Stern v Sekers; Sekers v Sekers

[2010] NSWSC 59

CITATION:	Stern v Sekers; Sekers v Sekers [2010] NSWSC 59
HEARING DATE(S):	14, 15, 16, 17 December 2009
JUDGMENT DATE :	12 February 2010
JURISDICTION:	Equity Division Family Provision Act List
JUDGMENT OF:	Ward J
DECISION:	Provision made
CATCHWORDS:	SUCCESSION – family provision and maintenance – principles upon which relief granted – application made by three adults from first marriage for provision from father’s estate –large estate left to five children from both marriages and second wife – whether inadequate provision made for three children from first marriage – if so, what provision ought to be made – one claimant with serious psychological condition requiring provision for special care – application of discount tables to lump sum award – whether property held by second wife as a result of survivorship and distribution of deceased’s estate is available to be designated notional estate after second wife’s death – held that inadequate provision made – property held by or distributed to second wife not able to be designated notional estate – provision ordered for plaintiffs by rewriting of testamentary trusts and capital sum to be held under special disability trust for one of claimants
LEGISLATION CITED:	Corporations Act 2001 (Cth) Explanatory Memorandum for the Corporate Law Economic Reform Program Bill 1999 Family Law Act 1975 (Cth) Family Provision Act 1982 Social Security Act 1991 (Cth) Succession Act 2006 Workplace Relations Act 1996 (Cth)
CATEGORY:	Principal judgment
CASES CITED:	Barbara Mayfield v Suzy Carolyn Lloyd-Williams [2004] NSWSC 419 Bladwell v Davis [2004] NSWCA 170 Bosch v Perpetual Trustee Co [1938] AC 463 Bovaird v Frost [2009] NSWSC 337 Brookfield v Yevad Products Pty Limited [2004] FCA 1164 Button v Lynch [2002] NSWSC 1148 Caldwell v Ang (unreported, NSWSC, 11 April 1991) Cetojevic v Cetojevic [2006] NSWSC 431 Civil Liability Act 2002 (NSW) Collings v Vakas [2006] NSWSC 393 Crisp v Burns Philip Trustee Company Ltd (unreported, NSWSC, 18 December 1979), Cropley v Cropley [2002] NSWSC 349 Davies v Eli Lilly & Co [1987] 1 All ER 801 Diver v Neal [2009] NSWCA 54 Falkingham v Falkingham [2002] NSWSC 534 Fellows v Paterson [2002] NSWSC 190 Foley v Ellis [2008] NSWCA 288 Ford v Simes [2008] NSWSC 1120 Ford v Simes [2009] NSWCA 351 Gillett v Holt [1998] 3 All ER 917 Gorton v Parks (1989) 17 NSWLR 1 Hardcastle v Advanced Mining Technologies Pty Ltd [2001] FCA 1846 In Re Hattie [1943] SR (Qld) 1 Kalmar v Kalmar [2006] NSWSC 437 Kavalee v Burbidge (1998) 43 NSWLR 422 Kearns v Ellis (unreported, NSWCA, 5 December 1984) Kennon v Spry [2008] HCA 56; (2008) 238 CLR 366 Lloyd-Williams v Mayfield [2005] NSWCA 189 Lonrho Limited v Shell Petroleum Co Limited [1980] 1 WLR 627 McGrath v Eves [2005] NSWSC 1006 Minister of Employment and Workplace Relations v Gribbles Radiology Pty Ltd [2005] HCA 9; (2005) 222 CLR 1994 Nicholls v Hall [2007] NSWCA 356 O’Loughlin v Low [2002] NSWSC 222 Palmdale Insurance Limited (in liq.) v L Grollo & Co Pty Limited [1987] VR 113 Palmer v Dolman; Dolman v Palmer [2005] NSWCA 361 Pontifical Society for the Propagation of the Faith v Scales [1962] HCA 19; (1961) 107 CLR 9 Pope and Ors v Christie Matter No 4918/94 [1998] NSWSC 118 Prince v Argue [2002] NSWSC 1217 Re Buckland deceased [1966] VR 404 Re Gilbert (1946) 46 SR (NSW) 318 Retter v Permanent Trustee Co Limited: Re Estate of Rita Retter, (unreported, NSWSC 13 April 1994) Robinson v Tame (unreported, NSWCA, 9 December 1994) Schaeffer v Schaeffer (1994) 36 NSWLR 315 Singer v Berghouse (No 2) (1994) 181 CLR 201 Tan & Ors v St George Bank Ltd & Ors [2005] WASC 143 Taylor v Santos Limited (1998) 71 SASR 434 Todorovic v Waller [1981] HCA 72; (1981) 150 CLR 402 Vigolo v Bostin (2005) 221 CLR 191 Walker v Walker, unreported, NSWSC, 17 May 1996 Wheatley v Wheatley [2006] NSWCA 262
TEXTS CITED:	R P Austin and I M Ramsay, Ford’s Principles of Company Law, 13th ed, Butterworths, Sydney R P Austin, H A J Ford and I M Ramsay, Company Directors: Principles of Law and Corporate Governance, LexisNexis, Sydney, 2005
PARTIES:	Ralph Stern (First Plaintiff in 5024/07) Dorothy Carroll (Second Plaintiff in 5024/07) David Sekers (aka David Shoresh) (First Defendant in 5024/07) Daniel Sekers (Second Defendant in 5024/07) Jasper Sekers (Third Defendant in 5024/07) Finley Stern (Fourth Defendant in 5024/07) William Carroll (Fifth Defendant in 5024/07) Edward Carroll (Sixth Defendant in 5024/07) Carol Judy Jennifer Sekers (by her tutor Thomas Joseph McLoughlin) (Plaintiff in 5645/07) David Sekers (aka David Shoresh) (First Defendant in 5645/07) Daniel Sekers (Second Defendant in 5645/07) Ralph Stern (Third Defendant in 5645/07
FILE NUMBER(S):	SC 5024 of 2007; 5645 of 2007
COUNSEL:	Mr R Wilson (Plaintiffs and Third, Fourth, Fifth and Sixth Defendants in 5024 of 2007) Dr C Birch SC with him Mr M Cleary (First and Second Defendants in both matters) Mr C Simpson SC (Plaintiff in 5645 of 2007)
SOLICITORS:	Turnbull Hill (Plaintiffs and Third, Fourth, Fifth and Sixth Defendants in 5024 of 2007) Milne Berry Berger Freedman (First and Second Defendants in both matters) L Rundle & Co (Plaintiff in 5645 of 2007)

- 134 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
FAMILY PROVISION ACT LIST

WARD J

FRIDAY 12 FEBRUARY 2010

5024/07 RALPH STERN & ANOR V SUZANNA SEKERS

5645/07 CAROL JUDY JENNIFER SEKERS by her Tutor THOMAS JOSEPH MCLOUGHLIN V SUZANNA SEKERS

JUDGMENT

1 For hearing before me on 14-17 December 2009 were two sets of proceedings, together involving claims by or on behalf of each of three adult children for provision out of the estate of their father, the late Peter Sekers. The deceased died on 27 May 2006 at the age of 85, leaving his widow, Suzanna, and his five adult children.

2 The plaintiffs in the first set of proceedings (5024/07), Ralph Stern and Dorothy Carroll, are the youngest and eldest, respectively, of the deceased’s three children with his first wife Eva, who died in October 1989. The plaintiff in the second set of proceedings (5645/07) is Carol Sekers (the second child of the deceased and Eva). Prior to the hearing, an order was made for the appointment of a tutor, Thomas McLoughlin, to conduct these proceedings in Carol’s name, on the basis that Carol has a long history of psychiatric illness and did not have the capacity to do so on her own behalf.

3 Probate of the deceased’s will was granted to Suzanna on 18 September 2006. Both sets of proceedings were commenced in late 2007, shortly before expiration of the time period for bringing claims of this kind. Suzanna died on 20 April 2008. Probate of her will was granted jointly to the two children of her marriage with the deceased (David and Daniel Sekers) on 21 October 2008, as a consequence of which they then became executors by representation of their father’s estate. This sequence of events is of relevance insofar as some criticism seemed to be made during cross-examination of David and Daniel of actions taken to distribute the deceased’s estate at a time before David and Daniel had any role as executors of the estate.

4 For convenience, and without intending any disrespect, I will refer to the respective parties by their first names.

Issues

5 Each of the plaintiffs, as a child of the deceased, is an eligible person (within the definition contained in s 6(b) of the Family Provision Act 1982) to bring a claim for provision out of the estate of the deceased and has done so within the time required under the Family Provision Act.

6 As the deceased’s estate was wholly distributed within the 18 month period in which any Family Provision Act claim could be brought, if any provision is to be made for one or more of the plaintiffs it will be necessary for some part of the estate or the distributed estate to be designated as notional estate, pursuant to s 23 or s 24 of the Family Provision Act. In that regard, there is an issue as to whether property formerly held by Suzanna (pursuant to a right of survivorship and/or distributed to her out of the estate) is able, following her death, to be designated as notional estate.

7 The power of the court to designate property as notional estate is dependent (among other things) on the court first being satisfied that an order for provision ought to be made on the application. Accordingly, the first step is to address the adequacy (or otherwise) of the provision made by the deceased for each of the plaintiffs during the deceased’s lifetime and out of his estate.

8 The issues for determination, leaving aside the question of costs (in relation to which an issue was raised as to whether there is power to designate property as notional estate simply for the purpose of satisfying costs orders), are relatively straightforward:

(i) was the provision, if any, made in favour of each of Ralph, Dorothy and Carol inadequate for his or her proper maintenance and advancement in life?

(ii) is the property which was held by Suzanna jointly with the deceased at the time of his death (a substantial share portfolio) property which, after Suzanna’s death, remains available to be designated as notional estate of the deceased pursuant to s 23 of the Family Provision Act (and, if so, should any part of that property be so designated)?

(iii) to what extent, if any, should the distributed estate of the deceased be designated as notional estate of the deceased pursuant to s 24 of the Family Provision Act ?

(iv) if there has been inadequate provision for any one or more of the plaintiffs, what orders, if any, should be made for the proper provision out of the deceased’s estate for his or her maintenance and advancement in life?

Summary

9 For the reasons set out below, I am of the view that:

(i) the provision in favour of each of Ralph, Dorothy and Carol was inadequate for his or her proper maintenance and advancement in life;

(ii) property held by Suzanna by right of survivorship following the deceased’s death or distributed to Suzanna out of the deceased’s estate is not property which is now able to be designated as notional estate;

(iii) the proceeds of the sale of the Denning Street property ($2.68 million) should be designated as notional estate;

(iv) as to the provision to be made for each of the plaintiffs:
provision should be made for each of Ralph and Dorothy by way of the re-writing of the testamentary trusts made in respect of the Francis Street property and Unit 4 in the Edward Street property, respectively, as indicated in my reasons below;
provision should further be made in favour of Ralph by way of the forgiveness of a loan claimed to be owing by him to the estate in respect of borrowings to fund renovation works for the Francis Street property;
provision should be made for Carol by way of the re-writing of the testamentary trust over Unit 1 in the Edward Street property (in which she currently has a life estate), as indicated in my reasons below, in order to permit its sale and for a capital sum to enable a trust to be established for the acquisition of suitable accommodation for Carol and for her ongoing care; and
further provision should be made, to the extent possible out of the property designated as notional estate, for each of Ralph, Dorothy and Carol by way of a sum to meet any costs which might ultimately be ordered in these proceedings.

Deceased’s assets

10 As at the date of the deceased’s death, his assets in the main comprised:

various parcels of real estate (a property consisting of four units at Denning Street, Coogee; a property consisting of three units in Francis Street, Bondi – one of which was, and still is, occupied rent-free by Ralph and his family; and two units in a building at Edward Street, Bondi – one of which (Unit 1) was, and still is, occupied rent-free by Carol);
a one-quarter shareholding in a company, Denning Real Estate Pty Limited (in which Suzanna, David and Daniel each held one of the remaining three shares), which company owns two commercial properties in Alexandria; and
a substantial share portfolio (which the deceased owned jointly with Suzanna), including large parcels of shares in Macquarie Bank, the National Australia Bank and the Commonwealth Bank, which passed by way of survivorship to Suzanna on the deceased’s death.

11 There were substantial liabilities of the estate (in the order of $830,000), which were in due course consolidated with Suzanna’s liabilities and paid out of funds drawn from a joint account held by David and Daniel (and, before her death, Suzanna). Into that account were deposited the proceeds of the sale by David and Daniel in late 2008 of the Denning Street property (title to which had been transferred to them out of their father’s estate) and of the sale from Suzanna’s estate (to David and Daniel) of some of the shares which Suzanna had held jointly with the deceased prior to his death.

12 The difficulty in identifying with precision the source of the funds used to pay the deceased’s liabilities (and, in particular, whether those were funds held by David and Daniel in their own right or as trustee of their mother’s estate) arises because, prior to Suzanna’s death, she and her sons had operated a loan facility through an account jointly held with the National Australia Bank. David and Daniel have continued to operate that account since Suzanna’s death. David confirmed that funds from that account were used to pay for several transactions (T 117.23), among them the acquisition after the deceased’s death of a property in O’Brien Street, Bondi, for $1 million.

13 When the net proceeds of sale of the Denning Street property and of the shares acquired from Suzanna’s estate were placed in this joint account, this had the effect of reducing and/or discharging the then outstanding liabilities to the bank (including liabilities in relation to the O’Brien Street loan, which was secured over both the Denning Street property and the home which the deceased had shared with Suzanna in Oceanview Avenue Dover Heights). No line of credit was secured by the O’Brien Street property (Daniel T 166).

14 David gave evidence that the National Australia Bank facility or line of credit remains available to be drawn down at least to the extent of the Denning Street sale proceeds (T 113). As David and Daniel accept that the proceeds of sale of Denning Street are available to be designated as notional estate (David at T 105 said that “as far as I am concerned it is still available to the trust”), it seems to me that nothing turns on how much of the actual funds used to pay out the deceased’s liabilities came from Suzanna’s estate and how much from David and Daniel in their own right. Nevertheless, I do note that, to the extent that the discharge of the deceased’s liabilities came out of the assets left to Suzanna, this has enabled distribution of estate assets to the plaintiffs, by way of transfer of estate properties on the trusts created under the will, free of any portion of the estate debts which they might otherwise have borne and the plaintiffs have thus obtained a benefit from the way in which the estate was administered in this regard.

15 Estimates of the net value of the estate, including the deceased’s interest in the jointly held assets, have varied. In the Inventory of Property sworn by Suzanna on her application for probate, the deceased’s estate was valued at $3,585,001. A higher estimate of the estate’s value was put in the affidavits sworn by each of David and Daniel in these proceedings and in the Outline of Contentions served on their behalf prior to the commencement of the hearing. (Part of the increase in the estimate of the estate’s value is due to the fact that, in the Inventory of Property, the value of the deceased’s share in Denning Real Estate was estimated at $1, though by reference to the value of the underlying assets of the company the deceased’s interest in the company would have been worth considerably more.)

16 In the defendants’ Outline of Contentions dated 9 December 2009, the net assets of the estate were put at $7,117,206 (excluding weekly payments made to or on behalf of Carol in accordance with the directions under the will). This sum includes a debt of $208,238 said to be owing by Ralph to the estate (which Ralph says had been forgiven by the deceased prior to his death). Further, the calculation by the executors of the estate’s net assets takes into account not only the deceased’s liabilities but also an amount said to represent interest on estate debts paid out of Suzanna’s estate (which the plaintiffs contend should not be included in the calculation of net assets).

17 It was submitted by Counsel for Ralph and Dorothy (Mr Wilson) that the value of the net estate was somewhere in the order of $9,000,000. In part, this was based on the increase, since the date of death, in the value of the shares in the portfolio the deceased had held jointly with Suzanna.

18 In evidence before me was a “kerbside” appraisal by Laing & Simmons of the respective properties as at July 2009 (Exhibit 1). That appraisal is broadly consistent with the estimates of value placed on the properties by the respective parties – the main difference being the value to be attributed to the Francis Street property (which Ralph had estimated at a lower figure – around $2 million, as opposed to the appraisal of $2.5-$2.7 million). There was no challenge in respect of this evidence and I have assumed that the Laing & Simmons appraisal gives a reliable indication of the current value of the properties.

19 For present purposes (treating the deceased’s share in Denning Real Estate as being worth around a quarter of its underlying assets and not including the debt claimed to be owing by Ralph or the interest claimed on the payment of estate debts), the deceased’s assets as at the time of death (including the deceased’s share of the share portfolio he had jointly held with Suzanna) would seem to be in the order of $8.48 million, valued as at the date of the hearing.

20 This sum is comprised as follows: Francis Street (adopting the midpoint of the valuation range) - $2.6 milllion; Edward Street units - $780,000 (again adopting the midpoint of the estimated range); Denning Street – the proceeds of sale of which were $2.68 million; deceased’s share in Denning Real Estate - say, $682,500 (the underlying properties being valued at $2 million and $730,000 respectively); and the share portfolio – now valued at around $2.8 million; less debts of $830,000. Even allowing for adjustments in the valuation of individual items, there is no doubt that this was a large estate (the executors, in effect, accepting that it was not less than around $7 million).

21 Counsel for the respective plaintiffs, Mr Simpson SC and Mr Wilson, contend that both the deceased’s interest in the share portfolio (which passed on survivorship to Suzanna) and his share in Denning Real Estate (which was transferred to her on the distribution of the estate) may be designated as notional estate (as well as the proceeds of the sale of Denning Street). Senior Counsel for the executors (Dr Birch SC) contends, on the other hand, that only the proceeds of sale of Denning Street ($2.68 million) are available to be designated as notional estate (T 156).

22 In looking at the size of the estate out of which provision could be made, the court ordinarily has regard to the parties’ costs of the proceedings. The costs of Ralph and Dorothy are estimated to be $194,261.10 inclusive of GST. Carol’s costs are estimated to be $153,234.99 inclusive of GST. The executors’ costs are estimated to be $441,468 inclusive of GST.

23 Senior Counsel for Carol (Mr Simpson SC) submitted that the disproportion in the respective costs was such that it would be appropriate for a costs capping order to be made in this case. Mr Simpson raised the concern that the level of fees incurred by the executors would otherwise diminish any claim for provision out of the estate. Dr Birch’s response is that no such concern arises in circumstances where, as here, the estate has been wholly distributed. I understand that, for all practical purposes, David and Daniel accept that they are likely to end up having to bear their own costs.

24 Although submissions as to costs were generally deferred until after judgment in the matter, Dr Birch did note that the unavailability of any undistributed estate from which to meet costs orders of the kind usually made in Family Provision Act proceedings might be a factor bearing upon the determination of what orders, if any, might be made in favour of some or all of the plaintiffs.

Deceased’s will

25 The deceased made provision in his will for each of his children other than Dorothy (though he did make provision for Dorothy’s adult children), and left the residue of his estate (after some minor pecuniary legacies) to Suzanna. In this regard, the manner in which he made provision for his children (or, in Dorothy’s case, her children) was broadly consistent – separate parcels of real estate were left to each of them (or to a trustee on trust for them) (and, in the case of David, Daniel and Ralph, on trust for any children each might have) for life with the remainder interest passing on their death to their respective children (or, in the case of the property held for Carol during her life on trust, to Ralph). The various properties were divided up amongst the family as follows.

26 The property at Francis Street, Bondi (valued in the order of $2.5 – 2.7 million) was left under the will to Suzanna (the deceased’s trustee) on trust for Ralph and any children he might have for life, with the remainder interest passing on his death to his children in equal shares (clause 3(5) of the will). Title to the property was transferred to Ralph by Suzanna prior to her death. (There is a dispute as to whether this was at Ralph’s request, although nothing seems to turn on this).

27 Unit 1 in the Edward Street property, which is currently occupied by Carol and was appraised at approximately $380,000 - $400,000, was left to Ralph to be held on trust for Carol for her life, with the remainder interest left to Ralph or his children (clause 3(3) of the will). Title to that property was also transferred to Ralph before Suzanna’s death. Given that Carol has a normal life expectancy, despite her psychiatric condition, of around 41 years and is only two years older than Ralph, the present value to Ralph of this remainder interest would seem to be low.

28 The second unit owned by the deceased in the Edward Street property, Unit 4, (similarly valued at $380,000 -$400,000) was left to Ralph as trustee for the benefit of Dorothy’s two adult children (William and Edward) (clause 3(4) of the will) but subject to a direction that the property be managed by Ralph and that he provide the net income from the property to Dorothy for the education of her two sons until Edward, the younger son, turns 25 (which will be in just under 5 years’ time from now) and thereafter that the income be given to Dorothy’s sons in equal shares. Each of Dorothy’s sons was joined as a party to, and swore an affidavit in, the proceedings brought by Ralph and Dorothy. Again, title to that property was transferred to Ralph prior to Suzanna’s death.

29 As I understand it, the executors accept that the intention disclosed in the will, though not clearly expressed, was that the effect of this bequest was that (subject to the payment of the income to Dorothy for her sons’ education for the next almost 5 years) Unit 4 was left to Dorothy’s two sons in equal shares. As the will is phrased, however, the entitlement of Dorothy’s sons seems to be only as to the income of the property and hence the will is open to the construction that Dorothy’s sons receive no more than a life interest in the property and that on their death the remainder interest in the property would form part of the residuary estate. Although no issue is taken on this point by the executors, it is a matter which should be taken into account when considering the effect on William and Edward of any orders for provision in favour of Dorothy out of the property left in trust for them – in that what they would be deprived of if the bequest in their favour were to be amended would on one view be no more than a half share in an income stream from the property for life.

30 Provision was made for each of David and Daniel under the will (clauses 3(1) and 3(2)) by an equal division between them of the four units in the Denning Street, Coogee property. Each was appointed trustee of two of the four units in the building, to hold on trust for himself and any children he might have as discretionary beneficiaries as to income for his life and then for his children. (David is married with two minor children; Daniel has no children but is shortly to marry.)

31 The Denning Street property was sold in November 2008 (notwithstanding that it was subject to the testamentary trusts created by the will) for a net sum of around $2.68 million. Two comments may be made as to this – first, the provision for each of David and Daniel under the deceased’s will was structured by way of trusts very similar to that under which provision was made for Ralph (so that there was no differentiation in that regard) and, secondly, the provision made for Ralph’s half brothers and their children can be valued, by reference to the net proceeds achieved on the subsequent sale of the building, at approximately $1.3 million (roughly half that of the value of the provision made under the will for Ralph).

32 The deceased’s share in Denning Real Estate was left to Suzanna (clause 3(6) of the will) on condition that during Carol’s life she pay $200 per week to Carol (thus maintaining the weekly provision the deceased had made prior to his death for Carol). The residue of the estate (after the two small pecuniary bequests to nephews of the deceased) was also left to Suzanna (on condition that she pay the strata management fees for Unit 1 during Carol’s lifetime). Clause 3 of Suzanna’s will (Exhibit P1/G) in turn directed David and Daniel during Carol’s life to pay Carol $200 per week and the strata management fees for Unit 1, a direction which they have honoured since their mother’s death.

Background facts

33 The deceased and his first wife, Eva, migrated to Australia from Hungary in 1957. According to Ralph, his parents had married in Hungary in 1956 and were never formally divorced. The executors, on the other hand, said that the relationship between the deceased and Eva had been a de facto relationship. As to the fact of the marriage, support may be gleaned from Ralph’s birth certificate (Annexure F to his 10 December 2009 affidavit), which, based on information recorded as having been provided by the deceased, describes Eva as the deceased’s wife; as well as from the reference by the deceased to Eva as his first wife in an earlier will which was prepared in 1998. There is no evidence before me as to the dissolution of that marriage, though the deceased referred to Suzanna as his wife.

34 It does not seem to me that anything turns on the question of the actual marital status of Eva and the deceased (though if the executors’ contention as to the lack of a marriage between the deceased and Eva were correct it would presumably explain why there was no formal divorce, assuming in that regard that Ralph’s contention in relation to the lack of a formal divorce is itself correct). The significance which Ralph seems to attach to his parents’ marital status is that he says that, had there had been a property settlement between his parents in 1978 (when his father left home) and had Eva received half of the deceased’s assets at that point (which Ralph estimates at approximately $300,000), he would have been in the position where he could have expected to receive, on his mother’s death, a third of those assets. Ralph has annexed to his affidavit a copy of a list, which he says is in his father’s handwriting, of the deceased’s net assets as at 1978, in support of the contention that Eva’s half share would have been worth $300,000. I do not consider this to be of assistance in the task before me. Such an exercise is, of its nature, speculative. It requires assumptions to be made as to the type of settlement that might have been made in 1978; as to what would have happened to any property so transferred to Eva; and as to how Eva would then have left her estate as between her three children.

35 The Francis Street property (by which provision was made for Ralph and his children under his father’s will) represents, on my calculations, almost one-third of the deceased’s assets at the date of death. The possibility that Ralph might, in other circumstances, have received a part of that inheritance at an earlier time through his mother’s estate does not assist me now in determining the adequacy of the provision made for Ralph in the deceased’s lifetime and under his will (particularly when I am unable to assess what effect an earlier property settlement would have had on the size of the estate which would later have been available for distribution). (Similarly, the fact that Eva may have been hard done-by, as seems the thrust of some of the affidavit evidence from Ralph and Dorothy, is not relevant to the claims made in these proceedings except perhaps to the extent, which I cannot quantify, that the assistance her children gave her, in lieu of any greater support from the deceased, may as a practical matter have operated to enlarge the deceased’s estate. In the absence of anything to suggest that the deceased would have been more generous to Eva but for the assistance provided to her by her children, I cannot see that this takes matters any further.)

36 The deceased and Eva were together for over 20 years. After the deceased left the family home he had shared with Eva (the unit now occupied by Ralph in Francis Street), the deceased continued to provide some financial support to Eva (in terms of rent-free accommodation and part of the rents from the other unit in the Francis Street property) until her death in 1989.

37 During the course of his relationship with Eva, the deceased had acquired various properties in Coogee and Bondi. In 1979 the deceased married Suzanna Sos, who had emigrated from Hungary where she had worked as a journalist, and they had two children, David and Daniel, in 1979 and 1981 respectively. Suzanna did not work during their marriage (other than to assist the deceased to an extent, which was disputed, in relation to the management of his or their properties). There was a reasonably large age difference between the couple (the deceased being 58 and Suzanna being 31 when they married), something to which Mr Wilson pointed when submitting that Suzanna had married the deceased at a time when he had already established not insubstantial property assets. According to David and Daniel, however, Suzanna had herself brought to the marriage funds which assisted the couple to acquire further property and assets.

38 Together, the deceased and Suzanna acquired the Alexandria properties, through Denning Real Estate Pty Limited, which was incorporated in 1980. (Each of David and Daniel was issued a share in 1984, when they were still very young.) The deceased and Suzanna also acquired a substantial share portfolio, largely utilising for that purpose the proceeds of sale of the deceased’s earlier acquired property at Coogee Bay Road, Coogee (which Dorothy contends had been promised to her). It seems that there were also in place one or more margin loan facilities through which shares were acquired at least by Suzanna and perhaps also by the deceased.

39 Both Dorothy and Ralph have given evidence that, after their mother’s death in 1989, their father informed them that he intended certain of his properties to be theirs (though Dorothy and Ralph appear to differ as to whether they understood that this was to occur during their father’s life or by way of inheritance on his death).

40 Dorothy says that when her mother died the deceased informed her and her two siblings that (of his then properties) the Coogee Bay Road property would be Dorothy’s to own; that Ralph would own Francis Street and that Carol would own all of the Edward Street units. (Although by this stage Carol’s mental illness had just begun to manifest itself, it may be that the deceased was then unaware that it would be of a lasting nature; hence the proposition that Carol would be left the whole of the (then three) Edward Street units in her own right, which is what Dorothy says her father had indicated, may not then have been as impractical as it would now seem.)

41 As I understand it, Dorothy saw this as being a promise as to her eventual inheritance, not as a promise that the property would be transferred to her in the immediate future.

42 Ralph, on the other hand, says that in March 1990 there was a conversation with his father (during which Dorothy, Carol, Suzanna and Ralph’s then girlfriend were present) in which his father said that he was ‘giving him [Ralph] his inheritance now’ (T 25.5-22). Ralph says that he understood by that that his father was promising to transfer the title of Francis Street to him. Ralph says that he planned to use this as the stepping stone for a career in property development (seemingly on the basis that this would give him sufficient capital to pursue such a career) (T 26.20). Ralph accepted in cross-examination that there was nothing given or required to be given in return, by him, for that promise, nor was there any condition that he do anything in return for what he described as his ‘inheritance’ (T 25.41); his father’s promise being unconditional (para 30, affidavit 13 March 2008). Ralph says that he asked his father over the years when he was going to honour that promise and that his father kept making excuses.

43 Ralph seems, at least since his father’s death, to have harboured a strong grievance at the fact that, having left his then employment at Lend Lease in 1990 on the strength of that promise, and having worked for his father since about that time, his father did not transfer the Francis Street property to him either during his father’s lifetime or under his will. He says that he has been made “no more than” a ‘caretaker’ of properties by his father.

44 I note that, according to Ralph, it was not until some three to four months after he left his employment at Lend Lease that he ‘volunteered’ to help his father with the management of his father’s properties. Therefore, on Ralph’s own evidence, it cannot be said that Ralph left his employment at Lend Lease in order to take up the position of property manager for his father. At most, he seems to have done so in the expectation or hope that this would (to use his own words) be a “shortcut” to the success and wealth as a property developer to which he seems to have aspired.

45 On 26 April 1998, the deceased signed a document that, on its face, appears to have been intended as his then will. It referred to Eva as his first wife; indicated his desire to be buried next to her; and included a bequest to Ralph of the whole of the Francis Street property “together with any encumbrances on it and costs to be borne by Ralph”, though noting that there were no encumbrances existing on that property at that time.

46 The 1998 will provided for the Denning Street and Edward Street units, as well as a Botany Road Mascot property, to be held in a testamentary trust with directions for the payment of annuities to Dorothy and Carol; for Carol to have the use of Unit 1 in the Edward Street property during her lifetime; and for Dorothy’s sons each to receive a $5,000 legacy. The residue was to be left for the further education of David and Daniel.

47 The deceased included in the 1998 will an explanation for his then testamentary treatment of each of his daughters – in relation to Carol, he did so by reference to her ailment and her inability to control her own financial affairs; in relation to Dorothy, the deceased described the situation as “more complicated”. He wrote (somewhat defensively, it might be said) that “It cannot be said I am hostile to her [Dorothy]”, on the stated basis that he was giving Dorothy $350 per week and that from June 1990 to May 1991 she had received the rent and had the management of the Coogee Bay Road units. In the 1998 will the deceased noted that after that management role had been “terminated”, he had resumed paying Dorothy $300 per week “as I knew they [Dorothy and her husband Michael] could not survive without my assistance”. He went on to say:

I have to conclude that she does not love me to say the least. But I love her and therefore I leave this annuity to her. If I would not love her I would leave her with a set amount which she would quickly scatter and would be left without assistance. I am writing all this unsavoury relationship down to present a clear picture of her attitude to me in the case if she decides to attack my will and would start a lawsuit to upturn my legacy …If Dorothy institutes legal proceedings to change my will then the weekly payments to her should stop and cease immediately without any later refund of the missed weekly payments.

48 (The 1998 will also referred to the issue of the deceased’s disappointment at the proposal for his grandsons’ schooling and stated that he had ‘confined’ himself to protesting against this proposal.)

49 It seems that, in 2000, the deceased prepared a codicil to that will (although there was not a signed codicil in evidence). The purported codicil was dated 11 August 2000. Ralph said in the witness box that the language used in this document was reminiscent of that of his father (T 42.16) and seems to have accepted that it is likely his father prepared it.

50 To put the codicil in context, it is relevant to note that, during 2000, work was carried out (at Ralph’s instigation) to the Francis Street property. A third unit was built, at a cost of around $150,000 or $155,000. The deceased paid for the cost of the extension. The basis on which the funds were provided to Ralph for the renovations is not clear.

51 Ralph says that he “offered” to repay that money when the deceased gave him title to the property (para 40 of his affidavit of 13 March 2008). If the agreement by Ralph to repay the loan was linked to his father transferring him the property, that would make some commercial sense (since it might be thought unlikely that Ralph would be prepared to meet the interest payable for a loan to fund building works if he were to get no benefit other than some increased rent for an uncertain time as a result of the extension), though this logic would also apply if it were merely expected that the property would be left to Ralph under the deceased’s will. In any event, if that was the case, it does not explain why Ralph proceeded to assume responsibility for repayment of interest payments in advance of any such transfer.

52 The executors, on the other hand, say that Ralph borrowed the money to undertake the Francis Street renovations from the deceased at a 6.4% interest rate – the deceased having borrowed those moneys on an interest only loan from the National Australia Bank – and that this remains to be repaid by Ralph. (Again, it does not seem commercially logical for Ralph to borrow a not insubstantial sum for the renovation works unless he anticipated that at some stage the Francis Street property would be his, lending support to Ralph’s claim that it was promised to him by his father but sheds no light on whether the deceased had intended the debt to run with the Francis Street property.)

53 There is no document recording the making of the loan as such (something which might have been expected from a meticulous record keeper, as David accepted the deceased was – T 148). However, there was a reference to the loan in the unsigned 2000 codicil to the deceased’s 1998 will, in which the following statement appears: “I have to change the third paragraph of the first page of my above will because a new third level was erected over 97 Francis Street Bondi Beach and I have given a loan of $155,000 to my son Ralph for this purpose. …Ralph is paying interest to me at the same rate which the bank is charging me on my mortgage on this $155,000.”

54 In the codicil, the deceased recorded a complaint as to his inability to make the Francis Street property available for inspection on behalf of a prospective mortgagee (due, it was said, to the failure of Ralph to complete certain works to the handrails on the property). Ralph disputes that there was any failure on his part (the time frame in which he could have completed the railing works after completion of the main building works, according to Ralph, being unrealistic). The codicil is nevertheless relevant insofar as it indicates an intention on the part of the deceased that the Francis Street property should be put forward as security for the loan (particularly since, under the 1998 will, Ralph was to be responsible for any encumbrances on the title, and hence under the then contemplated testamentary arrangements this would have left Ralph responsible for the cost of the renovations).

55 Ralph contends that the provision of the funds for the building work was at zero cost to his father because the deceased had claimed a tax deduction for the interest only loan (para 41, affidavit 13 March 2008) even though the interest payments had been largely made by Ralph. Whether or not that be the case, it does not seem to me to be relevant to the question whether there subsists a current obligation on the part of Ralph to repay the balance of the loan, the benefit of which has been and continues to be enjoyed by him in the form of the revenue from the renovations carried out with the funds provided by his father. (I note in passing that this is one of a number of instances in which Ralph has, since his father’s death, cast aspersions on his father’s integrity, including the assertion made by him, when complaining to Suzanna and half-brothers as to his treatment under the will, that his father had asked or tried to coerce him to mislead tenants and to perjure himself in relation to a statutory declaration for insurance purposes.)

56 Whatever the terms on which the funds were provided in the first place, Ralph seems to have accepted that there was a loan arrangement of some kind in place (and hence that he would bear the cost of the interest payments in respect of the money borrowed for the renovations), insofar as he made nearly all interest payments on the deceased’s loan until the deceased’s death (para 40 affidavit 13 March 2008).

57 Although Ralph does not dispute that there was a loan arrangement in relation to the renovation costs, what Ralph says (in answer to the executors’ assertion of the debt) is that in 2004, after his father settled an insurance claim for approximately $130,000, the deceased told him that he did not have to repay the loan or interest (paragraph 7 of Ralph’s affidavit of 28 July 2009). Again, if that is the case, Ralph’s conduct is inconsistent with this, in that he continued (with some exceptions on occasions) to make interest repayments after 2004 (when he says the loan was forgiven) and up to shortly before his father’s death. There seems no logical reason why Ralph would have continued to repay a loan that had been expressly forgiven by the lender. Therefore, although Mr Wilson notes that Ralph was not challenged on this conversation in cross-examination, the inconsistency in Ralph’s conduct is a matter which I think relevant to take into account in considering whether I am persuaded that the loan was in fact forgiven by the deceased.

58 The timing of the conversation in which, according to Ralph, his father indicated that he would forgive the loan, is also curious since (according to Ralph) the deceased told him in August 2004 that he was not going to receive anything from the deceased. (Ralph says that it was after this conversation that Suzanna had asked him not to fight the deceased and had told him she would look after him.) It is not clear whether there was any link between the two statements so attributed to the deceased (for example, whether the forgiveness of the loan was because the deceased had formed the view that Ralph should be left with nothing and hence thought that he should no longer be held responsible for its repayment), nor was any such link suggested by the parties. Therefore, I place no weight on this coincidence in timing.

59 On balance, the continuation by Ralph of interest payments for quite some time after the alleged 2004 conversation (even though there were times in that period when Ralph says he did not meet some of the interest repayments) is a strong indication that the loan was not forgiven by the deceased. Therefore, insofar as it be necessary to determine this issue, I am not persuaded that the deceased ever formally forgave the renovation loan.

60 After the deceased’s death in May 2006, Suzanna and her two sons became the beneficiaries of a newly formed Sekers Superannuation Fund, the trustee of which is Denning Real Estate (see affidavit David Sekers made in February 2009), and acquired the property at O’Brien Street, Bondi under a loan facility secured over the Denning Street property and the Oceanview Avenue property.

61 Of the 155,000 National Australia Bank shares that the deceased had held jointly with Suzanna at the date of his death, it seems that 29,331 were transferred into the Sekers Superannuation Fund to the credit of Suzanna’s member account (which on her death had a balance of close to one million dollars) and those shares still remain held in that fund (David and Daniel being entitled to them pursuant to the terms of the will of their late mother); 30,865 National Australia Bank shares were acquired by David and Daniel from their mother’s estate in November 2008 and remain held by David and Daniel for their respective testamentary trusts; and the remaining 94,804 National Australia Bank shares were held by Daniel and David at least as at 1 September 2009. Between 1 September 2009 and 28 September 2009, some 5,540 shares have been sold by Denning Real Estate (the trustee of the Sekers Superannuation Trust) for a sum of around $200,000, which it is said has been used to fund part of the defendants’ legal costs).

62 As noted earlier, Suzanna died in April 2008. When probate was granted of her will, the net value of her estate had been estimated at in excess of $5 million (Exhibit P1/C). This included her interest in the deceased’s estate, which by then had been distributed to her. Her estate assets thus included two shares in Denning Real Estate, as well as an interest in the Sekers Superannuation Fund of $930,000, the Oceanview Avenue property, in which Daniel now lives (valued at about $2 million) and a one-third interest (with her sons) in the property (described by David – T 115 - as a ‘commercial shopfront’ at O’Brien Street Bondi, which was owned outright by the superannuation trust), her share of that being valued at $300,000. Suzanna’s liabilities as at the date of her death included the moneys owing under the loan facility from the National Australia Bank of $1,876,896 ($1 million of which was referable to the O’Brien Street acquisition), secured by her Oceanview Avenue property and the Denning Street property, and a margin loan facility of $487,824 (which was used to acquire some of the shares held in her share portfolio).

63 The relevance of the size of Suzanna’s estate is that, as David and Daniel have inherited equally the bulk of their mother’s estate, they are both in a very comfortable financial position even apart from the bequests in their favour under their father’s will (though neither has apparently turned his mind to the extent of his net personal worth).

64 After Suzanna died, there was a consolidation of her and her late husband’s debts and these were paid out from the sale of some of the shares which had originally been held jointly by Suzanna and the deceased (para 20, David’s February 2009 affidavit). (Not disclosed in the affidavit was that the sale of the shares from Suzanna’s estate was a sale to David and Daniel for the benefit of their testamentary trusts.)

65 As noted above, the Denning Street property was sold (on 25 November 2008) for net cash proceeds of $2.68 million. (In Ralph’s affidavit evidence there was a suggestion, denied by David and Daniel, that this property was sold for less than its market value – something to which Ralph pointed as an indication that his half-siblings are so well-off that it was of no concern to them whether the property was sold at an undervalue. According to Daniel, however, the Denning Street property was in a dilapidated condition and beyond repair – T 166. David and Daniel appear to have considered the sale necessary in order to preserve the capital represented by the property for the benefit of their respective testamentary trusts.)

66 There was considerable confusion during the cross-examination of David and Daniel as to how exactly the consolidated estate debts were paid and as to how the funds from the sale of Denning Street were applied. In part, that confusion seems to have stemmed from the fact that David and Daniel were acting both as executors of their mother’s (and father’s) estate and also (on the sale of the Denning Street property and their acquisition of shares from their mother’s estate) in their capacity as trustees of their respective testamentary trusts.

67 As I understand it, out of the proceeds received by David and Daniel in their capacity as trustees of the testamentary trusts created in their favour out of the sale of Denning Street ($2.68 million), $1.1 million was used by them to acquire, from Suzanna’s estate, 30,865 National Australia Bank shares on 21 November 2008 and 18,000 Commonwealth Bank shares on December 2008; and the balance (of $1.58 million) was paid into the joint account they had held with their mother (by which they discharged or paid down the existing liability under the National Australia Bank loan facility, that loan facility having at least in part been used to acquire the O’Brien Street property). (It was apparently a condition of the bank that the proceeds of sale of Denning Street be used to discharge the O’Brien Street borrowings.) It was the evidence of David and Daniel that part of the balance of the proceeds they received from the Denning Street sale (after the $1.1 million share purchase) was used to discharge approximately $780,000 in debts of the deceased, consolidated with debts of Suzanna’s estate.

68 In turn, the $1.1 million consideration received by David and Daniel, as executors of their mother’s estate, on the sale (to themselves) of their mother’s shares was used by David and Daniel to pay down the loan facility account and/or a margin lending facility liability of about $487,000 which had been used for various of their mother’s share acquisitions.

69 As mentioned earlier, it seems to me likely that, apart from the potential for confusion stemming from David and Daniel’s roles on both sides of the sale of shares transaction, the main source of confusion derived from the fact that Suzanna and her sons had jointly operated, for some time prior to Suzanna’s death, a loan facility with the National Australia Bank, enabling moneys to be drawn down and repaid from time to time without there necessarily being any specific attribution of funds to the repayment of particular loans or debts to the bank. Hence, the difficulty for the plaintiffs and their representatives in ascertaining exactly what moneys had gone where (and the confusion between witness and cross-examiner during the cross-examination as to what moneys had gone where). Nevertheless, I think it fair also to say that the potential for confusion may have been exacerbated by the apparently piecemeal fashion in which it seems that information as to the financial affairs of the Sekers family was provided for the purposes of the proceedings. (It was conceded, for example, that some of the financial documents of the respective superannuation trusts – such as Exhibit P1/F - were produced only on the eve of the trial – T 168, and there was delay in compliance with at least one notice to produce – explained on the basis that it was necessary to obtain documents from the executors’ accountants.)

70 The complexity of the interlinked financial arrangements within the family, at least after the deceased’s death, was something that David and Daniel did not seem to be at pains (at least in their affidavits) to explain (and, indeed, in the witness box they were not always readily able to determine, by reference to their affidavits, what was comprised by certain of the amounts set out in their evidence – for example, at T 130/131 where David was not sure whether he had included, in his 4 December affidavit, any entitlement he had to a half share of his mother’s superannuation benefits and accepted it was possible this had not been brought to account).

71 Whether or not there was some reluctance (or perhaps resentment) on the part of David and/or Daniel to make clear their personal financial situation at the behest of their half-siblings, or whether they simply left compliance with discovery/notices to produce in the hands of their legal advisers, there were at least some aspects of their financial position (such as David’s ownership of a property in Israel, acquired for a not inconsiderable sum from funds provided by his parents, which David says he had ‘overlooked’ – T 144.36) which emerged only just before the commencement of the hearing and some (such as a detailed breakdown of Daniel’s credit card liabilities) which did not surface at all (Daniel having produced to his lawyers simply a photocopy of the front page of the summary sheets issued in relation to his various credit cards and not the details). Though the latter instance was explained by reference to the belief by Daniel that the records relating to his credit card expenses had already been produced, it seems to me that there was a basis for the complaints made by the plaintiffs’ legal representatives as to the time and manner in which this and other documents (of apparent relevance at least to an assessment of the financial position of those with competing claims on the estate, if not the estate itself) had been produced.

Reasons

72 The test required to be applied in Family Provision Act claims of the present kind is that outlined in Singer v Berghouse (No 2) (1994) 181 CLR 201, and approved in Vigolo v Bostin (2005) 221 CLR 191. It is a two stage test.

73 The first stage is a question of fact, namely whether the provision (if any) made for the applicant is inadequate for his or her proper maintenance, education and advancement in life. A factual finding of inadequacy of maintenance is necessary in order to enliven the statutory power to make an order for provision, as was recognised in Collings v Vakas [2006] NSWSC 393 at [66] per Campbell J.

74 An assessment of whether the provision made, if any, was “inadequate” involves an assessment as to what level of maintenance was appropriate having regard to the applicant’s financial position; the size and nature of the estate; the relationship between the applicant and the deceased; and the relationship between the deceased and other persons who have legitimate (and in this sense competing) claims upon the deceased’s bounty. The question as to the adequacy of provision falls to be decided having regard to facts as they exist at the time of the hearing, not at the time of the death (Nicholls v Hall [2007] NSWCA 356 at [40]).

75 The second stage of the Singer v Berghouse test, which involves the exercise of discretion, is to assess the proper level of maintenance and adequate provision which should be made. The factors to be taken into account in making such a determination are contributions to the property and welfare of the deceased; the character and conduct of the applicant in relation to the deceased; and the circumstances before and after the death of the deceased (including the extent of the claims of other persons on the estate of the deceased).

76 With that in mind, I turn to the four issues I have enumerated for determination.

(i) Inadequacy of provision by deceased?

77 In summary, having regard to the various factors identified above, I am of the view that each of the plaintiffs has established that there was inadequate provision made for him or her as a matter of fact and thus that the first part of the test in Singer v Berghouse is satisfied.

Plaintiffs’ financial circumstances

Ralph

78 Ralph is aged 45. He is married with two young children (aged seven and five at the time of the hearing). Neither Ralph nor his wife is presently in paid employment. Currently, Ralph assists his wife in the care of their young children. He concedes that this leaves him a significant amount of free time (T 11.25). Indeed, from June 1990 onwards, Ralph has not been employed in any paid capacity other than in his role as a property manager and maintenance engineer for his father, for which he says he was paid $20,000 a year.

79 Ralph describes his occupation as that of property manager (T 8.21). The properties he has managed over the past 20 or so years were those owned by his father; the properties he currently manages (for which he is not paid and does not seek a wage) are those which are the subject of the testamentary trusts for himself and for the respective beneficiaries of the trusts created over the Edward Street units (T 10.7; T 10.4). For a short time after his father’s death he continued to manage the other properties which had been owned by his father but he was told a couple of months after his father’s death that his services were no longer required other than for the Francis/Edward Street properties (T 10.23).

80 For most of the period since his mother’s death, Ralph has lived rent-free in one of the units at Francis Street and has received (and has continued since the deceased’s death to do so) the rental income from the rest of the property (approximately $84,660 gross per annum) plus rent from a garage, which brings his total annual income from the Francis Street property and garage currently to around $91,520 per annum.

81 Ralph’s affidavit of 4 December 2009 puts his income at $1,949.45 per week and his weekly expenses at $2,233.31. Ralph has little in the way of assets. He has no ongoing superannuation contributions. He has a motor car, on which there are loan payments to be made. He says his credit card, car loan account and tax liabilities total $118,573.00 (not including the debt claimed by the estate relating to a loan in 2000 for the purpose of the renovations at Francis Street, which, if subsisting, would increase Ralph’s liabilities by a further $208,238). (It is not clear to me whether Ralph’s present tax liabilities include both an amount referable to the 2005/2006 tax year, which Ralph says his father had agreed to bear (in return for the tax deduction his father had claimed for the interest repayments made by Ralph on the building works loan), and an amount referable to the current tax year, or simply the latter, although I assume the former is the case, since it appears from some of the material before me that Ralph has an arrangement in place to pay arrears of tax by instalments.)

82 Ralph says that there are major building repairs necessary to be carried out on the Francis Street property, which he says suffers from concrete cancer (para 69, affidavit 13 March 2009). He has estimated these repairs “as a minimum” in an amount of $97,908.25 (affidavit of 10 December 2009), although the quotation provided by his builder seems to divide the repairs into two amounts – repairs of $51,928.25 plus a ‘provisional’ sum of $45,980. Although Ralph says he wishes to carry out all of the repairs (T48.24), it might be inferred from his builder’s quotation that the essentials are roughly half of the amount claimed. Further, Ralph concedes in his affidavit that he could borrow against his income to meet the repairs (para 25, 10 December 2009 affidavit; para 61, 13 March 2009 affidavit).

359 In various cases the 3% tables appear to have been used without discussion as to the appropriateness of such tables. So, in Pope and Ors v Christie Matter No 4918/94 [1998] NSWSC 118, Young J (as his Honour then was) applied the 3% tables, without discussion of the factors relevant to determining the appropriate discount. Similarly, in Falkingham v Falkingham [2002] NSWSC 534 (at [34]), Macready M (as the Associate Justice then was) also applied the 3% discount tables.

360 There seems little guidance in the authorities on this issue. Nor, so far as I can ascertain, does it seem that the amendment to the Civil Liability Act has had any real impact on the practice of the court in Family Provision Act applications. I note that in Fellows v Paterson [2002] NSWSC 190 (at [36] and [42]) (albeit only the day after the commencement of the Civil Liability Act, Macready M (as the Associate Justice then was) looked to Todorovic in determining that the proper approach would be to apply a 3% discount rate.

361 In Barbara Mayfield v Suzy Carolyn Lloyd-Williams, the parties had agreed that it was appropriate to use a 3% discount rate in order to provide a capital sum which would yield a certain amount per week after tax for a specified period. There was no suggestion, when the matter was determined on appeal by the Court of Appeal, that this was inappropriate.

362 In McGrath and Anor v Eves and Anor (at [50]), Gzell J applied the 3% tables, without discussion of alternative discount levels or factors to be considered.

363 In Caldwell v Ang, Young J (as his Honour then was) had regard to the 5% tables when considering the value of a remainderman’s interest in property. There, again, the issue as to the appropriateness of the different tables was not argued before his Honour.

364 I have been unable to find authority which would be conclusive on the issue as to which of the tables is most appropriate in the present circumstances. I do note, however, that Todorovic was recently relied upon to apply the 3% tables in Bovaird v Frost [2009] NSWSC 337 by Brereton J in relation to a case concerning the assessment of damages for breach of a promise to fund the plaintiff’s retirement accommodation and associated expenses for life. Brereton J acknowledged the prescribed 5% discount in the Civil Liability Act but stated that for damages claims to which that Act does not apply, it would be appropriate to apply the 3% discount tables (at [73]). Bovaird v Frost also involved an application under the FPA, and Brereton J indicated that such an application would have been successful, but for the finding that the plaintiff was entitled to damages under the contractual claim and as such would have adequate provision, although did not go on to indicate what level of discount would have been applied to the FPA claim if awarded (at [122]).

365 I am of the view that the community would expect a conservative approach to be taken in a case where the testator is looking at the proper provision for a severely disabled daughter. On balance I consider that it is appropriate for the 3% tables to be used on this application.

366 I consider that there should be no discount for contingencies. It is accepted by Dr Birch that there is no likelihood that Carol’s condition will improve to the extent that ongoing care will not be required for the balance of her life. The contingency that Carol may not reach her normal life expectancy can be in part addressed by providing for the manner in which any fund remaining at the date of her death is distributed and is, in any event, reflected in the adoption of the life tables.

367 I consider that the fund held in trust for Carol, and any capital in any real estate then owned on trust for her, should on her death be distributed as between David, Daniel and Ralph (or in each case their respective children should any of them pre-decease Carol) such that Ralph receives that proportion of the fund which represents the proportion which the present day value of the Edward Street unit ($400,000) bears to the overall provision now to be made in favour of Carol out of the deceased’s estate and that David and Daniel receive in equal shares that proportion of the fund which represents the proportion which the amount of the estate distributed to them and which is now declared to be notional estate contribution bears to the overall provision now to be made in favour of Carol out of the deceased’s estate. I will hear any submissions from Counsel as to this proposed order to effect such a result, as it was not debated in those terms before me.

(iv) Capitalization of pension supplement

368 As to the capitalization of Carol’s $200 per week pension supplement, I think this falls within the proper provision to be made for Carol. I recognise that it may be unlikely that David and Daniel would both be unable to fund this in the future and that they have acknowledged an obligation to meet this amount but I consider that Carol should not be at risk of any subsequent failure or inability of her half-brothers to make this payment.

(iv) Contingency sum

369 As to the contingency sum claimed, I think this is reasonable and removes the risk of changes in the level of support from family members over the years.

370 I have not attempted to calculate the management fees which would be payable to the NSW Trustee and Guardian for a fund totalling the provision which I propose to order. I will ask that the parties liaise and prepare short minutes of order to reflect the above and to incorporate the management fees in such orders. I consider it appropriate for the NSW Trustee and Guardian to be appointed to manage the fund rather than the executors in order to remove any conflict of interest and to allow them to get on with their own lives without the responsibility of managing the funds for Carol’s care.

371 After calculation of the quantum of the amount ordered to be provided for provision in accordance with the above (namely to provide for the acquisition of a house or unit to a value of $585,000, plus stamp duty and legal expenses estimated at $28,000; relocation expenses of $2,000, body corporate rates capitalised at $79,426; furnishings at $17,141; funds for medical care (costed for a companion carer (14 hours per week for 28 years and 7 hours per week for 13 years) capitalised by reference to the 3% tables, plus costs of a case manager one hour a week for 41 years similarly capitalised ($185,985) and costs of a clinician similarly capitalised at $14,258); costs of management by the NSW Trustee and Guardian; supplement to pension ($200 per week capitalised at $247,980): and a contingency sum of $125,000) there must be deducted the sum of $10,000 already made available for Carol’s care by reason of the order for interim provision which I made at the conclusion of the hearing on 17 December 2009. Any funds remaining out of that $10,000 should be added to the fund to be held for Carol’s benefit in accordance with this judgment.

372 As the provision for Carol includes a number of components, I invite Counsel to draw to my attention if I have omitted to address any particular item of care which should be addressed.

373 On my calculations the provision to be made for Carol (excluding the management fees) should be somewhat less than the $2 million claimed (because of the differential in the companion carer’s hours over the period of Carol’s life expectancy), plus whatever the management fees of the NSW Trustee and Guardian will be. This will subsume to a very large degree (if not wholly) the amount received by David and Daniel from the proceeds of sale of the Denning Street property. They have nevertheless both had substantial provision during their life (in the form of a quarter share each of Denning Real Estate and provision of funds for various purposes – David to acquire a property in Israel; Daniel to fund part of his tertiary studies) and they have each inherited an equal share of their mother’s considerable estate.

374 In view of the findings I have made in relation to each of Ralph and Dorothy’s applications for provision (in effect limiting the provision made for them to the re-writing of the testamentary trusts under the will), I consider that it is appropriate that the provision for Carol be met out of the sale proceeds of Unit 1 in the Edward Street property, together with such amount out of the distributed estate received by David and Daniel from the sale proceeds of the Denning Street property (to be designated as notional estate) as is necessary to meet the shortfall.

375 Finally, insofar as it was submitted by Dr Birch that any trusts for Carol should provide a remainder for the beneficiaries whose share of the estate was the source of the fund, to which Mr Simpson objected on the basis that any order for provision is made out of the deceased’s notional estate as designated (not from the executors personally), I think that as the practical effect of the current position (albeit so reached in part because of the distribution of the estate before the expiry of the time for commencement of the present claims) is that David and Daniel will be compelled to fund a large part of the provision ordered to be made for Carol it is appropriate for such an order to be made (as contemplated above), though effectively preserving Ralph’s remainder in what represents the proceeds of sale of the Edward Street unit currently occupied by Carol.

376 As to costs, while I consider that Dr Birch is correct in his submission that the Family Provision Act in its terms does not provide for the designation of notional estate purely for the payment of costs (as opposed to a designation for the purposes of an order for provision which may include provision to meet debts such as costs), the Family Provision Act does contemplate in section 33 that an order for costs may be made out of notional estate once designated. (I note that in Barbara Mayfield v Suzy Carolyn Lloyd-Williams, both at first instance and on appeal, costs were ordered to be paid out of the notional estate.) In the circumstances I think it appropriate that the order for provision for each of the plaintiffs should reflect the fact that if they are required to bear their own costs of these proceedings it will operate to reduce the provision which I consider ought to have been made for them.

377 I therefore am inclined to expand the provision for each of the plaintiffs to order as a separate sum by way of provision out of the designated notional estate, such amount as would cover so much of their liability to their legal representatives for costs on a party/party or other basis as I would have been prepared to make the subject of a costs order in the ordinary course. That can only be determined after I have heard submissions as to costs. I am minded to cap any such provision so that, together with the monetary provision ordered for Carol, the total does not exceed the proceeds of sale of the Denning Street property. I will hear submissions on this issue when I hear submissions in relation to costs generally.

Conclusion

378 I find as a matter of fact that inadequate provision was made under the deceased’s will for each of Ralph, Dorothy and Carol.

379 I consider that the distributed estate comprised of the proceeds of sale of the Denning Street property should be designated as notional estate to the extent necessary for the making of the provision for Carol (after the application towards that fund of the net proceeds of sale of the Edward Street unit in which she currently resides) and to enable the plaintiffs’ costs (as may be ordered in due course) to be met.

380 I find that the proper provision to be made for Ralph is as set out in paragraphs 310-313 above.

381 I find that the proper provision to be made for Dorothy is as set out in paragraph 329 above.

382 I find that the proper provision to be made for Carol is as summarised in paragraph 371 and outlined in the preceding paragraphs of my conclusions in relation to Carol’s claim. I note that this will take into account the sum of $10,000 already ordered by way of interim provision for Carol.

383 I will hear submissions from Counsel as to the appropriate form of orders to implement my findings and, in the case of Carol, as to how those orders should be framed in order to constitute the trust, or an appropriate part of the trust, for her benefit as a special disability trust under Part 3.18A of the Social Security Act 1991 (Cth).

384 I will also hear any submissions as to costs. I consider it appropriate that the order for provision for each of the plaintiffs should include any amount which I may order in their favour in relation to the costs of these proceedings.

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