Stefanovic v Markovic
[2024] VSC 369
•1 July 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TESTATORS FAMILY MAINTENANCE LIST
S ECI 2020 03838
IN THE MATTER of an application pursuant to Part IV of the Administration and Probate Act 1958
IN THE MATTER of the estate of ZAGORKA STEFANOVIC (deceased)
BETWEEN:
| NEVENA STEFANOVIC (by her litigation guardian, BIBI AMIDZIC) | Second Plaintiff |
| and | |
| DRAGO MARKOVIC (in his capacity as Executor and Trustee of the Estate of Zagorka Stefanovic, deceased) & ORS according to the attached Schedule | Defendants |
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JUDGE: | Watson J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 4 and 5 June 2024 |
DATE OF JUDGMENT: | 1 July 2024 |
CASE MAY BE CITED AS: | Stefanovic v Markovic & Ors |
MEDIUM NEUTRAL CITATION: | [2024] VSC 369 |
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FAMILY PROVISION – Part IV application – Whether testator made adequate provision for her adult daughter – Whether the time for a family provision order should be extended – Time for making an application extended – Testator had a moral duty to provide for adult daughter’s proper maintenance and support – Will fails to make adequate provision for adult daughter – Consideration of form of provision – Administration and Probate Act 1958 (Vic) ss 91, 95, 99AA and 99.
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APPEARANCES: | Counsel | Solicitors |
| For the Second Plaintiff | Ms C Sparke KC | Zion Legal |
| For the Defendants | Mr A M Donald | Bowman & Knox |
HIS HONOUR:
The second plaintiff, Nevena Stefanovic (‘Nevena’) makes an application pursuant to Part IV of the Administration and Probate Act 1958 (‘the Act’) seeking further provision for her proper maintenance and support out of the estate of her mother, Zagorka Stefanovic (‘Zagorka’).
The first plaintiff, Milosav Stefanovic, (‘Michael’) died on 2 August 2023 and his claim was dismissed on 18 April 2024, his legal representatives and the defendants having resolved issues between them regarding expenses and costs.
Nevena and the defendants helpfully filed a joint trial document setting out, amongst other things, the legal issues to be determined. The issues which I have to determine in this proceeding are:
(a) Should the time within which Nevena may apply for a family provision order be extended?;
(b) If yes, did Zagorka have a moral duty to provide in the will for Nevena’s proper maintenance and support?;
(c) If yes, did Zagorka by the will make adequate provision for Nevena’s proper maintenance and support?; and
(d) If no, what order should the Court make by way of a family provision order?
For the reasons which follow, the answers to the questions posed by the parties are:
(a) Yes;
(b) Yes;
(c) No;
(d) Further provision in the sum of $550,000 should be made for Nevena. The parties should file orders giving effect to these reasons within 7 days.
Zagorka’s family and her will
For ease of reference and without meaning any disrespect, in this judgment I refer to the various members of Zagorka’s family with the surname Stefanovic by their first names and where they are commonly known by an anglicised version of their first name, by that anglicised version.
Zagorka died on 11 May 1998, aged 63.
She was survived by three children, Michael, Miodrag (‘Bobby’) and Nevena. Michael died in August 2023 and Bobby died in June 2019.
Michael is survived by four children, Vicki Crawley, Rose Shingles, Anna Kendall and David.
Bobby is survived by his son Aleksandar (‘Alex’).
Nevena has no children.
Zagorka’s last will is dated 3 October 1997. It appoints Drago Markovic, Mira and Alex as executors. Mr Markovic was a friend of Zagorka and Mira is Bobby’s former wife and the mother of Alex. The executors are the defendants in the proceeding.
On 17 December 2002 probate of the will was granted to the executors.
Clause 1 of the will revokes all former testamentary dispositions. Clause 2 of the will appoints the executors. Clause 3 of the will deals with a property at 9 Bellnore Drive, Norlane West (‘the Norlane property’). Clause 4 deals with property at 18 Indiana Avenue, Corio (‘the Corio property’). Clause 5 bequeaths property and assets situated in Serbia. Clause 6 deals with the residuary estate and Clause 7 provides a power to make payments to the parent or guardian of a beneficiary without seeing to their application.
The estate comprises the Norlane property, the Corio property and monies in two separate bank accounts, one for the Norlane property (‘the Norlane property bank account’) and one for the Corio property (‘the Corio property bank account’). The monies in those accounts are derived from the lease of those properties. On the evidence before me, no property or assets in Serbia have been able to be located by the executors.
This case centres on the provisions of clauses 3 and 4 of the will. They provide as follows:
3. I GIVE my freehold residence at 9 Bellnore Drive Norlane West or other such property as is my principal residence at my death to my Executors UPON TRUST:
(a) To sell and convert the same into money with power to postpone such sale and conversion for so long as they may think fit and, pending sale, to permit my sons MILOSAV and MIODRAG to have the use and occupation thereof during their joint lives they paying all rates and taxes and other outgoings including premiums for such fire and other insurances as my Executors think proper and keeping the property in reasonable state of repair;
(b) Upon the sale of the property TO HOLD the moneys in which it has been converted UPON TRUST to apply so much of the capital and income as my Executors in their absolute discretion think fit for the maintenance benefit support and education of any one or more of my sons MILOSAV and MIODRAG and their children in such shares and at such times as my Executors think fit, without obligation to make payments to or for all of my sons and their children or to make payments equally among those to or for whom payment is made;
(c) After both of my sons MILOSAV and MIODRAG have died I DIRECT my Executors to hold the proceeds of sale of the property ON TRUST as to one half thereof for my grandson David and as to the other half thereof for my grandson Aleksandar absolutely.
4. I GIVE my freehold residence at 18 Indiana Avenue Corio to my Executors UPON TRUST:
(a) To sell and convert the same into money with power to postpone such sale and conversion for so long as they may think fit and, pending sale, to permit my daughter NEVENA STEFANOVIC to have the use and occupation thereof during her life she paying all rates and taxes and other outgoings including premiums for such fire and other insurances as my Executors think proper and keeping the property in reasonable state of repair;
(b) Upon the sale of the property TO HOLD the moneys in which it has been converted UPON TRUST to apply so much of the capital and income as my Executors in their absolute discretion think fit for the maintenance benefit support and education of any one or more of my daughter NEVENA and her children in such shares and at such times as my Executors think fit, without obligation to make payments to or for all of my daughter and her children or to make payments equally among those to or for whom payment is made;
(c) After my daughter NEVENA has died I DIRECT my Executors to hold the proceeds of sale of the property ON TRUST for such of the children of NEVENA as are then living and attain the age of twenty-one years if more than one as tenants in common in equal shares but if NEVENA does not leave any children who survive her and attain the age of twenty-one then for my grandson Aleksandar absolutely.
(Emphasis in original)
Neither the Norlane property or the Corio property have been sold since Zagorka’s death. Bobby and Michael never lived in the Norlane property. Nevena has never lived in the Corio property. Both properties are still in the names of the executors and have been tenanted for most of the time since Zagorka’s death. The rent from the tenancies has been deposited in the respective bank accounts and outgoings for each of the properties have been paid from those bank accounts.
Nevena
Nevena was born on 24 February 1958. She is 64. She was born in Serbia and moved to Australia with her parents and brothers when she was 12 years old. She completed one year of primary school and three years of high school in Australia.
Nevena has a series of health issues. She has lived for a long time with epilepsy. She has osteoarthritis, diabetes, schizophrenia and other ailments. She is on a range of medications to treat those ailments. The evidence is that with medication she copes with daily living.
Nevena was assessed by a neuropsychologist in 2023 as demonstrating global cognitive impairments. Compared to her age-related peers Nevena scored results in testing ranging from below the 0.1 percentile to the third percentile. The report of the neuropsychologist formed the basis for the appointment of a litigation guardian in this case.
Nonetheless, despite her obvious physical and mental challenges, Nevena copes with day-to-day living on her own, receiving some assistance from her niece, Vicki and a cleaner. In particular, as will become evident Nevena has shown an impressive capacity to look after her own finances.
Nevena has been married twice. Once when she was 21. That marriage lasted a little over a year and ended when her first husband died. A couple of years later she married her second husband whom she describes as violent and destructive. She says that she and her second husband did not live together as husband and wife and that after four years she did not see him again. Nevena is unsure if she and her second husband have ever formerly divorced, but she has not seen him since the mid-1980s.
Nevena was also in a relationship with a man which commenced in 1985 and continued for approximately 10 years. Nevena says he tried to claim a carer’s payment in respect of her but that in fact he never provided her with care. She says that he was later convicted and sent to jail for taking advantage of vulnerable people and extorting money from them. Since the end of that relationship she has lived alone.
Since 1976 Nevena has been in receipt of a disability pension and has not been in paid employment since that time. As noted above, she has never resided in the Corio property, but rather has lived in a range of rental properties generally in and around Melbourne’s western suburbs. Currently she lives on her own in a rental property in St Albans.
I consider in more detail Nevena’s financial circumstances below in dealing with the question of appropriate relief in this matter.
Nevena gave evidence through an interpreter. It is apparent that Nevena has a limited understanding of English and on occasions struggled with understanding questions when they were interpreted for her into Serbian.
Legislation
Section 99AA of the Act provides as follows:
Transitional provision—Wills Act 1997
Despite the amendment of this Act by Part 7 of the Wills Act 1997, Part IV of this Act, as in force immediately before the commencement of Part 7 of the Wills Act 1997, continues to apply to the estate of a person who has died before that commencement.
Part 7 of the Wills Act 1997 commenced on 20 July 1998. As a result the provisions of the Act which apply in this matter are those which applied prior to the amendments introduced by the Wills Act 1997. For ease of reference, I set out the legislative provisions relevant to each of the questions I have been asked in my consideration of those questions. References to the Act below are (unless specifically noted to the contrary), references to the Act as at the date of Zagorka’s death.
Extension of time
Section 99 of the Act provided:
Time within which application may be made
No application shall be heard by the Court at the instance of a party claiming the benefit of this Part unless the application is made within six months after the date of the grant of probate of the will or of letters of administration (as the case may be):
Provided that the time for making an application may be extended for a further period by the Court after hearing such of the parties affected as the Court thinks necessary, and this power shall extend to cases where the time for applying has already expired but in all such cases the application for extension shall be made before the final distribution of the estate and no distribution of any part of the estate made prior to the application shall be disturbed by reason of the application or of any order made thereon.
…
The parties agree that in considering Nevena’s application for an extension of time I should pay regard to the following factors:
(a) the length of delay in bringing the application;
(b) Nevena’s explanation for that delay;
(c) the strength of Nevena’s case;
(d) any forensic prejudice to the Executors; and
(e) any prejudice to other beneficiaries.
The time for an application for a provision under s 91 expired on 17 June 2003. Nevena’s application for provision was made on 28 August 2020. Her application for an extension of time is therefore for a period in excess of 17 years. This is plainly a long time and the length of the delay is a factor in the balance against the grant of an extension of time in this case. However, in light of the other factors which I consider below, I do not regard the length of delay as decisive.
Nevena has a cogent explanation for her delay in bringing the application. She was ignorant of her rights. The evidence establishes that the first time that Nevena became aware of her ability to make an application under Part IV was some time in 2020 when her niece, Vicki Crawley, visited her and explained that Michael was going to make an application and suggested to Nevena that she might make one as well.
The executors opened their case and cross-examined Nevena and Vicki on the basis that at some stage, well before 2020, Vicki must have told Nevena of her rights to bring a Part IV application (because there was some evidence that Michael had consulted lawyers regarding the will as early as 2006). There is simply no basis for such a finding. Vicki’s evidence in this regard was unequivocal and whilst Nevena initially showed some confusion regarding timing in her answers as to when she spoke with Vicki, ultimately her evidence was to the same effect. Indeed, by final submission counsel for the defendants effectively conceded that there was no evidence that Nevena was aware of her rights until the time Vicki visited her some months before the instant application was commenced.
In considering the question of the strength of Nevena’s claim for the purposes of an extension of time both parties agreed that the relevant test was whether she had a real and not fanciful or weak claim. That factor is plainly satisfied here where on an overall consideration of the merits, I have determined that Nevena’s claim should succeed.
The executors submitted that given the length of delay prejudice should be presumed. Ordinarily that might be so, but this is a case where the executors as defendants can really point to no prejudice occasioned by the passage of time. In determining whether adequate provision has been made for Nevena I am required to construe the will and to consider the circumstances as at the date of Zagorka’s death. The provisions of the will are capable of being construed and there is no significant factual contest regarding any issue bearing on the question of provision where the executors can point to any forensic prejudice.
Further, I am not persuaded there is evidence of any relevant prejudice to other beneficiaries. Alex gave evidence that he had an expectation under Zagorka’s will and, in reliance on that expectation and on the basis that no claims would be made, he has lived his life accordingly. This points up a significant difficulty in the way in which Alex and the other trustees have approached Zagorka’s will. As I discuss below, it is plain from the totality of the evidence that the trustees have approached their role under Zagorka’s will on the assumption, in effect, that their job was to preserve the Corio property for Alex’s benefit. A proper construction of the will makes clear that Alex should have had no expectation regarding the Corio property or indeed the Norlane property. Those properties, or the proceeds from them, would only enure to his benefit if the executors, having properly exercised their discretion, had not distributed the capital and income from the sale of the properties prior to the death of Zagorka’s children.
The executors also make a similar argument in relation to David. No evidence is before me of David’s expectations. Alex gave evidence that the executors had not contacted David to ascertain his wishes but I was informed by senior counsel for Nevena that David was aware of the proceedings and had been present in Court throughout them. In the circumstances I do not regard the asserted prejudice to Alex as a factor which weighs heavily in the balance against an extension of time and I have no evidence regarding any prejudice to David.
Having regard to all of the above factors, I am persuaded that it is appropriate to grant an extension of time to Nevena so that she may bring her claim.
Moral duty
The executors accept that, in the circumstances, Zagorka had a moral duty to provide in the will for Nevena’s proper maintenance and support. That concession was appropriately made. At the time of Zagorka’s death Nevena was a 40 year old daughter with significant health issues, limited education and living on her own on a disability pension.
Adequate provision
Section 91 of the Act provided:
Maintenance and support of widow at set
Notwithstanding anything in this Act to the contrary where after the commencement of the Administration and Probate (Family Provision) Act 1962 any person (hereafter in this Part called “the deceased”) dies, and the distribution of his estate effected by his will (if any)… is such as not to make adequate provision for the proper maintenance and support of the deceased’s widow, widower or children the Court may, on application by or on behalf of the said widow widower or children, order that such provision as the Court thinks fit shall be made out of the estate of the deceased for such widow widower or children.
In granting or refusing Nevena’s application, Section 95 of the Act requires me to have regard to:
(a) the net value of the estate; and
(b) whether the applicant is entitled to independent means.
The cases establish a number of broad propositions:
(a) First, the starting point in any analysis is the right to freedom of testation;[1]
[1]Grey v Harrison [1997] 2 VR 359, 366 [15]; [1996] VSC 74, [15] (Callaway JA).
(b) Secondly, Part IV does not permit the court to re-write a will simply to accommodate its individual view regarding how the testator might have exercised their testamentary power;[2]
(c) Thirdly, the court should only intervene where the testator has failed to discharge their moral duty to the plaintiff;[3] and
(d) Fourthly, in determining whether the will makes ‘adequate provision for the proper maintenance and support’ of the plaintiff the court is to consider what a wise and just testator would have thought was their moral duty fully aware of all the circumstances.[4]
[2]Leyden v McVeigh & Anor [2009] VSC 164, [30].
[3]Ibid.
[4]In re Allen deceased; Allen v Manchester (1922) NZLR 218, 220-221; Bosch v Perpetual Trustee Co Ltd [1938] AC 463, 478-479.
For the reasons that follow, I have determined that Zagorka did not discharge her moral duty to Nevena and that the will fails to make adequate provision for her proper maintenance and support.
Under the will the executors are vested with broad discretions in relation to the Corio property. In the course of closing submissions the following interchange occurred:
His Honour: Assume though – and this goes back to a question I asked you, but assume that the discretion is as broad as you say, doesn’t that mean that effectively under the will Nevena was really given nothing much?
Mr Donald:That’s probably right, because when you look at the will, the source document is the will, the source document is paragraph (b), ‘to apply so much of the capital and income as my executors in their absolute discretions think fit’, and then other words appearing in clause (b) are, ‘as my executors think fit without obligation to make any payment.’ It is very similar to a discretionary trust in that regard where the only thing that a beneficiary in a discretionary trust has is a right to be considered.[5]
[5]Trial Transcript 5 June 2024 (day 2), 84–85.
Hedman v Frazer; Egan v Frazer[6] contains a very useful discussion of various authorities dealing with circumstances where the quantum of provision from a deceased’s estate is dependent upon the discretion of trustees. Those authorities establish that whilst all the circumstances of the case must be considered, usually where the quantum of provision is entirely dependent on the discretion of a trustee, this will not be adequate provision.
[6][2013] NSWSC 1915.
At the time of Zagorka’s death Nevena was 40 years old, suffering from epilepsy, on a disability pension, not having been in paid employment since 1976 and in rented accommodation. Whilst the evidence does not permit me to form a precise view regarding her cognitive challenges at that time, I am persuaded that it is likely that there were cognitive challenges. That said, I find that, as at the date of death of Zagorka, Nevena had a capacity to look after her own financial affairs and did not require those affairs to be managed by others.
Under the will Nevena’s only certain entitlement is to have the ‘use and occupation’ of the Corio property pending its sale. Once sold, Nevena had no right to any capital or income from the property but is entirely dependent on the exercise of discretion by the trustees.
I am not satisfied that the provision of use and occupation of the Corio property pending sale provided properly for Nevena. Insofar as Nevena was entitled to reside at the Corio property pending sale:
(a) It is clear that her preference was to remain in the western suburbs of Melbourne where she had made her life; and
(b) Moving to the Corio property would have left her entirely dependent on the executors as to the duration of her occupation of the property.
I accept Nevena’s argument that clause 4(a) of the will entitled her to receive rents from the Corio property if she chose not to reside there.
In Re Hillier, Primrose v Kewley[7] Long Innes CJ in equity said:
I think there is no doubt that a devise of the ‘use and occupation’ of, or a direction in a will that a person may ‘use and occupy’, a proper prima facie confers a life estate and will entitle the donee not only to personally reside in the property but also to receive the rents thereof.[8]
[7](1939) 39 SR (NSW) 71.
[8]Ibid 74.
To similar effect, in Re Keenan; Fordham v Keenan[9] AH Simpson CJ in Eq said:
If the words used, or anything in the will, imply that a personal right only is given, the gift must be confined to that. A direction that a person may reside or live in a house prima facie confers a personal right for a man cannot reside by deputy. But a right to use and occupy, or to occupy only, stands on a different footing for a man can ‘occupy’ by himself or a tenant.[10]
[9](1914) 30 WN (NSW) 214.
[10]Ibid 215.
I do not regard the putative right to receive rents of the Corio property pending sale as adequate provision for Nevena. First, the duration of any right to receive such rents was entirely subject to the discretion of the executors as to the time of sale of the property. Secondly, in the circumstances, and as I discuss below, I am satisfied that proper provision for Nevena’s maintenance and support would have entailed giving her the security of owning her own home.
I do not accept that the decision whether to sell Corio is as unfettered as the executors would have it – at the very least they were required to turn their minds to whether the property should be sold. However, as noted above, clause 4(b) of the will leaves Nevena entirely subject to the discretion of the executors should the property have been sold.
It is also apparent that of the executors, Alex was placed in a position where the exercise of his discretion as trustee to provide capital or income to Nevena upon sale of the property necessarily conflicted with his personal interest in ensuring that upon her death there were proceeds of the sale left for his benefit. In fact, it is clear that Alex took the view that he was entitled to act as an executor with a view to keeping the property so he could inherit it once Nevena died. But even without that misplaced view, the reality is that the will left Nevena in a situation where, had the property been sold, she was dependent on the exercise of discretion from trustees, one of whom had a positive interest in not exercising any discretion in her favour and the other of whom (his mother) was placed in circumstances of ‘potential embarrassment’[11] similar to those of the co-trustee in Re Lawther.[12]
[11]Re Brown deceased [1972] VR 36, 40.
[12]Re Lawther [1947] 2 DLR 510, 524-525 (Williams C.J).
In these circumstances, I am satisfied that the entitlement to rent pending sale and the dependence on the discretion of the executors after sale was not proper provision for Nevena at the time of Zagorka’s death. I am satisfied that a wise and just person in Zagorka’s position knowing her circumstances and knowing that Nevena did have a capacity to manage her financial affairs on her own would not have left her provision entirely to the discretion of the executors and would have provided her with some level of certain provision.
In reaching the conclusion in the previous paragraph I have not had regard to the executors’ actual administration of the trust. I take those matters into account in relation to the nature of the provision which should be made for Nevena.
Insofar as the mandatory requirements in s 95 of the Act are concerned I find that:
(a) The net assets of the estate do not bear on my finding, as at the date of death Zagorka could have made direct provision for Nevena rather than leaving her with provision entirely dependent on the discretion of trustees; and
(b) As is evident from above, Nevena did not have independent means, she was dependent on a government pension for her income, as Hedigan J said in King v White, ‘there can be no basic assumption that the provision of the fortnightly sum provided by the Commonwealth of Australia to pensioners ipso facto amounts to proper maintenance and support in all circumstances.’[13]
[13][1992] 2 VR 417, 422.
Taking all of the relevant factors into account, the will did not make adequate provision for Nevena.
Form of Provision
Nevena seeks further provision in the sum of $550,000 from the estate comprising:
(a) $450,000 being the proceeds of the sale of the Corio property, in order to provide her with the capacity to purchase a property of her own; and
(b) A ‘nest egg’ of an additional $100,000 in order to provide her with a buffer in terms of funds available for her future expenses and care.
The defendants’ primary contention was that the will made adequate provision for Nevena, but in the event I formed a different view (as I have), put a cascading series of propositions regarding what appropriate orders for provision would entail. These were:
(a) that the mechanism of the trust under clause 4 should remain in place;
(b) alternatively, a flexible life interest granted to Nevena in a property purchased using the net proceeds of the sale of the Corio property; and
(c) that there should be no nest egg provision, alternatively a modest sum of no more than $20,000.
In the course of the trial I heard evidence from Mr Markovic and Alex. Mira did not give evidence. Based on the evidence of Mr Markovic and Alex and the statements of the Corio property bank account and the Norlane property bank account, I am satisfied that it is not appropriate to leave Nevena’s further provision to the mechanism of the trust established by clause 4 of the will.
Mr Markovic fundamentally misunderstood his role as an executor under the will. His evidence made clear that he thought his job was to hold onto the property until Nevena died so it could be passed to Alex:
Counsel: Mr Markovic, I did not ask you what she said. I said what she wanted according to the Will?
Mr Markovic: She wanted …
Counsel: According to the Will?
Mr Markovic: To the Will, yes, according to the Will she wanted the house to be looked after till the last person alive. Nobody can sell it.
Counsel: So that's what you say the Will says?
Mr Markovic: No, that's what the Will says.
Counsel: So you're to keep hold of the trust until the last person is alive and nobody can sell it, is that what you just said?
Mr Markovic: No, no, no, I didn't say that.
Counsel: I misunderstood. Tell us again, what does the Will say?
Mr Markovic: I just said what she see what she said.
Counsel: No, I was asking about what the Will says?
Mr Markovic: That's what is in the Will said, we have to look after - and help everything, we can do it to keep the house because she said - she said to me and to the other people, 'I don't want my kids to be dying on the street. I have to have a house and you look after them.' And we tried that, we offered them the house to live inside, not to die on the street, but don't sell anything before, even person alive because after that Bellnore drive is going to Alex half, and half to David but in Corio they say that's going to Alex but allow Nevena to live there …[14]
(emphasis added)
[14]Trial Transcript 5 June 2024 (day 2), 13/5-27.
And later:
Counsel :You thought ‘I can’t buy a house in her name, I can’t sell the Corio property because I’m not allowed to?’
Mr Markovic: No, I’m not allowed by the Will.[15]
[15]Trial Transcript 5 June 2024 (day 2), 18/10-12.
Alex’s understanding of his role was slightly more accurate. He understood that if the property was sold the proceeds were to be placed on trust for Nevena, but it is clear from his evidence that he did not regard himself as obliged to consider a sale because Nevena had never asked for it and she was ‘pretty comfortable where she lived’. It is plain from his submissions that Alex had an expectation that the property would come to him under the will. He also gave this evidence:
Counsel: You took the view, did you not, that the property was really yours and that Nevena could live in it if she wanted to but really at the end of her lifetime it was yours?
Alex: Look, it was for her to live in, definitely. But down the track, yeah, it came to me, like, as a beneficiary, yes.[16]
[16]Trial Transcript 5 June 2024 (day 2), 44/9-14.
Further, neither Mr Markovic nor Alex seems to have appreciated that clause 4(a) of the will entitled Nevena to the net proceeds of the rent on the Corio property. It is plain that they did not regard themselves as owing any obligation to Nevena to remit those proceeds to her. Rather, the evidence establishes that the executors’ only payments to Nevena from the rental proceeds of the Corio property were ‘Slava’ payments. A Slava payment is a payment made to family members with a religious and cultural significance. It is plain from the evidence that Mr Markovic and Alex regarded the Slava payments as an act of generosity on their part, but something which bore no relationship to the net rent collected on the Corio property and no relationship to any consideration of Nevena’s needs.
For completeness, I should note that there was a dispute between Nevena and the executors as to the amount she was actually paid in Slava payments. Nevena’s evidence was that she had received a payment of $1,000 and perhaps another payment of about $900. In closing submissions the executors contended that the amount was ’at least’ $11,000. In the final analysis I do not need to resolve this dispute. Whichever of the two amounts it was woefully inadequate in terms of a proper consideration of Nevena’s need and, as I have indicated, bore no relationship to the net rental proceeds of the Corio property.
Finally, in respect of why it is not appropriate to continue the trust arrangements under the will, it is to be observed that on a number of occasions the executors chose to pay Slava payments to Michael and Bobby from the proceeds of the Corio property. In evidence Alex suggested that ultimately, these amounts might have been reimbursed from the Norlane property bank account, but an inspection of the Norlane property bank account statements does not demonstrate any such reimbursement. It need hardly be said, but there is no basis upon which it would have been proper to make payments from the Corio property account to Michael and Bobby.
In short, I am satisfied that it is not appropriate to leave Nevena’s further provision under the will in any way subject to the discretion of the existing executors. They have wholly failed to properly exercise their discretions under clause 4 and Nevena deserves the security of having property transferred to her in her own right.
In the circumstances of this case, I am not persuaded that provision of a flexible life interest to Nevena is appropriate.
In Downing v Downing & Anor[17] Osborn J helpfully summarised some of the relevant general principles:
The following general principles can be discerned in the relevant authorities:
1. The provision of a capital asset to the plaintiff may be appropriate as part of a package of measures intended to provide accommodation, income and a nest egg (Luciano v Rosenblum).
2. The whole circumstances of each case must necessarily be addressed and may lead to different conclusions in different cases despite the presence of particular factors common to different cases (Bosch v Perpetual Trustee Company Pty Ltd; Re Duncan).
3. Concern as to the capacity of a plaintiff to meet the vicissitudes and uncertainties of life may favour the provision of a capital asset to the plaintiff (King v White).
4. Concern as to the capacity of the plaintiff to maintain her or himself independently and autonomously may also bear upon the notion of what is a proper provision (Richard v AXA).
5. The fact that the provision of a capital asset to a plaintiff may incidentally enable a plaintiff in due course to pass that asset on to children or family contrary to the deceased’s wishes is not determinative of the propriety of such a provision (Worladge v Doddridge).[18]
[17][2003] VSC 28.
[18]Ibid [44].
Nevena is 64 and has significant health needs which one anticipates may worsen over the course of her life. The uncontested evidence is that her likely lifespan is a further approximately 22 years. In those circumstances, it is appropriate that Nevena be provided with the security of her own accommodation, but is also appropriate that should she choose, she be permitted to utilise the capital in her home for her other needs. For this reason, I do not favour the award of a life interest. Further, as Nevena submitted, the will contemplated the distribution of both capital and income to Nevena in order to meet her needs. The provision of a life interest would, in that sense, be a step backwards from the provisions of the will.
I deal with the question of Nevena’s savings below in more detail in my consideration of the question of a nest egg. However, I note here that I do not regard the fact she has saved over $80,000, the fact that she is in receipt of a disability pension from the government or the fact that she is in receipt of rental assistance, as factors which in any way detract from the proposition that Nevena should be provided with the opportunity to have the security of her own home in her own name.
The evidence before me establishes that Nevena will be able to purchase a modest two bedroom unit in St Albans for approximately $450,000. That, as it happens, is the estimated value of the Corio property. The appropriate order for provision in this respect therefore, is for the Corio property to be sold and for the proceeds of that sale to be utilised as the basis of a payment to Nevena of $450,000. For the avoidance of any doubt, in this respect I regard the provision of $450,000 to Nevena as the appropriate order. Thus, any costs of the sale and any capital gains tax payable upon the sale should be borne by the estate.
In addition to the provision of capital in order to purchase a home, it is appropriate that Nevena have a nest egg to provide her additional capital so that she may live a fuller life and to guard against the exigencies of declining health and increasing expenses as she ages. The executors say that no nest egg is needed. They point to the fact that Nevena has the disability pension and will shortly be eligible for the age pension and that whilst she has been in receipt of the disability pension she has managed to save in excess of $80,000. Nevena says that $50,000 of the $80,000 has been saved for her funeral expenses. The executors submit, and I accept, that it is unlikely that all of the $50,000 would be needed for funeral expenses.
It is to Nevena’s extraordinary credit that she has managed to save as much as she has whilst in receipt of the disability pension and rental assistance. I do not accept though that this fact disentitles Nevena to further provision of an additional modest lump sum.
First, Nevena has saved the amount she has by leading a life of extraordinary frugality. She should not be expected to maintain a lifestyle of that frugality as a necessity. As was said by Cleland J in In re Harris:
Property maintenance is (if circumstances permit) something more than a provision to keep the wolf from the door – it should at least be sufficient to keep the wolf from pattering around the house or lurking in some outhouse in the back yard – it should be sufficient to free the mind from any reasonable fear of any insufficiency as age increases and health and strength gradually fail.[19]
[19]Inre Harris [1936] SASR 497, 501.
Secondly, the evidence shows that the degree to which Nevena has been able to save in recent years has diminished.
Thirdly, Vicki’s evidence, which I accept, is that her family circumstances mean she may not be in a position to provide ongoing support for Nevena at the same level as in recent years. Nevena would likely incur increased expenses in the event Vicki is unable to help out as much as she has.
Fourthly, I am satisfied that as Nevena ages her expenses for medications, health care and other assistance are likely to increase.
These matters establish that Nevena has a need for a nest egg and doing the best I can with the evidence, the sum of $100,000 in addition to the amount she has saved is an appropriate sum.
Further, I accept Nevena’s submission that she has a prima facie entitlement to the net proceeds of the rent of the Corio house and that those proceeds arguably exceed $100,000. The evidence establishes that the amount currently standing in that account as at 15 February 2024 was $61,621.46. The evidence further establishes that the executors paid Slava payments to Michael and Bobby totalling $10,000 from the Corio property account. Whilst Alex suggested in evidence that that amount may have been reimbursed to the Corio property bank account from the Norlane property bank account, there is no record of this having occurred in either the bank statements of the Norlane property or the bank statements of the Corio property. In the circumstances, I would add back this sum of $10,000 to the balance in the Corio property account in determining what amount represents the net rental proceeds of the Corio property.
Further, the evidence shows that prior to 15 February 2024 amounts of approximately $32,500 have been deducted from the Corio property account related to costs in these proceedings:
$10,000 on 6 January 2022
$15,296 on 17 October 2023
$7,244.99 on 19 January 2024.
If Nevena had an entitlement to net rental proceeds (that is gross rent less outgoings) then there is some force in the proposition that the costs of these proceedings should be disregarded in determining her entitlements. If the payments for costs are disregarded her entitlements are approximately $104,000 – if they are taken into account her entitlement is $71,6212.46. In either event a provision of a nest egg in the amount of $100,000 is properly to be regarded as a modest intervention in the structure of the will once regard is had to Nevena’s entitlement to net rental proceeds.
In the circumstances, taking into account Nevena’s lifestyle, her current savings, her potential future needs and the amounts to which she is entitled under clause 4(a) of the will, I am satisfied that, subject to a consideration of prejudice to other beneficiaries, a further provision of a $100,000 ‘nest egg’ is appropriate.
I do not regard the prejudice to the remaining beneficiaries as a factor which stands in the way of a provision of $550,000 in total. Alex is self-employed, has a house of his own and suffers no disability. I do not have any evidence regarding David’s circumstances, but he is aware of the proceedings, was present in Court throughout the hearing and chose not to participate. Counsel for Nevena, doing the best she could with the evidence, estimated that the level of provision Nevena seeks, together with costs out of the estate, would leave an amount of approximately $250,000 for David and Alex to share.
Zagorka owed a lesser moral duty to David and Alex. Alex’s needs are clearly not as great as Nevena’s. Overall, I am satisfied that the prejudice to David and Alex is not a reason to reduce the amount of provision to Nevena that I regard as adequate for her proper maintenance and support.
Conclusion
The appropriate order is that Nevena be provided with further provision in the form of a lump sum payment of $550,000 from the estate.
Within 7 days the parties should file consent orders giving effect to these reasons (including as to costs) or in the absence of consent, file and serve proposed orders together with submissions of no more than 2 pages in support of their proposed orders.
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SCHEDULE OF PARTIES
S ECI 2020 03838
| NEVENA STEFANOVIC (by her litigation guardian, BIBI AMIDZIC) | Second Plaintiff |
| - and - | |
| DRAGO MARKOVIC (in his capacity as executor and trustee of the estate of ZAGORKA STEFANOVIC, deceased) | First Defendant |
| - and - | |
| MIRA STEFANOVIC (in her capacity as executor and trustee of the estate of ZAGORKA STEFANOVIC, deceased) | Second Defendant |
| - and - | |
| ALEKSANDAR STEFANOVIC (in his capacity as executor and trustee of the estate of ZAGORKA STEFANOVIC, deceased) | Third Defendant |
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