Beatrice McCleary v Metlik Investments Pty Limited Beatrice McCleary v Benedict Chan; Clement Chan v Benedict Chan

The Trust proceedings

Mr Willmott, in support of the contention that the discretionary power conferred by clause 8 of the Trust Deed had been exercised in favour of Beatrice McCleary, primarily relied upon the statement in August Chan's will concerning the provision of home units "in the year 2006". It was submitted that the terms of this statement, and the instructions given by August Chan to his solicitor when the will was prepared, indicated that August Chan had in fact taken steps to so exercise the power in 2006. Mr Bracks, the solicitor who took the instructions for the will, confirmed that August Chan had indicated that he had transferred three units to each of his four daughters in 2006. Mr Bracks said that he could not recall any specific instructions given, but said that the will was worded in accordance with what he had been told.
August Chan was not, of course, the trustee of the Trust. However, it was common ground that he controlled Metlik through his directorship of, and shareholding in, the company (see Statement of Claim paragraphs 2 to 5, admitted by paragraph 1 of the Amended Defence). He was not the sole director of the company, but it seems that at all relevant times August Chan held the 6 issued Class A Preference Shares in the company so as to be entitled to the sole right to vote at any general meeting (see Article 5(2)(a)).
Mr Willmott also referred to the draft minutes of a meeting apparently held on 3 July 1999 in relation to the Trust. The minutes (the second page of which is unfortunately incomplete) indicate that the meeting was attended by August and Brigid Chan, their four daughters, Benedict Chan (as Chairman), Nicholas Kwan (son of Agnes Kwan) and David McCleary (son of Beatrice McCleary). There was evidently a discussion about the history and nature of the Trust, as well as a proposal that a new corporate trustee, Kulau Pty Limited ("KPL"), be appointed in place of Metlik. The minutes also contain the following: "The assets of the trust will not be distributed by KPL to the potential beneficiaries until an appropriate time. An appropriate time may exist when the benefits of a distribution will maximise benefits to all August Chan's daughters. Rosemary may receive units 1 (2br), 4 (1br) and 7 (1br). Lucy may receive units 2 (2br), 3 (1br) and 11 (1br). Agnes may receive units 9 (2br), 10(2br) and 12 (1br). Beatrice may receive units 5 (2br), 6 (2br) and 8 (1br)."
In the section of the minutes dealing with questions asked at the meeting, the following appears: "Why was the distribution of units made as explained? The allocation decision was made solely by August Chan. His motives do not need to be justified. No individual has any entitlement to trust assets apart from those loans which are due."
Mr Willmott submitted that the combination of the minutes and the statement in the will amounted to evidence in writing sufficient to satisfy the requirements of s 23C of the Conveyancing Act 1919 (NSW) concerning the disposition of interests in land.
Mr Gorrick submitted that August Chan (who, since July 2001, was one of three directors of the company) did not have the power to bind or direct Metlik. Further, there was no evidence of any resolution of the board of Metlik, such as is contemplated by clause 21(b) of the Trust Deed, to the effect that units in Kulau Lodge be paid or applied for the benefit of Beatrice McCleary or her sisters. He further submitted that whilst the evidence showed that, at various times, August Chan expressed wishes that the units be eventually allocated amongst his daughters, these were merely expressions of future intent, not exercises or purported exercises of the power under clause 8 of the Trust Deed.
Mr Gorrick also pointed to practical barriers that stood in the way of effecting any transfers of the units, not least the existence of outstanding loans taken out by Metlik that were secured by mortgages over units in Kulau Lodge. He submitted that the evidence of the discussions about the eventual allocation of the units showed that it was recognised that a number of conditions had to be met before any transfers could take place.
As for the statement in the will, Mr Gorrick submitted that it was no more than a recognition by August Chan that he had made his wishes known in 2006, and believed that they would eventually be carried into effect to the benefit of his daughters. The words were a reflection of the "earmarking" of the units amongst the daughters.
Both Beatrice McCleary and Agnes Kwan gave evidence that on a number of occasions over the years, their father had said to them and their sisters words to the following effect: "I have left you girls the units at Kulau Lodge for your future benefit."
They also gave evidence that August Chan spoke about which units each of the sisters could have. Beatrice McCleary deposed that her father told her that he had nominated 5, 6 and 8 for her. Agnes Kwan deposed that her father had told her that he had nominated 9, 10 and 12 for her.
Beatrice McCleary recalled attending the family meeting in 1999 in relation to the Trust, and being told that the cost of her children's education had been paid for by the Trust, but gave no other evidence about what was said at the meeting. She seemed to have no recollection of any discussion about the changing of the trustee of the Trust. Agnes Kwan was unable to recall the details of the meeting.
Beatrice McCleary deposed that in about early 2003 Benedict Chan said that he wanted to dissolve the Trust and give her units 5, 6 and 8, but only if she signed a release and indemnity. She further deposed that she signed "such a document" as requested. However, no signed document of that description was adduced in evidence. Benedict Chan had no recollection of ever receiving a deed of release and indemnity from Beatrice McCleary. Agnes Kwan deposed that at some stage she, too, signed a release and indemnity as requested by Benedict Chan. Again, no document of that description was adduced in evidence.
Benedict Chan deposed that from at least 1999 he knew, based on what he had been told by his father, that his father had promised three units to each of Benedict's sisters. He further deposed that for many years it was "the intention of the Kulau Lodge Settlement Trust" to transfer certain units to each of his sisters. A document, prepared by Benedict Chan at the direction of his father in about 2005, reinforces that there had been an allocation, of some sort, of particular units to each sister (viz units 5, 6 and 8 to Beatrice; units 9, 10 and 12 to Agnes; units 2, 3 and 11 to Lucy; and units 1, 4 and 7 to Rosemary).
Benedict Chan deposed that after the July 1999 family meeting, he was party to numerous discussions and communications with his sisters (and also David McCleary and Nicholas Kwan) about the distribution of the assets of the Trust and the dissolution of the Trust. Benedict Chan, when asked in cross-examination about the statement in his father's will, and whether his father had made a determination in 2006 that the units should be transferred to the four sisters, said that his father had made a "conditional determination". He explained that his father wanted the units to go to the sisters "as he determined them", subject to three things happening. These were, first, that a line be drawn in the sand in relation to past distributions made to beneficiaries; secondly, that releases and indemnities be provided to the trustee; and, thirdly, that a loan of $400,000, made by the trustee to a company associated with Agnes Kwan, be repaid. Benedict Chan stated that the third condition was added after the loan was made in about December 2003. Metlik raised the $400,000 by way of a loan from Perpetual Trustees Australia Limited. The loan (which was managed by Royal Guardian Mortgage Corporation Pty Limited) was secured by mortgages over units 10 and 11 in Kulau Lodge. Personal guarantees were given by August, Brigid and Benedict Chan.
Benedict Chan stated that the first two conditions were reflected in the draft minutes of the July 1999 meeting, and all three conditions were reflected in certain correspondence that was adduced in evidence, including a letter sent by Benedict Chan to Agnes Kwan on 19 April 2007, and a letter sent by Benedict Chan to Nicholas Kwan on 25 June 2007.
The draft minutes do refer, in the context of a proposal that a new trustee be appointed, to a resigning trustee being entitled to a discharge and indemnity against all liabilities of the Trust. The minutes also contain the following: "The KLST has a number of assets and liabilities which are administered by the Trustee. The assets of the KLST include units at 24 Pacific Parade, Dee Why, cash deposits with CBA, AGC and Citibank and a portfolio of shares in listed companies. The liabilities include loans which are due to some of the Potential Beneficiaries. The amounts which are due are the result of nominal distributions. These distributions were made for commercial reasons. In addition, the distribution of KLST income to a number of potential beneficiaries resulted in a reduced tax bill for the trust and a saving of trust capital. Marginal increases in tax levied on the potential beneficiaries as a result of trust distributions were paid by the KLST on behalf of the affected potential beneficiaries. The loans outstanding to potential beneficiaries are due. The potential beneficiaries are presently entitled to the loans due, whereas they do not have a present entitlement to trust assets. […] In the event that one or more of the daughters chooses not to forgive debts owing to them by the KLST, then they will have paid to them what is due in the loans accounts and will lose entitlement to units in the trust."
The letter to Agnes Kwan dated 19 April 2007 included the following: "I trust that Nicholas and/or Melissa has advised you of our meeting of 16 April 2007 in which I advised that the distribution and winding up of the assets of the Kulau Lodge Settlement Trust will be made by the trustee on 30th April 2007. The distribution will be made to such of those who return to me the duly executed Deed of Release and Indemnity by 30th April 2007. […] I discussed with Nicholas the outstanding loans from you to the Kulau Lodge Settlement Trust. Some of these loans moneys [sic] made to you are taken in the name of the Kulau Lodge Trust, and must be settled prior to its winding up. […] I advised Nicholas that your outstanding loans must be addressed so Kulau Lodge Trust can be wound up, and to put forward to me a repayment proposal that would address the above (legitimate) concerns."
When pressed about whether the letter had been preceded by a "formal determination" to make a distribution of the units to the four sisters, Benedict Chan answered: "No more formal than all the past distributions had been."
He was not asked to explain the meaning of that answer, although he later said, in effect, that determinations had been made to make distributions of income to beneficiaries, and that these determinations were reflected in the loan accounts of the beneficiaries.
The letter to Nicholas Kwan dated 25 June 2007 was in the following terms: "I refer to my previous meeting with yourself, Katrina, Brenda and David (representing Agnes, Rosemary, Lucy & Beatrice respectively) at my house concern [sic] winding up and distribution of assets of Kulau Lodge Settlement Trust. At that meeting I advised of the background and purpose behind the establishment of the trust, and of how my previous attempts at distribution had been derailed by the obstinateness and bloody mindedness of some of the potential beneficiaries. I advised that your grandfather wished for the distribution to be effected and furthermore that I wanted the winding up and distribution to be effected at the same time. I refer also to a subsequent meeting between you and I regarding repayment of certain loan funds - this being necessary so that the Kulau Lodge Settlement Trust could be wound up and assets thereof distributed. You undertook to settle/refinance these loans so that the Trust could be wound up and distribution could proceed. I confirm my previous advice that I am anxious that your above matter be resolved as soon as possible, and continue to await your earliest advice."
It appears that copies of this letter were given to various others, including August Chan and David McCleary.
Other communications adduced in evidence show that the question of outstanding loans (there was at least one other loan made by the trustee to a member of the Kwan family) was the subject of further discussion in 2010, and in 2011 following August Chan's death. On 29 March 2011, Benedict Chan sent an email to David McCleary (copied to Nicholas Kwan) which included the following: "Please advise on any update progress on repayment of the Kwan loan/discharge of our personal loan guarantees - I remain anxious that the trust be wound up (or Trustee changed). This being subject to the discharge of our personal guarantees (that were given solely for the benefit of the Trust) and the required indemnities for the Trustee."
Nicholas Kwan responded later the same day by email in which he stated: "We've kept David informed of where we are at - and that is, that we're now in a position to totally repay our liabilities. Of course, we would really appreciate that the Trust's Units are distributed immediately thereafter."
However, for reasons which do not need to be canvassed, the repayment of loans and distribution of the Kulau Lodge units was not finalised until July 2014 when units 5, 6 and 8 were transferred to Beatrice McCleary, and units 9, 10 and 12 were transferred to Agnes Kwan. Ultimately, no deeds of release or indemnity were required in relation to those transfers. Units 1, 4 and 7 had earlier been transferred to Rosemary Seeto (in December 2013), and units 2, 3 and 11 had earlier been transferred to Lucy Tse (in February 2014).
Clause 8 of the Trust Deed confers a special power of appointment upon the trustee of the Trust to pay and apply any capital of the Trust Fund to or for any beneficiary of the Trust. The words "pay and apply" indicate that the nature of the power is one of disposition of property.
The power is a mere power rather than a trust power. Whilst the trustee may have an obligation to consider the exercise of the power from time to time, the trustee is under no obligation to exercise it.
Beatrice McCleary claims that Metlik, at some time prior to 18 November 2006, exercised the power in her favour in respect of units 5, 6 and 8 in Kulau Lodge. Such an exercise of the power would involve the disposition by Metlik of interests in land. In these circumstances, as apparently accepted by Mr Willmott, s 23C(1)(a) of the Conveyancing Act imposes a requirement that any such disposition be effected by writing signed by Metlik or its duly authorised agent. There was no suggestion that Metlik entered into any contract for the disposition of any interests in land, so s 54A of the Conveyancing Act is not applicable.
In the present case, reliance was primarily placed on the statement in August Chan's will that he had been instrumental in providing well for his daughters "even to the extent of three (3) home units each in the year 2006". That written statement, which is not in any case that of Metlik, does not in itself purport to effect the disposition of any interests in the home units. Neither does the other writing relied upon by Mr Willmott, namely, the draft minutes of the family meeting in July 1999 which contained the statement that the allocation decision in relation to the distribution of units in Kulau Lodge "was made solely by August Chan". In my view, the requirements of s 23C(1)(a) of the Conveyancing Act have not been satisfied in relation to Beatrice McCleary's claim that, by no later than 18 November 2006, the power under clause 8 of the Trust Deed had been exercised in her favour in relation to units 5, 6 and 8 of Kulau Lodge.
It is stated in Lewin on Trusts (19th edition at 29-193) that: "A power is not validly exercised unless an intention to exercise it is apparent. That requirement is not the same as the duty, in the case of a fiduciary power, to give genuine consideration from time to time to exercising the power. It is simply that before a power can be said to have been exercised the instrument or other act relied on should disclose an intention to invoke the power."
The claim, as presented, was to the effect that at some time prior to 18 November 2006, August Chan caused Metlik to exercise the power under clause 8 of the Trust Deed in relation to the units in Kulau Lodge, or that there was a defective attempt to so exercise the power. The writing referred to above was cited as evidence from which that conclusion should be drawn.
There is little doubt that, from at least 1999, August Chan had expressed the view that the units should be distributed amongst the four daughters, and made it known that the units should be allocated in a particular way. This is reflected both in the draft minutes of the family meeting in 1999, and in statements which I accept were made by August Chan to Beatrice McCleary and Agnes Kwan to the effect that the Kulau Lodge units had been left for the future benefit of the daughters and would be allocated amongst them in a particular way. It is also reflected in the document, referred to earlier, prepared by Benedict Chan at the direction of his father in about 2005.
Nevertheless, I accept the evidence given by Benedict Chan that his father's determination that the units should be distributed amongst the four daughters was of a conditional character. That is, August Chan made it known that he wanted certain things to happen before any distribution would be effected. First, he wanted the beneficiaries to forego their entitlements to repayment of loans due to them from Metlik. This is the "line in the sand" in relation to past distributions as referred to by Benedict Chan in his evidence. It is apparent that periodic distributions of trust income made to the beneficiaries were not in fact paid to them, and the amounts were treated as loans to the trustee; secondly, he wanted releases and indemnities provided to the trustee; and thirdly, after 2003, he wanted the $400,000 loan, made by Metlik to the benefit of Agnes Kwan, repaid. That would facilitate the repayment by Metlik of its loan from Perpetual Trustees Australia Limited, which was secured by mortgages over units 10 and 11 and supported by personal guarantees given by August, Brigid and Benedict Chan.
In my view, August Chan's stated determination in relation to the Kulau Lodge units cannot be regarded as an attempt to cause Metlik to exercise the power under clause 8 of the Trust Deed. There is no reason to think that August Chan was not aware that Metlik, rather than himself personally, was the trustee of the Trust. A proposal involving the appointment of a new corporate trustee in place of Metlik was evidently discussed at the family meeting in July 1999 but not proceeded with. August Chan should be taken to have known that if any capital of the Trust Fund was to be distributed, the distribution would have to be made by Metlik. August Chan was in a position to control Metlik through his ability to control proceedings at any general meeting. He could, for example, use that control to remove and appoint the directors of the company who were empowered to manage the business of the company and exercise such powers of the company as are not required to be exercised in general meeting (see article 73). Under article 65, the number of directors was to be not less than two, unless otherwise determined by a general meeting. However, there is no evidence that prior to 18 November 2006 Metlik took any steps to effect any disposition of units in Kulau Lodge. There is no evidence that any resolution to that effect was passed by the company, or that it brought documents into existence that showed that the company intended to actually effect such a disposition.
August Chan's conditional determination should be seen as an expression of his personal wish that once certain things had occurred, the units should be distributed by Metlik amongst the four daughters in the manner he foreshadowed. It appears that the task of pursuing the aim of eventually effecting the distribution was largely left to Benedict Chan. Following the death of Brigid Chan in 2005, Benedict Chan and August Chan were the only directors of Metlik. I accept that Benedict Chan, in pursuing the eventual distribution, was acting in conformity with his father's wishes. In that regard, I note that August Chan was given a copy of Benedict Chan's letter to Nicholas Kwan of 25 June 2007 in which the distribution of assets and the winding up of the trust was discussed, and reference was made to August Chan's wish for the distribution to be effected. It is likely that August Chan believed that, ultimately, the distribution of the units would occur as he wanted. He was the patriarch of the family who had accumulated considerable financial resources. Moreover, it was in the economic interests of the daughters to see to it that the conditions, which needed to be satisfied before the distributions would take place, were in fact fulfilled. The statement contained in August Chan's will should be read in that light. Despite the reference to "the year 2006", it is preferable to read it as a statement of an outcome he had every reason to expect would be achieved in due course, rather than a statement of an outcome that had already been achieved. In any event, as I have already noted, there is no evidence that Metlik in fact took any step to dispose of units in Kulau Lodge prior to 18 November 2006. In addition, I do not accept the submission that the statement in the will exhibited an immediate intention on the part of the donee of the power to exercise the power in relation to the units. The evidence does not disclose an intention on the part of Metlik to invoke the power under clause 8 of the Trust Deed.
For the above reasons, I am not satisfied that, prior to 18 November 2006, August Chan caused Metlik to exercise the power under clause 8 of the Trust Deed in relation to the units in Kulau Lodge.
I am also not satisfied that there was a defective attempt to so exercise the power. There is a long recognised distinction between a non-execution of a power and a defective exercise of a power (see, for example, Tollet v Tollet (1728) 2 P. Wms. 489 at 490; 24 E.R. 828 at 829 per Jekyll MR, cited by Rich J in Alison v Alison (supra) at 658). The equity of the type referred to in Alison v Alison can only arise in the latter situation. However, the present case is in my view an example of the former not the latter.
A defective exercise of a power nonetheless requires an intention on the part of the donee of the power to exercise the power (see Alison v Alison (supra) at 658, 659, 661-2 and 664). That intention is lacking here. It follows that the equity claimed by Beatrice McCleary cannot arise.
Accordingly, Beatrice McCleary's remaining claim for relief in the Trust proceedings fails.
It is not strictly necessary to consider the defence raised by Metlik that Beatrice McCleary's claim cannot be maintained because in 2003 she provided Metlik with a signed release and indemnity. However, in case I am wrong in my principal conclusion, I will deal briefly with this defence.
As noted earlier, Beatrice McCleary deposed that in about early 2003, Benedict Chan told her that he wanted to dissolve the Trust and give units 5, 6 and 8 to her, but only if she signed a release and indemnity. She deposed that she signed "such a document". Nevertheless, Benedict Chan had no recollection of ever receiving a deed of release and indemnity from Beatrice McCleary, and no such document was adduced in evidence. Even if Beatrice McCleary signed a document that could be described as a release and indemnity, I would not be prepared to find, on the evidence adduced, that any such document was provided to Benedict Chan, or anyone else on behalf of Metlik. Had such a document been provided, it is likely that some mention would have been made of it when Benedict Chan was seeking the execution of deeds of release from each of his sisters in April 2011.
Mr Gorrick submitted that whilst there was no direct evidence of the terms of the release and indemnity that Beatrice McCleary says she signed in early 2003, it could be inferred, primarily from the form of deed submitted in 2011, that it provided that in consideration of the distribution to her of units 5, 6 and 8, Beatrice McCleary would release Metlik from all claims in relation to the Trust. However, even if such an inference could be drawn, the evident intention would have been that the release and indemnity was to be given in exchange for a distribution to take place at about that time. No such distribution occurred. As Beatrice McCleary put it in cross-examination, "the whole thing negated" and "didn't go through" at that time. There was no distribution of any units until 2013, and no distribution of units 5, 6 and 8 until July 2014.
In summary, I am not satisfied that any release and indemnity signed in about early 2003 was ever provided to Metlik. Moreover, insofar as it may be possible to infer the terms of such a document, it appears that the contemplated transaction of which the release and indemnity was to form part did not proceed. In these circumstances, and quite apart from a lack of evidence of the precise terms of any release or indemnity, had it been necessary to consider the defence, I would not have concluded that Beatrice McCleary's claims in the Trust proceedings were not maintainable because of any release or indemnity given by her to Metlik.

Claims for family provision orders

I turn now to consider the claims made in the second and third proceedings for family provision orders. These claims are to be considered in the context of the fact that, as noted earlier, August Chan left a large estate. Benedict Chan, as executor of the estate, deposed (in affidavits sworn on 31 May 2013 and 17 March 2015) that the gross value of the estate was in the order of $10.725 million. In closing submissions, Mr Willmott suggested that the value of the estate was actually in the order of $15 million to $16 million.
Beatrice McCleary was born in November 1941, and is currently 73 years of age. She is the youngest of the four daughters. She grew up in Rabaul in Papua New Guinea. She deposed that her life was strongly influenced by Catholic doctrine and Chinese culture. She described herself as a very headstrong and independent child who was, however, dutiful. She described her father as a contemplative type of man whose business interests dominated his life. She referred to various business activities he was involved in throughout his life, including a milk bar, three copra and cocoa plantations, building and leasing commercial offices, and the development of a theatre. She deposed that her father was greatly respected within the business community in Papua New Guinea, was considered the unofficial spokesperson for the Chinese community there, and was awarded an MBE. At some stage August Chan obtained Australian citizenship, and thereafter began investing in the Sydney area. Beatrice McCleary deposed that by the time he retired, he held a large property portfolio which was initially managed by himself and later by Benedict Chan.
At the age of 12, Beatrice McCleary was sent to boarding school (Loreto Convent) in Sydney. She later went to Santa Sabina College, Strathfield. After she completed her schooling, Beatrice McCleary completed a secretarial course at a college in North Sydney. Following the completion of that course, she returned to live in the family home in Rabaul.
In due course, she obtained employment with the Commonwealth Bank in Port Moresby. In about 1961, whilst in Port Moresby, she met Trevor McCleary, who would later become her husband. Unfortunately, Beatrice McCleary became involved in some fraudulent activity of his for which he was sent to prison. Beatrice McCleary was herself placed on a good behaviour bond. These events caused her father to be extremely upset with her.
Nevertheless, the relationship with Trevor McCleary resumed following his release from prison. In 1964, after Beatrice McCleary became pregnant, she married Trevor McCleary in Sydney. She deposed that from that time until about 1976, when she divorced her husband, her father refused to have anything further to do with her.
Beatrice McCleary obtained custody of the three children of the marriage. Fearing violence at the hands of Trevor McCleary, she left Papua New Guinea with them and went to Mackay in Queensland. Whilst there, she formed a relationship with John Davis, and the couple had one child before that relationship broke down.
Beatrice McCleary moved to New South Wales. After a short time living near Gosford, she moved to unit 5 in Kulau Lodge. The children attended a local Catholic school. Later, August Chan allowed Beatrice McCleary and her children to live in a property in Neridah Street, Chatswood. That property was owned by a company associated with August Chan known as Hing Lung Pty Limited. In 2000, after her children had finished their tertiary education and left home, August Chan asked Beatrice McCleary to leave the Neridah Street, Chatswood property. She then returned to live in unit 5 in Kulau Lodge. She did not pay any rent to Metlik for her occupation of unit 5.
Beatrice McCleary deposed that from about 1976, and particularly from the late 1970s, her relationship with her father improved and they became more involved in each other's lives. In 1988, she accompanied her parents overseas as part of a tour group. During the 1990s, she would often assist her father by taking him to dental and medical appointments. She obtained a certificate in Aged Care so that she could provide good care to her parents in their later years.
After Brigid Chan died in November 2005, Beatrice McCleary moved into her father's home in Roseville for about two months to provide help and support to him. This arrangement ended following some incidents in March 2006 involving Beatrice McCleary and Benedict Chan's wife (Turid) and daughter (Astrid). It is not necessary to recount the details, and competing versions, of what took place on these occasions. It is sufficient to note that vitriolic arguments broke out between Beatrice McCleary and Turid Chan, and later between Beatrice McCleary and Astrid Chan, whilst in the presence of August Chan. It seems that Beatrice McCleary considered that her father did not adequately support her in these arguments, so she left the house, telling her father that that would be the last time he would ever see her. There was in fact some further contact between Beatrice McCleary and her father, but it was, as she described it, limited.
Beatrice McCleary's financial position may be broadly summarised as follows.
Since July 2014 she has been the owner of units 5, 6 and 8 in Kulau Lodge. Certificates of value as at 18 September 2013 given by W L Dobrow, valuer, indicate that the units had values of $470,000, $470,000 and $430,000 respectively. Beatrice McCleary still lives in unit 5.
Since August 2014, Beatrice McCleary has received rent for units 6 and 8. The gross rent is currently about $900 per fortnight for unit 6 and $750 per fortnight for unit 8. That fortnightly income of approximately $1,650 is supplemented by an aged pension of about $850 per fortnight, giving a total fortnightly income of about $2,500. The amount of her pension may be reduced as a result of her ownership of the three units. She estimates that her current fortnightly expenses (as at 18 February 2015) are about $1,050.
There was evidence that Beatrice McCleary occasionally receives amounts for casual work undertaken at her local TAB. It is not clear whether she continues to receive such payments.
Beatrice McCleary is the owner of a property in Narrabeen Park Parade, Warriewood. She purchased that property in 1977. The contract for sale indicates that Beatrice McCleary purchased the property as trustee of the BSK Trust. The BSK Trust was established by Trust Deed dated 26 April 1977. The beneficiaries of the BSK Trust are Beatrice McCleary's four children. Beatrice McCleary remains the registered proprietor of the property even though it appears that in January 2014 she retired as trustee of the BSK Trust. There is evidence that, on occasions, Beatrice McCleary has raised money on the security of the Warriewood property and used at least some of that money for her own purposes. Her First Option Credit Union loan, pursuant to which approximately $154,000 is owed, is secured by mortgage over the Warriewood property. There is also evidence that Beatrice McCleary has spent considerable sums of her own money on repairs to the Warriewood property. The proceeds of a life insurance policy she surrendered in about 2001 was largely directed to that purpose. It appears that Beatrice McCleary's youngest son has been living at the property for a number of years. It further appears that he has paid her $150 per fortnight, possibly in connection with such occupation. Beatrice McCleary gave evidence that the value of the Warriewood property (land only) is about $1.8 million. She deposed that she has a liability of about $37,000 for unpaid Council rates in relation to the property. Otherwise, her only substantial liability is the First Option Credit Union loan.
Beatrice McCleary is not the owner of any other substantial assets. She has some small amounts in bank accounts, a second hand car, and a small share portfolio, along with furniture and other personal effects.
Beatrice McCleary deposed that she suffers from various medical conditions. These conditions do not seem to be other than relatively minor in nature. No medical evidence was adduced in connection with them.
In her principal affidavit in support of her claim (sworn on 3 April 2012) she deposed that she sought provision out of her father's estate to assist her with the purchase of a house and, if possible, to provide her with some funds for day to day living and medical expenses. She cited a large three bedroom apartment in St Ives as the type of property she would like to be able to purchase.
The claim, as ultimately presented in final submissions, was for provision in a sum calculated by reference to the amount of rent on units 6 and 8 since 2006, the cost of repairs to units 5, 6 and 8, the amount of the First Option Credit Union loan, the amount of outstanding rates on the Warriewood property, and an amount to establish a fund against contingencies.
Agnes Kwan is currently 75 years of age. She is the second youngest of the four daughters. She also grew up in Rabaul. She recalls her childhood as happy and loving, and that she was brought up to honour her parents and be obedient. She gave evidence that the family honoured the Chinese tradition that the father was the head of the household. She describes her father as not a demonstrative or particularly affectionate person, but nonetheless says that she always felt loved and supported by him. She further deposed that although her father believed that the males of the family had priority, he always endeavoured to provide for his four daughters as much as he could. In that regard, she referred to the sending of the daughters to be educated at Loreto Convent.
Agnes Kwan completed her high school education at Santa Sabina College, Strathfield. She then undertook a Teacher's College course, and taught as a pre-school teacher in Port Moresby and later in Rabaul.
Agnes Kwan married in 1968. For a while she lived with her husband in Honiara in the Solomon Islands. She says that life was financially difficult at that time, but she learned to make do and live frugally.
Agnes Kwan and her husband moved to Sydney in late 1969. Initially they lived in his family's home. Later, after they had been asked to move out of the property, August Chan provided financial assistance when the family moved to another place owned by the Kwan family. He provided a housemaid to help Agnes Kwan, who was pregnant with her second child at the time. Subsequently, August Chan helped Mr Kwan to secure finance to support a business which he had established. In 1986, August Chan (via the Trust) provided financial assistance to enable Mrs Kwan to purchase a property in Barcoo Street, Chatswood. She later sold that property and purchased a property in Ashley Street, Chatswood.
Agnes Kwan deposed that she kept in regular contact with both her mother and her father, often on a daily basis.
In 1978, Mr Kwan purchased a property called "Mimosa" near Bowral. This property was used as a holiday farm for the family. August and Brigid Chan were regular visitors to the farm.
Mr Kwan died in 1993. It proved impossible for anyone in the family to successfully take over Mr Kwan's business, and eventually the business ceased to operate. As a consequence, the family faced difficult financial circumstances. As referred to earlier, in about December 2003, Metlik lent $400,000 to a company associated with Agnes Kwan (Project Redeployment Pty Limited). Those funds were used to pay off certain debts of Mr Kwan's business, and possibly also to reduce the mortgage over the Ashley Street, Chatswood property.
Following Brigid Chan's death in 2005, Agnes Kwan made efforts to spend as much time as she could with her father. He would go to her home for dinner at least twice a week for a period, and later, as he became more frail, she more commonly visited him in his home. These visits became less frequent after August Chan moved into Benedict Chan's home, which was on the next-door block in Roseville.
Agnes Kwan has three adult children. A fourth child, Belinda, died in July 2014 during the course of these proceedings. Prior to her death she lived with Agnes Kwan in the Ashley Street, Chatswood property. The three surviving children live elsewhere.
The evidence concerning Agnes Kwan's financial position was adduced in a somewhat haphazard manner. Some aspects of her financial position only emerged with any clarity during the course of her cross-examination. Even then, the Court was left with the firm impression that a full and accurate account of the financial position was not given. Agnes Kwan deposed that she had little understanding of her financial position and, during cross-examination, maintained that she was heavily reliant upon her children in relation to the bringing forward of financial information. None of those children was called to give evidence. Nevertheless, subject to the above stated qualifications, Agnes Kwan's financial position may be broadly summarised as follows.
Agnes Kwan owns the property at Ashley Street, Chatswood. A market appraisal, as at 30 July 2012, suggested that the property had a value of about $1.3 million. More recent market evidence adduced by Benedict Chan suggests that the property has a value in the range of $1.8 million to $2.2 million. Since July 2014, Agnes Kwan has also been the owner of units 9, 10 and 12 in Kulau Lodge. As is the case with Beatrice McCleary's three units, these consist of two two bedroom units and one single bedroom unit. No certificates of value were adduced in evidence in relation to units 9, 10 and 12, but there is good reason to think that these units would have values similar to units 5, 6 and 8. On that basis, their combined value would be in the order of $1.37 million.
Agnes Kwan deposed that she had debts totalling about $785,000, including a mortgage loan to Suncorp for about $722,000. She gave evidence that Ashley Street, Chatswood was encumbered by a mortgage.
Agnes Kwan also has life interests in lots 2 and 3 in Deposited Plan 1153343. The fee simple in remainder is held by Project Redeployment Pty Ltd. These lots are the remaining lots in a subdivision of "Mimosa". Lots 1 and 4 in the subdivision were sold in December 2010. Lots 2 and 3 consist of one vacant lot and one lot upon which the house and other improvements stand. A market appraisal dated September 2012 suggests that the vacant lot had a value of in excess of $500,000, and the improved lot had a value of between $1.3 million and $1.5 million. Agnes Kwan herself estimated that the two lots had a combined value of about $2.5 million. No evidence was adduced concerning the value of her life interests.
Agnes Kwan also appears to have an interest as the sole beneficiary of her deceased daughter's estate. She has estimated that the value of the estate is about $125,000. Agnes Kwan also has a one fifth interest in her late husband's estate. This estate has been distributed, at least in part. It is not clear whether any further distribution is likely to occur for the benefit of Agnes Kwan. However, the estate has an interest as a mortgagee of a property it formerly owned in Mowbray Road, Artarmon. Agnes Kwan's share of the income so produced is estimated at about $400 per month. This share appears to include her deceased daughter's one fifth interest in Mr Kwan's estate.
Agnes Kwan now receives income from the renting of units 10 and 12 of Kulau Lodge. One of her sons lives in unit 9. He does not pay rent. She estimates that the annual rental income from units 10 and 12 is in the order of $45,000.
Agnes Kwan estimates that her annual household expenditure is almost $72,000. $52,000 of that amount is ascribed to food and entertainment of $1,000 per week. On that basis, there would be a shortfall in income of in excess of $20,000 per annum. If there is indeed such a shortfall, it is not clear how it has been, or is being, financed. This is one of the areas in which the evidence is in an unsatisfactory state.
Agnes Kwan deposed that she suffers from various medical conditions. These conditions, with the exception of certain dental problems, were not the subject of medical evidence and do not seem to be other than relatively minor complaints.
In her first affidavit in support of her claim (sworn on 30 April 2012), Agnes Kwan deposed that she sought provision out of her father's estate to discharge her liabilities (then estimated to be $764,500), attend to her medical and dental problems, provide a fund against future contingencies and, if possible, provide a regular income stream for day to day living expenses. In a later affidavit (sworn on 7 June 2013), she deposed that she believed that it was appropriate that she be provided with a "very comfortable lifestyle" having regard to the fact that her father was a very wealthy man who had expressed the view that his daughters be well provided for.
The claim, as ultimately presented in final submissions, was for provision in a sum calculated by reference to the amount of rent on units 10 and 12 since 2006, the cost of repairs to units 9, 10 and 12, and an amount to establish a fund against contingencies.
Clement Chan is currently 65 years of age. After completing high school at Riverview College in Sydney, Clement Chan undertook an accountancy course at the Metropolitan Business College. However, he did not complete the course. He returned to Papua New Guinea and worked in his father's plantation and cinema businesses until about 1987. He returned to live in Sydney in about 1988 with his wife and family.
At about that time, August Chan provided financial assistance to Clement Chan to establish himself in Sydney. This included the provision of a sum of about $260,000 to assist in purchasing a property in Clark Place, Killara.
Clement Chan deposed that his life thereafter "spiralled downhill". He accumulated a number of debts and in about 1990 was forced to sell the Killara property. At about the same time, he and his wife separated. Clement Chan's wife and children were then accommodated in a property owned by Brigid Chan in Robert Street, Gordon.
Ultimately, Clement Chan and his wife were divorced. The property settlement in favour of Clement Chan's wife was apparently funded to a considerable extent by August Chan and also by Benedict Chan. In the course of the working out of the financial arrangements, Clement Chan, at the direction of his father, settled $177,000 upon trust for his children until they reached the age of 18 years. Clement Chan was also able to purchase a unit in Fitzroy Street, Surry Hills. He lived there for some years. He subsequently sold that unit in order to pay debts. In about 2000 he moved into the Robert Street, Gordon property, which by that time was vacant. He has remained living in the property ever since. No rent was paid. The property, together with a legacy of $50,000, was given to Clement Chan under the terms of his father's will.
It appears that for almost all of the time since he returned to Sydney, Clement Chan has not been in paid employment. He deposed that, apart from some jobs undertaken for his father, he has not held any paying jobs. He deposed that he "tried a stint" as a taxi driver, and has done some volunteer work with the St Vincent de Paul Society. Essentially, he has been for many years, and remains, reliant upon benefits provided through Centrelink. He estimates that his fortnightly expenses are about $300 more than the amount of the benefits he receives. No explanation was given as to how any excess expenditure was funded.
Clement Chan deposed that his relationship with his parents was always a close and loving one. He states that, despite all his problems, he continued to spend time with his parents when they were alive. He recognises that he caused sorrow to his parents but says that he always remained a son whom they loved. However, he agreed in cross-examination that after his father moved into Benedict Chan's house in about 2007, he did not visit him. He explained that he did not think he was welcome at his brother's house.
The property in Robert Street, Gordon, is Clement Chan's only significant asset. It is unencumbered and has a value of about $1.7 million to $1.9 million. Clement Chan deposed that the property requires major repairs, including to the roof which has partially collapsed, and to a bathroom which does not currently function adequately. Despite its condition, Clement Chan would like to remain living at the property. He says that he has a sentimental attachment to the house.
Clement Chan says that he would like to repair and upgrade the house and its furniture and fittings. He says that he has a need of funds to live upon as he ages, and he would also like to purchase a small motor vehicle. The $50,000 legacy, which was paid in March 2012 has been spent.
Clement Chan's claim was supported by evidence adduced from Dr Bruce Westmore, psychiatrist, Ms Wendy Longley, neuropsychologist, and Ms Karen Alcock, occupational therapist.
Dr Westmore, who conducted an examination of Clement Chan on 24 October 2013, reported that whilst he presented with an abnormal/unusual speech pattern, he did not diagnose him as suffering from any specific psychiatric condition. Dr Westmore noted that Clement Chan certainly presented as being an unsophisticated person who may well have a very simplistic understanding of various matters.
Ms Longley conducted a neuropsychological assessment of Clement Chan on 28 February 2014. This assessment involved the undergoing of several standardised psychological tests. Ms Longley reported that Clement Chan's level of intellectual functioning was estimated to fall within the low average/borderline range. That is to say, his overall intelligence quotient fell within the bottom 18% of the general population. She noted that he showed relative strengths in the areas of general knowledge, "common sense" concepts, and arithmetical problem solving. However, his processing speed was extremely slow and he was particularly poor at understanding abstract concepts. In the section of her report dealing with practical implications, Ms Longley stated that she would expect him to struggle to competently self-manage any large sums of money or investments. She further stated, however, that he should be capable of learning a system of managing his own daily and monthly finances if a trusted financial manager or close family member could set up a practical management system for him and check on his progress with it. She further stated that it is likely that his unsophisticated understanding of the world might make him vulnerable to be exploited financially.
Dr Westmore, in a supplementary report, considered Ms Longley's conclusions. He reiterated that he had not made any specific psychiatric diagnosis in relation to Clement Chan, and noted that he did not think his clinical presentation was consistent with a major mental illness. He noted that Clement Chan is likely to continue to experience some general life problems associated with his low average/borderline intellect, but there was nothing to suggest that his capacity to care for himself in the future will be any different to his capacity in the past to care for himself. Dr Westmore added the comment that Clement Chan has a need for financial advice and guidance, and that he is potentially vulnerable to being influenced by others. In answer to a specific query concerning Clement Chan's possible need to relocate from his home in Gordon, Dr Westmore stated that such relocation would obviously be very difficult and stressful for him, although he further noted that moving home is recognised as a major life event that can affect anyone who is required to move home. Dr Westmore further noted that Clement Chan would likely have problems prioritising maintenance needs in any residence, and in that regard would require assistance and advice. In relation to Clement Chan's ongoing mental health, Dr Westmore stated that he would need ongoing contact with a general practitioner, and might be assisted by receiving some support from a psychologist.
Ms Alcock attended Clement Chan's home in Gordon on 14 July 2014 to undertake an occupational therapy assessment. She reported that the home was in a very run down condition. She gave evidence that, in effect, Clement Chan lived in only a few rooms of the house, with the rest of the house being used for storage. She stated that he slept in a "sunroom" in the front of the house, watched television in the lounge room, and used the kitchen to cook meals. She reported that he uses the bathroom to shower and shave but does not use the toilet which has been out of order for some time. Ms Alcock reported that Clement Chan also uses the bath to handwash his clothes. She describes much of the home as being in a very dirty condition, although there was evidence to suggest that Clement Chan properly cleans the used areas of the kitchen. She noted that some taps and power points were not in working order. In the section of her report dealing with future requirements, Ms Alcock stated that given Clement Chan's current level of functioning, he would benefit from a support system involving a team of medical and dental practitioners and a financial manager coordinated by a case manager. She noted that his level of functioning was likely to deteriorate in the future as a result of the compounding effect of aging and his functional disability. As for his accommodation, Ms Alcock stated that, ideally, Clement Chan should remain in the Gordon home after major repair work was carried out. She stated that the home is a familiar social setting for him and is convenient to shops, recreational activities and medical services. She also noted that it was his clearly expressed preference to remain in the home. Ms Alcock further noted that the home was unfortunately quite a large property for him to maintain and live in independently, and he did not appear to have sufficient income to cover the cost of maintaining it. Ms Alcock further stated that Clement Chan required regular nursing support services to assist with managing his health and fitness, laundry, changing bed linen, light domestic activities, and assistance with problem solving and planning regarding household management.
In cross-examination, Ms Alcock agreed that at least some of Clement Chan's present difficulties could be overcome if he lived in a unit where the common property was maintained by a body corporate. She also accepted that a unit or a townhouse would provide more security than his present home which has the appearance of being derelict. She further agreed that Clement Chan would be in a better position than he is now if he lived in a unit in Gordon and had a fund of about $600,000 to $800,000 which could be managed for him.
Clement Chan himself agreed in cross-examination that there would be a real advantage to him if he lived in an apartment near to his current home because he would not have to maintain a large house and its surrounds. He was sceptical, however, about the prospect of acquiring a two bedroom unit in the Gordon area, close to shops and public transport, for between $500,000 and $800,000.
In considering the three claims for family provision orders, it is also relevant to consider the circumstances of Benedict Chan, the principal beneficiary of the estate.
Benedict Chan is currently 66 years of age. He completed his high school at Riverview College. He later obtained bachelor degrees in arts and laws at the University of Sydney.
Between about 1977 and 1984, Benedict Chan was involved in managing his father's various businesses in Papua New Guinea. During that period, August Chan resided mainly in Sydney. Apart from pursuing his own business interests, Benedict Chan continued to have a close involvement in his father's business activities. Those activities included the acquisition and sale of properties located in either Australia or Papua New Guinea. Benedict Chan became the manager of the real estate investments held by numerous companies associated with the family. Some of those properties were very substantial, and included a shopping centre and home unit blocks. It is clear that Benedict Chan played an important role in the success of his father's business ventures.
It is also clear that Benedict Chan maintained a very close relationship with his father throughout his life. Following his father's suggestion, he built his home on the block next door to his parent's home in Roseville. In about late 2007, August Chan moved into Benedict Chan's house so that he could be better looked after. Renovations were carried out to the house to enable that to occur.
As noted earlier, the value of the estate of which Benedict Chan is the principal beneficiary is large. This was amply demonstrated during Benedict Chan's cross-examination. It is not possible, on the evidence adduced, to make precise findings concerning the value of the estate. Neither is it necessary in the circumstances to do so. It is clear that the estate has a total value of between about $11 million and $16 million. On any view, under the terms of his father's will, Benedict Chan inherits a very large sum indeed.
Section 59 of the Act relevantly provides: "(1) The Court may, on application under Division 1, make a family provision order in relation to the estate of a deceased person, if the Court is satisfied that: (a) the person in whose favour the order is to be made is an eligible person, and […] (c) at the time when the Court is considering the application, 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 by the will of the deceased person, or by the operation of the intestacy rules in relation to the estate of the deceased person, or both. (2) The Court may 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."
Section 60(2) of the Act identifies a number of matters which may be considered by the Court for the purpose of determining, inter alia, whether to make a family provision order and the nature of any such order.
As stated by Basten JA in Chapple v Wilcox [2014] NSWCA 392; (2014) 87 NSWLR 646 at [3], the Court has a discretionary power to interfere with a testamentary disposition if satisfied that the requirements set out in s 59 of the Act have been met. At [11]-[12], Basten JA referred to the judgment of Allsop P in Andrew v Andrew [2012] NSWCA 308; (2012) 81 NSWLR 656 at [12] and [16]. In that case, Allsop P stated: "[12] Accepted and acceptable social and community values permeate or underpin many, if not most, of the individual factors in s 60(2) and are embedded in the words of s 59, in particular "proper" and "ought". That such values may be contestable from time to time in the assessment of an individual circumstance, or that they may change over time as society changes and grows can be readily accepted. […] [14] In a broad evaluative judgment based necessarily upon community values, the task should be expressed broadly and not by precise rules, lest particular rules or duties expressed by reference to one age's values come to distort later evaluative assessments by the imposition of the earlier age's rules and values. [15] The list of considerations in s 60(2) encompasses many, if not most, considerations likely to be of relevance to the resolving of the broad evaluative task. [16] If I may respectfully paraphrase Sheller JA in Permanent Trustee v Fraser at 46, the court in assessing the matter at s 59(1) and the order that should be made under s 59(1) and s 59(2), should be guided and assisted by considering what provision, in accordance with perceived prevailing community standards of what is right and appropriate, ought be made. This, Sheller JA said, referring to Mahoney JA in Kearns v Ellis (Court of Appeal, 5 December 1984, unreported), involved speaking for the feeling and judgment of fair and reasonable members of the community. It is to be emphasised that s 59(1)(c) and s 59(2) refer to the time when the court is considering the application and the facts then known to the court. The evaluative assessment is to be undertaken assuming full knowledge and appreciation of all the circumstances of the case. This is another consideration which makes the notion of compliance by the testator with a moral duty (on what he or she knew) apt to distract from the statutory task of the court."
It is accepted that in this area, statements of general principles may give assistance and provide guidance, but are not to be elevated to rules of law (see Burke v Burke [2015] NSWCA 195 at [84] per Ward JA (with whom Meagher and Emmett JJA agreed)). An instance of such a statement, made in relation to claims for family provision orders by adult children, was made by Hallen AsJ (as his Honour then was) in Bowditch v NSW Trustee and Guardian [2012] NSWSC 275 at [111]. His Honour there stated: "In relation to a claim by an adult child, the following principles, in my view, are useful to remember: (a) The relationship between parent and child changes when the child leaves home. However, a child does not cease to be a natural recipient of parental ties, affection or support, as the bonds of childhood are relaxed. (b) It is impossible to describe in terms of universal application, the moral obligation, or community expectation, of a parent in respect of an adult child. It can be said that, ordinarily, the community expects parents to raise, and educate, their children to the very best of their ability while they remain children; probably to assist them with a tertiary education, where that is feasible; where funds allow, to provide them with a start in life - such as a deposit on a home, although it might well take a different form. The community does not expect a parent, in ordinary circumstances, to provide an unencumbered house, or to set his or her children up in a position where they can acquire a house unencumbered, although in a particular case, where assets permit and the relationship between the parties is such as to justify it, there might be such an obligation: McGrath v Eves [2005] NSWSC 1006; Taylor v Farrugia [2009] NSWSC 801. (c) Generally, also, the community does not expect a parent to look after his, or her, child for the rest of the child's life and into retirement, especially when there is someone else, such as a spouse, who has a primary obligation to do so. Plainly, if an adult child remains a dependent of a parent, the community usually expects the parent to make provision to fulfil that ongoing dependency after death. But where a child, even an adult child, falls on hard times, and where there are assets available, then the community may expect a parent to provide a buffer against contingencies; and where a child has been unable to accumulate superannuation or make other provision for their retirement, something to assist in retirement where otherwise they would be left destitute: Taylor v Farrugia. (d) There is no need for an applicant adult child to show some special need or some special claim: McCosker v McCosker; Kleinig v Neal (No 2) [1981] 2 NSWLR 532; Bondelmonte v Blanckensee [1989] WAR 305; and Hawkins v Prestage (1989) 1 WAR 37 per Nicholson J at 45. (e) The applicant has the onus of satisfying the court, on the balance of probabilities, of the justification for the claim: Hughes v National Trustees, Executors and Agency Co of Australasia Ltd [1979] HCA 2; (1979) 143 CLR 134 at 149. (f) Although some may hold the view that equality between children does not discriminate between children according to gender, character, conduct or financial and material circumstances, the Act is not consistent with that view. To the contrary, the Act specifically identifies, as matters that may be taken into consideration, individual conduct, circumstances, financial resources, including earning capacity, and financial needs, in the Court's determination of an applicant's case."
The above statement was cited with apparent approval by Basten JA in Chapple v Wilcox (supra) at [21] in the context of a claim made by an adult grandchild.
It remains unsettled whether the statutory task embodied in ss 59 and 60 of the Act calls for the adoption of the two-stage approach which was applicable in relation to the Family Provision Act 1982 (NSW) (see Burke v Burke (supra) at [17]-[23] per Ward JA). It is clear, however, that the Court may only make a family provision order if the Court is satisfied of the matters set forth in s 59(1) of the Act.
There is no doubt that each of the applicants, being a child of August Chan, is an eligible person within paragraph (a) of the definition of eligible person found in s 57 of the Act. Accordingly, and leaving aside the question that arises due to Clement Chan's application being made out of time, it remains necessary for each applicant to satisfy the Court in accordance with s 59(1)(c) of the Act. That is to say, the Court must be satisfied that, at the time when it is considering the application, adequate provision for the proper maintenance, education or advancement in life of the applicant has not been made by the will of August Chan or the operation of the intestacy rules in relation to the estate of August Chan, or both. The intestacy rules do not operate in relation to the estate so the relevant inquiry under s 59(1) becomes whether adequate provision has not been made by August Chan's will for the proper maintenance, education or advancement in life of the applicant.
In relation to both Beatrice McCleary and Agnes Kwan, August Chan's will made no provision in their favour. In their cases, the question thus becomes whether such lack of provision is not adequate for their proper maintenance, education or advancement in life. In Clement Chan's case, the question becomes whether the $50,000 legacy and the gift of the Robert Road, Gordon property is not adequate for his proper maintenance, education or advancement in life. Before turning to consider the question raised in each case under s 59(1)(c) of the Act, I will summarise the principal submissions made in relation to the claims.
Mr Willmott submitted that in each case the provision made for the claimant under the will was not adequate. He emphasised the large size of the estate and in that regard referred to Lloyd-Williams v Mayfield [2005] NSWCA 189; (2005) 63 NSWLR 1 at [29]-[31] per Bryson JA. Mr Willmott further stated that whilst the estate has been distributed (save for assets having a value of about $1.925 million), to the extent the estate has been distributed it is open to the Court to make notional estate orders pursuant to s 79 of the Act. He further noted that Benedict Chan, as the principal beneficiary of the estate and competing claimant upon the testamentary bounty of August Chan, made no suggestion that any order for provision would have any relevant effect upon his own financial position. It was accepted that there was no obligation upon a testator to deal with children equally (see Barna v Barna [2008] NSWSC 1402 at [27] per Brereton J).
In relation to the claim of Beatrice McCleary, Mr Willmott submitted that whilst there were difficult periods in the relationship between Beatrice McCleary and her father, the circumstances were not such as to preclude her claim from succeeding, and indeed ought not to have any effect upon her claim. She had at various times looked after his welfare and at times they enjoyed a good relationship. It was submitted, moreover, that the Court should not attempt to ascribe fault for the difficulties.
Mr Willmott also pointed to the statement in the will about the daughters. He submitted that the statement showed (even after the incident in March 2006) that August Chan recognised an obligation to make provision for each of his daughters including Beatrice. It was accepted that August Chan had made various financial contributions to Beatrice McCleary throughout her life.
As far as her present financial circumstances are concerned, Mr Willmott referred to evidence to the effect that the three units in Kulau Lodge required substantial repair or renovation which would cost in the order of $144,000. He also referred to her debts, totalling about $190,000. He further submitted that it was likely that her costs of living will increase as she ages, having regard to her various health problems.
Mr Willmott submitted that August Chan, in stating that the daughters, including Beatrice McCleary, had been "well provided for in my lifetime", had (even assuming the transfer of the units) overestimated the adequacy of the provision he had made. He submitted that provision in an amount of about $515,000 ought be provided to Beatrice McCleary, as well as a fund against contingencies. The sum of $515,000 would be sufficient to pay for the repair and renovation of the units, discharge her liabilities, and compensate for the rent she did not receive on units 6 and 8 between 2006 and the actual date of transfer. It was put that such income is "part and parcel" of the property.
In relation to Agnes Kwan's claim, Mr Willmott submitted that she enjoyed a good relationship with her father throughout, and she made a significant contribution to his welfare. It was accepted that August Chan had provided financial assistance to Agnes Kwan at various times, including money towards the purchase of a house, and loans provided by Metlik.
As far as Agnes Kwan's present financial circumstances are concerned, Mr Willmott submitted that her three units required substantial repair or renovation (which would cost about $128,000), and she had debts of about $785,000. He submitted that her income was much less than her expenditure.
Mr Willmott referred to her age (75 years) and her health problems, notably a need for significant dental treatment, and submitted it was likely that her costs of living would increase as she ages. Mr Willmott again referred to the statement in the will as a recognition of the obligation to make provision for the daughters.
Mr Willmott submitted that even though Agnes Kwan's financial position "was not as parlous as those of Beatrice", provision in an amount of about $315,000 ought be provided, as well as a fund against contingencies. The sum of $315,000 would be sufficient to pay for the repair and renovation of the units, and compensate for the rent she did not receive on units 10 and 12 between 2006 and the actual date of transfer.
In relation to Clement Chan's claim, it was submitted that he had a close and loving relationship with his father. It was recognised that August Chan made considerable financial contributions to Clement Chan, including assistance to purchase a house in Killara, and provision of Robert Street, Gordon as a residence since 2000. It was put that Clement Chan was, and remains, financially dependent upon his father. Mr Willmott also pointed to the evidence of Clement Chan's intellectual difficulties, and the associated need for assistance.
As to Clement Chan's present financial position, it was submitted that his expenditure exceeded his income. Further, his home in Gordon, his only substantial asset, was in pressing need of major repair, and was deteriorating. The gift of the property could not be considered adequate and proper in the circumstances. It was submitted that Clement Chan also had a need to acquire various household items, and a second hand car.
Finally, Mr Willmott submitted that sufficient cause, within the meaning of s 58(2) of the Act, was shown so as to justify an extension of time for Clement Chan to bring his application. In particular, it was submitted that his delay in bringing proceedings could be explained by the fact that he was confused about his legal rights, and did not receive any independent legal advice until June 2013. It was put that Clement Chan's evidence on this issue had to be viewed in the context of the evidence of his intellectual difficulties. Further, the delay in bringing the application caused no prejudice to the estate.
It was submitted that provision in an amount of about $730,000 ought be provided to Clement Chan, as well as a fund to provide income to meet the current deficit, and a fund against contingencies. The sum of about $730,000 would be sufficient to pay for the repair of the Gordon property (about $529,000), the acquisition of household goods and a second hand car (about $30,000), the provision of occupational therapy support (about $152,000), and psychological treatment (about $20,000).
Mr Gorrick submitted, in relation to the claims of Beatrice McCleary and Agnes Kwan, that they were able-bodied adult children who had no moral claim on their father's bounty in circumstances where he had made, either directly or indirectly, significant provision for them in his lifetime, and they each subsequently received three units from the Trust. He submitted that as at the date of the hearing, they were in comfortable financial circumstances, and were in relatively good health.
Mr Gorrick referred to the importance of freedom of testamentary disposition, and emphasised that the Court will only interfere with that freedom to the extent necessary to make adequate provision for the proper maintenance, education or advancement in life of the claimant. That is the case even where the estate is large. Mr Gorrick noted that the favoured beneficiary, Benedict Chan, had a very close and caring relationship with his father, and made a substantial contribution to his wealth. This should be taken into account even if Benedict Chan did not put forward his financial circumstances as a factor to be considered in his favour (see Sammut v Kleemann [2012] NSWSC 1030 at [138]-[139]).
As for Clement Chan's claim, Mr Gorrick submitted that Clement Chan had not shown sufficient cause to warrant an extension of time for the making of his application. He pointed, in particular, to evidence that in 2011 Beatrice McCleary had told Clement Chan that there was a twelve month period in which to make a claim for provision against the estate. It was submitted that Clement Chan, knowing of the time limit, decided not to proceed, and only later had a change of heart.
In relation to the merits of the claim, Mr Gorrick submitted that the evidence adduced in support of the claim merely highlighted that at the nub of Clement Chan's problems is poor management and planning rather than inadequate provision. He submitted that provision of the Gordon property, worth between $1.7 million and $1.9 million, was clearly adequate in the circumstances. It was put that Clement Chan had the ability, if he was prepared to do so, to meet all his reasonable needs from his available resources by realising the value of the Gordon property and purchasing a more suitable unit in the area.
The applicable principles have been set out above. I note further that the question raised by s 59(1)(c) of the Act directs attention to the adequacy of provision (if any) for the "proper" maintenance, education or advancement in life of the applicant. In Alexander v Jansson [2010] NSWCA 176, Brereton J (with whom Basten JA and Handley AJA agreed) stated at [18] that the notion of "proper maintenance" is not limited to the bare sustenance of a claimant "but requires consideration of the totality of the claimant's position in life including age, status, relationship with the deceased, financial circumstances, the environs to which he or she is accustomed, and mobility". The assessment of what, in all the circumstances, is a proper level of maintenance, education or advancement in life, must have regard, inter alia, to 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 (see Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201 at 209-210).
There were undoubtedly significant difficulties in the relationship between Beatrice McCleary and her father at various times. There was a lengthy period when they had nothing to do with one another, and very little contact in the last few years of his life. I agree that it is not appropriate to attribute blame or fault for such difficulties. Nevertheless, they are to be considered, as part of the totality of the relationship between Beatrice McCleary and her father.
The relationship was otherwise a reasonably good and mutually supportive one. It is marked by the provision of considerable support to Beatrice McCleary, not only as a child growing up and being educated, but also throughout her adult years. There was generous financial support provided to her at various times, including the payment (by the Trust) of her children's school fees, the provision (by Hing Lung Pty Limited) of accommodation in Neridah Street, Chatswood, the provision (by the Trust) of rent free accommodation in unit 5 in Kulau Lodge, and the funding of a life insurance policy which Beatrice McCleary surrendered after she turned sixty.
Beatrice McCleary is now 73. She is of retirement age, and describes herself as retired. She is in reasonable health for her age. She has no dependants. She is the owner of three units in Kulau Lodge. There is no mortgage over such property. She lives in one of the units and lets the other two. The units in the block were refurbished in about 2000. Metlik borrowed $300,000 for that purpose. I accept that the units could now well do with further refurbishment, but the letting of units for apparently substantial rents indicates that the units are satisfactorily habitable.
Beatrice McCleary appears to have more than sufficient income to meet her expenses. Moreover, she has the practical ability, by selling one of the rented units, to pay off all of her debts, undertake repair and renovation work on the remaining units, and retain a fund of in excess of $150,000. Such a fund could be used to fund special items of expenditure, and would provide a buffer against contingencies.
I accept that the Warriewood property is held subject to the terms of the BSK Trust. The evidence of Beatrice McCleary's dealings as trustee of the BSK Trust in relation to the Warriewood property indicated a willingness to use it for her own purposes. Whilst Beatrice McCleary is no longer the trustee of the BSK Trust, she retains a power to vary the trusts and the provisions of the trust deed. It seems to me that there remains a practical prospect that the Warriewood property may continue to be available to Beatrice McCleary to use for her benefit.
The large size of the estate leaves no doubt that August Chan could have provided amply for any of his daughters had he chosen to do so. The statement in his will concerning his daughters indicates that he gave consideration to them as objects of his bounty. His assessment was that no further provision was warranted, having regard to the provision already made for them (which in his mind included the three units each in Kulau Lodge). That statement must be given appropriate weight (see Salmon v Osmond [2015] NSWCA 42 at [72] per Beazley P).
As noted earlier, the statement, insofar as it refers to the Kulau Lodge units, should be read as a statement of an outcome that August Chan had every reason to expect would be achieved in due course. The outcome has in fact been achieved. There is no reason to think that the statement in the will is other than a soundly based expression of the testator's wishes. I note in passing that, contrary to the suggestion made by Agnes Kwan, it is not a statement that his daughters be well provided for. It is a statement that, taking into account the Kulau Lodge units, they had been well provided for. The statement is a relevant matter to take into account but it is not, of course, determinative (see Salmon v Osmond (supra) at [73]).
It is also relevant that August Chan and Benedict Chan had a very close relationship of longstanding. This is clear from Benedict's involvement in his father's business affairs, and is perhaps exemplified by the fact that they lived side by side for many years, and ultimately under the same roof. Benedict Chan played an important role in the success of his father's business ventures, and hence to the accumulation of his father's assets.
In all the circumstances (and even ignoring any interests she may have or acquire in relation to the Warriewood property), I am not satisfied that adequate provision for the proper maintenance, education or advancement in life of Beatrice McCleary has not been made by the will of August Chan. That is, the lack of provision in the will for Beatrice McCleary is not in my view inadequate for her proper maintenance, education or advancement in life.
In making that assessment, I have taken into account that Beatrice McCleary might be said to have been dependent upon her father for her accommodation. However, in circumstances where ownership, not only of unit 5 but also units 6 and 8 of Kulau Lodge has been transferred to her, any such dependency remains satisfied. She is secure in her accommodation. In addition, as already noted, her financial position enables her, if she wishes, to make improvements to her living conditions and establish a substantial fund. Notwithstanding the large size of the estate, I do not think that fair and reasonable members of the community would conclude that, in all the circumstances, as outlined above, the will of August Chan did not make adequate provision for Beatrice McCleary's proper maintenance, education or advancement in life.
I have come to the same conclusion in relation to Agnes Kwan's claim.
She maintained a good and mutually supportive relationship with her father throughout, although there seems there was some lessening of contact between them in the last few years of his life. Again, it is clear that, at various times throughout her adult years, her father provided substantial financial support to her and her family. The provision of assistance to purchase the Barcoo Street, Chatswood property, and the loans made by Metlik are examples.
Agnes Kwan is now 75. She, too, describes herself as retired. Aside from some dental health problems which may require expensive treatment, she is in reasonable health for her age. She has no dependants. She lives in the Ashley Street, Chatswood property which was purchased after the Barcoo Street, Chatswood property was sold. The Ashley Street, Chatswood property was the family home for many years. It appears that the property, which is valued at somewhere between $1.8 million and $2.2 million, is subject to a mortgage upon which about $722,000 is owing. Agnes Kwan has another debt in the order of $63,000.
Agnes Kwan is also the owner of three unencumbered units in Kulau Lodge which (making the reasonable assumption that units 9, 10 and 12 have values similar to units 5, 6 and 8) have a combined value of about $1.37 million. One of her sons lives in unit 9 rent free. The other two units are let.
The sale of one of the two bedroom units and the one bedroom unit would enable Agnes Kwan to entirely discharge her liabilities, and leave a sum of about $100,000 left over. She would in that situation also retain one of the two bedroom units as well as her interest in her daughter's estate worth about $125,000, and life interests in lots 2 and 3 of "Mimosa" of indeterminate value.
The evidence shows that Agnes Kwan owns assets valued, conservatively, in the order of $3.5 million, and has liabilities of less than $800,000.
The position concerning her usual income and expenditure is unclear. Allowing her son to occupy unit 9 rent free tends to suggest that there is no want of income or financial support. If there is any deficiency in income, it has not been shown how it has been, or is being, financed. It should be borne in mind that it is the obligation of an applicant for a family provision order to adduce evidence so that a reasonably clear and complete picture of their financial position is given to the Court. Agnes Kwan has failed to do so. Given the unsatisfactory state of the evidence in this respect, I would not be prepared to find that Agnes Kwan has a need for income or support additional to that which she currently receives, or will in the future have a need for such. In any event, as finally put, no claim was specifically made for provision of a fund for that purpose.
It is appropriate to also take into account, in relation to Agnes Kwan's claim, the large size of the estate, August Chan's statement in the will concerning his daughters, and the relationship between August Chan and Benedict Chan.
When all the circumstances are considered, I am not satisfied that adequate provision for the proper maintenance, education or advancement in life of Agnes Kwan has not been made by the will of August Chan. That is, the lack of provision in the will for Agnes Kwan is not in my view inadequate for her proper maintenance, education or advancement in life.
In all the circumstances as outlined above, and in particular her failure to provide a clear and complete picture of her financial position, notably in relation to her expenses and how they are met, I do not think that fair and reasonable members of the community would conclude that the will of August Chan did not make adequate provision for Agnes Kwan's proper maintenance, education or advancement in life.
Clement Chan is now 65 years old. He is at or approaching retirement age. It is most unlikely that he will ever obtain paid employment. He has no dependants. He lives alone in the Robert Street, Gordon property that was given to him by his father's will. The property is worth about $1.7 million to $1.9 million. It is unencumbered. Clement Chan has lived at the property since about 2000.
Clement Chan has no significant health problems. However, the evidence shows that he suffers a degree of functional impairment as a result of his intellectual limitations. As stated by Dr Westmore, Clement Chan is likely to continue to experience some general life problems associated with his limited intellect, although there was nothing to suggest that his capacity to care for himself in the future will be any different to his capacity in the past to care for himself. These problems are manifest in the manner in which Clement Chan inhabits his Gordon home, as described by Ms Alcock in her report and in the witness box.
I accept that Clement Chan maintained a reasonably good relationship with his father, although the relationship seems to have withered after 2007 when August Chan was living in Benedict Chan's house. Again, August Chan provided considerable financial assistance to Clement Chan, including throughout his adult years. The assistance given to purchase the property in Killara, the assistance given at the time of Clement's divorce, and the provision of accommodation in Robert Street, Gordon are the main examples.
There is no doubt that the Gordon home is in a poor condition and is deteriorating. The roof is in a particularly poor condition. It has collapsed in at least one area. The property appears to be in a general state of disrepair, both inside the house and outside the house. The evidence of Mr Coulthard suggests that it might cost in excess of $500,000 to repair the property and restore it to a properly habitable condition.
Clement Chan's present living arrangements are problematic. He does not have the money to restore the property, but he does not want to move away. I accept that he has formed an emotional attachment to the home and that moving away would cause him some distress and anxiety. Nevertheless, I do not think that it should therefore be concluded that Clement Chan has a present need for $500,000 to restore his home.
There was evidence from Ms Alcock that it would in some respects be beneficial for Clement Chan to move into a unit because the maintenance obligations would be much reduced compared to living in a house on a suburban block, and his security would be improved. Whilst Ms Alcock considered that "ideally" Clement Chan should remain in his Gordon home, she also accepted that Clement Chan would be in a better position than now if he moved into a unit in the area and had funds of about $600,000 to $800,000.
There was evidence that good quality two bedroom units in Gordon, close to the shops and public transport, could be purchased for between about $760,000 and $850,000, and one bedroom units in the area from about $575,000. If it is assumed that the Gordon property was sold for $1.7 million, a capital gains tax liability (as agreed between the parties) of about $240,000 would be payable. If net proceeds of sale (after payment of capital gains tax) of about $1.4 million is assumed, it would appear feasible for Clement Chan to acquire a two bedroom unit in the area and still be left with a fund well in excess of $500,000. Such a fund could be used to supplement income, meet special items of expenditure, or as a buffer against contingencies. It could be utilised to acquire some of the services which Ms Alcock referred to in her evidence, including domestic help and nursing support services.
Mr Willmott submitted that Clement Chan's desire to remain in his home should be respected. Whether Clement Chan so remains is, of course, his own decision. His right to make that decision is respected, but it is another matter entirely to regard that decision as determinative of Clement Chan's present or future needs. I note further that there must be considerable doubt about whether Clement Chan would ever actually undertake a building repair project of the magnitude contemplated here.
Clement Chan has been living for many years on social security benefits. He has estimated his expenses as exceeding his benefits by about $300 per fortnight. However, no explanation was given as to how any excess expenditure was funded. In those circumstances, I am not prepared to conclude that Clement Chan has a need for income or support additional to that which he currently receives, or will in the future have a need for such. In any event, as noted above, it is within his power to rearrange his financial affairs so that a substantial fund, which could be used to supplement his income, is established.
As is the case with the claims of his sisters, it is appropriate to also take into account, in relation to Clement Chan's claim, the large size of the estate and the relationship between August Chan and Benedict Chan.
When all the circumstances are considered, I am not satisfied that adequate provision for the proper maintenance, education or advancement in life of Clement Chan has not been made by the will of August Chan. That is, the provision in the will of the $50,000 legacy and the gift of Robert Street, Gordon is not in my view inadequate for his proper maintenance, education or advancement in life.
I have taken into account that Clement Chan was apparently dependent upon his father for his accommodation. However, the gift of the unencumbered Robert Street, Gordon property means that such dependency remains satisfied. He is secure in his accommodation and is able, if he chooses, to acquire more suitable secure accommodation and establish a substantial fund. Allowing that the estate left by August Chan is large, I do not think that fair and reasonable members of the community would conclude that, in all the circumstances as outlined above, the will of August Chan did not make adequate provision for Clement Chan's proper maintenance, education or advancement in life.
I have dealt with the merits of Clement Chan's claim, albeit that it was made out of time. I think that sufficient cause has been shown on the evidence to warrant an extension of time to permit his claim to be so considered. The relevant principles to be applied in relation to an extension of time to bring a family provision application were considered in Verzar v Verzar [2014] NSWCA 45 at [23]-[38] per Meagher JA (with whom Macfarlan and Barrett JJA agreed).
The evidence concerning Clement Chan's intellectual difficulties (including his poor ability to understand abstract concepts), coupled with the fact that he did not have the benefit of legal advice until June 2013, persuades me that I should accept Clement Chan's evidence to the effect that he did not understand until then that he could make a claim against his father's estate for further provision. It is true that in 2011 he was told that at least Beatrice McCleary was going to make a claim, and that claims for provision had to be made within twelve months of August Chan's death. However, I accept Beatrice McCleary's evidence that her brother was confused about the matter. With the benefit of observing Clement Chan in the witness box for a considerable time, I am firmly of the impression that he would not have had a clear appreciation that he had the right to make such a claim. Unlike his sisters, he was a beneficiary under his father's will. I do not think this is a case, as submitted by Mr Gorrick, of someone making a decision not to pursue a claim, and then later having a change of heart.
In my view, Clement Chan's incomplete understanding of his position, at least until June 2013, together with the fact that his claim, although unsuccessful, is not devoid of merit, and the fact that the estate was in any event the subject of family provision claims such that no prejudice is suffered, or delay occasioned, by reason of the lateness of Clement Chan's claim, constitutes sufficient cause for the purposes of s 58(2) of the Act. It was not suggested that the delay had the consequence that Clement Chan's position was improved compared to the position he would have been in had he made his application within the stipulated period (see Verzar v Verzar (supra) at [34]).
In relation to each of the claims for family provision orders, the Court, not being satisfied that adequate provision was not made in August Chan's will for the proper maintenance, education or advancement in life of the claimant, must dismiss such claims.
Accordingly, the Trust proceedings, and both of the family provision proceedings, will be dismissed.
As for the costs of each proceeding, I direct that if any party wishes to contend for an order other than that the unsuccessful plaintiff pay the defendant's costs of the proceeding, a brief written submission be filed with my Associate and served within 7 days of today. I further direct that if any such submission is made, a brief written submission in reply be filed with my Associate and served within a further 7 days.

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