Zagame v Zagame
[2014] NSWSC 1302
•24 September 2014
Supreme Court
New South Wales
Medium Neutral Citation: Zagame v Zagame [2014] NSWSC 1302 Hearing dates: 25, 26 and 27 August 2014 Decision date: 24 September 2014 Jurisdiction: Equity Division Before: Hallen J Decision: Direct the parties to bring in Short Minutes of Order reflecting the reasons for judgment within 14 days. Stand over the proceedings to deal with any outstanding argument on the form of the Short Minutes of Order
Catchwords: SUCCESSION - FAMILY PROVISION - The Plaintiff, an adult child of the deceased, applies for a family provision order under Chapter 3 of the Succession Act 2006 (NSW) - Two of three Defendants are also adult children of the deceased and beneficiaries named in the Will - No actual estate of the deceased - Third Defendant the Trustee of a discretionary trust which controls property of value - Second Defendant registered proprietor of property transferred shortly before death of the deceased - No provision made in Will for the Plaintiff - Explanation given in Will - Whether adequate and proper provision not made in Will of the deceased for the Plaintiff and, if so, the nature and quantum of the provision to be made for him - Whether property of the Trust and/or property held by the second Defendant should be designated as notional estate of the deceased Legislation Cited: Family Provision Act 1982 (NSW)
Interpretation Act 1987 (NSW)
Practice Note SC Gen 18
Probate and Administration Act 1898 (NSW)
Succession Amendment (Family Provision) Act 2008 (NSW)
Succession Act 2006 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)Cases Cited: Akkerman v Ewins [2003] NSWCA 190
Allardice v Allardice; In re Allardice (1910) 29 NZLR 959
Allen (Deceased); Allen v Manchester [1922] NZLR 218
Andrew v Andrew [2012] NSWCA 308; (2012) 81 NSWLR 656
Attorney-General v Earl of Sandwich [1922] 2 KB 500
Aubrey v Kain [2014] NSWSC 15
Barna v Barna [2008] NSWSC 1402
Bartlett v Coomber [2008] NSWCA 100
Belfield v Belfield [2012] NSWSC 416; (2012) 83 NSWLR 189
Bladwell v Davis [2004] NSWCA 170
Boettcher v Driscoll [2014] SASC 86
Bondelmonte v Blanckensee [1989] WAR 305
Bosch v Perpetual Trustee Co Ltd [1938] AC 463
Bouttell v Rapisarda [2014] NSWSC 1192
Buckland Deceased, Re [1966] VR 404
Bull, Re [2006] VSC 113
Butcher v Craig [2009] WASC 164
Cameron v Cameron [2009] SASC 27
Caska v Caska [1999] NSWSC 289 Cetojevic v Cetojevic [2007] NSWCA 33
Christie v Manera [2006] WASC 287
Collicoat v McMillan [1999] 3 VR 803.
Collins v McGain [2003] NSWCA 190
Crossman v Riedel [2004] ACTSC 127
de Angelis v de Angelis [2003] VSC 432
de Blac v Lo [2014] NSWSC 142
Dennis (Deceased), Re [1981] 2 All ER 140
Devereaux-Warnes v Hall (No 3) [2007] WASCA 235; (2007) 35 WAR 127
Diver v Neal [2008] NSWSC 304
Diver v Neal [2009] NSWCA 54
Flathaug v Weaver [2003] NZFLR 730
Foley v Ellis [2008] NSWSC 288
Galt v Compagnon (Supreme Court (NSW), Einstein J, 24 February 1998, unrep)
Gardiner v Gardiner (Supreme Court (NSW) Santow J, 28 May 1998, unrep)
Gardiner v Gardiner [2014] NSWSC 435
Goodman v Windeyer [1980] HCA 31; (1980) 144 CLR 490
Goodsell v Wellington [2011] NSWSC 1232
Gorton v Parks (1989) 17 NSWLR 1
Grey v Harrison [1997] 2 VR 359
Hawkins v Prestage (1989) 1 WAR 37
Hughes v National Trustees Executors and Agency Co. of Australasia Ltd [1979] HCA 2; (1979) 143 CLR 134
Hyland v Burbidge [2000] NSWSC 12
Jelley v Iliffe [1980] EWCA Civ 4; [1981] 2 All ER 29
John v John [2010] NSWSC 937
Kastrounis v Foundouradakis [2012] NSWSC 264
Kavalee v Burbidge; Hyland v Burbidge (1998) 43 NSWLR 422
Kay v Archbold [2008] NSWSC 254
Kleinig v Neal (No 2) [1981] 2 NSWLR 532
MacGregor v MacGregor [2003] WASC 169
Macquarie Developments Pty Ltd v Forrester [2005] NSWSC 674
Marks v Marks [2003] WASCA 297
Marras, In the Estate of the late Anthony [2014] NSWSC 915
Marriott, Deceased, Re [1968] VR 260
Mayfield v Lloyd-Williams [2004] NSWSC 419
McCosker v McCosker [1957] HCA 82; (1957) 97 CLR 566
McGrath v Eves [2005] NSWSC 1006
McKenzie v Topp [2004] VSC 90
Neale v Newell; Re Wilkinson (Deceased) [1978] 1 All ER 221
Ogburn v Ogburn; Ogburn v Ogburn [2012] NSWSC 79
Palaganio v Mankarios [2013] NSWSC 61
Phillips v James [2014] NSWCA 4
Pogorelic v Banovich [2007] WASC 45
Pontifical Society for the Propagation of the Faith v Scales [1962] HCA 19; (1962) 107 CLR 9
Puckridge, Deceased, In the Estate of (1978) 20 SASR 72
R (on the application of M) v Slough Borough Council [2008] UKHL 52; [2008] 1 WLR 1808
Sam Wardy v Gordon Salier; William Wardy v Gordon Salier; Hassiba Wardy v Estate of late Edmond Wadih Wardy, developer and Ch 3 of the Succession Act 2006 [2014] NSWSC 473
Samsley v Barnes [1990] NSWCA 161; (1991) DFC 95-100
Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201
Slack v Rogan; Palffy v Rogan [2013] NSWSC 522
Smith v Woodward (Supreme Court (NSW), Macready M, 9 September 1994, unrep)
Stern v Sekers; Sekers v Sekers [2010] NSWSC 59
Strano v Jovcevski [2008] NSWSC 380
Szypica v O'Beirne [2013] NSWSC 297
Taylor v Farrugia [2009] NSWSC 801
Tobin v Ezekiel [2012] NSWCA 285
Turner v Perpetual Trustees Australia Ltd [2001] ACTSC 56
Verzar v Verzar [2012] NSWSC 1380
Verzar v Verzar [2014] NSWCA 45
Vigolo v Bostin [2005] HCA 11; (2005) 221 CLR 191
Wade v Harding (1987) 11 NSWLR 551
Walker v Walker (Supreme Court (NSW), 17 May 1996, Young J, unrep)
West v Mann [2013] NSWSC 1852
Wilcox v Wilcox [2012] NSWSC 1138
Williams v Aucutt [2000] 2 NZLR 479Texts Cited: Rosalind Atherton, 'The Concept of Moral Duty in the Law of Family Provision - a Gloss or Critical Understanding?' (1999) 5 Australian Journal of Legal History 5
Rosalind Croucher, 'Contracts to Leave Property by Will and Family Provision after Barns v Barns [2003] HCA 9' (2005) 27(2) Sydney Law Review 263
J D Heydon and M J Leeming, Jacobs' Law of Trusts in Australia (7th ed, 2006, LexisNexis Butterworths)Category: Principal judgment Parties: Phillip Armando Anthony Zagame (Plaintiff)
Robert Michael Ross Zagame (first Defendant)
Roseanne Maree Zagame (second Defendant)
Zagame Enterprises Pty Ltd ACN 075 629 702Representation: Counsel:
Mr P Blackburn-Hart SC
Mr J E Armfield
Solicitors:
Peter Erman Solicitor (Plaintiff)
Elias Gates & Associates (Defendants)
File Number(s): 2013/118328
Judgment
The Claim
HIS HONOUR: These reasons relate to a claim in which the Plaintiff, Phillip Aramando Anthony Zagame, seeks a family provision order, pursuant to the Succession Act2006 (NSW) ("the Act"), consequential relief, including a notional estate order, and costs out of the estate and notional estate of his father, Robert Bartolo Zagame ("the deceased"). A family provision order is an order made by the court in relation to the estate, or notional estate, of a deceased person, to provide from that estate, or notional estate, for the maintenance, education, or advancement in life, of an eligible person. A notional estate order is an order made by the court under Chapter 3 of the Act designating property specified in the order as notional estate of a deceased person.
Without intending to convey undue familiarity, with no disrespect intended, and for convenience and clarity, I shall refer, hereafter, to the parties, after introduction, by her, or his, given name.
Phillip commenced his proceeding by Summons filed on 17 April 2013. There is no dispute that the Summons was filed within the time prescribed by the Act (within 12 months of the date of the death of the deceased). Subsequently, on 18 September 2013, an amended Summons was filed.
The first two Defendants named in the amended Summons are Robert Michael Ross Zagame and Roseanne Maree Grace Zagame, each of whom is a child of the deceased and the sibling of Phillip. Each is also an executor named in the Will of the deceased, to whom Probate was granted.
The third Defendant, Zagame Enterprises Pty Ltd ("ZEPL"), is the trustee of the Robert Zagame Family Trust ("the Trust"). Phillip joined ZEPL as a party/Defendant by the amended Summons in order that it would be bound by any order designating property, held by it as Trustee of the Trust, as notional estate of the deceased.
Phillip also sought an order designating another property, registered in the name of Roseanne shortly prior to the death of the deceased, as notional estate of the deceased. I shall return to this aspect of the case later in these reasons.
There was, initially, a dispute about whether any property should be designated as notional estate. However, at the hearing, the parties agreed, in the event an order is made in favour of Phillip and costs orders are made, that such part of the property held by the Trust as necessary to satisfy those orders should be the subject of the notional estate order, and that it would be necessary to sell that property in order to satisfy the orders made. (Senior counsel for Phillip also submitted that this did not mean that the property held by Roseanne should be ignored in calculating and considering the value of the notional estate of the deceased.)
I raised with the parties the possibility that the real property held by ZEPL could sell for more, or for less, than the agreed estimated gross value, with the result that the Plaintiff, or the Trust, might be detrimentally affected by its actual sale price if a lump sum order were made. I contemplated that it might be prudent, in the event that Phillip were successful, to provide him, absolutely, with an amount calculated as a percentage of the net proceeds of sale of the Trust property. In this way, both Phillip and the Trust would benefit if that property were sold for a price greater than had been estimated, and each would be detrimentally affected if it sold for less than the estimate. There would also be certainty of price, costs and expenses upon which calculations could be made.
After obtaining instructions (which, in the case of Phillip, were confirmed expressly on the third day of the hearing), each of the parties stated, through his, and their, counsel, respectively, that any lump sum to be paid to Phillip as a family provision order should be calculated by reference to a percentage of the actual net proceeds of sale of the real property held by the Trust added to the cash also held. I shall follow this course. However, I shall use the estimates supplied to provide a guide to whether an order should be made and the quantum of the family provision order.
Phillip accepted that, if a family provision order in his favour and any costs orders were to be met out of the property held by ZEPL as trustee of the Trust, he would disclaim any further interest as a discretionary object of the Trust.
Background Facts
The following background facts are uncontroversial.
The deceased died on 22 April 2012. He was then aged 82 years, having been born in January 1930.
The deceased was married to Mary, the mother of Phillip, Robert and Roseanne. She predeceased the deceased, having died in December 2008. There were no other children of their marriage. Robert was born in December 1957 and Roseanne was born in September 1970.
The deceased left a duly executed Will that he made on 12 March 2012. This court granted Probate in common form of that Will to Robert and Roseanne on 3 September 2012.
By the Will, after the revocation of all former wills and other testamentary dispositions, the deceased provided for the sale, calling in and conversion of his estate and, after the payment of debts funeral and testamentary expenses, made a gift of one third of the proceeds of sale, calling in and conversion, to Robert, one third thereof, to Roseanne, and one sixth, to be held on trust for each of two named grandchildren, Christopher and Bianca, who are Phillip's children, until he, and she, respectively, attained the age of 30 years. (Christopher was born in November 1994 and Bianca was born in September 1996.) In the event that Christopher and Bianca did not survive the deceased, and if neither had issue also surviving and attaining the age of 21 years, then the share in the estate passing to them would pass to Phillip.
Clause 6 of the deceased's Will provided:
"6. I HEREBY wish to state that the reason why I have not made any other provision in this my Will for my said son PHILLIP ARMANDO ANTHONY ZAGAME is due to the fact that I and his deceased mother had provided a great deal of support and benefit to him in the past including, inter alia, waiving the requirement for the payment of rent for approximately one (1) year to assist him in running his business at the premises in Fairfield owned by my company Zagame Enterprises Pty. Limited; the payment of $100,000.00 to assist him recently when he got into financial difficulties and a further $30,000.00 provided by his said late mother MARIA ZAGAME and therefore, I have concluded that I have already made adequate provision for my said son PHILLIP ARMANDO ANTHONY ZAGAME."
According to the Inventory of Property, a copy of which was placed inside, and attached to, the Probate document, the property owned solely by the deceased at the date of his death, was disclosed as having an estimated (or known) gross value of $22,910. At the date of death, his estate was said to consist of shares in ZEPL ($10) and cash in bank ($22,900). No jointly held, or other, property, in which the deceased held an interest at the date of his death, was disclosed. There were also no liabilities disclosed. (I have omitted, and shall continue to omit, any reference to cents in the amounts to which I shall refer, which will explain what may appear to be minor mathematical errors.)
In an affidavit sworn on 26 July 2013, Robert stated that there were some liabilities of the estate, namely funeral expenses and the costs of administration of the deceased's estate. However, he did not state the amount of either in the affidavit. He simply stated that there were no remaining assets or liabilities of the estate at the date of swearing the affidavit and that the estimated gross distributable value of the estate was "$Nil".
Robert's affidavit, however, also stated:
"9 The following property is or may be the subject of a relevant property transaction:
(a) The property located at xx Arthur Street, Punchbowl, New South Wales being the land on Certificate of Title Folio Identifier xxx/xxxxx which was transferred to the second defendant on 12 March 2012; and
(b) Zagame Enterprises Pty Limited as trustee of the Robert Zagame Family Trust has property at xx Ware Street, Fairfield, New South Wales of an estimated value of $1.5 million. The Robert Zagame Family Trust Financial statement shows financial liabilities in the amount of $809,400.11. One of the liabilities listed is 'Other loans $538,171.00'. This was recently drawn to my attention by my solicitor. My current accountant has not been able to explain to me what the 'other loans' are and said the entry was carried over from financial statements prepared by previous accountants for the Robert Zagame Family Trust. I am endeavouring to make inquiries with the previous accountants for the Robert Zagame Family Trust to ascertain what the figure for 'other loans' represents.
10. The property at xx Arthur Street, Punchbowl is registered in the name of the second defendant and she lives in that property...".
In an affidavit subsequently sworn, on 19 July 2014, Robert stated that the amount received when the deceased's bank accounts were closed was $23,615. He stated that the estate had incurred expenses totalling $24,425 after the deceased's death, being funeral expenses ($16,096) and administration expenses ($8,329). It was then said that the entire actual estate, having been used to pay those expenses, comprised a shortfall of $810.
Although not specifically referred to in Robert's affidavit, at the hearing, counsel for the Defendants acknowledged that, in addition to the real estate at Fairfield ("the Fairfield property"), the property of the Trust also includes funds on deposit of $88,019.
The parties were able to agree that, at the date of hearing, the Fairfield property, held by ZEPL as trustee of the Trust, should be treated as having a value of $1,650,000.
They were also able to agree that, at the date of hearing, the value of the Punchbowl property, registered in the name of Roseanne, is $775,000.
The parties were unable to agree on the quantum of the known liabilities of the Trust until the second day of the hearing. Agreement was then reached that there was a debt due to Robert ($206,130) and a debt due to Roseanne ($45,154). (It will be necessary to refer to these debts later in these reasons.)
In addition, the parties agreed that, if provision were made for Phillip, and if the burden of the order was from the Fairfield property, that being the property held by ZEPL, it would be sold. The costs and expenses associated with the sale of the Fairfield property were estimated to be $54,889 (being legal costs ($3,000), marketing expenses ($6,514) and agent's commission ($45,375)).
There were, additionally, two potential liabilities of the Trust. The first was Capital Gains Tax ("CGT") which would be payable on the sale of the Fairfield property (including, perhaps, an amount for CGT payable referable to the sale of part of the property in about 2001). The amount payable for CGT was estimated, on the third day of the hearing, to be between $195,947 and $239,908 (Ex. RMZ 11).
The second potential liability related to two contingent claims made by tenants of the Fairfield property (the total of the two claims being $57,103 (Ex. RMZ 9)), which would also have to be satisfied, upon completion of the sale of the Fairfield property, in determining the net amount available in the Trust.
Upon completion of the sale of the Fairfield property, these potential liabilities, when established and quantified, would also have to be paid from the proceeds of sale.
In calculating the estimated net value of the property that may be designated as notional estate, finally available for distribution, the costs of the present proceedings should also be considered, since Phillip, as the Plaintiff, if successful, normally, will be entitled to an order that his costs and disbursements, calculated on the ordinary basis, be paid, whilst Robert and Roseanne, as the persons representing the estate in the proceedings, irrespective of the outcome of the proceedings, normally, will be entitled to an order that their costs, calculated on the indemnity basis, be paid out of the estate of the deceased. (Presumably, no additional costs on behalf of ZEPL have been incurred.)
Phillip's solicitor, Mr P Erman, in an affidavit sworn on 22 July 2014, estimated Phillip's costs and disbursements of the proceedings, including senior counsel's fees, calculated on the ordinary basis, to be $69,000 (inclusive of GST and upon the basis of a two day hearing).
The Defendants' solicitor, Ms J Mulheron, in an affidavit affirmed 21 July 2014, estimated their costs and disbursements, including counsel's fees, calculated on the indemnity basis, to be $66,483 (inclusive of GST and upon the basis of a two day hearing). Robert has paid $6,712 on account of these costs and disbursements but he will be repaid if an order for the Defendants' costs is made, which will also be payable out of the notional estate of the deceased.
The parties agreed that, in the event that Phillip is successful, the usual costs order should be made, and that, if he is unsuccessful, the usual order for costs should also be made. If the parties are unable to reach agreement on the quantum of costs to be paid, it will be for an assessor to determine the appropriate quantum of costs.
(I note, in passing, that the costs estimates of each of the parties were calculated on the basis of a two day hearing. The hearing, in fact, was not completed within that time. Submissions were completed on the third day of the hearing.)
It follows that, if orders for costs are made, and if the costs estimates prove accurate (in total, $135,483), if the liabilities of the Trust ($251,284), and the costs and expenses of sale ($54,889) are also paid out of the gross proceeds of sale of the Fairfield property ($1,650,000) and the money held by the Trust ($88,019), the net value of all of the property of the Trust that could be designated as notional estate, available for distribution, will be about $1,296,363. If the two estimated contingent liabilities are also paid, the amount available for distribution will be reduced by between $253,050 and $297,011.
If, however, the Punchbowl property was able to be designated as notional estate as well, a matter to which I shall return, the net value of the property that could be designated as notional estate would be $2,071,363. If the two estimated contingent liabilities are paid, the amount available for distribution will, as above, be reduced by between $253,050 and $297,011.
At the hearing, the parties agreed that the only eligible persons are Phillip, Robert and Roseanne. Only Phillip has commenced proceedings under the Act. However, Robert and Roseanne are parties to the proceedings and each is a beneficiary named in the Will of the deceased. Each has raised his, and her, respective competing claim, financial and moral, on the bounty of the deceased. The court will not disregard his, or her, interests as a beneficiary named in the Will of the deceased.
Other Background Facts
There are a number of other facts that are not the subject of real dispute between the parties or that have been established to my satisfaction on the balance of probabilities.
The deceased operated a retail shoe business through a company, initially called Loralla Pty Ltd, which changed its name to The Boulevarde Shoe Store Pty Ltd in August 1976. Between September 1976 and March 1994, Mary was also a director and the secretary of the business. However, Robert says that "she was not involved in a practical sense".
Robert was appointed a director of The Boulevarde Shoe Store Pty Ltd in September 1976 and ceased to be a director in October 2002. Phillip was appointed a director in March 1994, and remained a director until the company went into voluntary liquidation in August 2011. Phillip and Robert each owned one fully paid share beneficially, until Robert's share was transferred to Phillip in October 2002.
Initially, the company conducted the business of a retail shoe shop at The Boulevarde, at Punchbowl. Subsequently, it purchased, and began to operate, an existing retail store at Lakemba, which Phillip managed while Robert continued to manage the Punchbowl store. Another store, at Cabramatta, was opened in 1981, which Phillip managed, Robert having taken over the management of the Lakemba store. The Punchbowl store was closed at about this time. In the late 1980s, the Cabramatta store was closed and a new store, elsewhere in Cabramatta, was opened. The Lakemba store was closed in 1986. Later, in the early 1990s, the business opened a store in Parramatta, a store in Merrylands and a store in Liverpool. Robert says "Phillip and I both managed and worked between the stores by this stage."
In 1996, the deceased wished to purchase a commercial property and decided upon the Fairfield property. Before the loan was approved, it was necessary for the deceased to provide security over the Punchbowl property. It was also necessary for Phillip to provide security over a property that he owned in Chipping Norton. In about 2002, the security over Phillip's property was discharged from profits of the retail shoe business.
Following its purchase, the Fairfield property was sub-divided into two lots. On the rear lot, two lock-up shops were constructed. To pay for the renovation cost, The Boulevarde Shoe Store borrowed $300,000. The rear lot was sold in about 2001, for about $465,000. The front lot was divided into strata units, being two retail shops on the ground floor and two commercial offices on the upper level. Subsequently, the front lot has been leased as two retail shops and a function centre.
In October 2002, Robert, Phillip and The Boulevarde Shoe Store Pty Ltd, entered into a Deed, pursuant to which Robert sold his share in the company to Phillip upon certain terms and conditions, which are not necessary to repeat. Although the consideration was said to be $135,000, Robert did not, in fact, receive that amount, which was paid, at his direction, to the Commonwealth Bank to be applied towards the reduction of the loan account of ZEPL. This amount forms part of the debt owed by the Trust to Robert, to which reference has earlier been made.
(In about March 2001, Robert had obtained a valuation "to assist the owner in determining whether to offer the business for sale", which reveals the value of the business, as at 30 June 2000, to be $570,000. When the Deed was entered into, Phillip and Robert were the only two shareholders and directors of The Boulevard Shoe Store Pty Ltd. Robert agreed that, whilst there was a corporate entity involved through which the retail shoe business was conducted, it was, in essence, a partnership between him and Phillip.)
On the same day as the Deed between Robert, Phillip and The Boulevarde Shoe Store Pty Ltd was entered into, another Deed was executed. The parties to that Deed were Phillip, The Boulevarde Shoe Store Pty Ltd, the deceased and Mary, ZEPL and a company, Nobule Pty Ltd. (Nobule Pty Ltd was registered in June 1982, at which time the deceased and Mary were directors. Both Phillip and Robert were made directors in April 1985. The company was de-registered in 2003.) Pursuant to this Deed, the parties "agreed to mutually release each other from further obligations particularised" in the Deed.
The Boulevarde Shoe Store Pty Ltd was voluntarily placed into liquidation at a general members meeting on 11 August 2011. Phillip stated that the failure of the company was due to decreased turnover and high fixed costs. In the summary of the affairs of the company, priority claims totalled $43,363; partly secured creditors showed a "shortfall" of $81,128; and unsecured creditors totalled $1,522,864.
Following the death of Mary, Phillip was advised, in a letter dated 4 January 2010, from the deceased's solicitor, that the deceased had obtained Probate of Mary's Will and that the three children were to share, equally, a sum which was calculated to be $140,000. The letter also stated that "[w]e have also received instructions from your father that you and your brother may be willing to pay your share of the estate to your sister, Roseanne". An authority to pay Phillip's share of Mary's estate to Roseanne "for her own use and benefit absolutely" formed part of the evidence in the case. Phillip, apparently, signed the authority and returned it to the deceased's solicitors, with the result that his share of Mary's estate was paid to Roseanne.
Phillip responded to the facts asserted in Clause 6 of the deceased's Will, quoted above, in one of his affidavits (as to which, see later). However, in his cross-examination, he admitted that he had, in fact, received $100,000, in September 2011, from the deceased (paid to "Eagle Nominees", a company which Phillip controlled: T43). He also admitted that The Boulevarde Shoe Store Pty Ltd had not paid rent to ZEPL between April and August 2009 (4 months) and then again between July 2010 and August 2011 (12 months). The rent that was paid between September 2009 and June 2010 was $5,200 (plus GST) per month, with the result that Phillip, indirectly, and his company, directly, benefited by about $83,200 (exclusive of GST) because of the conduct of the deceased in not pressing for that rent.
Phillip accepted, additionally, that he had received about $30,000 from Mary by way of loan, but said that he had "paid some back ... approximately half". He also admitted that, shortly after his marriage, he and his wife had lived in a property that Mary had inherited, rent-free, for a period of about six years. The value of the benefit received from this rent-free accommodation was estimated to be about $31,700.
(Although senior counsel for Phillip submitted that I should ignore benefits received from Mary, who, of course, is not the deceased person whose estate is under consideration, I have included the admissions made by Phillip, since the deceased, in Clause 6 of the Will, considered that the provision made by Mary formed part of the benefits that had been provided to Phillip by him and Mary and which he believed constituted adequate provision.)
It was accepted that the contribution, particularly by Roseanne, to the welfare of the deceased, was significant. (I shall return to this matter later in these reasons.)
The Deed establishing the Trust was dated 25 September 1996. The Trustee of the Trust was ZEPL, the directors of which were the deceased and Mary. Following Mary's death, the deceased remained the sole director and shareholder. The current shareholders and directors are Robert and Roseanne. They became directors and shareholders following the death of the deceased.
The Trust is what might be described as a standard discretionary trust, in which ZEPL, as trustee, may, in its absolute and uncontrolled discretion, appoint various persons to receive income or capital distributions.
The Trust Deed provides:
(a) The deceased and Mary are named as the Primary Beneficiaries: Clause 1.9(i) and the Schedule.
(b) The Secondary Beneficiaries include any child of the Primary Beneficiaries. Thus, each of Phillip, Robert and Roseanne is a discretionary object. (Grandchildren of the Primary Beneficiaries are also Secondary Beneficiaries, with the result that Christopher and Bianca are also discretionary objects): Clause 1.9(ii) and the Schedule.
(c) The Tertiary Beneficiaries, set out in the Schedule, include any corporation in which any of the beneficiaries is registered as a holder of at least one share, or has a beneficial interest in at least one share. This would include the Trustee itself, ZEPL.
(d) The "Principal" was the deceased and, pursuant to Clause 6 of the Trust Deed, he could, at any time, appoint a Primary Beneficiary, Secondary Beneficiary or Tertiary Beneficiary under the Deed.
(e) The Principal could remove the Trustee and appoint a new one. The power of appointment and removal following the death of the Principal could be exercised by the legal personal representatives of the Principal, namely Robert and Roseanne: Clause 9.3(i)-(ii).
(f) The Trustee could distribute (Clause 3.1) the whole or any part of the income of the Trust to the Primary Beneficiaries or any one, or more, of them in his absolute discretion: Clause 3.2(i) and the proviso thereto.
(g) The Trustee could apply capital for the benefit of any one, or more, of the beneficiaries from time to time, without restriction as to whether those beneficiaries are Primary, Secondary or Tertiary Beneficiaries: Clause 4.1.
(h) The Trustee could assign the whole of the trust fund to one, or more, of the Primary, Secondary and Tertiary Beneficiaries living at the perpetuity date in such proportions as it thought fit in its absolute discretion: Clause 4.2.
(i) Prior to the perpetuity date, the Trustee could pay, or apply, the whole, or any part, of the trust fund to, or for the benefit of, any one, or more, of the Primary, Secondary or Tertiary Beneficiaries: Clause 5.2.
By Deed dated 25 September 1996, ZEPL was excluded from receiving any benefit either directly or indirectly from the Robert Zagame Family Trust.
Phillip stated that he had not received any distributions from the Trust since the death of the deceased. The evidence reveals that before, and after, the death of the deceased, some distributions had been declared to Robert and Roseanne, but those distributions had not been paid. They are included as debts of the Trust, referred to above, to each of Robert and Roseanne. In the case of Robert, the total amount of the distributions appears to have been $71,130 and, in the case of Roseanne, to have been $45,154. (What part of these amounts were distributions made before the deceased's death to each is not precisely disclosed, but most of the distributions appear to have been declared to each of them after the death of the deceased.)
As stated above, the Transfer relating to the Punchbowl property was dated 12 March 2012. The consideration identified in the Transfer was $1.00. The transferor identified was the deceased and the transferee was Roseanne.
Robert agreed that he had lived in the Punchbowl property until about 2009. Roseanne has lived in the Punchbowl property since the age of three years.
The estimated land size of the Punchbowl property is 733 square metres. There is a residence on the Punchbowl property, being a freestanding two-storey dwelling, estimated to be 55 to 60 years old. It is constructed of double brick and consists of a formal entry, lounge room, dining room, kitchen, 2 bathrooms (one on the lower level and one on the upper level), and 7 bedrooms, three of which are on the lower level and four of which are on the upper level. The residence is said to be in average condition and generally functional.
There was evidence given by Roseanne, which was not the subject of any cross-examination, and which evidence I accept, of a number of conversations that she had with the deceased, in the following terms:
"Over the years when the deceased and my mother [Mary] were both alive there were conversations between them and the rest of the family about what was to happen with the Punchbowl property when they died. The deceased and my mother had both said words to the effect:
'We want Roseanne to have the home as she is single and alone and she has stayed with us and looked after us.'
Phillip was present when such conversations took place as was his wife Maria.
On December the 9th 2011 I arrived home from work and the deceased... said to me words to the effect:
'Your brother Phillip came here today and made more trouble. He was asking for more money from me and expects you to pay for his car registration. I told him that you are only working part time and looking after me on days off and after work. Then we spoke about this house and he is saying that he does not want you to have the house. He said he wants the lot. I told him that it was your mother's wish as well as mine that you are looked after and have the house. I told him that he has been helped in the past. You and Robert have always known what my wishes and your mother's wishes were.'
The deceased went on to say words to the effect:
'It was very bad, Phillip was very aggressive. He was screaming and shouting. He said I won't be seeing the children [Christopher and Bianca] again. He said that he will see me at my funeral. I told him that he has been helped and you have not been given anything. He told me to tell your daughter that I will see her at the High Court.'
The deceased also said words to the effect:
'This is it now, final, Phillip has been given too much and is used to getting his own way. I am ashamed of his behaviour. He is so greedy. When I die, I hope it is in 100 years, don't ever let him into the house again. He is out to destroy you and Robert.'
...
The deceased also asked me in January 2012 to contact his solicitor David Bentley at Thurlow Fisher in Bankstown and organise an appointment for him. The deceased said to me words to the effect :
'I am sick of Phillip's nastiness and selfishness and his demands and threats. I want to be sure you will be looked after when the time comes for me to pass away as he has threatened to throw you out of your home. He doesn't care about your health or your situation.'
I arranged an appointment for the deceased with David Bentley as requested by him. The deceased subsequently said to me words to the effect:
'I have had advice from David Bentley. I am going to transfer the house to you now so it will be clear that it is my wish that you have it.'"
Demeanour of the Parties
There was some justified criticism of Phillip by counsel for Robert and Roseanne. In particular, I note:
(a) A number of debts that Phillip identified in his affidavits as debts for which he was personally liable had previously been disclosed in the affairs of the company, The Boulevarde Shoe Store Pty Ltd, produced for the meeting of its creditors, as unsecured debts of that company.
Phillip stated that he had personally guaranteed a number of the debts, but there was almost no evidence of the nature of the personal guarantees that had been given and none of those personal guarantees were produced.
(I do not draw any adverse inference from the failure to produce the documents as he said that he had been unable to obtain a copy of them because the first Notice to Produce was sent to his solicitors under cover of letter dated 7 August 2014 (Ex. RMZ 10) and the second was sent under cover of letter dated 22 August 2014 (Ex. PAZ 4). Phillip also said, in evidence in chief, on the first day of the hearing, that the liquidator who had conducted the liquidation of The Boulevarde Shoe Store Pty Ltd had passed away approximately six weeks before the hearing. The liquidator had taken possession of all company documentation in 2011. Despite Phillip's enquiries regarding that documentation, he had been unable to obtain information.)
(b) When pressed on certain matters, Phillip was unable to provide any real detail. For example, he was unable to state whether a judgment that had been obtained in the Local Court at Parramatta, in relation to one of the debts, had been set aside. (In some respects, I found his evidence on the topic of his financial affairs a little vague.)
(c) Phillip had said, in his first affidavit, that he was unemployed for the 2012 tax year when, in fact, he had been employed in that year. He had changed his evidence apparently because he had read Roseanne's affidavit in which reference had been made to a business card, a copy of which was annexed, that he had given her showing that he had been working at Sheriton Shoes Pty Ltd, with which company he currently works.
He had also not disclosed, in that affidavit, that Sheriton Shoes Pty Ltd employed his wife, Maria, at that time.
(d) Phillip said he believed that a car registered in Roseanne's name was "not necessarily" his property, that "[i]t's my belief [that] on paper it's her car", and that "I've got no right to that car". He made these statements of belief even though:
(i) he had paid the purchase price of the car;
(ii) he had not intended to make a gift of the car to Roseanne;
(iii) he had retained possession of the car since its purchase and had driven it, as had his wife;
(iv) he had paid any traffic infringement penalty notices that were issued in respect of the car; and
(v) he had wanted it registered in Roseanne's name because he was concerned about the state of his personal assets in circumstances where he had creditors suing him.
Phillip accepted that he had not referred to the car as his property in any of his affidavits.
(e) Phillip appreciated that, if he had disclosed to creditors that he was receiving an indirect benefit, through payments made by a trustee (Chrisbian Nominees Pty Ltd) of a family trust (the Sky High Trust), that disclosure would possibly have changed his financial position and might have had a significant effect on his application to pay a debt by instalments.
He did not regard his failure to disclose to any of his creditors that money he was receiving as a result of distributions made by Chrisbian Nominees Pty Ltd to Christopher, which, by arrangement, Christopher was paying to him, as dishonest.
(Senior counsel accepted that the manner in which Phillip receives that income was not "a common procedure or a usual procedure". However, he went on to say "but unless there is an obvious illegality associated with it, in an area that has not yet been articulated ... I would say that that is where the matter [lies]".)
(f) It was not until re-examination, on the second day of the hearing, that Phillip was able to explain how $200,000, which had been deposited into a bank account in the name of his wife (Ex. RMZ 5), and which had been transferred into another account in his and his wife's name as trustees of his two children (Ex. RMZ 6), and had been withdrawn from that account and paid into two other accounts, had been utilised. Then he stated he believed that those funds had been used to pay the debts of The Boulevarde Shoe Store Pty Limited prior to its liquidation.
Furthermore, when asked why the $200,000 had been paid into an account held on behalf of the children, he said he did not know.
In re-examination, he stated that the funds had been part of the proceeds of sale of the property that he had owned that was described as the family home.
(g) He denied having seen a copy of a number of text messages sent from his mobile telephone to the mobile telephone of each of Robert and Roseanne, although a transcription of those messages had been annexed to an affidavit of each of Robert and Roseanne. (It is fair to say that the terms of the text messages do not paint Phillip in the most favourable light.)
I note, in passing, that there was no evidence from Phillip's wife, Maria, or his son, Christopher. (It is also relevant to note that Maria "went into voluntary bankruptcy in (March) 2014".)
Importantly, however, despite these criticisms, counsel for Robert and Roseanne did not specifically put to Phillip that, overall, his financial position was better than it appeared. The cross-examination went, principally, to the nature and value of the debts that were asserted and whether those debts were truly debts for which Phillip remained liable.
There was some criticism made by senior counsel for Phillip, in cross-examining Roseanne, going to the form of the affidavits of Robert and Roseanne, particularly in relation to a conversation that they had with Phillip in about May 2012. In the affidavit of each of Roseanne and Robert, parts of the conversation are recounted in identical form and terms.
It was not suggested that this occurred because the stated conversations derived from any contemporaneous recording thereof to which either, or both, had referred.
Roseanne accepted that a witness should give his, or her, own evidence, so far as practicable, uninfluenced by what anyone else had said or written. She accepted that this was so whether formal discussions or informal conversations between witnesses occurred.
However, she denied any "collaboration" between her and Robert in the preparation of the affidavits. She said "[i]t appears this way because we are saying what was said by him [Phillip]... That is why they are the same... We were there together and these words were very clearly said to us. They may be identical but we were there, we are repeating what was said." (No questions were put to Robert about this matter.)
I tended to believe Roseanne's evidence relating to "collaboration", although it is clear that each of her, and Robert's, affidavits, so far as the subject conversations are concerned, bear all the hallmarks of a "cut and paste" from one affidavit to another. There may have been clarity of recollection by each but it is hard to conclude that the recollection was identical.
In any event, the criticism would have had more substance if Phillip had disputed the contents of each of the conversations that were recounted in identical terms. He did not respond to the parts of the affidavits referred to and, when cross-examined on other parts of an affidavit sworn by Robert that had not been denied in his affidavit in reply, he accepted that "if he had disagreed with Robert's assertion he would have responded to it" (T42.03 - T42.05).
I have not forgotten what was written by Palmer J in Macquarie Developments Pty Ltd v Forrester [2005] NSWSC 674, at [89], in considering the weight to be attributed to two affidavits dealing with critical discussions in virtually identical terms, in circumstances where the evidence was that the solicitor who prepared the affidavits had "copied and pasted" portions from each. His Honour noted that:
"[I]t is totally destructive of the utility of evidence by affidavit if a solicitor or anyone else attempts to express a witness' evidence in words that are not truly and literally his or her own.
Save in the case of proving formal or non-contentious matters, affidavit evidence of a witness which is in the same words as affidavit evidence of another witness is highly suggestive either of collusion between the witnesses or that the person drafting the affidavit has not used the actual words of one or both of the deponents. Both possibilities seriously prejudice the value of the evidence and Counsel usually attacks the credit of such witnesses, with good reason."
(Very fairly, if I may say, during submissions, senior counsel for Phillip did not assert that I should not accept the evidence on this topic by each of Roseanne and Robert.)
Overall, I found that Roseanne gave her evidence honestly, admitting matters that went to the issue of the distribution of trust income since the death of the deceased. Senior counsel for Phillip did not make any submission to the contrary.
There were a number of conversations involving Phillip and the deceased, which conversations were heard by Robert and/or Roseanne, which it was said demonstrated the relationship of Phillip and the deceased. They described these conversations as "serious arguments" between them, whilst Phillip described them as "disagreements that were business related" or "vigorous discussions relating to the conduct of the business from time to time".
Having read and seen the evidence of each of Phillip, Robert and Roseanne, I prefer the evidence of Robert and Roseanne so far as it relates to events at which one, or both, were present involving the deceased and Phillip. However, it is not necessary to encumber these reasons further by reference to the disputed conversations, or the conduct complained of, because it seems, from Clause 6 of the Will, that the deceased's stated reason for not making any provision for Phillip, was not related to the nature of their relationship but, rather, to the deceased's belief that he and Mary had provided a great deal of support and benefit to Phillip in the past and that he had already made adequate provision for Phillip. There is no a basis for the court to infer some additional, or different, reasons to those stated by the deceased.
I also found Robert to be a particularly good witness. He gave his evidence in a measured and calm manner and was prepared to make admissions that did not assist the case being advanced by the Defendants. Again, it is not necessary to make specific reference to the concessions that he made, but I refer to his evidence in re-examination, by way of example.
I should state that I do accept that Phillip did not see the deceased for approximately two years commencing in about 2000, and that he did not see him again between December 2011 and the date of the deceased's death. However, following the initial period of two years, the relationship was resurrected, to some extent, and, thereafter, Phillip would visit the deceased and also speak to the deceased by telephone. I accept Phillip's evidence that, other than the two occasions to which reference has been made, he continued to visit the deceased "when time permitted".
I also accept that the deceased was concerned about Phillip's level of expenditure, which he regarded as extravagant, and that he made complaints to Phillip about that level of expenditure.
The Statutory Scheme - The Act
Next, I shall discuss the statutory scheme that is relevant to the facts of the present case. Although I have set out most of what I state hereunder in other cases, in view of the importance of this case to the parties, I shall repeat the principles. It is equally important that they are able to follow the reasoning and for each to be satisfied that I have considered the evidence and the submissions in the application.
The wording of the Act is similar to the wording of the Family Provision Act 1982 (NSW) ("the former Act"). However, it is necessary to remember the warning of Kirby P in Samsley v Barnes [1990] NSWCA 161; (1991) DFC 95-100, at 76,304:
"Purposive construction of the Act
There is always a danger where a reformed Act borrows heavily upon ideas which previously existed in the common law or in an earlier statute, that lawyers will approach the construction of the Act affected by the previous law: Gamer's Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1985) 2 NSWLR 475, 478. That danger is but an illustration, in the specialised activity of law, of a universal phenomenon of psychology long established in relation to human perception generally. We tend to perceive what we expect. We expect that with which we are familiar.
There is a particular danger in the case of the Family Provision Act in construing its terms by reference to the law which developed around the Testators' Family Maintenance and Guardianship of Infants Act 1916. That Act was passed in earlier times to govern the entitlements of a testator's family, as narrowly defined. The definition by s 3(1) of that Act confined applications to those made by 'the widow, husband or children of such persons'. There was no mention in it of former spouses. Doubtless this was because, for the early part of this century, divorce was relatively infrequent and then based upon concepts of matrimonial fault which would make interference in the testamentary disposition of the deceased unlikely. When enacted, the statute was a radical interference in the power of testamentary disposition. That was a significant power over private property, the disturbance of which was regarded as highly exceptional."
The former Act was repealed by s 5 of the Succession Amendment (Family Provision) Act 2008 (NSW). A new Chapter 3 was added to the Act, which dealt with the topic of family provision from deceased estates. The long title of the Act describes that new Chapter as one to ensure that adequate provision is made for the members of the family of a deceased person, and certain other persons, from the estate of the deceased person. Importantly, this should not be taken to mean that the Act confers, upon those persons, a statutory entitlement to receive a certain portion of a deceased person's estate. Nor does it impose any limitation on the deceased's power of disposition by his, or her, Will. It is only if the statutory conditions are satisfied that the court is empowered, under the Act, to alter the deceased's disposition of his, or her, estate (or the disposition on intestacy), to produce a result that is consistent with the purpose of the Act. Even then, the court's power to do so is discretionary.
The key provision is s 59 of the Act. The court must be satisfied, first, that the applicant is an eligible person within the meaning of s 57(1) (s 59(1)(a)). In New South Wales, it is a multi-category based eligibility system, rather than one with a general category of eligibility (as it is, for example, in Victoria). There are six categories of persons by, or on whose behalf, an application may be made.
Relevantly, in this case, Phillip relies upon the category of eligibility referred to in s 57(1)(c) of the Act. There is no dispute that he is a child of the deceased.
The language of the relevant sub-section is expressive of the person's status, as well as his, or her, relationship to the deceased. There is no age limit placed on an eligible person making an application.
It is only if eligibility is found, that the court must determine whether adequate provision for the proper maintenance, education or advancement in life of the applicant has not been made, relevantly, by the Will of the deceased (s 59(1)(c)). It is this mandatory legislative imperative that drives the ultimate result and, it is only if the court is satisfied of the inadequacy of provision, that consideration is given to whether to make a family provision order (s 59(2)). Only then may "the Court ... make such order for provision out of the estate of the deceased person as the Court thinks ought to be made for the maintenance, education or advancement in life of the eligible person, having regard to the facts known to the Court at the time the order is made".
Other than by reference to the provision made by the Will in relation to the estate of the deceased, the operation of the rules of intestacy being irrelevant in the present case, s 59(1)(c) of the Act leaves undefined the norm by which the court must determine whether the provision, if any, is inadequate for an applicant's proper maintenance, education and advancement in life. The question would appear to be answered by an evaluation that takes the court to the provision actually made by the Will, on the one hand, and to the requirement for maintenance, education or advancement in life of the applicant on the other. No criteria are prescribed in the Act as to the circumstances that do, or do not, constitute inadequate provision for the proper maintenance, education and advancement in life of the applicant.
Importantly, in s 59(1)(c) of the Act, there no longer appears to be any sanction to consider the provision made by the deceased during his, or her, lifetime for the applicant (see s 9(2) of the former Act).
In Grey v Harrison [1997] 2 VR 359, at 366-367, Callaway JA observed:
"There is no single provision of which it may be said that that is the provision that a wise and just testator would have made. There is instead a range of appropriate provisions, in much the same way as there is a range of awards for pain and suffering or a range of available sentences. Minds may legitimately differ as to the provision that should be made. Furthermore, it is not at all clear that reasons for an appropriate provision need be fully articulated. To borrow again from the analogy of sentencing, what is required is an instinctive synthesis that takes into account all the relevant factors and gives them due weight."
It was said, in the Court of Appeal (by Basten JA), in Foley v Ellis [2008] NSWCA 288, at [3], that the state of satisfaction "depends upon a multi-faceted evaluative judgment". In Kay v Archbold [2008] NSWSC 254, at [126], White J said that the assessment of what provision is proper involved "an intuitive assessment". Stevenson J has described it as "an evaluative determination of a discretionary nature, not susceptible of complete exposition" and one which is "inexact, non-scientific, not narrow or purely mathematical, and fact and circumstance specific": Szypica v O'Beirne [2013] NSWSC 297, at [40].
Under s 59(1)(c) of the Act, the time at which the court gives its consideration to the question of inadequacy of provision is the time when the court is considering the application.
"Provision" is not defined by the Act, but it was noted in Diver v Neal [2009] NSWCA 54; (2009) 2 ASTLR 89, at [34], that the term "covers the many forms of support and assistance which one individual can give to another. That support and assistance will vary over the course of the person's lifetime".
Neither is the word "maintenance", nor the phrase "advancement in life", defined in the Act.
In J D Heydon and M J Leeming, Jacobs' Law of Trusts in Australia (7th ed, 2006, LexisNexis Butterworths), at 542, the learned authors comment upon the difference between the concepts of maintenance and advancement:
"The essential difference between 'maintenance' and 'advancement' is that 'maintenance' denotes a periodical payment or a payment which could validly be made periodically, whereas 'advancement' denotes a definite unique outlay for a specific purpose. Recipients of maintenance must, practically speaking, be infants, but adults may be recipients of an advancement.
An advancement can never be made of a sum of money which the person to whom it is made can immediately pocket, but it must be made with a view to the establishment of that person in a business or profession, or otherwise in some definite way for that person's benefit, the whole essence of an advancement being the immediate payment of a tolerably large sum for an immediate benefit to one beneficiary."
In Re Dennis (Deceased) [1981] 2 All ER 140, Browne-Wilkinson J, at 145, wrote:
"The court has, up to now, declined to define the exact meaning of the word 'maintenance' and I am certainly not going to depart from that approach. But in my judgment the word 'maintenance' connotes only payments which, directly or indirectly, enable the applicant in the future to discharge the cost of his daily living at whatever standard of living is appropriate to him. The provision that is to be made is to meet recurring expenses, being expenses of living of an income nature. This does not mean that the provision need be by way of income payments. The provision can be by way of lump sum, for example, to buy a house in which the applicant can be housed, thereby relieving him pro tanto of income expenditure. Nor am I suggesting that there may not be cases in which payment of existing debts may not be as appropriate as a maintenance payment; for example, to pay the debts of an applicant in order to enable him to continue to carry on a profit-making business or profession may well be for his maintenance."
In In the Estate of Puckridge, Deceased (1978) 20 SASR 72, at 77, King CJ said:
"The words 'advancement in life' have a wide meaning and application and there is nothing to confine the operation of the provision to an earlier period of life in the members of the family: Blore v Lang (1960) 104 CLR 124, per Dixon CJ at 128."
In Goodman v Windeyer [1980] HCA 31; (1980) 144 CLR 490, Murphy J wrote, at 505:
"Provision for advancement may, for example, extend to retraining or the gaining of a qualification which could advance and perhaps enable an applicant to maintain himself or herself."
In Kleinig v Neal (No 2) [1981] 2 NSWLR 532, Holland J discussed the financial assistance which an applicant may need for his, or her, maintenance and advancement in life, in the following terms:
"If the court is to make a judgment as to what a wise and just testator ought to have done in all the circumstances of the case, it could not be right to ignore that the particular testator was a wealthy man in considering what he ought to have done for his widow or children in making provision for their maintenance, education or advancement in life. There are different levels of need for such things. In the case of maintenance and advancement in life they can range from bare subsistence up to anything short of sheer luxury. A desire to improve one's standard of living or a desire to fulfil one's ambition for a career or to make the fullest use of one's skills and abilities in a trade or business, if hindered or frustrated by the lack of financial means required for the fulfilment of such desire or ambition, presents a need for such assistance and it would seem to me that it is open to a court to say, in the case of a wealthy spouse or parent who could have but has failed to provide such financial assistance, that . . . [the deceased] has failed to make adequate provision for the proper maintenance and advancement in life of the spouse or children who had such need."
In Mayfield v Lloyd-Williams [2004] NSWSC 419, White J, at [114], noted:
"In the context of the Act the expression 'advancement in life' is not confined to an advancement of an applicant in his or her younger years. It is phrase of wide import. (McCosker v McCosker (1957) 97 CLR 566 at 575) The phrase 'advancement in life' has expanded the concept used in the Victorian legislation which was considered in Re Buckland permitting provision to be made for the 'maintenance and support' of an eligible applicant. However Adam J emphasised that in a large estate a more extravagant allowance for contingencies could be made than would be permissible in a small estate and still fall within the conception of maintenance and support."
In Bartlett v Coomber [2008] NSWCA 100, at [50], Mason P said:
"The concept of advancement in life goes beyond the need for education and maintenance. In a proper case it will extend to a capital payment designed to set a person up in business or upon marriage (McCosker v McCosker (1957) 97 CLR 566 at 575; Stiles v Joseph (NSW Supreme Court, Macready M, 16 December 1996); Mayfield v Lloyd-Williams [2004] NSWSC 419)."
In McCoskerv McCosker [1957] HCA 82; (1957) 97 CLR 566, Dixon CJ and Williams J stated, at 575:
"The presence of the words 'advancement in life' in the... Act in addition to the words 'maintenance and education' is not unimportant... 'Advancement' is a word of wide import."
The word "adequate" connotes something different from the word "proper". "Adequate" is concerned with the quantum, described by Rosalind Atherton in 'The Concept of Moral Duty in the Law of Family Provision - a Gloss or Critical Understanding?' (1999) 5 Australian Journal of Legal History 5, at 10, as "an objective, economic test", whereas "proper" prescribes the standard, of the maintenance, education and advancement in life: Devereaux-Warnes v Hall (No 3) [2007] WASCA 235; (2007) 35 WAR 127, per Buss JA, at [72] and [77], which seems to invite more subjective criteria.
These words were considered by Lord Romer in delivering the advice of the Privy Council in Bosch v Perpetual Trustee Co Ltd [1938] AC 463, at 476:
"The use of the word 'proper' in this connection is of considerable importance. It connotes something different from the word 'adequate'. A small sum may be sufficient for the 'adequate' maintenance of a child, for instance, but, having regard to the child's station in life and the fortune of his father, it may be wholly insufficient for his 'proper' maintenance. So, too, a sum may be quite insufficient for the 'adequate' maintenance of a child and yet may be sufficient for his maintenance on a scale that is 'proper' in all the circumstances."
Their Lordships went on to state (at 478):
"The amount to be provided is not to be measured solely by the need of maintenance. It would be so if the Court were concerned merely with adequacy. But the Court has to consider what is proper maintenance, and therefore the property left by the testator has to be taken into consideration."
Dixon CJ and Williams J, in McCosker v McCosker, at 571-572, after citing Bosch v Perpetual Trustee Co Ltd, went on to say, of the word "proper", that:
"It means 'proper' in all the circumstances of the case, so that the question whether a widow or child of a testator has been left without adequate provision for his or her proper maintenance, education or advancement if life must be considered in the light of the competing claims upon the bounty of the testator and their relative urgency, the standard of living his family enjoyed in his lifetime, in the case of a child his or her need of education or of assistance in some chosen occupation and the testator's ability to meet such claims having regard to the size of his fortune. If the court considers that there has been a breach by a testator of his duty as a wise and just husband or father to make adequate provision for the proper maintenance education or advancement in life of the applicant, having regard to all these circumstances, the court has jurisdiction to remedy the breach and for that purpose to modify the testator's testamentary dispositions to the necessary extent."
In Goodman v Windeyer, Gibbs J wrote, at 502:
"[T]he words 'adequate' and 'proper' are always relative. There are no fixed standards, and the court is left to form opinions upon the basis of its own general knowledge and experience of current social conditions and standards."
In Vigolo v Bostin [2005] HCA 11; (2005) 221 CLR 191, at 228, Callinan and Heydon JJ said:
"[T]he use of the word 'proper' ... implies something beyond mere dollars and cents. Its use, it seems to us, invites consideration of all the relevant surrounding circumstances and would entitle a court to have regard to a promise of a kind which was made here...The use of the word 'proper' means that attention may be given, in deciding whether adequate provision has been made, to such matters as what use to be called the 'station in life' of the parties and the expectations to which that has given rise, in other words, reciprocal claims and duties based upon how the parties lived and might reasonably expect to have lived in the future."
Santow J pointed out in Gardiner v Gardiner (Supreme Court (NSW), Santow J, 28 May 1998, unrep), that "adequate" and "proper" are independent concepts. He said, at 12:
"'Adequate' relates to the needs of the applicant. It is determined by reference to events occurring up to the death of the deceased, but also encompassing what the deceased might reasonably have foreseen before death. 'Proper' depends upon all the circumstances of the case. These include the applicant's station in life, the wealth of the deceased, the means and proper claims of all applicants, the relative urgency of the various claims on the deceased's bounty, the applicant's conduct in relation to the deceased, the applicant's contribution to building up the deceased's estate, the existence of dependents upon the applicant, the effects of inflation, the applicant's age and sex, and whether the applicant is able-bodied ..."
In Palaganio v Mankarios [2011] NSWSC 61, at [72], White J observed that the question of what provision for a person's maintenance, education or advancement in life is "proper" and the question of whether the provision made by the deceased was "adequate" for that person's maintenance, education or advancement in life involve value judgments on which minds can legitimately differ, and there are no definite criteria by which the question can be answered.
His Honour added, in Slack v Rogan; Palffy v Rogan [2013] NSWSC 522, at [123]:
"The question of what level of maintenance or advancement in life is 'proper' depends on all of the circumstances of the case 'including the applicant's financial position, the size and nature of the deceased's estate, the totality of the relationship between the applicant and the deceased, and the relationship between the deceased and other persons who have legitimate claims upon his or her bounty' (Singer v Berghouse (1994) 181 CLR 201 at 210)."
Until recently, it was unanimously thought that there are two stages of the determination. The first stage, provided for by s 59(1)(c), has been described as "the jurisdictional question": Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201 at 208-209. At this stage, the court will consider whether it can make an order for provision for the maintenance, education or advancement in life of a particular applicant. The court does this by determining whether it is satisfied that adequate provision for the proper maintenance, education or advancement in life of the applicant has not been made by the Will of the deceased, for the applicant. If it is not so satisfied, then the court is precluded from making a family provision order. At this stage, the court has regard to, among other things, the applicant's financial position, the size and nature of the deceased's estate, the totality of the relationship between the applicant and the deceased and the circumstances and needs of the other beneficiaries or potential beneficiaries: see McCosker v McCosker, at 571-572; Singer v Berghouse, at 209-210; Vigolo v Bostin, at [16], [75], [112]; Tobin v Ezekiel [2012] NSWCA 285, at [70].
Whether an applicant has a 'need' or 'needs' is also a relevant factor at the first stage of the enquiry. It is an elusive concept to define, yet, it is an element in determining whether "adequate" provision has been made for the "proper" maintenance, education and advancement in life of the applicant in all of the circumstances: Collins v McGain [2003] NSWCA 190 (Tobias JA, with whom Beazley and Hodgson JJA agreed).
In Collins v McGain, Tobias JA said:
"42. Further, there can be no question that, at least as part of the first stage of the process, the question of whether the eligible person has a relevant need of maintenance etc is a proper enquiry. This is so as the proper level of maintenance etc appropriate for an eligible person in all the circumstances clearly calls for a consideration of his or her needs. However, the question of needs must not be too narrowly focussed. It must, in my view, take into account, depending upon the particular circumstances of the case, present and future needs including the need to guard against unforeseen contingencies.
...
47. As I have observed, the issue of need is not confined to whether or not an eligible person has, at the date of hearing, a then need for financial assistance with respect to his maintenance etc. It is a broader concept. This is so because the question of needs must be addressed in the context of the statutory requirement of what is 'proper maintenance etc' of the eligible person. It is because of that context that, in the present case, the 'proper maintenance etc' of the appellant required consideration of a need to guard against the contingency to which I have referred."
In Devereaux-Warnes v Hall (No 3), at [81] - [84], Buss JA said, in respect of the first stage of the process:
"The term 'need' has been used to refer to the claimant's inability to satisfy his or her financial requirements from his or her own resources. See Singer per Gaudron J at 227.
'Need' has also been used in the context of a value judgment or conclusion, namely, that the claimant is 'in need' of maintenance, etc, because inadequate provision has been made for his or her proper maintenance, etc. See Gorton v Parks (1989) 17 NSWLR 1 per Bryson J at 10-11.
The determination of whether the disposition of the deceased's estate was not such as to make adequate provision for the proper maintenance, etc, of the claimant will always, as a practical matter, involve an evaluation of the provision, if any, made for the claimant on the one hand, and the claimant's 'needs that cannot be met from his or her own resources on the other. See Hunter per Kirby P at 575.
Although the existence or absence of 'needs' which the claimant cannot meet from his or her own resources will always be highly relevant and, often, decisive, the statutory formulation, and therefore the issue in every case, is whether the disposition of the deceased's estate was not such as to make adequate provision for his or her proper maintenance, etc. See Singer per Gaudron J at 227. Compare Gorton per Bryson J at 6-11; Collicoat v McMillan [1999] 3 VR 803 per Ormiston J at 816 [38], 820 [47]."
"Need", of course, is a relative concept: de Angelis v de Angelis [2003] VSC 432, per Dodds-Streeton J, at [45]. It is different from "want". The latent difference between the words was stated by Lord Neuberger of Abbotsbury (now President of the Supreme Court of the United Kingdom), in the House of Lords decision, R (on the application of M) v Slough Borough Council [2008] UKHL 52; [2008] 1 WLR 1808, at [54]:
"'Need' is a more flexible word than it might first appear. 'In need of' plainly means more than merely 'want', but it falls far short of 'cannot survive without'."
In Boettcher v Driscoll [2014] SASC 86, David J, at [41], added:
"'Need' is not so synonymous with 'want' such that the two are interchangeable."
As Callinan and Heydon JJ emphasised in Vigolo v Bostin, the question of the adequacy of the provision made by the deceased "is not to be decided in a vacuum" or "by looking simply to the question whether the applicant has enough on which to survive or live comfortably". The inquiry is not confined only to the material circumstances of the applicant. The whole of the context must be examined.
Yet, in referring to the concept of "need", it should also be noted that the statutory formula makes no reference to "need", but rather to "adequate provision for the proper maintenance, education or advancement in life". No doubt, this has prompted White J to write, in Sam Wardy v Gordon Salier; William Wardy v Gordon Salier; Hassiba Wardy v Estate of late Edmond Wadih Wardy, developer and Ch 3 of the Succession Act 2006 [2014] NSWSC 473, at [147], that "the need a claimant must demonstrate is a need for 'proper' maintenance, education and advancement in life", but that does not mean that "adequate provision for proper maintenance and advancement in life implies no more than provision for the necessities of life, irrespective of the size of the estate and the effect, if any, of an order for provision on others". I respectfully agree.
In the event that the court is satisfied that the power to make an order is enlivened (i.e. in this case, it is satisfied that Phillip is an eligible person, and that adequate provision for his proper maintenance, education or advancement in life has not been made), then, the court determines whether it should make an order, and if so, the nature of any such order, having regard to the facts known to the court at the time the order is made.
The second stage of the process arises under s 59(2) and s 60(1)(b) of the Act. Mason CJ, Deane and McHugh JJ, in Singer v Berghouse, at 211, affirmed that the decision made at the second stage involves an exercise of discretion in the accepted sense. The fact that the court has a discretion means that it may refuse to make an order even though the jurisdictional question has been answered in the applicant's favour.
I have dealt with the question that has been raised in other cases whether the two-stage approach identified in Singer v Berghouse continues to apply to the provisions of the Act in other cases, the most recent of which is Aubrey v Kain [2014] NSWSC 15. I remain of the view that the two-stage approach should continue to apply. I shall not repeat what I said in that case, which is not affected by the recent decision of the Court of Appeal in Phillips v James [2014] NSWCA 4, or its decision of Verzar v Verzar [2014] NSWCA 45.
(Since I delivered my reasons in Aubrey v Kain, Robb J has also considered the topic in Janette Susan Gardiner v Raymond James Gardiner as Administrator of the Estate of the Late Dulcie Eva Gardiner [2014] NSWSC 435. I respectfully adopt his Honour's reasoning, set out at [117] - [120], and [124], as to the persuasiveness of the reasoning of Barrett JA in Andrew v Andrew [2012] NSWCA 308; (2012) 81 NSWLR 656. I also refer to what Bergin CJ in Eq has written in In the Estate of the late Anthony Marras [2014] NSWSC 915, at [15].)
Ultimately, as Allsop P said in Andrew v Andrew, at [6], "it may be an analytical question of little consequence" since the questions remain the same, namely, whether the court can make an order for provision (whether it is satisfied that adequate provision for the proper maintenance, education or advancement in life of the person in whose favour the order is to be made has not been made) and, if so, whether it should (whether to make an order and, if so, the terms of that order).
Section 60 of the Act, at least in part, is new. It provides:
"(1) The court may have regard to the matters set out in subsection (2) for the purpose of determining:
(a) whether the person in whose favour the order is sought to be made (the 'applicant') is an eligible person, and
(b) whether to make a family provision order and the nature of any such order.
(2) The following matters may be considered by the court:
(a) any family or other relationship between the applicant and the deceased person, including the nature and duration of the relationship,
(b) the nature and extent of any obligations or responsibilities owed by the deceased person to the applicant, to any other person in respect of whom an application has been made for a family provision order or to any beneficiary of the deceased person's estate,
(c) the nature and extent of the deceased person's estate (including any property that is, or could be, designated as notional estate of the deceased person) and of any liabilities or charges to which the estate is subject, as in existence when the application is being considered,
(d) the financial resources (including earning capacity) and financial needs, both present and future, of the applicant, of any other person in respect of whom an application has been made for a family provision order or of any beneficiary of the deceased person's estate,
(e) if the applicant is cohabiting with another person-the financial circumstances of the other person,
(f) any physical, intellectual or mental disability of the applicant, any other person in respect of whom an application has been made for a family provision order or any beneficiary of the deceased person's estate that is in existence when the application is being considered or that may reasonably be anticipated,
(g) the age of the applicant when the application is being considered,
(h) any contribution (whether financial or otherwise) by the applicant to the acquisition, conservation and improvement of the estate of the deceased person or to the welfare of the deceased person or the deceased person's family, whether made before or after the deceased person's death, for which adequate consideration (not including any pension or other benefit) was not received, by the applicant,
(i) any provision made for the applicant by the deceased person, either during the deceased person's lifetime or made from the deceased person's estate,
(j) any evidence of the testamentary intentions of the deceased person, including evidence of statements made by the deceased person,
(k) whether the applicant was being maintained, either wholly or partly, by the deceased person before the deceased person's death and, if the court considers it relevant, the extent to which and the basis on which the deceased person did so,
(l) whether any other person is liable to support the applicant,
(m) the character and conduct of the applicant before and after the date of the death of the deceased person,
(n) the conduct of any other person before and after the date of the death of the deceased person,
(o) any relevant Aboriginal or Torres Strait Islander customary law,
(p) any other matter the court considers relevant, including matters in existence at the time of the deceased person's death or at the time the application is being considered."
It can be seen that s 60(2) enumerates 15 specific matters, described by Basten JA in Andrew v Andrew, at [37] as "a multifactorial list", and by Lindsay J in Verzar v Verzar [2012] NSWSC 1380, at [123], as "a valuable prompt" to which the court may have regard, together with "any other matter the court considers relevant", for the purposes of determining eligibility, whether to make a family provision order and the nature of any such order.
It was said by White J in Slack v Rogan; Palffy v Rogan, at [121], that s 60 "lists a wide range of matters" that the court "may have regard to", but these do not provide any tangible assistance in answering the question in any particular case whether the provision made in a will was less than adequate for an eligible applicant's "proper" maintenance, education or advancement in life.
In West v Mann [2013] NSWSC 1852, Kunc J, at [12], wrote:
"Section 60(2) provides a helpful checklist but it is no more than that. The Court is not obliged to take those matters into account. The extent to which it does (if at all) will depend upon the facts of each particular case.
Section 60(2)(p) confirms the breadth of matters the Court can take into account. Once enlivened, the Discretion is expressly fettered only by the requirement in s 59(2) that if an order is made, it must be such order 'as the Court thinks ought to be made for the maintenance, education or advancement in life of the eligible person, having regard to the facts known to the Court at the time the order is made'".
Beazley P, in Phillips v James, at [51], described s 60(2) as involving:
"... a statutory iteration of matters that had always been considered relevant in the determination of claims for provision by persons claiming an entitlement under a testator's will. However, as Basten JA observed in Andrew v Andrew, the factors identified in s 60(2) provide a more focussed direction to the Court as to relevant matters to which regard may be had. His Honour was of the view that the statutory list invites consideration of a broader range of factors than was previously the case. Whether or not that is so, the important matter is that the Court is required to have regard to the circumstances, including those specified in s 60(2), that it considers relevant in determining whether to make an order for family provision and the nature of any such order."
I am satisfied that Phillip has a continuing earning capacity.
The monthly expenditure of Phillip and his family was said to be $6,658 including rent ($2,600), food ($2,000), motor vehicle expenses ($452), telecommunications ($400), debt instalments ($736), health and other insurance ($290) and power ($180). (The debt instalments relate to weekly payments made to BMW in respect of a debt to which reference shall later be made.)
There was a brief amount of time spent, during cross-examination of Phillip, in relation to what was submitted, by counsel for the Defendant, to be "a large amount of discretionary spending in the form of restaurants, entertainment and the like" by Phillip and his family. Counsel for the Defendants submitted that such spending "shows a pattern and it is consistent with what [the deceased] said [about Phillip]".
In these circumstances, counsel for the Defendants handed to the court, as an aide memoir, a schedule of identified entries from various bank statements going to items of expenditure.
Phillip denied that a substantial amount of money was expended in a discretionary fashion. I tend to agree.
Phillip's assets consist of superannuation with Australian Unity ($205,977 as at 20 August 2014) and money held in trust with Sage Solicitors, Five Dock, for the purpose of meeting some of his debts (the current balance is about $12,500).
He also jointly owns assets with his wife, Maria, to the value of $2,500, including clothing, a copy machine, a computer, a desk, jewellery and personal effects.
Phillip's employer, Sheriton Shoes Pty Ltd, provides him with a motor vehicle as part of his salary.
Earlier, I have referred to the debts Phillip stated that he currently has. In his affidavit of 17 July 2014, Phillip disclosed debts in the order of $720,551.
At the hearing, the current status of those debts was clarified. It can be summarised as follows:
Status of debt
Particulars
Value
Total
Settled
Centro Lease Guarantee
Originally: $232,407
Settled for: $7,500
Originally:
$491,302 Settled for:
$15,000
Westfield Lease Guarantee
Originally: $258,895
Settled for: $7,500
Not Currently Being Pressed
Cube Footwear
$37,560
$106,619
Marathon Footwear
$21,615
Newco Shoes
$8,463
NMI
$12,386
Subway
$4,895
Eric Chu
$21,700
No Arrangement/
No Activity
STG Van Finance
$11,593
$51,766
ANZ Credit Card
$4,024
Citibank Credit Card
$15,663
Westpac Credit Card
$14,692
Bianco Imports
$5,794
Pursued/Payable
BMW Car Finance
$8,000 (being paid in weekly instalments of $184)
$88,438
CBA Overdraft
$53,000 (proceedings to recover this debt are returnable at the Bankstown Local Court in November 2014: Ex. RMZ4)
Office of State Revenue
$12,859 (judgment was entered in 2013 regarding this debt)
Sheriton Shoes Pty Ltd
$14,579 (payable in 39 weekly instalments commencing 4 August 2014)
The most pressing of these debts are those set out in the last category ("Pursued/Payable").
The last debt there referred to is a loan from Phillip's employer. The repayments being made take the form of a reduction of the weekly invoices rendered by Sheriton Shoes Pty Ltd to Chrisbian Nominees Pty Ltd. It was accepted, on the final day of the hearing, that about three repayments had already been made by that date.
Phillip has also given evidence that Sheriton Shoes has indicated that "it would be willing to advance me further amounts to deal with the other debts".
While the debts classified above as pursued/payable are the most urgent, senior counsel for Phillip maintained that the court should also take into account the possibility that those debts currently not being pressed might be pressed in the future. There is simply insufficient evidence to enable me to form a view about these debts and whether repayment will, in fact, be sought by the creditors.
Phillip states that if he receives provision he would use some of it to "relieve some of the pressure on my wife and me from our creditors, so I can provide for our future. I would like to explore my prospects of entering into a scheme under Part X of the Bankruptcy Act but I have no funds to offer the creditors at this stage. I would also like some assistance in securing accommodation without the drain on my income in paying rent as well as obtaining some security for our future."
Robert works on a part-time basis as a salesperson at David Jones. He works a minimum of 27 hours per week "and such further hours as I am offered". As a result, he says that his "wage varies according to the number of extra hours offered and shifts worked". He says that, on average, his gross monthly income is $3,333.
I am satisfied that Robert has a continuing earning capacity.
Robert's gross monthly expenditure, which was itemised in the evidence, is approximately $2,309. This leaves a monthly surplus of $1,024.
Robert has property with a value of $1,074,605, comprising:
Real Estate in Burwood
$500,000
Superannuation
$118,578
Money in various accounts
$229,794
Household contents
$20,000
Jewellery
$100
Debt owed by Zagame Enterprises Pty Ltd
$206,130
Robert's only disclosed liability is a credit card debt of $134.
Roseanne works on a part-time basis as a personal banker with Westpac Banking Corporation and earns approximately $3,538 gross per month.
While Roseanne says that her health problems, about which more will be written later, prevent her from working on any more than a part-time basis, I am satisfied that she retains, at least, a partial earning capacity.
Roseanne's gross monthly expenditure, which, also, was itemised in the evidence, is $2,975. This leaves her a monthly surplus of $563.
Roseanne's assets include:
Real Estate in Punchbowl
$775,000
Superannuation
$90, 615
Money in various accounts
$110,479
Household contents
$10,000
Jewellery
$1,500
Debt owed by Zagame Enterprises Pty Ltd
$45,154
Westpac Shares
$15,173
The total value of Roseanne's property is, therefore, $1,047,924.
Roseanne's only disclosed liability was $3,776 owing on a credit card.
(e) if the applicant is cohabiting with another person-the financial circumstances of the other person
Phillip resides with his wife, Maria, to whom he was married in 1989.
Maria is a manager with Sheriton Shoes Pty Ltd and she is paid $850 to $900 per week. Her employer also contributes to her superannuation, which contributions for the year ending 30 June 2014 were $5,183.
She has superannuation of about $187,739.
I have earlier noted that Maria went into voluntary bankruptcy in March 2014.
Christopher and Bianca, who also live at home with their parents, are both students. Whilst they work on a casual basis, neither contributes to the payment of household expenditure.
I have referred, earlier, to the arrangement whereby monies paid to Christopher, by virtue of distributions made by Chrisbian Nominees Pty Ltd, is transferred to Phillip.
(f) any physical, intellectual or mental disability of the applicant, any other person in respect of whom an application has been made for a family provision order or any beneficiary of the deceased person's estate that is in existence when the application is being considered or that may reasonably be anticipated
There is no evidence advanced about any disability suffered by Phillip.
Roseanne suffers from "severe arthritis" in her back, neck and feet. She had a work injury in 2002 to her L4/5 disc in her back, which has resulted in "episodes of severe [back] pain". Roseanne also has a condition known as Diffuse Idiopathic Skeletal Hyperostosis Syndrome. Roseanne sees her general practitioner, Dr R Riisfedt, and an orthopaedic specialist, Dr R Clark, in respect of her conditions.
Robert has scoliosis "which causes severe back and leg pain". He also has "decreased vision due to retinitis pigmentosa". As a result, he is now prevented from driving. He has "abdominal problems with a diagnosis of probable Crohn's Disease" and also suffers from Sleep Apnoea.
(g) the age of the applicant when the application is being considered
Phillip was born in September 1960 and is currently 54 years of age.
(h) any contribution (whether financial or otherwise) by the applicant to the acquisition, conservation and improvement of the estate of the deceased person or to the welfare of the deceased person or the deceased person's family, whether made before or after the deceased person's death, for which adequate consideration (not including any pension or other benefit) was not received, by the applicant
I have earlier referred to the contribution made by Phillip to the operation of the deceased's business ventures, including working in the family company and providing security for the bank loan to the deceased by way of mortgage over the property at Chipping Norton.
Phillip provided the following evidence in an affidavit sworn11 September 2013:
"I say that I was my father's main assistant with respect to his business affairs. I secured for him two tenants for the Fairfield property and assisted him in relation to legal disputes, arranging many meetings for him with the council. I also attended many meetings with him and the council, and with solicitors."
Despite the allegations made by the Defendants, it is likely that Phillip, as the deceased's son, would have, save for, perhaps, during the two periods where there was no contact between them, contributed to the welfare of the deceased.
(i) any provision made for the applicant by the deceased person, either during the deceased person's lifetime or made from the deceased person's estate
I have also referred, above, to the contributions made by the deceased, during his lifetime, directly and indirectly, to Phillip. Counsel for the Defendants submitted that the contributions fall, broadly, into four categories:
(1) The provision of rent-free use of the premises from which the business of the Boulevard Shoe Store was conducted to the value of about $83,200 (exclusive of GST);
(2) The provision of $100,000 for financial assistance in 2011;
(3) Provision from Mary in the form of the $30,000 loan and the provision of rent-free accommodation in the property which Mary had inherited, to the value of $31,700; and
(4) The provision of a start in his employment and in business.
Counsel for the Defendants submitted that the first two contributions are especially significant given that they were made in close proximity to the death of the deceased.
(j) any evidence of the testamentary intentions of the deceased person, including evidence of statements made by the deceased person
The terms of the deceased's Will provide evidence of his testamentary intentions. Those terms, and specifically Clause 6, have been considered earlier in these reasons.
Senior counsel for Phillip submitted, however, that, under the Will, there is "still a degree of recognition by the deceased of the Plaintiff's moral claim". This submission was made by reference to the gift to Phillip in Clause 5(b) of the Will that would have taken effect, in the event that the estate was solvent, if both Christopher and Bianca had pre-deceased the deceased without having left any issue. Senior counsel accepted, fairly, in these circumstances, that Phillip's "interest [under the Will] only arises, of course, if a number of hurdles are surmounted, none of which were."
I have also earlier referred to the deceased's stated intentions, and the Transfer executed, in relation to the Punchbowl property passing to Roseanne.
Phillip provided evidence that, in the early 1990s, when the deceased asked for financial assistance from him and Robert, the following exchange took place:
"At the time the factory was purchased, my father said to me words to the effect of: 'The only way I can purchase this property is to have you and your brother's company support the loan'.
I said to him: 'What is in it for us?'
He replied in words to the effect of: 'In the long term it will be yours'."
(k) whether the applicant was being maintained, either wholly or partly, by the deceased person before the deceased person's death and, if the court considers it relevant, the extent to which and the basis on which the deceased person did so
I have referred to the amount of $100,000 that the deceased gave to Phillip to assist him with his finances in 2011. However, otherwise, the deceased was not maintaining Phillip.
(l) whether any other person is liable to support the applicant
There is no other person with a legal obligation to support Phillip. There is, of course, support provided by his wife, Maria. There is also the present loan arrangement involving, and offer of further support from, Phillip's employer, Sheriton Shoes Pty Ltd.
(m) the character and conduct of the applicant before and after the date of the death of the deceased person
An evaluation of "character and conduct" may be necessary, not for the sake of criticism, but to enable consideration of what is "adequate and proper" in all the circumstances. Importantly, the Act does not limit the consideration of "conduct" to conduct towards the deceased.
In Collicoat v McMillan [1999] 3 VR 803, at 817, Ormiston J wrote in relation to the manner in which an applicant's behaviour towards the deceased is to be considered:
"...Ordinarily each of the persons who have a statutory right to make application are entitled to have their position considered by a testator but their behaviour (right or wrong) towards the testator may only provide a basis for measuring appropriately the testator's obligation to make provision for each of those applicants. Their sins are irrelevant except insofar as a testator might properly take exception to their behaviour."
Phillip contends that his relationship with, and conduct toward, the deceased was "always good". He says that he "had regular contact with [the deceased] by telephone and in addition I would visit him during the week and on occasion I would also take him shopping."
I have, elsewhere, referred to the alleged periods of lack of contact between Phillip and the deceased.
Phillip says that the frequency of contact between he and the deceased diminished in the last two years of the deceased's life but that was not because of any estrangement but because of other commitments including those relating to an illness suffered by Bianca which required time to be spent at hospital.
Reference was also made, above, to the arguments between the deceased and Phillip, predominantly surrounding Phillip's business affairs.
Finally, I have briefly referred, earlier, to the text messages allegedly sent from Phillip's mobile telephone to the mobile telephone of each of Robert and Roseanne after the deceased's death. There is also evidence of other threatening conduct by Phillip, after the deceased's death, toward his siblings. Without encumbering these reasons with the detail of that conduct, it, again, does not paint Phillip in a very favourable light.
(n) the conduct of any other person before and after the date of the death of the deceased person
The conduct of each of Robert and Roseanne is important in this case. Whilst it appears that Robert's conduct towards the deceased does not warrant any criticism at all, Roseanne's conduct and the devotion to her parents and, then, after the date of Mary's death, to the deceased, must be regarded as exemplary.
Roseanne says, and it was not disputed, that she was the main carer for her parents "in their declining years". She "originally reduced [her] hours of work to assist [them] at home ... and to care for them as they grew older". She says that she had "a very close relationship with the deceased", which, in all the circumstances, cannot be challenged.
I bear in mind, of course, that she remained living in the Punchbowl property for virtually the whole of her life, rent and occupation fee free, which involves a significant benefit to her. The Punchbowl property was also transferred to her, in 2012, for $1.00 only. Whilst there is no specific evidence of its value at that time, it is not difficult to infer that it must have been worth at least several hundred thousand dollars.
Robert lived in the Punchbowl property until 2009, at which time he moved to his current residence at Burwood. After he left the family home, Robert says that he continued to visit the deceased "on a regular basis on Sundays and Wednesdays" and spoke regularly with him on the telephone.
Robert says that he provided assistance to the deceased with his business affairs by keeping accounting records, organising tax returns and arranging for the payment of bills. He also assisted with obtaining legal advice, on behalf of the deceased, in relation to the business, including providing any necessary documents and instructions. Robert says that, further, he assisted with the management of tenants and dealings with estate agents in relation to the Fairfield property. He, while he had the capacity to drive, and because the deceased could not drive, took the deceased to various doctor's appointments and shopping centres and on visits to friends. Finally, he says that he assisted with the outdoor maintenance of the Punchbowl property.
I acknowledge that, like Roseanne, while Robert lived in the Punchbowl property, he had the benefit of accommodation on a rent and occupation fee free basis.
I am satisfied that Roseanne and, to a lesser extent, Robert, made a significant contribution to the welfare of the deceased during his lifetime.
(o) any relevant Aboriginal or Torres Strait Islander customary law
This factor is not applicable.
(p) any other matter the court considers relevant, including matters in existence at the time of the deceased person's death or at the time the application is being considered
It is necessary to consider the statement made by the deceased in his Will and Phillip's response thereto.
In an affidavit in reply sworn 6 June 2013, Phillip gave the following evidence:
"I have read Clause 6 of my father's Will.
I did run a shoe business from the trust premises at Fairfield in 2003, through The Boulevard Shoe Store Pty Ltd, but that business was never profitable. At the time the premises had been empty for about two years and my father said to me words to the effect of 'The building has been vacant a long time. Can you do me a favour and open a store there to attract other tenants[?]'
I replied in words to the effect of 'A shoe store did not work there the first time around, why would it work now?'
My father replied in words to the following effect 'You have other shops and another won't hurt. Just do it for a few months until we lease the building out'.
I operated the business from the [Fairfield property] for approximately twelve months until other tenants took up leases in the premises.
...The $100,000.00 was not paid by my father but paid to me by a cheque from my sister.
The $30,000.00 provided by my late mother was a loan in the early 1990s to assist me in the construction of my house at Chipping Norton. My brother was given an advance of approximately $25,000.00. I paid back a substantial proportion of that loan in irregular payments over a number of years..."
Determination
Being an "eligible person" is a necessary precondition to the court being empowered to make an order for the maintenance, education or advancement in life of the eligible person. In this case, there is no dispute that Phillip, as a child of the deceased, is an eligible person within the meaning of s 57(1)(c) of the Act.
There is also no dispute that he commenced his proceedings within the time prescribed by the Act.
Thus, I must first consider, whether, at the present time, adequate provision for the proper maintenance, education, or advancement in life, of Phillip has not been made by the deceased's Will. This must be determined, so it would appear, before the question whether property should be designated as notional estate, since the court may make such an order only for the purposes of a family provision order to be made under Part 3.2 of the Act, or for the purposes of an order that the whole or part of the costs of proceedings be paid from the notional estate of the deceased.
Yet, as has been pointed out by Ball J in Ogburn v Ogburn; Ogburn v Ogburn [2012] NSWSC 79 at [66]:
"...it is not possible to divorce the question whether a notional estate order should be made from the question whether a family provision order should be made. A court can only make a notional estate order if and to the extent the order is necessary to satisfy a family provision order. However, one of the matters the court needs to take into account in deciding whether a family provision order should be made is the size of the deceased's estate, including the size of the potential notional estate."
Except for the gift in Clause 5(b), which, as it turned out, did not eventuate, there was no provision in the deceased's Will for Phillip. However, this does not, automatically, mean that he will have satisfied the jurisdictional threshold. However, the fact that he is not entitled to receive any provision out of the estate or notional estate of the deceased, may enable the court the more readily to find that inadequate provision has been made: Turner v Perpetual Trustees Australia Ltd [2001] ACTSC 56, per Gray J, at [8].
However, the court is still required to consider all of the circumstances. Judged by quantum and looked at through the prism of his financial and material circumstances, adequate provision for Phillip's proper maintenance or advancement in life was not made by the Will of the deceased. Whether inadequate provision was made requires an assessment of his financial position, the size and nature of the deceased's estate, the relationship between him and the deceased and other persons who have legitimate claims upon the deceased's bounty and the circumstances and needs of those other persons: see Tobin v Ezekiel, at [70]; McCosker v McCosker, at 571-572; Singer v Berghouse, at 210; Vigolo v Bostin, at [16], [75], [112]; and Verzar v Verzar [2014] at [39].
Taking into account all of the matters that I am required to consider at the first stage, including what I have found to be the financial position of each of Robert and Roseanne, the size and nature of the notional estate (for present purposes, as will hereunder be addressed, comprising only the property held by the Trust and not the Punchbowl property), the relationship between Phillip and the deceased, and the relationship between the deceased and the other persons who have a legitimate (and, in this sense, competing) claim upon his bounty (Robert and Roseanne), I am satisfied that Phillip has satisfied the jurisdictional threshold.
It is clear, in my view, that Phillip has some immediate "needs". As stated above, "need" in the context of the Act is not determined by reference only to minimum standards of subsistence. Nor is it limited to whether the applicant has, at the date of hearing, an immediate need for financial assistance with respect to his maintenance. It is a broader concept, which requires consideration of matters necessary to guard against unforeseen contingencies. The term is also used in the in the sense of what was necessary for the applicant's "proper maintenance, education and advancement in life": Akkerman v Ewins [2003] NSWCA 190, per Tobias JA, with whom Beazley and Hodgson JJA agreed.
In coming to this conclusion, I also have taken into account the legitimate claims upon the bounty of the deceased and the obligation and responsibility that the deceased had to provide for each of Robert and Roseanne. I shall also take into account, for reasons to which I shall come, that Roseanne has received the Punchbowl property absolutely.
In this case, relevantly, the court's power to make a notional estate order will only arise if I am satisfied that the deceased's actual estate is insufficient for the making of the family provision order, or any order as to costs, that should be made. Clearly that is the position.
Even then, I must not designate as notional estate, property that exceeds what is necessary to allow the provision that should be made, or, if I make an order that costs be paid from the notional estate under s 99, to allow costs to be paid as ordered, or both.
In this case, in relation to the Punchbowl property, I am not satisfied that the deceased had the relevant intention required to be established under s 80(2)(a) of the Act. Senior counsel accepted that he was not able to refer me to any specific evidence of the deceased's requisite intention. There was simply no evidence of any discussion with the deceased about a claim for provision that might be made by Phillip or by any other eligible person. Furthermore, there are no documents of any kind recording an intention, then held by the deceased, to transfer the Punchbowl property to Roseanne in order to, wholly or partly, deny or limit provision being made out of the estate for the maintenance, education or advancement in life of any person who was entitled to apply for a family provision order.
Senior counsel submitted that I should infer such an intention. Yet, in my view, there is no need to infer that intention when the deceased stated his intention clearly and unambiguously. His intention in transferring the Punchbowl property was to benefit Roseanne, an intention that both he and Mary had long held, and which he continued to hold, after Mary's death. The conversations between them, which I have earlier recorded, provide the evidence of that intention.
In those circumstances, the requisite intention of the deceased is not established and s 80(2)(a) does not apply.
I turn then to s 80(2)(b) of the Act. The transfer of the Punchbowl property to Roseanne took effect within one year before the date of the death of the deceased. I must next consider whether it was a transaction that was entered into when the deceased "had a moral obligation to make adequate provision, by will, or otherwise, for the proper maintenance, education or advancement in life of any person who is entitled to apply for a family provision order" (in this case, relevantly, Phillip) "which was substantially greater than any moral obligation of the deceased ... to enter into the transaction".
In my view, the deceased, in March 2012, did have a moral obligation to make adequate provision, by will, for the proper maintenance and advancement in life of Phillip. Phillip was, after all, one of his three children. That obligation was, however, not substantially greater than his obligation to transfer the property to Roseanne absolutely. In this regard, her claim upon the deceased, at that time, was very significant. Phillip did not dispute that. Furthermore, that intention to transfer the property to her was a long held one and the deceased took the view that he should transfer the property to her to ensure her security.
It follows, in my view, that s 80(2)(b) of the Act has not been satisfied.
Having considered all of the matters, I am not satisfied that the Punchbowl property should be designated as notional estate of the deceased. In circumstances where there is other property that may be designated as notional estate, and where there is no longer any dispute that provision for Phillip may be made out of that property, I am also satisfied that the substantial justice and merits do not require the court to make a designating order.
There has been a concession made in respect of designating the property of the Trust, to the extent necessary to satisfy any order for provision for Phillip and for costs.
Finally, I remember that the court cannot make an order designating more than is required to satisfy the order for provision and costs to be made.
I turn now to the second stage, namely the nature of the order that should be made in favour of Phillip. The more difficult question then arises, namely what provision "ought to be made for the maintenance, education or advancement in life" of Phillip, having regard to the facts known to the court. This involves "an instinctive synthesis that takes into account all the relevant factors and gives them due weight": Grey v Harrison. It is not a scientific, or arithmetic, exercise.
I am of the opinion that Phillip should receive provision by way of a lump sum, which would enable him to pay off some of the debts and a modest lump sum to provide for exigencies of life. He can use that lump sum to provide income or as part of a deposit on a home for himself and his family or otherwise.
In my opinion, that lump sum should be calculated as 23.5 per cent of the net proceeds of sale of the Fairfield property and the cash currently held in the estate. (Using the estimated net value of these amounts referred to earlier, this would yield a lump sum of about $304,645.)
Since the hearing, McDougall J in Bouttell v Rapisarda [2014] NSWSC 1192, at [96], has raised the concern that "to make provision by way of a share, the value of which can only be ascertained until after realisation of all the estate's assets, runs the very real risk of under-providing (or over-providing) for [the applicant's] needs". Whilst this is undoubtedly true, in some cases, for example, where the estate, or property which may be designated as notional estate, has a value that cannot be precisely determined, or where liabilities, such as CGT, can only be determined when the precise value of the property is ascertained, it seems to me that to make a lump sum order will not be the most appropriate way of determining what is "proper" in all the circumstances of the case.
I direct the parties to deliver to my Associate, within 14 days, agreed Short Minutes of Order giving effect to these reasons. The Short Minutes of Order should include the usual orders as to the costs of each of the parties. They should also reflect the parties' agreement on the categories of expenses referred to, to be paid out of the gross proceeds of sale of the Fairfield property and make allowance for the contingent liabilities (if they have not yet been clarified) to be paid out of the gross proceeds of sale. They should also include, as a condition, a notation that Phillip disclaims any further interest as a discretionary object under the Trust.
Robert and Roseanne, as the executors named in the Will and directors of the Trust, should have control of the sale, although, as a matter of comity, they should advise the solicitors acting for Phillip of what is being done in that regard. The Fairfield property should be put on the market for sale as soon as reasonably possible, but no later than 3 months from the date of making orders, or such other time as the parties are able to agree in writing. Provided the amount to which Phillip is entitled is paid, within 7 days of completion of the sale of the Fairfield property, no interest is payable on the amount to be paid. Otherwise, interest at the rate prescribed under s 84A(3) of the Probate and Administration Act 1898 (NSW) is payable from that date.
I am also prepared to make an order granting leave to any party to approach the court to make additional orders for the purpose of giving effect to the family provision order to be made.
Finally, there should be an order included in the Short Minutes of Order that the Exhibits should be dealt with in accordance with the Uniform Civil Procedure Rules 2005 (NSW) (rule 31.16A and rule 33.10) and Practice Note No SC Gen 18 (Para 26) and that the Court Book be returned.
In the event that the parties are able to reach agreement on the terms of the Short Minutes of Order, I shall deal with the matter in Chambers without the need for a further appearance. The matter, however, will be listed before me on a mutually convenient date in case agreement cannot be reached.
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Decision last updated: 24 September 2014
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