Button v Lynch and ors

[2002] NSWSC 1148

Supreme Court of NSW|2002-07-24

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Supreme Court of NSW

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2002-07-24

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Judgment (24 paragraphs)

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CITATION : Button v Lynch and ors [2002] NSWSC 1148 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 3012/00; 3015/00 HEARING DATE(S) : 29, 30, 31 May, 24 July 2002 Written submissions to 30 October 2002 JUDGMENT DATE : 29 November 2002

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Justin Button, by his tutor Bradley Trent Button (Plaintiff 3012/00) Christine Button (Plaintiff 3015/00) Dennis John Edward Lynch (First Defendant) PARTIES : Janet Rose Johnson (Second Defendant) Dennis Leonard James Lynch (Third Defendant) Gregory John Lynch (Fourth Defendant) Deon Ibbett (Fifth Defendant) JUDGMENT OF : Master McLaughlin

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COUNSEL : A. Bulley (Plaintiffs) K. Morrissey (1st, 2nd, 4th, 5th Defendants) SOLICITORS : Russell McLelland Brown, Lawyers (Plaintiffs) Johnston Brien, Solicitors (1st, 2nd, 4th, 5th Defendants) CATCHWORDS : Succession - Family Provision - Claims by adult daughter and by adult grandson (a disable person) - Financial and material circumstances of Plaintiffs - Nature of relationship of Plaintiffs with Deceased - Whether Plaintiffs have been left without adequate provision for their proper maintenance - Notional estate of Deceased - Whether Deceased entered into prescribed transactions - Competing claim of widower of Deceased, who is chief beneficiary - Trusts - Discretionary trusts - Absolute discretion in trustee to exercise power of appointment - Deceased and First Defendant were sole shareholders and sole directors of trustee and were principal beneficiaries of the trust - Trust was essentially a vehicle by which Deceased and First Defendant conducted their personal affairs - Whether a member of a class of beneficiaries has standing to seek relief in respect to alleged breaches of trust - In any event, relief sought would be a jejune and barren exercise - Whether parties have been unnecessarily joined. LEGISLATION CITED : Family Provision Act 1982 Wills, Probate and Administration Act 1898 Blore v Lang (1960) 104 CLR 124 Federal Commissioner of Taxation v Vegners (1989) 90 ALR 547 CASES CITED : Re Fulop Deceased (1987) 8 NSWLR 679 Karger v Paul [1984] VR 161 Re Londonderry's Settlement; Peat v Walsh [1965] Ch 918 Singer v Berghouse (1994) 181 CLR 201 DECISION : (1). I order that the proceedings be dismissed. (2). I order that the Plaintiff pay the costs of the First, Second, Fourth and Fifth Defendants, such costs to be on the party and party basis. (3). The exhibits may be returned.

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3012/00 JUSTIN BUTTON, BY HIS TUTOR BRADLEY TRENT BUTTON -v- DENNIS JOHN EDWARD LYNCH 3015/00 CHRISTINE BUTTON -v- DENNIS JOHN EDWARD LYNCH JUDGMENT 1 MASTER: These are two sets of proceedings under the Family Provision Act 1982. 2 By summons 3012 of 2000, filed on 30 June 2000, Justin Button (a disable person, by his tutor Bradley Trent Button) claims an order for provision for his maintenance, education and advancement out of the estate and notional estate of his late grandmother, Eunice Gwenda Lynch (to whom I shall refer as "the Deceased"). 3 By summons 3015 of 2000, filed on 30 June 2000, Christine Button claims an order for provision for her maintenance, education and advancement out of the estate and notional estate of her mother, the Deceased. 4 Each summons also seeks an order pursuant to section 23 of the Family Provision Act, designating as notional estate of the Deceased "any property held by or on trust for the Deceased which was the subject of a transaction entered into by the Deceased on or after 4 June 1996". 5 Each summons names five Defendants, being respectively, Dennis John Edward Lynch, Janet Rose Johnson, Dennis Leonard James Lynch, Gregory John Lynch, and Dion Ibbett. 6 In proceedings 3015 of 2000 there was subsequently filed on 18 September 2001 (purportedly pursuant to leave in that regard granted on 30 August 2001) an amended summons. By that amended summons the Plaintiff claims not only relief of the nature sought in the summons, pursuant to the Family Provision Act, but also relief in respect to the reinstatement of a company Fairlyn Pty Limited, and declaratory relief that that company, as trustee of the Lynch Family Trust, was in breach of its duties in a number of particulars, and relief in respect to the payment of equitable compensation by each of the Defendants named in the summons and by Fairlyn Pty Limited. 7 Subsequently, at the commencement of the hearing, there was on 29 May 2002 filed in proceedings 3015 of 2000 a further amended summons, which seeks relief pursuant to the Family Provision Act, and declaratory relief in respect to alleged breaches of its duties as trustee of the Lynch Family Trust by Fairlyn Pty Limited, together with an order for the taking of accounts of Fairlyn, and an order that Fairlyn and each of the Defendants make equitable compensation to the Plaintiff. 8 During the course of the hearing there was on 31 May 2002 filed in proceedings 3012 of 2000 an amended summons, which seeks similar relief to that sought in the further amended summons in proceedings 3015 of 2000. 9 On 23 April 2002 Justice Barrett ordered in each matter that the trial of the proceedings and all issues therein be referred to a Master. 10 At the commencement of the hearing before me on 29 May 2002 I made in each matter an order that proceedings 3012 of 2000 and proceedings 3015 of 2000 be heard together, and that the evidence in the one be treated as evidence in the other, so far as it is relevant. 11 At the hearing Mr Bulley of Counsel appeared for each Plaintiff; Mr Morrissey of Counsel appeared for all Defendants other than the Third Defendant, Dennis Leonard James Lynch, who was unrepresented and who appeared in person. 12 After inquiry made by me of the Third Defendant at the commencement of the hearing, it was noted as follows, That Dennis Leonard James Lynch is present in person, but he has informed the Court that he supports the claim of each Plaintiff and that he does not desire actively to participate in the proceedings. 13 The hearing then continued as adversarial proceedings between, on the one hand, the Plaintiffs, represented by Mr Bulley, being supported by the Third Defendant, and, on the other hand, the First, Second, Fourth and Fifth Defendants, represented by Mr Morrissey. 14 I have already recorded that Christine Button is the daughter of the Deceased. She is also the mother of Justin Button, who is thus a grandson of the Deceased. (I shall hereafter refer to the Plaintiff Christine Button as "Christine" and to the Plaintiff Justin Button as "Justin".) 15 The Deceased was survived by her husband, Dennis John Edward Lynch (who is the First Defendant to the proceedings), and by her four children, being Christine (who is a Plaintiff) and Janet Rose (Mrs Johnson), Dennis Leonard James Lynch and Gregory John Lynch (being respectively the Second, Third and Fourth Defendants). 16 The First Defendant, Dennis John Edward Lynch, was the second husband of the Deceased, and thus is the stepfather of Christine, and the stepgrandfather of Justin. The Deceased and the First Defendant were married on 16 April 1960, shortly after the divorce of the Deceased from her first husband. Of her first marriage there were born to the Deceased two children, being Christine and Janet Rose. Of the Deceased's marriage to the First Defendant, there were born two children, being Dennis Leonard James Lynch and Gregory John Lynch. Thus Christine and the Second Defendant are sisters, whilst the Third and Fourth Defendants are half-brothers of Christine. The Deceased and her first husband separated, and subsequently divorced, when Christine was about four years of age. Upon that separation Christine remained with her mother. The Fifth Defendant, Dion Ibbett is the grandson of the Deceased, being the son of Janet Rose Johnson. 17 The Sixth Defendant, Fairlyn Pty Limited ("Fairlyn") is a corporation which was the trustee of a trust known as the Lynch Family Trust. Although deregistered in July 1999, Fairlyn was reinstated by order of the Court on 16 November 2001, for the purposes of the present proceedings. 18 The Lynch Family Trust was a discretionary trust, the class of the income beneficiaries and the class of the corpus beneficiaries whereof each included the Deceased, and the First, Second, Third and Fourth Defendants, as well as Christine. 19 It was the assertion of Christine that shortly before the death of the Deceased on 4 June 1999 Fairlyn, which at that time was the owner of a number of pieces of real property, entered into a series of transactions by which it divested itself of those pieces of real property. Those pieces of real property were sold by Fairlyn to third parties, or, in some instances, to the Deceased and the First Defendant as joint tenants. 20 The Plaintiffs have presented their case in two ways. Firstly, each Plaintiff seeks an order for provision out of the notional estate of the Deceased. It is asserted that the transactions to which I have just referred (concerning the sale of real property) - or, more accurately, the results of certain of those transactions, by which he Deceased and the First Defendant became joint tenants of property formerly held by Fairlyn - were prescribed transactions, in consequence whereof property which has passed to the First Defendant by survivorship as joint tenant with the Deceased should properly be designated as notional estate of the Deceased, and thus be the subject of orders for provision in favour of one or both of the Plaintiffs. 21 Secondly, it is alleged by the Plaintiffs that Fairlyn committed breaches of trust in its capacity as trustee of the Lynch Family Trust, in that Fairlyn failed to account for profits, entered into transactions which were not for the benefit of the trust or its beneficiaries, and failed to comply with the conditions of the trust deed; and that, in consequence, each Plaintiff is entitled to property now held by the Defendants as a result of those alleged breaches of trust, is entitled to a taking of an account of the dealings of Fairlyn in its capacity as such trustee, and is entitled to equitable compensation from Fairlyn and each Defendant in consequence of the foregoing alleged breaches of trust. 22 It has already been observed that Christine was a daughter of the Deceased by her first husband. Christine was born on 3 September 1951 and is presently aged fifty-one. Until she was aged about fifteen or sixteen (in about 1966 or 1967) Christine used the surname Coulson, being that of her father, the Deceased's first husband. Thereafter, until her marriage, Christine used the surname Lynch, being that of her stepfather, the First Defendant. Christine on 22 February 1969 married Ernest Garth Button, she being aged on seventeen at that time. Of her marriage, two surviving children were born to Christine, they being Justin (born 17 July 1971, who is presently aged thirty-one) and Bradley (born 3 November 1973, who is presently aged twenty-nine). Christine's marriage lasted about seven and a half years. 23 The Deceased died on 4 June 1999. She left a will dated 11 June 1997. The executor named in that will was her husband, Dennis John Edward Lynch, the First Defendant. However, he has never applied for probate of the will, because, he states, of the small size of the estate. At the date of her death, the only assets of which the Deceased was the sole owner were half the shareholding in a company Dronorn Pty Limited (stated to be worth $4,199), and an account with the Illawarra Mutual Building Society (having a credit balance of $1,164). Thus the assets of the Deceased at the time of her death totalled $5,364. After payment of her funeral expenses, the net balance in the estate was $2,391. 24 By her will the Deceased gave various chattels to her children, Christine, Janet, Dennis and Gregory. She gave a legacy of $5,000 to her grandson Dion Ibbett, and, in the events which have happened, gave the residue of her estate, after payment of debts, funeral and testamentary expenses, to her husband, the First Defendant. 25 According to his affidavit of 28 July 2000, the First Defendant used the balance of the moneys in the estate, $2,391, towards payment of the legacy to Dion Ibbett, and made up the balance of the amount of that legacy ($2,609) from his own pocket. In consequence, the estate is indebted to the First Defendant in that latter amount. 26 All the chattels referred to in the will as being the subject of specific gifts have, according to the affidavit of the First Defendant, been distributed in accordance with the terms of the will. 27 Although, as has already been recorded, no application has ever been made by the First Defendant for Probate of the will of the Deceased, Letters of Administration of the estate of the Deceased were on 11 September 2000 granted to Christine, pursuant to section 41A of the Wills, Probate and Administration Act 1898, for the purposes only for an application under the Family Provision Act. (It will be appreciated that the jurisdiction of the Court to make an order for provision under section 7 of the Family Provision Act is activated only where administration has been granted of the estate of the deceased person. In the absence of a grant of Probate or Letters of Administration the Court has no jurisdiction to make such an order for provision.) 28 It is appropriate here to record that estimations of the costs of the respective parties to the proceedings (which are relevant to a consideration of the size of the estate or of the notional estate of the Deceased which might be available to meet any order for provision which might ultimately be made) are in the amount of $100,000 for the two Plaintiffs and in the amount of $65,000 for the First, Second, Fourth and Fifth Defendants. 29 When Christine was aged twenty-six, despite being a single mother with two young sons, she returned to full-time studies, and completed her Higher School Certificate at Bomaderry High School in 1978. She then undertook teacher training at what was then known as the Wollongong Institute of Education, specialising in secondary mathematics. She graduated as a mathematics teacher, an achievement of which the Deceased and the First Defendant were proud. Christine has remained in that professional occupation to the present time, and has the reputation of being a respected and excellent teacher. However, she now teaches only three days a week, the reason being, according to Christine, physical and mental problems from which she has suffered. 30 Christine gave evidence concerning a discussion which she had had with the Deceased and the First Defendant in about 1985, when Christine for the first time became aware of the existence of Fairlyn, whose purpose was then described to her by the Deceased. In consequence of that conversation it would appear that each of the four children of the Deceased was, through Fairlyn, the recipient of a block of land at Berry. It would appear that Christine received such a block of land, which she subsequently sold in 1987 or 1988. 31 (I would here interpolate that at that time the First Defendant was a partner in a real estate business in Berry. He and the Deceased had ceased dairy farming in 1979.) 32 Evidence was presented on behalf of Christine concerning various property transactions (including the transfer by Fairlyn to the Deceased and the First Defendant as joint tenants of a strata unit in North Street, Nowra and the transfer of subdivided property known as "Morschels Development").

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34 Evidence was also given by Christine concerning various bank accounts maintained by Fairlyn with the ANZ Bank, 98-100 Junction Street, Nowra. Although a beneficiary of the Lynch Family Trust, Christine has not received, either by way of the estate of the Deceased or otherwise, any part of the funds disclosed by those bank records as having been received by Fairlyn. 35 Christine presently resides in a house property owned by her which is situate at and known as 20 Sherwood Drive, Balgownie. That property, which has a present value of $265,000, is unencumbered. Until recently Justin also resided with Christine in that house property. 36 It cannot be emphasised too strongly that it is incumbent upon an applicant for provision to place before the Court as fully and as frankly as possible all information and details relating to the applicant's financial and material circumstances. That in the instant case Christine has failed to do. 37 Christine is currently employed as a mathematics teacher at the Illawarra Senior College, Port Kembla. Since November 2001 she has been on long service leave, receiving half pay. That long service leave will expire in February 2003. Before she took long service leave Christine was working only two days a week. Her income was usually about $400 net a fortnight. At the present time her income is $50,141 gross a year. Each fortnight a total of $353.80 is deducted directly from her earnings. These deductions include PAYG tax deduction ($108) and $110 to the Department of Education. The reason for that latter deduction is that Christine had been overpaid by a total of about $27,000, and that that overpayment is being repaid by way of deductions from her salary. (The circumstances relating to that overpayment were not disclosed to the Court.) In addition, there is a fortnightly deduction (in an amount unspecified) in respect to repayment of a loan from the Teachers' Credit Union. That loan was originally in an amount of $7,000. 38 During the course of her evidence Christine admitted that she had failed to disclose, either to the Taxation Office or to the Court, income from tutoring (for which she was paid in cash at least $20 an hour, at times $25 an hour). 39 Further, she understated her income by $20,000. In her affidavit of 21 June 2000 (paragraph 75) she stated her present salary from the Education Department to be $30,000, whilst the Department of Education and Training disclosed her salary for that year to be $50,141. 40 Christine failed in her affidavit evidence to disclose as an asset the contents of her house, which contents it emerged are insured for $81,600. Further, she stated that she had no idea of the amount of the legal costs which to date she had paid to her solicitors. 41 The foregoing omissions from Christine's affidavit evidence as to her financial circumstances have a considerable bearing upon the substance of her claim, since they impact upon the question whether she has been left without adequate provision for her maintenance. Further, those omissions support the submission of the Defendants that Christine should not be accepted as a witness of credit, and that in consequence I should approach with caution her assertion that she cannot engage in full-time teaching. 42 According to her affidavit of 23 May 2002, Christine's assets consist of: House property, 20 Sherwood Drive, Balgownie 1998 Mitsubishi Mirage motor car (purchased in 1998 for about $16,000)

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Comprehensive Insurance on Justin's motor car - $40 a month 46 Justin is presently aged thirty-one. He attended primary school at Bomaderry, and thereafter Bomaderry High School and then Keira High School in Wollongong. Justin left school in Year 10 to take up an apprenticeship in gardening. He worked first at Padstow and then at North Wollongong. 47 Whilst Christine was attending university to qualify as a mathematics teacher Justin and his brother Bradley would sometimes stay overnight with the Deceased. That was the practice when Justin was in about third to fifth class (upon my calculations that would have been when Justin was aged from about eight to ten, being from about 1979 to about 1981). It would appear that he had a good relationship with the Deceased, and enjoyed living on the Deceased's rural property (where she and the First Defendant were conducting a dairy farm). 48 When Justin was aged about twenty-four or twenty-five he was diagnosed as suffering from manic-depressive schizophrenia. Shortly after that diagnosis Justin went to Queensland in search of employment. His employment history both then and subsequently has been one of instability, with his periods of employment being of short duration. Justin kept in contact with his family by telephone whilst he was in Queensland. 49 On his return from Queensland Justin was admitted to the psychiatric ward of the Shellharbour Hospital, where he remained for a period of from nine to twelve months. It would appear that he was suffering delusions during that period. 50 Details of the mental illness from which Justin suffers are set forth in the affidavit of Dr Vaughan Turnbull, Consultant Psychiatrist, who has been treating Justin since 1995. According to Dr Turnbull, Justin has a severe schizophrenic illness, either paranoid schizophrenia or schizoaffective disorder. Although Justin is under a regime of medication, Dr Turnbull states that during the time that he has known Justin total control of his symptoms has never been achieved, and that it is unlikely that this situation will change in the future. 51 It would appear that Justin was involved in a motor vehicle accident in 1987 (when he was aged about sixteen). Using the proceeds of the settlement of his claim arising out of that accident, in the early 1990s, Justin purchased a home unit situate at The Avenue, Corrimal. (The evidence does not disclose details of the price or the funding of that purchase.) He is paying off a mortgage loan owing to the ANZ Bank in respect of that home unit at the rate of $220 a fortnight. The present balance outstanding on that loan is about $53,000. The home unit is presently tenanted (at a rent unspecified), and Justin uses that rent to meet the loan repayments. 52 Justin owns a motor vehicle, being a Ford Courier utility. No value was attributed to that motor vehicle, although, according to the evidence of Justin's tutor, his brother Bradley, that vehicle is not currently roadworthy and requires maintenance which would cost about $1,500. As has already been recorded, Justin owes his mother about $10,000, but he is not currently making any repayments in respect to that indebtedness. 53 Justin presently resides in rented premises at Nowra, for which he pays $80 a week. In addition, he pays about $20 a week for electricity and telephone. Although he maintains an account with the ANZ Bank, at the present time there are no funds in that account. 54 Justin's sole income consists of Social Security benefits, being a disability pension in a net amount of $409 a fortnight. He is unable to hold down employment, and is partly dependent upon Christine, with whom he has until recently resided on a full time basis. Christine and Bradley maintain regular contact with him. 55 It should here be recorded that no evidence, either by way of affidavit or by way of oral evidence, was given by Justin in the proceedings. The totality of the evidence concerning his claim and concerning his financial and material circumstances was given essentially by his tutor, his brother Bradley, and, to a lesser extent, by his mother Christine.

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56 I have already referred to the evidence of Christine concerning the subdivision by the Deceased of certain land at Berry and the gifts by the Deceased to each of her four children of various blocks of that land. According to the evidence of the First Defendant (in his affidavit of 10 January 2001) that situation came about as follows. The Deceased and the Defendant purchased a ten acre block of land in Berry, which they then subdivided into twenty-eight blocks. Each of the four children was invited to choose one of those blocks, which the Deceased and the Defendant were proposing to place on the open market at $25,000 each. Apart from Janet (who with her husband purchased a separate piece of land, consisting of five acres, for a purchase price of $50,000, of which she and her husband paid to the Deceased and the Defendant only the difference between that sum and $25,000), each of the other three children of the Deceased received a gift of a block of land valued at $25,000. Subsequently, Christine sold her block for $25,000 in order to assist in paying the mortgage outstanding upon the house property which she had by then purchased at Balgownie. 57 In 1985 the Deceased underwent surgery for the removal of her left kidney, which had been diagnosed as cancerous. Subsequently she developed secondary cancer in the lower spine. In January 1996 she underwent spinal decompression and internal fixation for spinal cord compression. Complications of that procedure left her a paraplegic, and required a permanent indwelling urinary catheter. From 1996 to her death in 1999 the Deceased suffered chronic neuropathic pain affecting both legs. In consequence, the Deceased from 1996 was confined to a wheelchair. It was necessary for her to undergo a program of radiotherapy at the Prince of Wales Hospital in Sydney. The Deceased also underwent surgery in November 1993 for a pelvic abscess, which required drainage and formation of a defunctioning colostomy. In 1994 the Deceased developed deep vein thrombosis in her left leg, for which she was treated with anticoagulants over an extended period. The pain and distress resulting from the problem with her legs required treatment by way of large dosages of analgesics. Details of the various medical problems of the Deceased in her declining years are set forth in the affidavit of her treating physician, Dr Barry Chambers, sworn 12 September 2001. 58 In consequence of the difficult physical condition of the Deceased, the bottleshop which had been conducted by herself and the First Defendant since the mid-1980s was sold by them in about 1993. The Deceased and the First Defendant then purchased a commercial strata unit at 62 North Street, Nowra, from which they derived an income. They also at that time purchased a house property in Albany Street, Berry. However, they lived there only for a very short period before selling that residence. 59 For the last three and a half years of her life the Deceased was residing with the First Defendant in a house property at Shoalhaven Heads, which had been designed for the specific purpose of accommodating and meeting the physical needs of the Deceased, who by that time was confined to a wheelchair. The First Defendant acquired a van with an electric lifter, and an electric bed was also installed in the house. 60 The commercial strata property at 6/62 North Street, Nowra has been valued at $350,000 (or, if it be the subject of a "forced sale", at $310,000). Information concerning that property and the income derived therefrom is set forth in the affidavit of Graeme John Cord, his accountant, sworn 9 October 2001. That affidavit also contains details of the assets and liabilities, income and outgoings, and other financial and material circumstances of the First Defendant, both at the date of the death of the Deceased and at 18 December 2001, and also concerning the Morschels Lane development. 61 After the Deceased suffered the physical problems which resulted in her being confined to a wheelchair, the First Defendant retired from his work as a real estate salesman, and became the full time carer of the Deceased. 62 A great deal of the evidence, especially that given by way of affidavit, was directed to the nature of the relationship between Christine and the Deceased, and also (albeit to a lesser extent) between Christine and the First Defendant and between Christine and various of her siblings. 63 It should be emphasised that an order for provision under the Family Provision Act is not made as a reward for good conduct; neither is it withheld as a punishment for perceived bad conduct on the part of the applicant. In this regard it is appropriate to refer to the salutary admonition of Windeyer J in Blore v Lang (1960) 104 CLR 124 at 137, where His Honour said of the statutory predecessor to the Family Provision Act (the Testator's Family Maintenance and Guardianship of Infants Act 1916), The jurisdiction under the Testator's Family Maintenance Act is to provide for deserving persons according to their requirements, not to reward past services. This is sometimes overlooked and evidence concerning the present and probable future requirements of the applicant is subordinated to or submerged in evidence of past services to the testator. Allegations and denials concerning episodes in the past are then likely to become emphasised at the expense of evidence directed to the central issues in the case.

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64 According to Christine, she had a close and loving relationship with the Deceased, whom she frequently visited, especially in the later years of the Deceased's life. According to the First Defendant, and to the Second and Fourth Defendants, the relationship between Christine and her mother was neither good nor close, and the frequency of contact was far less than that asserted by Christine. 65 It is unnecessary for me to resolve these disputes. Probably the truth lies somewhere between the two extremes. Christine did maintain a relationship with her mother. Certainly it emerges very clearly that the Deceased gave considerable practical assistance to Christine, especially during the period when Christine resumed her education, and the Deceased looked after Christine's two young children. 66 Christine has attempted to depict the First Defendant (whom she admitted under cross-examination that she did not like) as being other than a loving and devoted husband to the Deceased over a period of thirty-nine years. That attempt has been unsuccessful. But, even if the relationship between the Deceased and the First Defendant were not as close and as loving as that described by the First Defendant, that fact would be totally irrelevant to the present claim by the Plaintiffs. The Plaintiffs must establish their own claims upon their own merits. Those claims cannot be enhanced by establishing (even if the Plaintiffs are able to do so) that the First Defendant, had no provision been made for him by the will of the Deceased, would not himself have succeeded in a claim under the Family Provision Act. The First Defendant is the chosen object of the testamentary beneficence of the Deceased. He does not have to prove anything. 67 The financial and material circumstances of the First Defendant are nevertheless relevant, not only in respect to section 27 of the Family Provision Act, relating to notional estate, but also to the extent that those circumstances might, in any event, have the effect of reducing, or even extinguishing, any order for provision an entitlement to which one or both of the Plaintiffs might otherwise have established. 68 Concerning Fairlyn, evidence was placed before the Court by Graeme John Cord, the accountant for the First Defendant, who was also the accountant for the Deceased and for Fairlyn. In his affidavit of 9 October 2001 Mr Cord states that Fairlyn as trustee of Lynch Family Trust, a discretionary trust, was set up as legitimate tax minimisation vehicles [sic] for the First Defendant and the Deceased, and that, apart from small amounts paid to some grandchildren many years ago, the Deceased and the First Defendant were the only real beneficiaries. Fairlyn was wound up, according to Mr Cord, because of the Land Tax which it had to pay on the North Street property. It was upon Mr Cord's recommendation and advice that that property was transferred out of Fairlyn's name into the individual names, because of Mr Cord's perception of the attitude of the Australian Tax Office to trusts such as that of which Fairlyn was trustee, and also because of the Land Tax situation. According to Mr Cord, there was never any discussion that the purpose of the winding up of Fairlyn was to defeat a claim by any potential beneficiary. 69 It was acknowledged by Christine under cross-examination that she did not like the First Defendant. She disputed that the marriage between the Deceased and the First Defendant had in general been a happy, loving marriage for nearly forty years. She grudgingly admitted that the First Defendant had provided support for the Deceased from the time when she became seriously ill in 1985 until her death in 1995. In the mid-1970s when she was a young single mother with two young sons, receiving very little child support from her husband, Christine asserted that the Deceased gave her a great deal of support, but asserted that the First Defendant gave her little, if any, support during that period. 70 Christine, as a child of the Deceased, is an eligible person within paragraph (b) of the definition of that phrase contained in section 6(1) of the Family Provision Act. As such, she has the standing to bring the present proceedings. 71 It is asserted that Justin is also an eligible person in relation to the Deceased, being such within paragraph (d) of the definition, since, so it is asserted, he not only is a grandchild of the Deceased, but was also partly dependent upon the Deceased. 72 It would appear that for about two years, when he was aged from about eight to ten, Justin (together with his brother Bradley) was provided with occasional overnight accommodation and associated meals by the Deceased. 73 The Defendants acknowledge that those circumstances constitute partial dependency of Justin upon the Deceased, and that in consequence Justin is an eligible person in relation to the Deceased. As such he has the standing to bring the present proceedings.

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74 Nevertheless, it is necessary for Justin, as an eligible person only within paragraph (d) of the definition, to fulfil the requirements of section 9(1) of the Act, by establishing that there are factors which warrant the making of his present application. 75 It has been held by McLelland CJ in Eq in Re Fulop Deceased (1987) 8 NSWLR 679 that those factors are factors which, when added to facts which render the applicant an eligible person, give him the status of a person who would generally be regarded as a natural object of testamentary recognition by the deceased person. 76 I am not persuaded, in the circumstances of this case, that Justin has established that there are such factors. His dependency upon and his close relationship with the Deceased were at a time when he was a young child. Thereafter it was Christine, his mother, who was essentially responsible for his accommodation, upbringing and education until he reached adulthood. 77 In consequence, therefore, the claim by Justin must fail. 78 But even if (contrary to the conclusion which I have just expressed) Justin were to establish that there are factors which warrant the making of the present application, the financial and material circumstances of Justin, to the extent to which they have been disclosed to the Court, do not satisfy me that he has been left without adequate provision for his proper maintenance, education and advancement in life. He owns a home unit (in which he does not choose to reside), which provides income. He is in receipt of a pension. He owns a motor vehicle. Whilst he is indebted to his mother, it appears that she has no present intention of requiring repayment of that debt. Justin has not, in those circumstances, established an entitlement to an order for provision. 79 For the past twenty-two years Christine has been in secure government employment as a high school teacher. It would appear that she presently has savings of $35,000. In 1997 she received (as a result of a claim against the estate of her natural father, the former husband of the Deceased) an amount of $33,000. She has a superannuation entitlement of almost $35,000. She owns a residence, which is unencumbered, and which has a present value of $265,000. She owns a motor car, which was purchased new four year ago for $16,000. 80 During the Deceased's lifetime, the Plaintiff received considerable financial and practical assistance from her mother, including in 1986 a gift (from her mother and the First Defendant) of a block of land of a value of about $25,000, which she subsequently sold and the proceeds whereof she used to reduce her mortgage. 81 I am not satisfied that Christine has established that she has been left without adequate provision for her proper maintenance. The only relevant need which she has identified is in respect to repairs and renovations to her house, which are estimated to cost about $40,000-$45,000 (plus GST). 82 But, even if (contrary to the conclusions which I have just expressed) either Plaintiff be regarded as having established relevant need (and thus fulfilling the first stage in the two stage process identified by the High Court of Australia in Singer v Berghouse (1994) 181 CLR 201 at 208-210), nevertheless, the claims of the Plaintiffs must be approached in the light of competing claims upon the testamentary bounty of the Deceased. 83 In the circumstances of the instant case, the relevant competing claim is that of the First Defendant. He was the husband of the Deceased for thirty-nine years. I am satisfied that he was a devoted and loving husband to the Deceased throughout that period (subject, of course, to the normal vicissitudes of married life). During the 1990s, and especially during the last three and a half years of the Deceased's life, whilst she was confined to a wheelchair, the First Defendant was the principal carer of the Deceased, and, indeed, he gave up his employment in order to be her fulltime carer, essentially devoting his life to that role. He is now aged almost seventy. 84 According to the affidavit of Mr Cord, his accountant, sworn 9 October 2001 the present financial and material circumstances of the First Defendant are as follows:

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85 It will be appreciated that, in the event that either Christine or Justin were to establish an entitlement to any order for provision, that provision would need to be made out of notional estate of the Deceased, and would require the designation of property held by the Defendant as such notional estate. 86 The practical consequence of such an order for provision and such an order designating property as notional estate of the Deceased would be to deprive the First Defendant of either his residence or his chief source of income. During the course of her cross-examination Christine was asked questions concerning the consequence that the First Defendant might be deprived of his residence. She appeared either not to have considered that possibility at all, or to have considered it and regarded it as unimportant. When it was drawn to her attention that the practical consequence of an order for provision in her favour would be to deprive the First Defendant of his residence, the reaction of Christine was one of mirth (a reaction which did not in any way attract the sympathy of the Court to her claim, but which was consistent with her admitted dislike of the First Defendant). 87 Even if (contrary to the conclusions which I have already expressed) I were persuaded that either Christine or Justin has established an entitlement to an order for provision out of the notional estate of the Deceased, I would not, in the exercise of my discretion, in the circumstances of this case, make such an order, in the light of the competing claim of the First Defendant. 88 Moreover, it will be appreciated that before the Court may make an order designating property as notional estate, it must be satisfied firstly that an order for provision ought to be made on the application of one or both of the Plaintiffs, and, further, that at any time before her death the Deceased entered into a prescribed transaction. In the instant case, the prescribed transaction relied upon is the failure of the Deceased to sever the joint tenancy between herself and the First Defendant in respect to property which, at the time of the death of the Deceased, was held by her and the First Defendant as joint tenants. That property consists of the residence at Shoalhaven Heads and the North Street, Nowra commercial strata unit. The former provides the First Defendant with a home; the latter provides him with an income. 89 Moreover, the Court is precluded (by section 27(1) of the Act) from making an order designating property as notional estate of the Deceased unless it has considered the following matters: "(a) the importance of not interfering with reasonable expectations in relation to property,

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(c) any other matter which it considers relevant in the circumstances." 90 In the circumstance of the instant case, it was the reasonable expectation of the First Defendant (and, doubtless, also of the Deceased) that the First Defendant would be the absolute owner of the property which he and the Deceased held as joint tenants, to the intent that he should receive the absolute ownership of his residence at Shoalhaven Heads, and that he should continue to receive the income from the commercial premises at North Street, Nowra. 91 It will be appreciated from what I have already said concerning the claims of the Plaintiffs that I am of the view that the substantial justice and merits involved in making or refusing to make the order designating property as notional estate are such that it is not appropriate that such an order be made. 92 I would not, therefore, even if I were satisfied that the failure of the Deceased to sever the joint tenancy constituted a prescribed transaction, be disposed to make an order designating as notional estate of the Deceased either of the pieces of real property which by survivorship passed to the First Defendant upon the death of the Deceased. 93 In all the circumstances, therefore, I am not satisfied that either Plaintiff has established an entitlement to an order for provision. 94 As I have already observed earlier in this judgment, Christine by her further amended summons and Justin by his amended summons each seeks not only relief pursuant to the Family Provision Act, but also declaratory relief in respect to alleged breaches by Fairlyn of its duties as trustee of the Lynch Family Trust, together with an order for the "taking of accounts" of Fairlyn, and an order that Fairlyn and each of the Defendants make equitable compensation to the Plaintiff. 95 The Lynch Family Trust, which was created by a deed made on 21 May 1981, is of the kind commonly known as a "discretionary trust". The meaning of the expression "discretionary trust" primarily is a matter of usage, not doctrine. It is used to identify a species of express trust, being one where the entitlement of beneficiaries to income, or to corpus, or both, is not immediately ascertainable; rather, the beneficiaries are selected from a nominated class by, for example (as here), the trustee, and this power may be exercisable from time to time. The person with the right to select the cestui que trust thus holds a special power of appointment (see Federal Commissioner of Taxation v Vegners (1989) 90 ALR 547 at 551-552). 96 According to Jacobs' Law of Trusts in Australia, 6 ed. (1997), 68, paragraph [317]), The chief jurisprudential interest of discretionary trusts is that a member of the class of possible objects of appointment has no proprietary interest in the trust assets, … although he has sufficient locus to compel proper administration of the trust. 97 In the instant case, by the deed of 21 May 1981 Fairlyn (which was at that time known as Wheedle Pty Limited) was appointed trustee. The deed made provision for what were described as "Income Beneficiaries", being the First Defendant, the Deceased, and "any child or children or remote [sic] issue of the said Dennis John Edward Lynch and Eunice Gwenda Lynch and the spouse if any for the time being of any income beneficiary and after the death of any income beneficiary his or her widow or widower if any". 98 The deed also made provision for "Corpus Beneficiaries", who shall be "Dennis John Edward Lynch and Eunice Gwenda Lynch and any Income Beneficiary". 99 Provision is made in clause 21(a) for the trustee to pay the whole of the income of the trust received in any one accounting period to such of the Income Beneficiaries as he [sic] shall decide in accordance with that clause. Clause 21(d) provides, At any time during any accounting period the Trustee may make a payment of income by way of exercise of his discretion to any beneficiary in respect of the current accounting period in such amount as he in his absolute discretion thinks fit. 100 Provision is made by clause 23(a) concerning corpus beneficiaries, as follows, The Trustee shall pay the Corpus of the Trust to such of the persons named in the Schedule under the heading "Corpus Beneficiaries" as he shall in his absolute discretion decide in accordance with this Clause. 101 Each of clause 21 and clause 23 contains provision that no person being a member of respectively the class of Income Beneficiaries or the class of Corpus Beneficiaries shall be entitled to the whole or any part of any income or any part of the Corpus unless in respect of that income or that Corpus there has been a list prepared by the Trustee. Provision is then made for the preparation of such a list by the Trustee. 102 It is basic to the concept of a discretionary trust that a person who comes within a class of beneficiaries has no interest in the trust property, in the sense of having any legal or equitable estate therein. The choice of those beneficiaries who shall receive either income or corpus of the trust property, and the amount of such income or corpus is in the absolute discretion of the trustee. 103 In the instant case, not only were the First Defendant and the Deceased the sole directors and sole shareholders of the trustee, but they essentially regarded the trust as being a vehicle by which they conducted their own personal affairs, and by means of that vehicle they enjoyed certain taxation advantages. Apart from a very small distribution by them to a number of grandchildren of the Deceased in 1982 or 1983, the distributions made by the trustee were from then until the death of the Deceased always distributions made to the Deceased and the First Defendant themselves. 104 The First Defendant was cross-examined concerning compliance by the trustee with the procedures stipulated by the deed (for example, the preparation of a list) before payment of income or corpus. It was his evidence that those procedures had been complied with. 105 Assuming (without deciding) that the submissions of the Plaintiffs are correct, in that the class of Income Beneficiaries be construed distributively (rather than conjunctively), so as to include children and remote issue of only one of the First Defendant and the Deceased (and thus to include Christine and Justin), I do not see how a single member of that class (or even two members of that class acting conjointly) can have the standing to seek and obtain the relief claimed by the Plaintiffs in respect to the trust. I am not persuaded that the mere fact of membership of the class of beneficiaries entitles a person to an accounting by the trustee. 106 I have already referred to evidence, of which there was a considerable quantity, adduced on behalf of the Plaintiffs concerning various real property transactions involving Fairlyn, the Deceased and the First Defendant. The purpose of that evidence appeared to be an attempt to establish that Fairlyn had somehow acted improperly in divesting itself of various pieces of real estate. Fairlyn was fully entitled to buy and sell real estate, and to hold such property, or the proceeds thereof, as assets of the trust. Since Fairlyn as trustee had an absolute discretion concerning distribution of trust assets, including the proceeds of any sale of real estate, and since, as I have already emphasised, the Deceased and the First Defendant were the principal beneficiaries of the trust and since the fundamental purpose of the trust was to be a vehicle for the conduct of the personal affairs of the Deceased and the First Defendant, I do not see how those various real property transactions can be regarded as in any way improper. Moreover, it emerged from the evidence of Mr Cord, the accountant over many years for Fairlyn, the Lynch Family Trust, the Deceased and the First Defendant, that in regard to at least two of those transactions the Deceased and the First Defendant were thereby being repaid moneys owing to them by Fairlyn which they had advanced to that company by way of director's loans. 107 That Christine appears to regard as some cause for complaint the fact that she did not ever receive any part of the proceeds of those sales of real property reveals a fundamental misunderstanding of the nature of the discretionary trust. 108 There is no evidence in the instant case which supports a suggestion that the trustee in some way acted otherwise than bona fide, especially since the trustee was acting for the benefit of the Deceased and the First Defendant themselves, as the trustee was fully entitled to do, each of those persons being the principal persons designated in the deed as Income Beneficiaries and also as Corpus Beneficiaries. 109 Moreover, in any event (and, to my mind, yet more significantly), even if (contrary to the conclusions which I have just expressed) a member of the class of beneficiaries has the standing to require a taking of an account of the trustee, there can be no loss established to such a beneficiary, since the distribution among beneficiaries is within the total and absolute discretion of the trustee. There is no reason whatsoever why, if the trust were now to be treated as continuing in existence and if Fairlyn were now to exercise its discretion to make a distribution among beneficiaries, it should do so in favour of either Plaintiff. (As to whether the exercise of discretion by trustees in a discretionary trust of the nature of that being presently here considered is examinable by a Court, see Karger v Paul [1984] VR 161; see, also, Re Londonderry's Settlement; Peat v Walsh [1965] Ch 918.) The taking of such an account as the Plaintiffs now seek would only be a jejune and barren exercise, of no practical benefit to the Plaintiffs or anyone else. 110 In my conclusion the relief sought by each Plaintiff in respect to alleged breaches of trust by Fairlyn and consequential relief sought as a result of such alleged breaches of trust is misconceived. 111 I have already referred to written submissions lodged by the parties during the course of the hearing in respect to the substantive claims of the Plaintiff. Subsequently, on 30 October 2002, Counsel for the Plaintiff lodged further written submissions, in respect to the joinder of the Second, Third, Fourth and Fifth Defendants. It will be appreciated that the joinder of those persons to the proceedings is a matter relevant to orders in respect to costs which may ultimately be made. Despite the submissions recently made on behalf of the Plaintiffs, I do not see any justification for the joinder as defendants of any persons other than the First Defendant. Not only was he the executor named in the will of the Deceased, but he was also the surviving director and shareholder of Fairlyn. Any and all of the relief which was sought by the Plaintiffs against Fairlyn could quite properly have been sought against the First Defendant as that surviving director. 112 I have already recorded that the Third Defendant appeared in person and that he supported the claim of the Plaintiffs. He did not otherwise actively participate in the proceedings, but left the conduct of the proceedings to be in the responsibility of the Plaintiff and the other Defendants. 113 Since the Plaintiffs have been totally unsuccessful in their claims, both in respect to their claims under the Family Provision Act and in respect to their claims concerning the Lynch Family Trust, it is appropriate that an order for costs be made in favour of the First, Second, Fourth and Fifth Defendants against the Plaintiffs. There will be no order for costs in favour of the Third Defendant, since he aligned himself with the Plaintiffs and took no active part in the proceedings. 114 I make the following orders in each of proceedings 3012 of 2000 and proceedings 3015 of 2000:

Button v Lynch and ors

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Decision date

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Judgment (24 paragraphs)

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Cases Cited (4)

Cited By (2)