Baychek v Baychek [2010] NSWSC 897 | Case summary

12 Although title to the Rose Bay property passed to the deceased, the plaintiff continued to live at the property with friends for a period of time. However, she was not happy there - partly, she says, because her father often visited unannounced and was critical of the state of the house and intimidated her friends. It seems clear from the evidence that the deceased was a larger than life sort of character who was loud, gregarious, entertaining, emotional and inclined to over dramatise events, often as a means of getting his own way. On the other hand, it appears from my observations of her in the witness box that the plaintiff is reserved and analytical. It is not surprising that there was a considerable degree of friction between them. 13 Eventually, in the first half of 1984, the plaintiff moved out of the Rose Bay property into shared accommodation at Glebe. At about that time, she wrote the deceased a long letter in which she said that she cared for him but in which she says that it would be best if they had a break from one another. The plaintiff also says that at about this time the deceased said that he would buy her a house when the market was right. 14 Shortly after the plaintiff moved out of the Rose Bay property, the deceased and the defendant moved in. At that time, the defendant says that the deceased told her that, when he died, the Rose Bay property would be hers. As a result, she sold her terrace at Waverley. She received approximately $82,000 as a result of that sale. She lent $40,000 to the deceased and the plaintiff (it appears without her knowledge) to discharge mortgage over the properties at Darlinghurst and Chippendale. That loan was expressed to bear interest at the rate of 15 per cent per annum. The defendant applied a further $30,000 to renovating the Rose Bay property. The defendant says, and I accept, that she would never have sold her Waverley property if she had known that there was a dispute about the ownership of the Rose Bay property. The defendant continued to work for Metro Press and to assist the deceased in running the investment properties. She was paid a wage until 1988 for doing so but from then on she was not. 15 Nothing of particular significance happened for the next few years. The plaintiff studied for a period of time at Macquarie University and then worked in a secretarial capacity at St Vincent's Hospital. During this time, and despite what she said in her letter, she remained on reasonable terms with the deceased and use to visit him and the defendant periodically at the Rose Bay property, often with Ms McNair. In 1987, the plaintiff took an extended holiday and travelled through Europe and, while she was there, she joined the deceased and his family for about three weeks. 16 When the plaintiff returned from Europe, she raised with the deceased the promise she said he had made in relation to the Rose Bay house and her entitlement to an interest in the properties that formed her mother's estate. 17 The plaintiff says that during 1988 she had many discussions with the deceased on this subject. On each occasion, the deceased resisted doing anything. It appears from evidence given by the defendant that the deceased was not someone who willingly sold any properties. Although the evidence is not clear, it appears that the plaintiff married at about this time. She had her first child, Magda, in December 1989. 18 In late 1988 or early 1989, the plaintiff sought legal advice in relation to the sale of the properties in which she held an interest as a result of her mother's will. The plaintiff first consulted Mr David Lam and then Gordon & Johnstone, solicitors. There was correspondence between them and the deceased. The deceased was very upset about that correspondence. Nonetheless, the properties at Chippendale and Blackheath were sold and, on 11 August 1989, the plaintiff received $63,000 from the sale of the Chippendale property and $55,000 from the sale of the Blackheath property. The Darlinghurst property was put on the open market, but did not sell and the plaintiff and the deceased agreed to postpone its sale until the property market improved. The plaintiff's interest in the Chippendale and Blackheath properties were bought by the defendant from money advanced to her by Trans-World. An amount of $100,000 remained owing in relation to the property at Darlinghurst. Of that, $40,000 was the amount that the defendant had lent the deceased and the plaintiff in 1984 to pay out an existing mortgage. How the balance was made up or when and in what circumstances the money was borrowed is unclear. 19 On 13 September 1989, about a month after settlement of the sale of the Chippendale and Blackheath properties, Gordon & Johnstone wrote to the deceased seeking information in relation to the Baychek Family Trust. That trust was established in 1974. The beneficiary of the trust was the plaintiff. The income of the trust was to be paid to her until she attained the age of 25, at which time the trust property was to vest in her. It appears that the trust was established to pay for the plaintiff's school fees. The defendant says that the only assets of the trust were rents received from a property at Bourke Street, Surry Hills. Subsequently, the plaintiff's solicitors also made a claim on her behalf in respect of the Rose Bay property and she lodged a caveat over it. The plaintiff changed solicitors again and ultimately Hickson Lakeman & Holcombe commenced proceedings on her behalf against her father claiming an interest in the Rose Bay property, an account in respect of the sale of the Bourke Street property, which was sold on 12 August 1988 for $180,000, and an order that the Darlinghurst property be sold. 20 Those proceedings were settled on the day the hearing was due to commence. Under the terms of the settlement, the plaintiff released the deceased "from any claim howsoever arising which she may have against the Defendant or any property of or registered in the name of the Defendant". In return, the deceased agreed to pay the plaintiff (a) $40,000 within 14 days of the date of the settlement; (b) $60,000 on or before 1 October 1994; (c) $100,000 adjusted by reference to the consumer price index on or before 7 March 1999. The $40,000 was required by the plaintiff to pay her legal fees. 21 The result of the proceedings was to bring about a total breakdown of the relationship between the plaintiff and the deceased. Despite repeated attempts by the plaintiff, the deceased refused to speak to her. The position he took was that she may as well have been dead. That state of affairs continued up until 2008, shortly before the deceased died. In the meantime, the plaintiff had a second child, Juno, who was born in 2000, and, in 2002, divorced her husband. 22 The deceased had numerous health problems during the last years of his life. He had a heart bypass operation in 1993. He had an operation for penile cancer and cancer of the lymph glands in 2002. He was hospitalised with serious pneumonia in 2005 and was diagnosed and treated for other forms of cancer between 2005 and 2008. Throughout this time, the defendant took care of him. Between 1988 and 2003 she also spent on average 40 hours a week working for Metro Press and assisting in the rental of the properties that they owned, including renovating and cleaning the properties. As I have said, she was not paid a wage for doing so. 23 In April 2008, the plaintiff again rang the deceased. During that conversation the deceased told her that he was dying, that he would like to see her and that whatever had happened she was forgiven. From that time on, the plaintiff saw the deceased weekly or fortnightly and spoke to him at least once a week by telephone. In June 2008, the deceased gave the plaintiff a cheque for $14,211 from the liquidator of Trans-World, which was a return of capital on the seven shares originally held by her mother. 24 As I have said, the deceased made his last will on 28 April 2008. At the same time, he also swore an affidavit. That affidavit was made in anticipation of proceedings under the FPA by the plaintiff. In that affidavit, he explained his reasons for not making a provision for his daughter in his will in these terms: "(a) Following the death of her mother, Katherine commenced proceedings against me in the Supreme Court of NSW in matter 2357 of 1991. Those proceedings were settled and at that time Katherine acknowledged that she released me from any claims howsoever arising. (b) Katherine has already been adequately provided for my [sic] myself during my life, and from the estate of her late mother. (c) Katherine's actions hurt and upset me, and I believe they contributed to the deterioration of my health. I believe that she was well aware of the consequences of her conduct as I explained to her on many occasions that my heart problems are exacerbated by stress and tension." 25 The deceased died on 30 August 2008. Shortly before his death, on 5 and 15 August 2008, the deceased and defendant sold two lots which formed part of the property that they owned at Blackheath. They received approximately $214,000 for the sale of those two lots. There was some dispute during the course of the hearing about what happened to that money and whether the defendant had accounted for it in the evidence concerning her financial position. I accept the defendant's evidence that the money was paid into the joint bank account of her and the deceased and that the money was ultimately disbursed to pay a number of different expenses, including legal fees and the costs of renovating the investment property at Chippendale. 26 The plaintiff is currently employed as a nurse. She has two children, Magda, now aged 19, and Juno, now aged 8. She has a partner, Kim, who does not live with her. The plaintiff owns a unit in St Peters which is worth approximately $525,000. There is a mortgage of $208,000. However, $25,000 of that relates to a loan she made to a friend, who reimburses her for interest on that part of her mortgage. A further $50,000 relates to legal fees incurred in connection with this case. Her total legal fees in connection with this case are estimated to be in the order of $111,000. In 2009, the plaintiff earned approximately $65,000 before tax. In addition, she received fringe benefits worth approximately $9,000 (after tax). In 2010, she earned approximately $49,000 as well as receiving a fringe benefit worth $9,000. The difference in her income is to be explained by her decision to reduce her workload from 6 days per week to 5 day per week, partly to enable her to undertake further study. There is no formal child support agreement or arrangement between the plaintiff and her former husband, although, from time to time he helps her out with the children's expenses when he has employment. That help is limited. The plaintiff is generally in good health, although she has some problems with her back. 27 The plaintiff seeks the following provisions:

The defendant has no debts. She receives income from her superannuation fund and the Chippendale property of approximately $7,000 per month. She estimates her living expenses at approximately $72,000 per year. That amount does not include maintenance costs of the properties and rates payable on the Chippendale property. A substantial proportion of the defendant's expenses relate to Kristen's living expenses. He is now aged 29, but continues to be supported by his mother. The defendant says, and I accept, that it will also be necessary to spend a substantial amount on the property at Rose Bay, which is now in a dilapidated condition. 29 It was put to the defendant in cross-examination that she had not disclosed all her assets. I have already mentioned one example - the proceeds of sale from two lots of the Blackheath property. I should mention two others. First, it was put to the defendant that she must have received more from the sale of the shares in Trans-World. In circumstances that are not explained in the evidence, the defendant ended up with 264 shares in that company and the deceased 250. As I have mentioned, the plaintiff received approximately $14,000 for her seven shares. On that basis, it was suggested that the defendant and deceased must have received approximately $1,028,000 for their shares. The evidence does not support that inference. Rather, it shows that the deceased received approximately $512,000 and the defendant received approximately $37,000. The amount of $37,000 was arrived at after deducting amounts owing to the company by the defendant. Just how that loan was made up is not clear from the evidence. However, it no doubt included the amount the defendant borrowed to acquire the plaintiff's half interests in the Chippendale and Blackheath properties. Secondly, it was put to the defendant that her bank account records showed the payment in of significant amounts (such as $5,000) from an unidentified source. The defendant explained these entries by saying that, when she received money for rent which was not paid directly into the bank account, she would draw a cheque on the account representing the amount she received and pay that amount into the account so that there was a record that she had received that amount for accounting and taxation purposes. I accept the defendant's evidence on this matter. There is no evidence to suggest that the defendant had some undisclosed source of income apart from those entries. Although the defendant's system of book-keeping is somewhat unorthodox, I see no reason to disbelieve her. 30 The defendant, who is currently aged 65, suffers from diabetes and polymyalagia rheumatica in her shoulders and hips, which causes her to seize up on occasions. She has also torn the rotator cuff in her right shoulder, which requires an operation, and recently she tore the rotator cuff of her left shoulder while moving rubbish from the property at Blackheath in preparation for its sale. An operation was performed on that shoulder shortly before the hearing. 31 Section 23 of the FPA permits the court, subject to a number of qualifications set out in ss 26, 27 and 28, to make an order designating as notional estate of the deceased person such property as it may specify if it is satisfied (a) that an order for provision ought to me made and (b) (relevantly) the deceased person entered into a prescribed transaction which took effect on the deceased's death. "Prescribed transaction" is defined in s 22. It includes a failure to sever a joint tenancy: Cetojevic v Cetojevic [2006] NSWSC 431. The court should not make an order under s 23 unless (a) the prescribed transaction disadvantaged the estate or an eligible person (s 26); (b) the court has considered the importance of not interfering with reasonable expectations in relation to property and the merits of making or refusing to make an order (s 27); and (c) the estate is insufficient to allow for the making of the provision that it considers ought to be made, in which case it is not to make an order in excess of what is necessary (s 28). 32 Section 7 of the FPA permits the court to make an order for provision out of the estate or notional estate of the deceased person. Whether an order should be made under s 7 of the FPA raises two questions. The first is whether the plaintiff has been left without adequate provision for her proper maintenance, education and advancement in life. The second is, assuming she has, what provision, if any, should be made for her: Singer v Berghouse (No. 2) [1994] HCA 40; (1994) 181 CLR 201, Vigolo v Bostin [2005] HCA 11; (2005) 221 CLR 191. The assessment is to be made having regard to the circumstances as they exist at the time the order is made: FPA s 7. In considering the first stage, the court is required to consider all 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 (No. 2) [1994] HCA 40; (1994) 181 CLR 201 at 210 per Mason CJ, Deane and McHugh JJ. 33 There are four preliminary issues that need to be dealt with in this case. The first three are connected. The first of those is what weight should be given to the fact that the plaintiff commenced court proceedings against the deceased and the fact that, as a result, there was a complete breakdown in their relationship until shortly before the deceased's death. The second is what weight should be given to the fact that the court proceedings were settled and the plaintiff gave the deceased a release as part of that settlement. The third is what weight should be given to the affidavit that the deceased swore at the time that he made his will in which he explained why he had made no provision for the plaintiff. The fourth issue concerns the defendant's position. A substantial proportion of her ordinary living expenses are living expenses of her son, who she supports. The plaintiff submitted that I should ignore or discount those expenses when weighing the competing needs of the plaintiff and the defendant. 34 In my opinion, the commencement of the court proceedings by the plaintiff and the subsequent breakdown in the relationship between her and her father does not disentitle her from making a claim. The deceased must bear a substantial part of the responsibility for the fact that the relationship between him and his daughter reached the point where she thought she had no alternative but to commence the court proceedings. He procrastinated in giving her any of the benefits of her inheritance from her mother. I will say something more about the property at Rose Bay shortly. However, it seems that she or her mother's estate had at least a reasonable basis for a claim in respect of that property. It was a claim that the deceased refused to recognise. Although the relationship between them broke down, the deceased must bear some responsibility for that. Moreover, there was a reconciliation between them shortly before the deceased's death. In those circumstances, I do not think that this factor disentitles the plaintiff from making a claim: see Cooper v Dungan (1976) 9 ALR 93; Wheatley v Wheatley [2006] NSWCA 262. 35 The general policy of the law is to bring finality to disputes between parties. That policy is most obviously reflected in the principle of res judicata and similar principles such as issue estoppel and the form of estoppel considered by the High Court Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. It is reflected in the principle that the court should not reconsider the grant of an interlocutory injunction unless circumstances have changed or have come to light which could not reasonably have been known at the time the original injunction was granted: see Brimaud v Honeysett Instant Printing Pty Ltd (1988) 217 ALR 44. It is also reflected in the principle that generally a court should not notionally try a case that has settled for the purpose of determining which party should bear the costs of the action: Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622. In my opinion, this general principle applies equally in this case. Absent fraud, the court should not seek to investigate whether the settlement reached by the plaintiff and deceased was fair to the plaintiff. Rather, it should proceed on the assumption that whatever amounts the plaintiff claimed in the litigation and to which she was entitled, she received as a result of the settlement. 36 There is, however, one qualification to the previous paragraph. In my opinion, the court should still take into account the circumstances under which the deceased obtained the plaintiff's mother's half interest in the Rose Bay house. Whatever the merits of the plaintiff's claim in relation to the house, it seems to me that, in working out what was adequate provision for his daughter, a wise and just testator would take into account the circumstances in which he came to inherit his former wife's interest in the house. In the absence of clear evidence to the contrary, I think that the inference must be that the plaintiff's mother would not have wished her former husband and his new family to inherit her interest in what she would have regarded as the family home. Her husband left her after she had been diagnosed with cancer to establish another family. It seems inconceivable that, in those circumstances, she would have been happy for him to inherit her interest in the family home. A wise and just testator would take those matters into account in assessing what was adequate provision for his daughter. That fact, and its consequences for any claim under the FPA, is not something that could ever have been the subject of the claim the plaintiff did bring against her father and consequently I think that it should be considered in this context. Consideration of that matter, of course, is complicated by the fact that the plaintiff did bring a claim in respect of the Rose Bay property on other grounds, along with other claims, and those claims were settled for a lump sum. But I do not think that this complication means that the circumstances in which the deceased obtained the Rose Bay property should be ignored. 37 There is one other matter that should be mentioned in this context and that is that I do not think that the release given by the plaintiff to the deceased as part of the settlement of the earlier proceedings has the effect of releasing the deceased's estate from a claim under the FPA. A claim of that type could not have been brought then. However broad the release is, it cannot operate as a release of claims that only arose after the release was given: see Grant v John Grant & Sons Pty Limited (1954) 91 CLR 112; Iletrait Pty Ltd v McInnes, (New South Wales Supreme Court, Priestley, Handley JJA and Grove AJA, 17 April 1997, unreported). 38 As to the deceased's affidavit, in my opinion, little weight can be put on it. The statement is admissible under s 32 of the FPA. Moreover, as Young J (as he then was) observed in Walker v Walker (Supreme Court of New South Wales, 17 May 1996, unreported, at [34]), where the deceased has evaluated the claims on his or her estate carefully, the court should respect his or her views unless those views are contrary to community standards. Here, however, it seems to me that the deceased has taken an incorrect view of his daughter's conduct. He has attributed the court proceedings and the breakdown in their relationship to her alone whereas, in my opinion, he must bear a substantial part of the responsibility for what happened. 39 The final preliminary issue to consider is the position of the defendant's son. As a general principle, it is a matter for the defendant how she spends her money. Moreover, the defendant's son, like the plaintiff, is an eligible person who would have been entitled to make a claim on the estate, although in considering that claim it would be necessary to take into account the fact that he is supported by his mother and the fact that he is likely to inherit her estate. For these reasons, I think that little weight should be placed on the fact that the defendant chooses to support her son. 40 In light of these matters, the question remains whether the plaintiff has been left without adequate provision. In my opinion, so far as her desire to pay off her mortgage is concerned, she has. In my opinion, the circumstances in which the deceased inherited the plaintiff's mother's interest in the house at Rose Bay made it appropriate for the deceased to provide suitable accommodation for the plaintiff. The property she currently lives in meets that requirement and, in those circumstances, it would have been appropriate for the deceased to ensure that plaintiff was left with sufficient assets to pay off the mortgage she owed on that property. The defendant, of course, has a strong competing claim. She was married to the deceased for almost 30 years, she helped him in his business, she looked after him in his old age and she contributed her own money to improve the property at Rose Bay. However, I think that the estate is sufficiently large for the deceased to have made some provision for the plaintiff without interfering with his obligations to the defendant. On the other hand, I do not think that the plaintiff has been left without adequate provision so far as her other claims are concerned. She has secure employment and a reasonable income, and there is no reason to suppose that she will not able to work until a normal retirement age. In my opinion, the other things that she seeks are not necessary for her proper maintenance, education or support. If the plaintiff is able to pay her mortgage off, she will have a sufficient income to buy a new car if she wishes. I do not regard the genetic testing she seeks as necessary. Few people in the community have testing of that sort. In circumstances where the plaintiff has secure employment, I do not think that she needs $120,000 for the vicissitudes of life. Moreover, I think that a provision of more than the amount necessary for the plaintiff to repay her mortgage runs the risk of reducing to an unacceptable level the provision that has been made for the defendant. 41 The amount of the plaintiff's mortgage is $208,000. However, that amount needs to be reduced by $25,000, since the plaintiff lent that amount to a friend who is under an obligation to repay it. Moreover, approximately $50,000 of the $208,000 relates to legal fees incurred by the plaintiff. To allow that amount and to give the plaintiff her costs would involve double counting. In my opinion, the best way to deal with that is to make provision for the plaintiff calculated by reference to the mortgage but to make no specific order for legal costs. The effect of that order will be that the plaintiff will recover some but not all of her legal costs; and the effect of that may be that she will not be able to reduce her mortgage to zero. However, in my view, the amount that the plaintiff has spent on legal costs in this case was not warranted by the size of her claim and I do not think that the defendant should bear the consequences of that. If, as a result, the plaintiff cannot repay her mortgage in full, then that will be because she has spent more on legal costs than was warranted, not because the provision made for her is inadequate. As a result, an appropriate provision for the plaintiff in my view is $183,000 with no order for costs. I do not think that a provision in that amount will have an unduly adverse consequence for the defendant. She will still have the house at Rose Bay and other assets worth approximately $1,575,000. She will be able to pay the amount awarded from the proceeds of the sale of Blackheath. As a result, her income will not be affected and she will still have $65,000 left over from the sale of the Blackheath property. She will be able to continue to support her son, if that is what she wishes to do. 42 To some extent, it is somewhat arbitrary what property is made part of the deceased's notional estate in order to enable the provision I propose to be made. I do not think that it can be the cash held by the defendant since half of that cash belonged to her in any event and half the amount she holds in cash is not sufficient to pay the amount I propose to order should be paid to the plaintiff. In those circumstances, it seems to me that the most appropriate order to make is that the deceased's interest in the Chippendale property form part of the deceased's notional estate. The value of that interest is clearly sufficient to meet the liability of $183,000. However, before I make final orders I think that I should invite the parties to bring in short minutes of order which are consistent with this judgment and, if the parties cannot agree, to have submissions on the matter before making final orders.

Baychek v Baychek

At a glance

Court

Decision date

Before

Source

Judgment (19 paragraphs)

Parties

Cases Cited (11)

Cited By (2)