicils dated 8 June 2008 (‘2008 codicil’) and 29 September 2013 (‘2013 codicil’), which were prepared without legal assistance. The original will includes the following clauses:

I APPOINT KARL HEINZ STEPP Company Director, and my son [KLAUS HORST SCHMIDT] (hereinafter called ‘my Trustees’) to be Executors of this my Will and Trustees of my Estate.
I GIVE DEVISE AND BEQUEATH the whole of my Estate both real and personal unto my Trustees upon the following trusts:
(a)Save and except for my property situated at and known as [the Donvale property] to sell call in and convert the same into money such part or parts thereof as shall not already consists of money.
(b)Out of the nett proceeds of such sale calling in and conversation and my ready money to pay my just debts and testamentary expenses and the Probate and Estate Duties payable in respect of my Estate.
(c)Thereafter to stand possessed of my Estate upon the following trusts:
(i)As to my property situated and known as [the Donvale property] and furniture and articles of household use or adornment therein TO PERMIT my sons [KLAUS HORST SCHMIDT] and [MARCUS SCHMIDT] or such of them shall survive me to live in the house and have the use of the furniture until both of them has in the opinion of my Trustees ceased to reside permanently in the house then the said property, furniture and household articles may at my Trustees discretion be retained during the life of my sons [JENS SCHMIDT] and [BERNHARD SCHMIDT] for their use in lieu of the residence referred to in clause 3(c)(ii) hereof. Upon the death of both of my said sons [Jens V. Schmidt] and [Bernhard Schmidt] the property will fall into the residue of my Estate;
(ii)To set aside 30% of the balance (including the value of [the Donvale property]) of my Estate to set up a trust fund for the benefit of my said sons [JENS SCHMIDT] and [BERNARD SCHMIDT] and I DIRECT AND EMPOWER my Trustees to use part of that fund to purchase a dwelling house within the general area of Donvale with a total land area of about one acre and a swimming pool. If a suitable dwelling is found without a swimming pool then I direct my Trustees to install one. I DIRECT AND EMPOWER my Trustees to use the balance of the trust fund for the maintenance and upkeep of the dwelling and to maintain my said sons and for this purpose my Trustees shall employ such staff as may be necessary to care for my said sons. I FURTHER DIRECT that under no circumstances and for no reason whatsoever shall any part of the trust or any income arising therefrom be placed with or paid to or placed in control of their mother. AND I FURTHER DIRECT my Trustees to personally carry out the trusts hereby established and not place the said [JENS SCHMIDT] and [BERNHARD SCHMIDT] and the said [JENS SCHMIDT] or either of them in any government or charitable institution. Upon the death of both my sons the trust fund will fall into the residue of my Estate;
(iii)To divide ten per cent of the balance (excluding the value of [the Donvale property]) of my Estate equally between such of my brother and sisters as shall survive me.
(iv)To hold the residue of my Estate for such of my said sons [KLAUS HORST SCHMIDT] and [MARCUS SCHMIDT] as shall survive me and if both survive me then equally between them as tenants in common;
(v)IF any portion of my Estate fails to vest then such unvested portion or portions shall be divided by my Trustees equally between such of my brother and sisters survive me.

The 2008 codicil was handwritten. A transcription prepared by the solicitors for the executors is reproduced below:

Page 1.
Para 3.1.To sell only to the degree necessary to pay debts due but not on any CommSec margin loans outstanding.
Page 4.[Klaus Schmidt] to carry on “our investment philosophy over the last fifteen years at his discretion”.
[Klaus] and [Jens] with [Anna Wagner] to stay at [the Donvale property] as long as they live. [Klaus Schmidt] with Jorja and Joshua only if they so choose.

Page 5.Before any distribution, Marcus to receive $500,000 “to pay for the house he is about to build”.
[Klaus Horst Schmidt] to receive $1,500,000 for his investment performance over the last fifteen years. He also to inherit 5 shares in Tenedo Pty Ltd[4] and 51 shares in Neptune Design to be able to exercise control.

Page 6.Michael Walter appointed as executor in place of Carl Heinz Stepp, along with [Klaus Horst Schmidt].
[Jens] and [Bernhard] to be looked after by the executors for their meals additional to their pension, at [the Donvale property]. Mrs [Anna Wagner] not to be given any money whatsoever.

[4]Tenedo Pty Ltd (‘Tenedo’) is the trustee of the family trust.

The 2013 codicil states as follows:

I, [Klaus Richard Schmidt], an adult residing at [the Donvale property], being of sound mind, declare this Codicil to my Last Will and Testament (‘Will’) dated August 2012, effective as of today, Sunday 29 September, 2013.
ITEM I
This article shall be added to my Will, and shall read:
That to [Klaus Horst Schmidt] I shall bequeath 6 (six only) of my shares in Tenedo Pty Limited.
ITEM II
This article shall be added to my Will, and shall read:
That [Klaus Horst Schmidt] shall continue to manage the entire investment portfolios of Tinnid Pty Limited and Tenedo Pty Ltd, at his discretion, as to maximise the full value of the existing investment.

That this will continue at least until Tinnid Pty Limited has distributed all of its franking credits after which time it can be put to a vote of shareholders as to whether to continue the said operations and investments of Tinnid Pty Limited.
ITEM III
That [Klaus Horst Schmidt] be solely responsible for the continued management of the share portfolio in the name of [Klaus Horst Schmidt], to the benefit of the [Schmidt] Family and that these assets NOT be included with other communal assets.
Otherwise, I hereby confirm and republish my Will dated August 2012, in all respect other than those herein mentioned.[5]

[5]No Will dated August 2012 has ever been located.

Probate of the Will was granted to Klaus Jr and Mr Michael Walter (‘executors’) on 22 August 2016, nearly three years after the death of the deceased. Mr Walter, an accountant, had met the deceased in 1974, was the deceased’s accountant for over three decades. He only learned of his appointment as executor in early 2015, when Marcus told him of his appointment.

Annexed to the original will and the 2008 and 2013 codicils (together ‘the Will’) was an inventory of assets and liabilities dated 22 August 2016 (‘probate inventory’). Included in the assets of the estate was the Donvale property, then valued at $1,225,000.00. The other significant assets of the estate were the deceased’s shareholding in Tinnid (said to be worth $91,920.00), the amount of $1,441,080.00 said to be owed by the family trust to the deceased, and a share portfolio said to be worth approximately $350,000.00. In addition to three motor vehicles, the personal estate of the deceased was said to be worth approximately $1.9 million, not quite enough to meet the liabilities of the estate, to fund the repairs required to be carried out on the Donvale property, and to fund the specific legacies to Marcus, Klaus Jr and Anna, but not too far short. However, this figure is vastly overstated, given that the family trust does not have the assets to repay the debt owing by it to the deceased, and the estate’s shareholding in Tinnid is of uncertain, but probably limited value. Even before taking the legal costs of the parties to these proceedings into account (save the costs paid by the executors to date), the net value of the deceased’s personal estate is closer to $250,000.00. The true financial position of the estate only became completely clear shortly prior to trial.

State Trustees brought this proceeding on behalf of Jens and Bernhard on 11 October 2016, not long after the grant of probate, seeking further provision from the estate. At the first directions hearing on 21 February 2017, at a time when the total value of the estate was assumed to be approximately $3 million, State Trustees indicated that it sought that Jens and Bernhard receive fifty per cent of the estate.

Anna issued the second proceeding on 6 December 2016. At the hearing on 21 February 2017, she also indicated that she sought fifty per cent of the estate. Marcus was joined as a defendant to both proceedings on 11 July 2017. There were a number of adjournments over the course of 2017 and 2018 as the parties engaged in mediation, and exchanged correspondence concerning the financial position of the estate.

On 14 August 2018, Mr Walter filed and served an updated affidavit with respect to the financial position of the estate, which revised the estimate of the net value of the estate from $3,153,703.60 as at 22 August 2016 to $2,161,973.69 as at 30 June 2018. Mr Walter’s latest affidavit, sworn on 15 February 2019 (in the days leading up to the commencement of the trial) estimates the net assets of the estate to be $1,898,716.20. The major asset of the estate is the Donvale property, valued at $1,650,000, if certain reasonably pressing repairs are carried out.

The reasons for the diminution in the assets of the estate compared with what was recorded in the probate inventory are threefold: first, the underlying assets of the family trust and Tinnid were probably never worth as much as recorded in the accounts of the family trust and Tinnid, as prior to his death the deceased rejected Mr Walter’s advice to record their shareholdings valued at their market price, rather than at cost price. While the family trust and Tinnid held some ‘blue chip’ shares, the investment philosophy of the deceased focussed on acquiring highly speculative mining and energy stocks, which are notoriously subject to vast fluctuations in value, and are not necessarily readily marketable. Secondly, after the deceased’s death, rather than promptly winding up the affairs of the family trust and the estate, Klaus Jr continued to trade in speculative stocks (consistent with what he believed to be the deceased’s wishes), and their value continued to diminish (indeed, many are now unsaleable). Thirdly, Klaus Jr, who had previously been largely dependent upon his father for his living expenses, commenced paying himself a salary from the family trust and Tinnid, although it is not entirely clear how much was paid to him in shares and how much was paid to him in cash. In any event, since late 2013, Klaus Jr and Anna have largely been supporting themselves from the resources of the family trust and Tinnid. Needless to say, both State Trustees and Marcus have taken a rather dim view of the conduct of Klaus Jr, and, perhaps to a lesser extent, Anna. Despite being a beneficiary of the estate and the family trust, and a director and shareholder of Tinnid, Marcus has never received any funds from either entity since the death of the deceased, and has had no influence over the way in which the affairs of the estate, the family trust, or Tinnid have been managed.

Subject to there being some dispute about where the responsibility for the lower than expected value of the estate ought to lie, there are relatively limited disputes between the parties regarding the factual background to the current proceedings and the principles applicable to the claims of Jens, Bernhard and Anna. All parties agree that the deceased owed a moral duty to each of Jens and Bernhard, his severely disabled sons. All parties agree that the deceased owed a moral duty to Anna, his loving domestic partner with whom he spent many happy years prior to his death, and who is in financial need. Further, while it is not contended that either or both of Klaus Jr and Marcus have needs over and above the other parties, they both have young families. Marcus has children with special needs, and the ability of Klaus Jr to support himself and his family and to acquire assets has been severely impeded by his choice to work with, and remain dependent upon, his father, thus having no experience in the mainstream workforce commensurate with his age, education, and abilities.

All parties agree that the resources of the estate are insufficient to give effect to the terms of the Will: that is, that the Donvale property be preserved for Anna, Jens, Bernhard, Klaus Jr and Klaus Jr’s children to live in, and that sizeable financial legacies be provided to Klaus Jr, Marcus and Anna. Further, the assets of the estate are insufficient to meet any substantial claim by Jens and Bernhard in addition to the legitimate claims of Anna, Klaus Jr and Marcus. What the parties disagree about is what is to be done. Anna’s position is that she must stay in the Donvale property as long as she is willing and able to do so. She makes no financial claim on the other assets of the estate, save that she seeks that her right to reside in the Donvale property be converted into a portable life interest to provide her with flexibility should her needs change over time. The executors support her position, submitting that the interests of Klaus Jr, Marcus, Jens and Bernhard all ought be postponed until after Anna dies, or needs to move into different accommodation should her health and/or mobility decline.

Both State Trustees and Marcus contend that the Donvale property must be sold, and after provision is made for part of the proceeds of sale to be used to provide Anna with secure accommodation for life, the remainder be utilised to meet the various claims by the deceased’s children upon the estate. At trial, counsel for State Trustees suggested that any concerns regarding Anna’s mental state could be ameliorated by postponing the sale of the Donvale property for a period of time (say, six to twelve months) to enable Anna to receive appropriate psychiatric assistance and care.

Accordingly, the primary issue before me is whether the Donvale property is to be sold. If so, how are the assets of the estate to be distributed? If not, which has the consequence of postponing the interests of each of the deceased’s children, what framework should be put in place for the future? The task before the Court in this case is to reconcile the deceased’s wishes as expressed in the Will with the legitimate claims of the parties to these proceedings, and the practical reality of the (relative) paucity of the assets of the estate.

In order to determine the above matters, it is necessary to consider the following issues:

(a) Whether Anna’s intense attachment to the Donvale property, to the extent that her family and treating professionals hold grave fears for her health and safety should she be forced to leave the Donvale property, warrant, in effect, the postponement of other legitimate claims to the assets of the estate;

(b) in relation to Jens and Bernhard, given that, unlike at the commencement of these proceedings, they now receive considerable support from the National Disability Insurance Scheme (‘NDIS’), whether their needs warrant substantial provision being made for them at this time, given that their current income is sufficient to meet their accommodation and other living expenses, and given the other competing claims on the estate;

(c) whether part or all of the responsibility for the diminished resources of the estate should be sheeted home to Klaus Jr, and, if so, whether any such responsibility should be reflected in any current or future provision made for him from the estate;

(d) whether Marcus’ legacy should be kept intact, and/or given priority from the assets of the estate; and

(e) the question of costs looms particularly large, given the limited cash assets of the estate, and the extent of the costs known to have been or likely to have been incurred by the parties in preparing for and conducting a six day trial.

Given there are relatively few factual disputes between the parties (save for the question of whether Klaus Jr should bear the responsibility for the diminution of the value of the estate), I shall not traverse the evidence advanced by the parties in great detail. However, for completeness, a number of witnesses were called to give evidence at trial. All but one of the witnesses had made affidavits or prepared expert reports. By agreement, to limit the duration of what turned out to be a reasonably lengthy trial, at least for this jurisdiction, the deponents of affidavits were cross-examined upon their affidavits, instead of giving viva voce evidence in chief. The exception, Ms Veena Mishra, the NDIS partnership manager of State Trustees, gave very helpful evidence regarding how NDIS works, and how State Trustees co-ordinates its role as the manager of its clients’ financial affairs with the NDIS. Otherwise, each of Anna, Klaus Jr, Marcus, and Mr Walter gave evidence, along with Dr Peter Wolf and Ms Kylie Allen, Anna’s treating general practitioner and clinical psychologist respectively, Ms Sneh Nand of State Trustees, and Ms Tania Willey, an occupational therapist engaged by State Trustees to evaluate the care and support needs of Jens and Bernhard.

Anna, the Schmidt family, and the Donvale property

The Donvale property is a large (one acre) residential property in a leafy cul-de-sac in an attractive suburb of Melbourne known for its large properties and semi-rural atmosphere. It is a multi‑level, five bedroom home, with a swimming pool and tennis court, built to the deceased’s specifications in the 1970s. It requires some substantial repairs and modifications (including a pending compulsory sewerage connection). Currently, Anna, Klaus Jr, and Klaus Jr’s son live there on a full time basis, while Jens visits for dinner each Wednesday evening, and spends one weekend a month at the Donvale property.

Anna’s financial resources are limited. All parties agree that, as the deceased’s surviving domestic partner, provision should be made for her to have secure accommodation for life, with the flexibility to enable her to enter supported accommodation and/or nursing home accommodation should her needs change over time. If the situation were viewed through the lens of what is financially necessary and pragmatic, as contended for by State Trustees and Marcus, her needs could be met by selling the Donvale property, and setting aside fifty to sixty per cent of the proceeds to purchase a smaller, single level home in the area, which may be more practical as she grows older, over which she would have a portable life interest.

But there are more matters to be taken into account than just financial and practical considerations.

It is clear from the evidence that Anna has an intense emotional connection with the Donvale property. It was where she lived happily with the deceased and members of his family for many years. She lives there with Klaus Jr and his son, and Jens visits regularly. She has a close and supportive circle of friends in the street she lives in, who provide her with emotional and logistical support (as was apparent from the presence of some throughout the whole of the trial). As she does not drive (albeit by choice), it would be difficult for her to keep in touch with family and friends if she was forced to leave the Donvale property. She says that Jens enjoys visiting the Donvale property, and he makes regular use of the swimming pool during the warmer months of the year. She feels very strongly that the deceased’s wishes that she continue to live at the Donvale property, and that Klaus Jr, his children, Jens and Bernhard be able to make it their home, should be respected.

Anna relied upon expert reports prepared by her general practitioner, Dr Peter Wolf, and a clinical psychologist, Ms Kylie Allen, in support of her application. Both reports were provided in response to a request made by Anna’s solicitors, in which they requested that they specifically address the following issues:

1. Ms Wagner’s current condition, treatment and prognosis;
2.The effect which you believe the death of her partner and associated legal proceedings have had on Ms Wagner’s health;
3.The effect having to sell and vacate her home would have on her healthy;
4.Whether you believe Ms Wagner would potentially harm herself in the event of a negative outcome at trial;
5.Ms Wagner’s ability to understand the legal proceedings she is involved in and her ability to make decisions in relation to same;
6.The estimated cost of Ms Wagner’s further treatment.

Both Dr Wolf and Ms Allen gave evidence at trial, and both impressed me as being very capable professionals. Dr Wolf has seen Anna on a regular basis since at least January 2009, when he diagnosed her with depression following the hospitalisation of the deceased with a respiratory illness. He prescribed antidepressant medication, but her depression escalated after the death of the deceased. He prescribed alternative medication in April 2015, but her symptoms have continued unabated. He has seen her on a weekly or fortnightly basis over the past year or two, and in 2018 he referred her to Ms Allen for counselling. He has a good rapport with Anna. In his report dated 8 January 2019, he stated as follows:

In late December 2013, Ms Wagner’s husband died whilst on holiday in Europe while in Germany, and this has had a severe impact on Ms Wagner’s health, initially with grief, but this was soon followed by persistent severe exacerbation of her depression, associated with marked anxiety.
Furthermore, ongoing legal proceedings added to her severe anxiety and depression, with severely depressed mood, frequent recurrent tearfulness, loss of interest in life, loss of hope for her future, marked reduction in self esteem, poor sleep, markedly reduced appetite, difficulty concentrating, tremulousness, nervousness and panic attacks. These symptoms have been severe and remain persistent, preventing normal activities of daily living and adversely affecting her quality of life very markedly.
The prolonged nature of legal proceedings and constant stress and anxiety relating to same prevent Ms Wager from making a recovery and indeed exacerbate her depression severely.
Ms Wagner has no sense of closure, remains fearful of what the future may hold, including the prospect of losing her home and being left in poverty.
Repeatedly, during many consultations, Ms Wagner explained that the effect of having to sell and vacate her home would have a devastating impact on her health , stating that there would be nothing left in her life, and that everything that she and her deceased husband had tried to build in their lives would be lost, and that there would be no point in going on. Ms Wagner has stated that she would jump out of a window and take her own life if placed in the position of losing her home. This thought becomes much more pervasive when legal proceedings and enquiries are taking place.
Given this impact on her health, Ms Wagner may be at risk of self harm in the event of a negative outcome at trial. The simple thought about her attendance at a trial results in marked anxiety, agitation and panic attacks. A negative outcome in such a trial would result in marked deterioration in her condition, and it would be very likely for her to require hospitalisation for psychiatric treatment for her depression.
At present, I have noted the deterioration of Ms Wagner’s depression despite treatment with antidepressant medication and should this persist at her next review consultation, I envisage referral for further psychiatric assessment and management.
Following numerous consultations and discussion with Ms Anna Wagner, I have very significant concerns for her health and welfare and also for the health and welfare of other members of her family in the setting of a negative outcome of any trial or legal proceedings.

Dr Wolf’s evidence remained largely undisturbed by cross-examination.

Ms Allen first saw Anna in May 2018, having been referred to her by Dr Wolf. She prepared a report on 16 January 2019. In her report of 16 January 2019, she stated as follows:

It is my belief that Ms Wagner is experiencing severe depression and panic disorder. She regularly experiences panic attacks, particularly in the middle of the night. Ms Wagner is extremely fearful of the prospect of losing her house, and what this would mean for her. She finds it exceedingly difficult to imagine any future if she has to leave the home that she shared with her partner and his children.
Given the severity of Ms Wagner’s current mental health struggles, it is imperative that she receive as much support as possible. As such, it is notable that Ms Wagner’s significant supports in Australia are neighbours in her court. To move away from these people would represent a devastating loss to Ms Wagner, and in my opinion would further jeopardise her mental health.
It should be noted that I do hold concerns regarding the risk of Ms Wagner deciding to end her own life if she is to lose her house. It is never possible to state with certainty the likelihood that any individual will or will not commit suicide, however, I can state that I have held concerns regarding her suicide risk and feel that the stakes are very high in this case. Ms Wagner sees no alternative future for herself if she is separated from the house. She will never return to Germany, even to visit, due to the memories she has of her partner dying there.

In my opinion, it is imperative that Ms Wagner’s mental state, including her struggles with chronic depression and panic disorder be fully taken into account in the current court proceedings. I would also like to state that I hold significant concerns for Ms. Wagner’s capacity to cope with court proceedings, if this case proceeds to that point.
In my opinion, Ms Wagner will most certainly require long term therapy and professional support over the coming years to manage the symptoms that she experiences. Ms Wagner utilises a Medicare Mental Health Care Plan which partly subsidizes her counselling sessions for the first ten sessions in a calendar year. However her out of pocket cost for attending fortnightly sessions for one year would still be $3435.00. The legal proceedings with The State Trustees has been so distressing for her that she is likely to take a considerable amount of time to recover and be able to move forward, even if the outcome goes in her favour. Ms Wagner is highly likely to require psychological therapy on a regular and long term basis.

Ms Allen was cross‑examined by counsel for Marcus regarding the difference between her report of 16 January 2019 and a letter she wrote ‘to whom it may concern’ on 28 November 2018, which she said was prepared at the request of Anna. She explained the more gloomy prognosis in her report of January 2019 as being based upon her observation of a deterioration of Anna’s mental state over the course of December 2018. Also in evidence was an email from Klaus Jr to her on 16 January 2019 commenting upon her draft report, and his observations regarding her mental state, well‑being and capacity. She replied:

Thanks Klaus, this is helpful and I will include these points in the report.

However, I do not consider that any changes in Ms Allen’s position (which are really changes in emphasis) between November 2018 and January 2019, or her communications with Klaus Jr, detract materially from the credibility of her evidence.

Accordingly, both Dr Wolf and Ms Allen consider Anna is suffering from quite severe depression and anxiety, which has been largely unresponsive to medication and counselling, and they hold grave fears for Anna’s health and safety should she be forced to leave the Donvale property, including the risk that she may harm herself. The evidence in their reports was, contrary to the submissions advanced on behalf of Marcus, largely undisturbed by cross‑examination. The only positive conclusion I can derive from their evidence is that Anna’s care and treatment is in the hands of excellent health practitioners.

Counsel for Anna relied upon the decision of Zammit J in Warriner v Warriner[6] (‘Warriner’) in support of his contention that a particular home may be of such importance to the health and wellbeing of a beneficiary that the Court should not make orders for its sale, even when the requirement to preserve the home deprives other potential beneficiaries of a fund against which they can make a claim.
[6][2015] VSC 314.

Jens and Bernhard and the National Disability Insurance Scheme

The only provision for Jens and Bernhard in the Will is that they may live at the Donvale property for the rest of their lives, with the trustees being required to pay for their meals. This provision arises out of the 2008 codicil. A minor point of construction arises: while the 2008 codicil does not expressly revoke the provision made for Jens and Bernhard in the original will (being that thirty per cent of the residue of the estate, excluding the Donvale property, to be set aside to purchase a one acre home with a swimming pool in the Donvale area for Jens and Bernhard to live in, and for the trustee employ staff to care for Jens and Bernhard), it seems to me to be quite clear that the deceased intended to substitute the gift in the 2008 codicil for the gift in the original will. First, the evidence is that the deceased suffered considerable financial losses as a result of the global financial crisis around that time. It may well be that the deceased recognised that his financial position had deteriorated to the extent he would not be able to fund all of the gifts in the original will. Secondly, it makes no sense for the deceased to set aside a substantial sum of money to purchase a large property in Donvale for Jens and Bernhard to live in, while enabling them to also live in the Donvale property. Thirdly, by 2008 the deceased’s family circumstances had changed since the time the original will was made in 1997. Anna had moved into the Donvale property permanently, and was helping him take care of Jens and Bernhard, who by that time were living at the Donvale property approximately half of the time. Accordingly, in my view, the gift to Jens and Bernhard in the 2008 codicil supersedes the gift to them in the original will. Similarly, given the changes made in the 2008 codicil, I consider that the gifts to Klaus Jr and Marcus in the 2008 codicil supersede the gift to them of the Donvale property in the original will.

Both Jens and Bernhard rely upon the disability support pension, which covers their financial expenses. They have modest savings, being $28,083.19 in the case of Jens and $15,429.28 in the case of Bernhard at the time of trial.

There is no doubt that Jens and Bernhard have special needs. There is also no doubt that the provision for them in the 2008 codicil cannot be given full effect, at least in the foreseeable future, given that they now both live in supported accommodation. While for present purposes it is not necessary to go into any great detail regarding these matters, it seems that after the death of the deceased, there was substantial disputation between Klaus Jr and Anna on the one hand, and Marie on the other hand, regarding the accommodation and care arrangements for Jens and Bernhard. The disputes between them culminated in Jens and Bernhard living in separate supported accommodation facilities, funded in part through their disability support pensions, with Jens regularly visiting and staying in both households. Bernhard does not stay at or visit the Donvale property, but Klaus Jr and Anna visit him occasionally, not often. Both Klaus Jr and Marie are plan nominees for Jens and Bernhard for the purposes of them receiving services under the NDIS, and as such, they both have a continuing involvement in their care.

The following is an extract from a transcript of a video on the NDIS website titled ‘About the NDIS’:

The National Disability Insurance Scheme (also called the NDIS) is the new way of providing support to Australians with disability, their families and carers.
The NDIS will provide all Australians under the age of 65 with a permanent and significant disability with the reasonable and necessary supports they need to enjoy an ordinary life.
The NDIS will help people with disability achieve their goals, including independence, community involvement, education, employment and health and wellbeing.
As an insurance scheme, the NDIS takes a lifetime approach, investing in people with disability early to improve their outcomes later in life.
The NDIS also provides people with disability, their family and carers with information and referrals to existing support services in the community.
By 2019, the NDIS will support about 460,000 Australians with disability.
Why do we need the NDIS?
People with disability have the same right as other Australians to decide their best interests and to have choice and control over their lives.
The NDIS recognises that everyone’s needs and goals are different.
The NDIS provides people with individualised support and the flexibility to manage their supports to help them achieve their goals and enjoy an ordinary life.
The NDIS replaces a disability system that was unfair and inefficient with a new, national system that is world-leading, equitable and sustainable.
This provides certainty and consistency for people with disability, their families and carers.
Australians will now have peace of mind that if their child or loved one is born with or acquires a significant disability that is likely to be with them for life they will get the support they need, when they need it.
Can I access the NDIS?
To become an NDIS participant a person must:
·Have a permanent disability that significantly affects their ability to take part in everyday activities;
·Be aged less than 65 when they first enter the NDIS;
·Be an Australian citizen or hold a permanent visa or a Protected Special Category visa; and
·Live in Australia where the NDIS is available (the NDIS is being introduced gradually around Australia from 1 July 2016)

State Trustees commenced this proceeding before Jens and Bernhard received any services through NDIS, which had been rolled out in Victoria from about 2016. State Trustees, as part of their preparation for trial, engaged an occupational therapist, Ms Tania Willey, to prepare reports regarding the current and future support needs of Jens and Bernhard, and to identify what services could be provided under a range of different funding scenarios. Ms Willey prepared reports in relation to both Jens and Bernhard in October 2016, and updated reports in June 2018. Ms Willey’s reports were the subject of some criticism from the other parties. That criticism was, in my view, largely unwarranted. Ms Willey responded to the instructions she was given, and the reports are thoughtful and comprehensive. However, the reports seem to have been prepared on the basis of certain assumptions on the part of State Trustees: first, that the estate was substantially larger than it actually was, and secondly, (I assume), that there would be no barrier to the estate selling the Donvale property. Both of these assumptions were reasonable to make. Further, Ms Willey’s report did not take into account the services being provided, or the services that may or will be provided, under the NDIS. Ms Willey’s reports do however provide a useful guide to evaluating the extent to which the NDIS services do meet and will meet the support needs of Jens and Bernhard.

It is not necessary for present purposes to go into great detail regarding the matters referred to in Ms Willey’s reports. The thrust of her evidence can be summarised as follows:

(a) insofar as the current needs of Jens and Bernhard are concerned, their quality of life would be enhanced by increased one on one support after normal school hours, on weekends, and during holidays, with scope for more excursions and vacations;

(b) on the assumption that Jens and Bernhard have a normal life expectancy, their support needs are likely to significantly increase after they reach the age of 65; and

(c) neither Jens or Bernhard received support from NDIS when she prepared her reports in 2016. When she prepared her updated reports in 2018, she was aware that Jens had received an NDIS plan, but was unaware of its contents. Ms Willey considers that the NDIS scheme was uncertain in its future operation, as:

(i) NDIS plans re subject to annual review, and, by implication, the nature and level of support may change over time;

(ii) there is uncertainty as to whether they would continue to receive support once they reached an age where they would receive the aged pension, and were eligible for support under government funded aged care programs; and

(iii) there is uncertainty as to whether the Commonwealth Government would continue to fund the NDIS, or fund it at an appropriate level.

State Trustees called Ms Veena Mishra, the NDIS partnership manager of State Trustees, to give evidence at the trial. Ms Mishra’s evidence can be summarised as follows:

(a) Ms Mishra has worked in her role as the NDIS partnership manager of State Trustees for over two years. She has previous experience working in the disability sector. Her current role includes working with the NDIS to address issues which may arise between the two organisations, and to attempt to resolve any issues in the interest of their mutual clients;

(b) by 30 June 2019 most of State Trustees’ clients in Victoria who have been identified as having a disability will receive support under the NDIS. She agreed that the NDIS has the flexibility to accommodate client needs over time;

(c) NDIS does not provide any funding for anything other than disability-related costs. The scheme is not means-tested: rather, NDIS assesses each person’s needs based on their disabilities, rather than their income. All of State Trustees’ clients’ personal expenses will continue to be funded by the disability support pension or any other income that they have. State Trustees makes decisions concerning their clients’ personal funds, but not their NDIS funding;

(d) Ms Mishra is working towards improving the exchange of information between NDIS and State Trustees regarding individual clients, but the exchange of information is hampered by the strict privacy provisions contained in the enabling legislation;

(e) as State Trustees cannot make lifestyle decisions on behalf of their clients and is prohibited by statute from becoming guardians of their clients. State Trustees does not have a role in preparing NDIS plans for their clients. Rather, the plan nominee, the guardian, and sometimes the client themselves, works with NDIS to determine what services are provided. Care providers and the clinicians also have an input into NDIS plans. State Trustees is not provided with a copy of the NDIS plan unless the client, guardian, or the plan nominee makes it available to them. However, one of her objectives is to improve communication and coordination between State Trustees and NDIS so that State Trustees is in a position to understand its clients’ entitlements and their use of these entitlements to assist in budgeting for its clients’ needs;

(f) State Trustees does not provide plan management services, because NDIS considers it a conflict of interest for State Trustees as administrator to manage their clients’ NDIS funding as well as their personal income. Plan management services are often undertaken by an external organisation with expertise in disability services, funded by NDIS; and

(g) in circumstances where a client received compensation payments, for example, for injuries as a result of employment or traffic accident, NDIS would consider whether any component of the payment included a component related to disability, to ensure that the client would not be getting a double payment. However, Ms Mishra does not know whether NDIS would regard a disabled persons receiving funds from a testator’s family maintenance claim to be in the same category as recipients of compensation or common law damages for an injury, but expects that it would be treated as personal income, rather than a disability related payment. Ms Mishra was not aware of any instances where NDIS has asked for information concerning family provision claims and awards or settlements. State Trustees has on occasion advised NDIS of a client’s change in circumstances due to receipt of funds from a deceased estate, but has not receive a request for further information or any other response from NDIS to such notifications.

The current NDIS plans of Jens and Bernhard are in evidence. Jens’ plan of 15 February 2019 has the following objectives:

(a) to increase his social and community participation on weekends and holidays;

(b) to increase his independent living skills;

(c) to improve his health and wellbeing;

(d) to maintain his family connections; and

(e) to continue to live in supported accommodation.

Jens’ NDIS plan provides for funding of $67,253.94 for the year 15 February 2019 to 15 February 2020. The core support funding of $60,070.50 includes funding for assistance with daily life, consumables, assistance with social and community participation, and transport. In addition, the plan provides for funding of $7,183.44 for ‘capacity building’, being funding for ‘an allied health professional/s to assess and develop a program that enables [Jens] to achieve [his] goals of improved communication, with provision of support to [his] care workers to implement plan within home and community’, and funding for up to thirty hours for coordination of support ‘to engage and coordinate services, assistance to achieve goals and develop personal capacities’.

Bernhard’s NDIS plan for the period 18 June 2018 to 18 June 2019 provides for approved funding of $230.727.44, comprising $151,089.12 for assistance with daily life (which is paid to his accommodation provider), $65,016.06 for assistance with social and community participation, $7,479.68 for home modifications, $4,514.88 for support coordination, $2,472.00 for transport, and $1,755.70 for assessment of Bernhard’s needs. His goals, as set out in the plan, are to increase community access, and to be healthy and fit.

As can be seen from the above, the NDIS services provided (or at least budgeted for) to Jens and Bernhard are described in fairly generic terms. However, the evidence demonstrates that both Jens and Bernhard are, or should be receiving support from NDIS valued well in excess of their income, and well in excess of what Ms Willey estimates to be the cost of funding their priority needs, at least prior to turning 65. The only current service not funded by NDIS which Ms Willey considers is desirable for Jens and Bernhard to have is support and funding for occasional holidays.

Also in evidence were communications between Klaus Jr and representatives of the Victorian Department of Health and Human Services and Jens’ supported accommodation manager regarding the services and activities provided for Jens and Bernhard. This, and other correspondence in evidence, indicates that Klaus Jr is actively involved in monitoring the services provided to Jens and Bernhard through NDIS, and in advocating on behalf of them with service providers.

Counsel for State Trustees submitted that, in order to make proper provision for Jens and Bernhard, the Donvale property ought to be sold, and payments be made to State Trustees (or the Senior Master, at the discretion of the Court) in two tranches, the first being $75,000.00, and the second payment equivalent to 16.6 per cent of the remainder of the proceeds of sale after an appropriate provision is made for Anna. Counsel for State Trustees estimates that provision in this form would result in both Jens and Bernhard having, in addition to their own modest savings, a fund of approximately $220,000.00 to $230,000.00 each to supplement their income from the disability support pension, to provide goods and services over and above what can be provided through NDIS, and to fund the additional support needs identified by Ms Willey as they advance in age.

The submissions of the other parties recognised that Jens and Bernhard are in need, but contend that, with the advent of the NDIS, their needs are being met, such that a substantial financial bequest is not warranted in all of the circumstances, in particular, having regard to the other competing claims upon the estate. Further, Anna and the executors submitted that Jens in particular benefits from having regular access to the Donvale property. Counsel for the executors submitted that an adverse inference could be drawn from State Trustees’ failure to call any evidence from those involved in their day to day care. While the details of each of their proposed orders differ, Anna and the executors propose that, in effect, the claims of Jens and Bernhard be postponed until Anna passes away, or until such time as the sale of the Donvale property was to occur for some other reason. They submitted that, to the extent that the evidence identifies any pressing needs on the part of Jens and Bernhard, they are only likely to emerge after they reach their senior years, and, given Anna’s current life expectancy of approximately twenty three years, this proposed framework will mean that funds are likely to become available for Jens and Bernhard as their needs become more pressing.

The position and conduct of Klaus Jr

Klaus Jr is an executor of the Will, the controller of the family trust through his directorship of Tenedo, the controller of Tinnid, a major beneficiary under the Will, an ally of Anna in this proceeding, a person in some financial need himself, and the subject of some attack by State Trustees and Marcus for his management of the financial affairs of the family after the death of the deceased.

Turning to the last point first, Klaus Jr has been (justifiably) criticised for failing to wind up the estate in a timely manner (contrary to the urgings of the other executor, Mr Walter, who only became aware of his appointment in early 2015). He was criticised for continuing to use the assets of the family trust and Tinnid to trade in speculative shares, rather than winding up their affairs in order to finalise the estate. He left the Wantirna property largely vacant for at least two years prior to selling it, thus depriving the family trust of rental income. He was criticised for taking a salary and unsecured loans from the family trust and Tinnid, and for excluding his brother Marcus from the affairs of Tinnid. Arguably, he was responsible for the family trust and Tinnid trading while insolvent, but it is not necessary for me to make an express finding of that kind.

These criticisms are legitimate. The submission advanced on behalf of the executors to the effect that Tinnid, the family trust (a discretionary trust) and the estate were separate entities ignores the fact that it was well known to Klaus Jr that the fortunes of the estate were inextricably bound up with the financial position of the family trust and Tinnid. But Klaus Jr (supported by Anna) defended his conduct on the basis that he was doing what his father wanted him to do, as expressed in the Will, and he continued with the investment philosophy adopted and maintained by the deceased over a number of years. He paid himself a salary because he worked very hard upon his share trading activities on behalf of the family trust and Anna, and needed funds to support himself, his children, and Anna. This occupation is time consuming, as at least part of the shareholdings secure margin loans, which can be called upon if the value of the parcels of shares which secure the loans falls below a pre‑determined price, such that continued monitoring of fluctuations in the shares market is required.

I do not quibble with the propositions advanced on behalf of Marcus regarding the duties of executors and directors, and I doubt the justifications advanced by Klaus Jr and Anna would ultimately excuse any breach on the part of Klaus Jr as the executor of the estate, and as a director of both Tinnid and Tenedo. But I do not have to make any positive findings here as to whether Klaus Jr breached his duties as an executor and as a director. However, it is clear that the financial position of the estate, the family trust, and Tinnid is poor. What is less clear is what extent the state of affairs could be attributed to Klaus Jr (as acquiesced to by Anna, who became a director of both Tinnid and Tenedo on 30 November 2013, the day the deceased passed away), and what responsibility should in fact be sheeted home to the deceased. After all, it was the deceased who devised the investment strategy, which has proven to be, at least in recent years, spectacularly unsuccessful. It was he who arranged for the family trust to borrow funds secured against the Wantirna property in May 2013 to fund the purchase of more shares (and, possibly, to fund the family’s travel and living expenses, noting that on the final trip to Germany, the deceased was accompanied by Anna, Klaus Jr, and his children). It was he who rejected Mr Walters’ advice to record the value of the various entities’ shareholdings in the accounts of the family trust and Tenedo at their market value, rather than their cost price, thus ensuring that the accounts painted an unduly rosy picture of the family’s financial position. This is not intended as a criticism of the deceased: it was in effect, his money, given that he was the only source of funds for the family trust, but rather, it is difficult to sheet home all of the financial problems of the family trust and Tinnid to Klaus Jr.

Further, while it seems odd that Klaus Jr was taking a substantial salary for trading unprofitably, it is not clear whether all of the amounts withdrawn by Klaus Jr were in cash, or were in shares that may well have been worth a lot less than what was recorded in the accounts as being paid or loaned to Klaus Jr. Klaus Jr’s evidence suggests that the amount taken in shares was not negligible.

Accordingly, while I largely agree with the criticisms directed at Klaus Jr’s conduct by Marcus and State Trustees, albeit I would not make them quite so vehemently, it is not entirely clear that the whole of the diminution of the value of the estate between the date of the deceased’s death, or even the great part of it, can be sheeted home to Klaus Jr (with the concurrence of Anna). The most probable conclusion which can be drawn from the evidence was that, even as at the date of the death of the deceased, the value of the estate was far closer to the current value of the estate than the amounts shown in the probate inventory. This much can be illustrated by a comparison of the accounts of Tinnid and Tenedo for the 2013 and 2014 financial years, noting that the deceased died nearly mid-way through the 2013/2014 financial year.

Apart from the Donvale property, the main asset of the estate was the debt owed by the family trust to the deceased. As at 30 June 2013, this debt was $2,330,000.00. The family trust also had other liabilities of approximately $1.2 million, including a loan of $390,849.00 secured against the Wantirna property. The value of the shareholdings of the family trust was said to be $3,494,141.00, being shares valued at cost. Of this amount, the value of the family trust’s shareholding in Tinnid was said to be $380,000.00. The sum of $380,000.00 was derived from the face value of the issued shares in Tinnid, not the underlying assets of Tinnid.

However, the position had changed dramatically by 30 June 2014, when the accounts reflected the change in valuation policy adopted by Klaus Jr and Anna, at the urging of Mr Walter. The value of the shares held in listed companies at cost fell to $1,284,152.00. This diminution in value must have been as a result of sales of shares, given that the amount outstanding on the margin loans fell from $831,359.00 as at 30 June 2013 to $201,918.00 as at 30 June 2014. Accordingly, sales of shares with a ‘face value’ of $1,829,989.00 apparently only generated sufficient funds to repay approximately $630,000.00 of loans, and fund a salary for and drawings by Klaus Jr of approximately $100,000.00. Further, the market value of the remaining shares valued at cost price of $1,284,152.00 was actually $376,020.00, and the value of the family trust’s shareholding in Tinnid was reduced to $297,344.00. Accordingly, setting aside the equity in the Wantirna property, the value of the family trust’s investment portfolio (net of margin loans) some seven months after the death of the deceased was $673,364.00, approximately one‑fifth of the value of the investment portfolio recorded in the 2013 accounts. It is difficult to see how responsibility for this diminution in value could be sheeted home to Klaus Jr alone. Similarly, the value of the shares held by Tinnid fell from $1,273,959.00 to $510,651.00 by reason of their revaluation.

That said, the same could not be said for what followed. If the assets of the family trust and Tinnid had been liquidated at 30 June 2014, that is, within a reasonable time of the death of the deceased, I estimate that, based upon the 2014 accounts, the estate would have been able to recoup (setting aside some reservations I have about the true value of Tinnid at that time) approximately $771,459.00 (ignoring intra family loan accounts).[7] This compares with the current value of the realisable assets of the family trust of $359,061.79, which in part reflects a diminution in the estimate of the value of Tinnid from $290,858.84 to $72,714.71, of which $63,988.94 may be realisable by the estate and the family trust (noting Mr Walter considers the actual value of the estate’s shareholding in Tinnid to be $18,314.70).[8] Even if the value of the estate attributable to Tinnid should always have been in the order of $65,000.00, rather than $300,000.00 (which is not possible for me to determine either way – the position may be somewhere in between), the value of the estate referable to what might be recoverable through the family trust or Tinnid and has diminished by approximately $180,000.00 between 2014 and 2019. That it did not diminish further is largely attributable to the injection of funds into the family trust through the sale of the Wantirna property of approximately $580,000.00 in 2018.
[7]I accept that the parties may analyse the accounts differently, such that they may reach different conclusions regarding the value of the deceased’s personal estate as at the date of his death, but this sum is intended to be for illustrative purposes only, rather than being a conclusive finding.
[8]Counsel for State Trustees disagrees with this valuation. He considers that the value of the shareholdings of the estate and the family trust should be valued on the basis of the net tangible assets of Tinnid, rather than what an arm’s length investor might pay for the shareholding of the family trust and the estate in Tinnid.

Accordingly, while Klaus Jr’s conduct is not to be commended, the submissions advanced on behalf of Marcus to the effect that he has denuded the estate of approximately $900,000.00 along the way are somewhat overstated. Further, even if all of the transactions referred to in counsel’s written outline of submissions as constituting that amount were for the benefit of Klaus Jr (which is not immediately apparent from the description of the transactions), it seems that a significant proportion of the total of the identified transactions may represent book entries in the accounts, or transfers of largely valueless shares to Klaus Jr, rather than cash payments to Klaus Jr.

Accordingly, there is insufficient evidence before me to reach the conclusion urged upon me by counsel for Marcus to the effect that Klaus Jr has enriched himself at the expense of the estate in the sum of $900,000.00, and that Klaus Jr has been less than frank about his financial position. In order to reach such a conclusion, I would need to reach a degree of satisfaction commensurate with the gravity of such an allegation.[9] While the only evidence before me regarding Klaus Jr’s financial position is that adduced by Klaus Jr himself, if Marcus did have serious suspicions that Klaus Jr had undisclosed assets, it would have been open to him to seek discovery, or issue subpoenas in order to test that evidence.
[9]See Briginshaw v Briginshaw (1938) 60 CLR 336, 361-362, which provides that when applying the civil standard of proof, a court must be actually persuaded of the relevant facts, and all the more so when they concern a serious allegation. See also s 142(2) of the Evidence Act 2008 (Vic).

The evidence in fact shows that Klaus Jr’s financial position is poor. He was dependent upon his father for his accommodation and living expenses (including his children’s school fees prior to their transfer to government schools) for all of his adult life. Since his father’s death, he has received at least $403,998.00[10] from the family trust and Tinnid, although some unspecified portion of that was paid in shares. He has used these funds to support himself, his children, and Anna. He has no job, no real property, no superannuation, a share portfolio worth $59,489.00 (compared with a book value of $756,400 in 2016), a car, a ten per cent interest in two racehorses, and debts of approximately $60,000.00.
[10]See the undated statement of agreed facts (Court Book page 464).

On one view, Klaus’ financial position could be considered to be one of his own making. He remained dependent upon his father during his prime working years. His only investments are in speculative shares and interests in race horses. He is unlikely to be able to secure employment commensurate with his qualifications, and there is no evidence that he has even tried.

However, it is impossible to speculate upon how much responsibility for Klaus Jr’s present position is due solely to his own personal choices, or to his desire to accede to the wishes of his father. There is simply insufficient evidence to reach a conclusion one way or another.

Finally, for completeness, while Klaus Jr has had to support himself and his children, and has been required to at least partially support Anna from the payments made to him from the family trust and Tinnid over the past five or so years, it may well be that the demands upon his resources will reduce over time. In 2020, Anna becomes eligible for the German pension, which will improve her income position. His children are now teenagers, and his daughter now lives with, and is presumably supported by her mother. His son lives with him only on a part‑time basis, and I assume is also partially supported by his mother.

The position of Marcus

After finishing university, Marcus established a life independent of the deceased and his family. He was not as close to his father as Klaus Jr was, although he provided his father with information technology support. He was traumatised by his parents’ divorce and the accompanying disputation, but he had a good relationship with his father until he went to live with Marie while he was studying at university. The deceased then cut off financial support until he moved out on his own, leaving Marcus with a HECS debt and some outstanding personal loans. The deceased paid for some of his furniture and whitegoods after he moved out of home, and when he and his wife built their new home. The deceased also paid for the landscaping at the new home. He received dividends of approximately $30,000.00 from Tinnid on three occasions. The deceased also paid for a number of motor vehicles, including the motor vehicles currently being driven by him and his wife.

In 2006, the deceased promised to pay for Marcus' building of the new home on the condition that his wife changed the title of her property to include Marcus as a joint proprietor. This was agreed by Marcus and his wife. However, the deceased was unable to pay for the building costs of the new house, so the couple borrowed funds to cover those costs.

At the time of the deceased’s death, Klaus Jr appointed Anna a director of Tinnid. However, Marcus was not consulted about this, although Marcus was also a director of Tinnid. In 2014, Klaus Jr asked Marcus to sign a solvency resolution in relation to Tinnid but refused to provide him copies of the company’s accounts. Marcus refused to sign the solvency resolution, and in 2016, Marcus resigned as a director of Tinnid. He remains a minority shareholder of Tinnid, holding twelve per cent of the issued shares.

In his affidavit sworn on 12 February 2019, Marcus deposed to the following matters regarding his personal and financial affairs:

(a) currently, Marcus has full time employment as a software developer earning about $150,000.00 per year;

(b) his wife is engaged in home duties, and receives a carers allowance from Centrelink of around $240.00 per fortnight. She has a HECS debt of approximately $25,000.00;

(c) Marcus and his wife have a share portfolio valued at $223,297.00, purchased with funds from a loan secured by their home, which is valued by the local council at $1,855,000. They have a mortgage of over $448,000.00, of which $285,000.00 was borrowed to fund the purchase of the shares. The balance of Marcus’ superannuation account is approximately $161,000.00, while the balance of his wife’s account is approximately $75,000.00;

(d) Marcus and his wife have two children, aged nine and eleven at the time of trial, who have both been diagnosed with high functioning autism. One child qualifies for NDIS funding, which covers psychological counselling and occupational therapy. They do not function well in mainstream schooling, and Marcus and his wife intend to send them to independent schools for their secondary education;

(e) in addition to Marcus’ salary, Marcus and his wife have an income of roughly $3,200.00 per month from share trading and dividends;

(f) Marcus’ wife is 42 years old and has a HECS debt of $25,000.00. She may never earn sufficient income to be required to pay it back. She plans to qualify as a kindergarten teacher to take advantage of with flexible working hours; and

(g) Marcus has a good relationship with his mother. He has asked her to prepare a will to avoid what he described as ‘the mess that dad left behind’.

Marcus’ position is that the Donvale property should be sold, and that he should be paid his legacy of $500,000.00, consistent with the wishes of the deceased. This would enable him to clear the family’s debt, with some left over for contingencies, including the educational and therapeutic needs of his children. He makes no submission as to how the balance of the estate ought be distributed, save that he is critical of the claims advanced by the other parties to the proceeding. His position is that Jens and Bernhard have not demonstrated any needs that cannot be accommodated by their income and the services provided by NDIS. He submits that there is no reason why the Donvale property should not be sold. It is the major asset of the estate, and Anna does not require the provision of a multi‑level, five bedroom house with all of its space and facilities.

Marcus noted that Anna failed to disclose in her affidavit that from April 2020, she will be receiving approximately €1,222 per month for the rest of her life, or approximately $23,400.00 per annum, from her German pension in addition to her Centrelink benefits. Marcus was critical of Anna’s role in acquiescing in the depletion of the assets of the estate by Klaus Jr, noting that ‘long gone are the days when passive directors were given a reprieve’. He distinguished Anna’s mental health issues with the circumstances of the relevant beneficiary in Warriner.[11] He was critical of the evidence given by Ms Allen and Dr Wolf. While it was not directly put that way, Marcus’ submissions suggested that their evidence may be overstating the position regarding the risks to Anna’s mental health should she be forced to leave the Donvale property, and in any event, they would be able to provide her with sufficient support to assist her with the adjustment process, given that she has engaged well with the counselling process.
[11][2015] VSC 314.

Unsurprisingly, Marcus saved his most severe criticism for Klaus Jr. While he made no express submissions as to what provision Klaus Jr should receive from the estate, he submitted that any provision must take into account the funds he has already received from the family trust and Tinnid, and Klaus Jr’s mismanagement of the remaining assets.

As for the other parties, no specific criticism was levelled against Marcus, but all noted that Marcus was in a substantially better financial position than each of the other beneficiaries. Further, the executors submitted that the gift to Marcus of $500,000.00 in the 2008 codicil needs to be considered in the context in which the 2008 codicil was made: at that time, Klaus Jr was living in a property purchased by the family trust, which he no longer can live in, because it has been sold. Further, Marcus also has a reasonable expectation of an inheritance from Marie, who is likely to prefer Marcus over Klaus Jr given their estrangement.

Marcus is in a much better financial position than any of the other parties to this proceeding. He has assets, including superannuation and shares, relatively modest debt, and a good, if not exceptionally high, income from his work as a software developer. At the age of 44, he has the prospects of continuing to earn a good income for another two decades or more. I do accept that he has substantial needs, given the demands of his children, whose needs prevent his wife from working, and require the family to incur considerable educational and therapeutic expenses. It is unclear from the evidence whether either or both of his children will ever become self‑supporting. However, he does maintain a good relationship with his mother, such that he might reasonably expect to benefit from her estate after her passing.

(i) Any physical, mental or intellectual disability of any applicant or any beneficiary of the estate

Jens and Bernhard are profoundly intellectually disabled. Bernhard also suffers from a number of physical health problems, and it seems that he is less even tempered and compliant than Jens, which limits his ability to participate in community activities and family life.

Anna is in good physical health, save for some moderate arthritis in her knees, and is clearly intelligent and astute. However, her mental health is poor, and her depression and anxiety are not responding particularly well to either medication or psychological counselling. In part, this is as a result of the ongoing stress caused by these proceedings, not only the existence of the proceedings, but also her fear of any adverse outcome. The evidence of her treating practitioners, which I accept, is that her mental state is likely to deteriorate further should she be forced to leave the Donvale property.

Klaus Jr is in reasonable physical health, save for some back pain. He also suffers from stress and sleeplessness. He has been prescribed opioid medication and benzodiazepines to deal with both stress and pain. The nature of the medications prescribed to him indicates (but does not conclusively establish) that Klaus Jr’s symptoms of back pain and stress are reasonably severe.

Marcus has no disclosed physical health issues, but has been prescribed medication for depression and anxiety, which appears to be a consequence of the ‘exhausting and demanding’ task of parenting his children with limited family or external support.

(j) The age of the applicant

Anna is aged 64, which, along with her limited English and lack of recent employment experience severely limits her earning capacity. She has an average life expectancy of 87 years. Jens and Bernhard are in their forties, such that they are unlikely to need significant support for age related conditions for at least two decades. They each have a life expectancy of 82 years in the absence of any evidence to suggest otherwise. Contrary to the submissions advanced on behalf of Anna, it is open to me to have regard to the estimated life expectancy of the parties as calculated by the Australian Bureau of Statistics Life Tables: in my experience, that is a common practice in this jurisdiction. In any event, s 144(1) of the Evidence Act 2008 (Vic) provides that:

Proof is not required about knowledge that is not reasonably open to question and is –
…
(b)capable of verification by reference to a document the authority of which cannot be reasonably questioned.

(k) Any contribution (not for adequate consideration) of the applicant to building up the estate or to the welfare of the deceased or the family of the deceased

Jens and Bernhard were in no position to contribute to the estate and welfare of the deceased.

Anna made no financial contribution to the estate of the deceased. The deceased was retired when they met, and probably lost substantial sums of money over the period of their relationship. No responsibility for that can be attributed to Anna.

Anna did make a substantial contribution to the welfare of the deceased, Jens and Bernhard, and Klaus Jr and his children. She kept house for them all. She assisted the deceased with the demands of caring for Jens and Bernhard. She cared for Klaus Jr’s children as if they were her own grandchildren.

(l) Any benefits previously given by the deceased person to any applicant or any beneficiary

The deceased provided for Jens and Bernhard over his lifetime by providing accommodation at the Donvale property.

The deceased provided financially for Anna from about December 2002, after she was retrenched and began spending most of her time in Australia. Apart from her living expenses, he funded their travel together.

The deceased provided for Klaus Jr throughout his life. He paid for Klaus Jr’s living expenses, and the family trust purchased a property for Klaus Jr and his family to live in. While Klaus Jr helped the deceased with his share trading activities for some three decades, it is difficult to assess whether the value of this work equated or exceeded the support provided by the deceased to Klaus Jr.

The deceased provided some assistance and support to Marcus over his life. He helped out with furniture, household goods, motor vehicles, and paid for the landscaping of his home (valued at about $30,000.00). He arranged for Marcus to obtain a twelve per cent shareholding in Tinnid, through which he received approximately $90,000.00 in dividends prior to the death of the deceased. While Marcus is largely self-sufficient, the assistance he received from his father could not be described as negligible.

(m) Whether the applicant was being maintained by the deceased before that person’s death either wholly or partly and, where the Court considers it relevant, the extent to which and the basis upon which the deceased had assumed that responsibility

Jens and Bernhard were being maintained by both the deceased and Marie. Anna was being wholly maintained by the deceased.

(n) The liability of any other person to maintain the applicant

Marie is also liable to maintain Jens and Bernhard. No other person has a liability to maintain Anna.

(o) The character and conduct of the applicant or any other person

This is not a factor relevant to the application made on behalf of Jens and Bernhard.

As for Anna, while it is reasonable to criticise her for enabling Klaus Jr to conduct the affairs of the family trust and Tinnid as if they were his own, there are some mitigating factors. First, it is clear that Anna suffered immense grief and dislocation as a result of the death of the deceased, which exacerbated her existing mental health problems. Secondly, while this is a little difficult to fathom given her long experience of independence and self‑sufficiency in Germany, it seems that upon coming to Australia she adopted a very traditional domestic role within the household. Thirdly, it appears that much of Anna and Klaus Jr’s time and energy in the year or so following the death of the deceased was consumed by disputes with Marie over the living and access arrangements for Jens and Bernhard.

On the other hand, Anna was clearly a devoted and caring partner of the deceased, and willingly helped and supported Jens, Bernhard, Klaus Jr and Klaus Jr’s children. Her position in this litigation appears to be completely unmotivated by the prospect of financial gain, but rather, by emotional attachments and considerations.

The conduct of Klaus Jr with respect to his management of the affairs of the estate has already been canvassed earlier in these reasons. Otherwise though, for the purposes of considering this factor, there is no basis for suggesting other than that he has been a caring and supportive son and step son to the deceased and Anna, and brother of Jens at least.

No criticism can be made of the character and conduct of Marcus. He did not spend as much time with the deceased and the rest of his family as Klaus Jr did, but his explanation that he has been busy with his work and his family is perfectly reasonable.

(p) Any other matter the Court considers relevant

There are three relevant matters which fall for consideration under this heading: the question of the testamentary intentions of the deceased, construed in the light of the surrounding circumstances, the submissions advanced on behalf of Anna regarding the abatement of Marcus and Klaus Jr’s legacies, and the impact of the NDIS upon the question of whether the Will made adequate provision for Jens and Bernhard.

Notwithstanding the submissions advanced on behalf of Marcus to the effect that the Act empowers the Court to rewrite the Will, the authorities make it clear that the testamentary dispositions of the testator are to be given great weight.[34] It is only when a testator has failed to comply with his moral duty in his or her testamentary dispositions that the Court’s jurisdiction to intervene is enlivened.[35]
[34]See the discussion in paragraph 92 of these reasons.
[35]Davison v Kempson [2018] VSCA 51 [31].

I consider that the deceased has failed to comply with his moral duty insofar as Jens and Bernhard is concerned (by reason of his failing to make any material financial provision for them), and as far as Anna is concerned, because the right of residence afforded by the Will does not provide her with sufficient flexibility as her needs change over time.

However, the fact that the Court’s jurisdiction to order further provision does not mean that the testamentary wishes of the deceased can be ignored. These intentions, despite the informal nature of the 2008 and 2013 codicils, are reasonably clear. He wanted the Donvale property to be retained for Anna, Jens and Bernhard to live in for the rest of their lives, along with Klaus Jr and his children should they so choose. He wanted to provide substantial financial legacies to both Klaus Jr and Marcus in the ratio of three to one. I can infer from the reference to Marie in both the original Will and the 2008 codicil that the deceased would have only wanted Jens and Bernhard to receive funds or support from the trustees of the Will, rather than make any absolute gift to them, which might ultimately fall within her control.

In relation to the second matter, counsel for Anna submitted that the effect of s 39B of the Act is that the pecuniary legacies of both Klaus Jr and Marcus abate, such that Klaus Jr and Marcus in fact have no entitlements under the Will.

Section 39B of the Act was introduced by the amending act. However, it applies to the estate, as the relevant transitional provisions provide that s 39B applies to estates where probate was granted after the commencement date of the provisions introduced by the amending Act. Section 39B of the Act provides as follows:

Solvent estates—pecuniary legacies
(1)Subject to subsection (2) and any contrary intention in the deceased's will, any pecuniary legacy must be paid out of—
(a) any property comprising the residuary estate; or
(b)any property in relation to which a disposition in the deceased's will operates as the exercise of a general power of appointment.

(2)If the property referred to in subsection (1) is insufficient to pay any pecuniary legacy, the pecuniary legacy must abate proportionately.

Example
X's will gives pecuniary legacies totalling $4000 to A, B and C. A is to receive $500, B is to receive $1500 and C is to receive $2000. X's available property has a value of $2000 and is insufficient to pay the pecuniary legacies.
If the pecuniary legacies must abate proportionally and only 50% of the value of the gifts is available to meet them, each gift must abate by 50%. As a result, A receives $250, B receives $750 and C receives $1000.

Counsel for Anna submitted that the above provision codified the position at common law. Further, given that the liabilities of the estate, including the legal costs of the parties, are likely to swallow up the residuary estate, it cannot be said that Marcus is defending his entitlement under the Will, since there is no legacy left for him to defend.

Counsel for Marcus submitted that the principle of abatement is irrelevant to the current proceedings, as applications under part IV of the Act are concerned with the adequacy of testamentary dispositions, rather than the administration of the estate under a valid or otherwise unmodified will. I agree. However, the fact that the legacies to Klaus Jr and Marcus are pecuniary legacies, payable from the residuary estate, rather than the real estate, is a relevant consideration in determining both testamentary intention, and the appropriate provision to be made.

Resolution

As noted above, I agree that the deceased did not fully comply with his moral obligations to Anna, Jens and Bernhard. I consider that the framework which best accords with the deceased’s wishes, and best accommodates the financial and non-financial needs of the parties to the proceedings, is the framework proposed by the executors, with some modification, that is:

(a) the Donvale property be retained, so that both Anna and Klaus can continue to live there;

(b) if the Donvale property is sold prior to Anna’s death for any reason whatsoever, the proceeds of sale be distributed as follows:

(i)fifty per cent to fund appropriate accommodation for Anna pursuant to a Crisp[36] order;
[36]See Crisp v Burns Philp Trustee Company Ltd (Supreme Court (NSW), Holland J, 18 December 1979, unreported). A Crisp order provides a claimant with an interest for life in a property of sufficient flexibility to enable him or her to substitute that interest for an interest in a more appropriate property, or to fund an accommodation bond for a nursing home. See also Thompson v Thompson [2015] VSC 706.
(ii)twenty per cent to State Trustees to be held for the benefit of Jens and Bernhard in equal shares;
(iii)thirty per cent to be paid to Klaus Jr and Marcus in the following proportions: two‑thirds to Klaus Jr and one‑third to Marcus; and

(c) upon Anna’s death, the proceeds of sale of any property purchased for her (or refund of any bond payable for her accommodation) be divided between Klaus Jr, Marcus and on trust for both Jens and Bernhard in accordance with the above proportions: that is, ten per cent for each of Jens and Bernhard , with the balance to be divided between Klaus Jr and Marcus as to two-thirds and one-third respectively;

(d) for the avoidance of doubt, State Trustees may apply first the income and then the capital of the trusts created by the terms of paragraph 128(b)(ii) and (c) above (‘trusts’) to meet the needs of Jens and Bernhard ; and

(e) upon the death of either Jens or Bernhard , the balance of the trusts is to be divided in equal shares between the surviving children of the deceased.

For the avoidance of doubt, in the unlikely event that there is any residuary estate after the outstanding liabilities of the estate are met, the balance of the residue should pass to Anna in order to provide her with a modest nest egg. I see no difficulties with the executors’ proposed allocation of the deceased’s chattels.

However, while the framework I have adopted most closely follows that proposed by the executors, I have departed from the executors’ proposed allocation of the proceeds of the Donvale property, which in my view unduly benefits Klaus Jr. In my view, the distribution to Klaus Jr should reflect the fact that Klaus Jr has received considerable benefits from the deceased during his lifetime, and from the family trust and Tinnid after his death. While the true value of the benefits Klaus Jr has received is difficult to calculate precisely, it cannot be disputed that what he has received has been a considerable down payment upon his legacy under the Will. He does not deny having received approximately $400,000.00 from the family trust, Tinnid, and the estate since November 2013. He has been able to support himself, his children and Anna for some five years. Further, while I do not propose to provide Klaus Jr with an independent right of residence at the Donvale property, there would have to be a dramatic change in the relationship between Anna and Klaus Jr for him to be unable to continue to reside at the Donvale property. Apart from any other consideration, I would expect that Anna’s loyalty to the deceased is so strong as to ensure that Klaus Jr and his children will always have a home with her at the Donvale property while she remains there, in accordance with the wishes of the deceased.

My conclusion that the Donvale property ought be retained for the foreseeable future is based upon the following considerations (in roughly descending order of importance):

(a) it most closely aligns with the deceased’s wishes that the Donvale property be available to live in by Anna, Klaus Jr and his children, and Jens and Bernhard;

(b) the significant attachment Anna has to the Donvale property, and her family and friends, and the risk of serious harm to her mental health should she be forced to leave the Donvale property within the immediate future; and

(c) the benefits to Jens’ wellbeing of continuing to have regular access to the Donvale property to spend time with his family; and

(d) the rather dire financial circumstances of Klaus Jr.

The framework I have proposed does provide what counsel for State Trustees and Marcus would no doubt consider to be unduly generous provision for Anna, in the context of the other claims on the estate. In particular, in addition to querying whether her mental health is quite as poor as asserted by her expert witnesses, they contend that a single woman of her age does not require a large, multi‑level residence with recreational facilities she does not use.

Those submissions ignore the fact that the Donvale property is Anna’s family home, in which other members of her family live on a fulltime or part‑time basis. Further, I have already indicated that I accept the evidence of Anna’s treating health practitioners that she is in an extremely fragile emotional state, and indeed, that was consistent with her presentation at trial. Finally, I recognise that, in the case of surviving spouses, the courts have resisted limiting provision to the mere grant of a life interest.[37] However, Anna makes no claim for anything beyond a life interest, and the position is often different where there are children of a first marriage, as is the case here.[38]
[37]See, for example, Bladwell v Davis [2004] NSWCA 170.
[38]See McKenzie v Topp [2004] VSC 90.

I agree with the submissions advanced on behalf of the executors and Anna that the entitlements of Jens and Bernhard can be safely postponed. Their disability support pension meets their day-to-day financial needs. To the extent that they have needs for, or could benefit from, additional support, those needs will almost certainly be met by the services funded under the NDIS. I agree that, to the extent that their needs increase as they age, those needs can be met from the proceeds of the ultimate sale of the Donvale property. Further, they would no doubt have a strong claim for provision from their mother’s estate in due course, particularly should they prove to have a greater need for services than can be provided from NDIS, or the health of one or more of them deteriorates.

I have already discussed the likely long term viability of the NDIS earlier in these reasons. This decision should not be taken as authority for the proposition that, in all cases where a beneficiary of an estate or a claimant upon an estate receives services from NDIS, it should be held that a testator does not owe a moral duty to make adequate provision for the proper maintenance and support for a disabled child, or a disabled spouse. It all depends upon the circumstances, including the size of the estate, and the competing claims upon the estate. However, the advent of the NDIS does represent a substantial shift in the landscape against which claims for provision by disabled people, particularly severely disabled people, must be assessed.

In the current case, it has been necessary to conduct a balancing exercise between the interests of Anna, and the interests of Jens and Bernhard . In undertaking that exercise, it is necessary to keep in mind community standards as to what is appropriate. In the past, community standards would demand that making provision to improve the life of disabled children be given utmost priority. While those sentiments still carry great force, I am doubtful that community standards warrant the making of provision to fund the provision of services that those disabled children are already receiving, as of right, at the expense of someone who has been a devoted spouse with a severe mental health problem. I agree with the submissions of the executors that the position adopted by State Trustees overweights the contingent needs of Jens and Bernhard, and underweights the needs of Anna.

Further, while I accept that Marcus is not free of need, particularly given the needs of his children, and the strains those needs impose upon his family finances, those needs need to be viewed in the context of his overall financial position, especially compared with the other parties to these proceedings. He and his wife have a net worth of at least $1.6 million, excluding superannuation. The proposed framework will see him receive funds from the estate in tranches which may well be sufficient to reduce or extinguish the family’s debt at or around retirement age, even setting aside any entitlement he may ultimately have to a share of his mother’s estate.

I accept that the proposed framework leaves Klaus Jr in a somewhat parlous state. However, he is prepared to postpone his entitlements under the Will to ensure that Anna can stay at the Donvale property. Further, to some extent, his current position is a product of the choices he has made. He has had the benefit of free accommodation all of his adult life. He has not had to fund his living expenses until now, although it does not seem as if he has lived a lavish lifestyle. While I have no reason to dispute his and Anna’s evidence that he spends a lot of time monitoring the share market, he has not had to be subject to the discipline and expectations of the regular workforce. At his age, he still has time to obtain employment and improve his financial position. He has already had considerable benefits from the estate, and may well have had more, had he acted prudently and wound up the affairs of the estate promptly.

Once the parties have had an opportunity to consider these reasons and their positions generally, I will hold a further hearing to determine the final form of orders and the question of costs.

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[2019] VSC 385

21 June 2019 (revised version published 23 September 2019)*