Cabban v Cabban

PARTIES : Chloe Cabban & Emily Hay by their tutor Kathleen Joyce Hay v Cameron Cabban

COUNSEL : Mr D Liebhold for plaintiffs Mr MJ Heath for defendant

SOLICITORS : Andrew John Fleming for plaintiff BHM Lawyers for defendant

• 1- IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

No 2010/00093359 CHLOE ANN CABBAN & EMILY KATE HAY BY THEIR TUTOR KATHLEEN JOYCE HAY v CAMERON CABBAN JUDGMENT

1 This is an application under the Succession Act 2006 ('the Act') in respect of the estate of the late, Rebecca Anne Hay, who died intestate on 20 April 2009, aged 30. 2 The deceased was survived by her husband, Cameron Cabban, the defendant in the proceedings and their two children, Chloe Ann Cabban and Emily Kate Hay, aged 5 and 3 years respectively. Chloe and Emily are the plaintiffs. Their tutor Kathleen Joyce Hay is their grandmother and the deceased's mother. 3 Although the deceased and Cameron Cabban had separated, Cameron would be entitled to the deceased's estate. Estate 4 At the date of death the deceased was co-owner as joint tenants with the defendant of a property at Spring Creek Road, Wamban. The property passed by survivorship to Cameron Cabban. The deceased had superannuation entitlements of some $59,788.51 and a mortgage insurance policy which she held jointly with the Cameron Cabban as co-debtor under their mortgage over the Spring Creek Road property. There was also some personal property including motor vehicles, none of which are of great value. History 5 The deceased, Rebecca Anne Hay was born in August 1978. She and Cameron Cabban were married in September 2002. The first plaintiff, Chloe was born in June 2005. In July 2006, Rebecca and Cameron separated. In December 2006, the second plaintiff Emily Kate Hay was born. 6 Rebecca and Cameron took no steps to dissolve the marriage and after the separation the deceased had custody of her daughters and her daughter also had access to Cameron. Rebecca and Cameron had informal discussions about a property settlement that did not result in a binding agreement. The parties had in fact put the matrimonial home at Spring Street on the market not long after they separated. 7 The discussions about a property settlement were to the effect that Rebecca would have 70 per cent and Cameron 30 per cent of the proceeds of sale. This was on the expectation that Rebecca would have the care of her daughters. 8 On 18 April 2009, Rebecca had a motorbike accident and she died at Canberra Hospital on 20 April 2009. 9 There was one serious purchaser interested Spring Creek Road and it sold shortly after Rebecca's death for $539,713.31. After payment of agent's commission and discharge of the mortgage, the net proceeds were $364,264.40. The deceased's mortgage insurer subsequently paid a total amount of $63,342.21. 10 The insurance policy was life insurance, which was to be applied to reduce the mortgage. The value of the total insurance payment in respect of Rebecca's death was $62,135.15, which is being held by the solicitors for the estate. I will return to the details of the insurance later. 11 In late 2008, Cameron commenced a relationship with Shannon Bill, a registered nurse. 12 Cameron applied the whole of the net proceeds of the sale of Spring Creek Road to purchase a property at Noggarula Drive, Congo for $620,000. Cameron purchased the Noggarula Drive property with his de facto spouse, Shannon Bill. Shannon advanced $62,000 and Cameron and Shannon hold that property as tenants in common in the proportions of 75 per cent to Cameron and 25 per cent to Shannon. 13 Shannon Bill has three children ranging in age from 5 years to 13 years. At the time of the hearing she was expecting another child with Cameron. 14 At the time of the deceased's motorcycle accident, Chloe and Emily were in Cameron's custody and he has had custody of them after Rebecca's death. Therefore at present Cameron and Shannon have five children in their family with another child expected shortly. From time to time, Kathleen Hay, the children's grandmother has access to Chloe and Emily. 15 Fortunately, Cameron and Shannon are young. Shannon is 36 years of age and is a registered nurse. Cameron is an electrical contractor and the same age as Shannon. Shannon is not working at the present time as she is caring for their large family. 16 The house at Noggarula Drive has three bedrooms and they are in the process of extending the home to create six bedrooms. Eligibility 17 The plaintiffs are eligible persons. 18 In Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201 at 208-210, the High Court has set out the two stage approach which is also applicable to applications under the Succession Act 2006.

"The first stage calls for a determination of whether the applicant has been left without adequate provision for his or her proper maintenance, education and advancement in life. The second stage, which only arises if that determination be made in favour of the applicant, requires the court to decide what provision ought to be made out of the deceased's estate for the applicant. The first stage has been described as the "jurisdictional question". ….

The first question is, was the provision (if any) made for the applicant "inadequate for [his or her] proper maintenance, education and advancement in life"? The difference between "adequate" and "proper" and the interrelationship which exists between "adequate provision" and "proper maintenance" etc were explained in Bosch v Perpetual Trustee Co Ltd [1938] AC, at p 476. The determination of the first stage in the two-stage process calls for an assessment of whether the provision (if any) made was inadequate for what, in all the circumstances, was the proper level of maintenance etc appropriate for the applicant having regard, amongst other things, 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.

The determination of the second stage, should it arise, involves similar considerations. Indeed, in the first stage of the process, the court may need to arrive at an assessment of what is the proper level of maintenance and what is adequate provision, in which event, if it becomes necessary to embark upon the second stage of the process, that assessment will largely determine the order which should be made in favour of the applicant. In saying that, we are mindful that there may be some circumstances in which a court could refuse to make an order notwithstanding that the applicant is found to have been left without adequate provision for proper maintenance. Take, for example, a case like Ellis v Leeder (1951) 82 CLR 645, where there were no assets from which an order could reasonably be made and making an order could disturb the testator's arrangements to pay creditors." 19 Chloe and Emily are in good health and they attend pre-school. The oldest, Chloe, will attend the local Catholic school next year and it is likely that Emily will go to the same school. 20 Although Chloe and Emily had difficulties over the death of their mother it seems now, living with their father and Shannon, they enjoy a stable family environment. There is adequate evidence before me from family members, including the deceased's sister, who have observed the family as it is now constituted, to suggest that Chloe and Emily have integrated with the family and it is functioning well. The girls are still aware that their mother has died and Shannon encourages her memory. As the girls are dependent upon Cameron and Shannon, it is necessary to look at their financial situation.

21 Cameron and Shannon own the property Noggarula Drive, Congo, which they purchased for $620,000. The mortgage to IMB Mortgage is $273,000: made up of the initial advance of $223,000 and an additional advance of $50,000. The mortgage repayments are $450 per week. 22 Cameron is an electrical supervisor for the local council. His weekly income is $1650 and his expenses are $1,436 per week. Discussion 23 The children's tutor, Kathleen Hay, has brought an application for a fund for education and a fund for contingencies for Chloe and Emily. Her application is to have an order made for provision for Chloe and Emily and to have the following property declared as notional estate:

(a) Superannuation (cash): $59,788.51 (b) 50 per cent of the mortgage insurance/death benefit proceeds: $31,671.12 (c) Notional equity in the property at 138 Noggarula Drive, Congo (50 per cent of the net proceeds of sale of Spring Creek Road): $182,132.20 24 Total value of assets that the plaintiff suggests are liable to be designated as notional estate is $273,591.83. 25 The tutor's application is that the Noggarula Drive property be designated as notional estate at a value of $200,000 and that Chloe and Emily each have a legacy out of the notional estate of $100,000. The order suggested is that this amount is secured by a charge on the property that would crystallise when Emily attains the age of 18 years. 26 The tutor's submissions plainly show that it is not intended that the provision should disturb the present housing arrangements for the children. Under the proposed arrangement once the children attain the age of eighteen, there is a potential for serious disruption for the whole family. That is because two children in the family will be in a privileged position vis-a-vis the other children and the parents will face the prospect of the sale of their home. 27 As I have mentioned, the total insurance payment of $62,135.15 in respect of Rebecca's death could not be paid immediately after her death because a death certificate was not available, as there had to be an inquest. For this reason Shannon contributed $62,000 towards the purchase of the Noggarula Drive property because it had been intended that the mortgage proceeds would be used for this purpose. Once the death certificate was available, the insurance company paid the insurance proceeds to the mortgagee, but because the original account was closed, the mortgagee did not accept the money and returned it to the insurance company. The insurance company then forwarded the funds to the solicitors for the estate. The solicitors now hold the funds presumably on the basis of some ex gratia payment by the insurance company. 28 Cameron and Shannon have partly completed their endeavours to build the extension to the home, but it is not at a lock up stage. It is thought that a further amount of $40,000 will be required to complete the home. 29 It might be thought that some of the funds that are available as a result of the mortgage insurance and superannuation would provide an adequate fund for education and other expenses for the children, which are likely to be their immediate needs. Unfortunately, the fact that these proceedings are been started means there have been substantial costs. 30 The tutor holds a small trust fund of $6,000, which is comprised of the proceeds of the sale of some of her daughter's furniture and gifts from family members and acquaintances in the community. 31 The cash available as a consequence of the death of the deceased is approximately as follows: Mortgage insurance proceeds: 63,342.24 Superannuation: 59,788.51 Cash held on trust for plaintiffs: 6,000.00 Sub total: 129,130.75

Less: Plaintiff's costs: 38,500.00 Defendant's costs: 38,700.00 Sub total: 51,930.75

32 The defendant's building funds are as follows: Defendant's remaining building loan funds: 15,000.00 Total cash assets available to complete renovations: 66,930.75 Less: Defendant's estimated further building costs: 40,000.00 Excess funds: $26,930.75

33 The tutor's application raises a number of issues as to whether it is appropriate to make an order.

34 I have referred earlier to Singer v Berghouse where the High Court referred to Ellis v Leeder (1951) 82 CLR 645 as an example of a situation where although it was established that a person had been left without adequate provision, the court, in its discretion, would not make an order. I do not think, given what I will say below, that this would apply in this case. 35 As I have said the tutor does not wish to disturb the present living arrangements and the application seems to be directed at securing something for the children when they reach 18 years. It is predicated upon the argument that the defendant had a windfall as a result of the deceased's death and it is intended to protect the children from future upheaval of the present domestic relationship. 36 The opposite is in fact the case. Under the tentative arrangements proposed for a property settlement between the deceased and Cameron, the deceased would have had the full time care of the children. As a result of the accident Cameron is obliged to look after the children and provide them with a home for the next fifteen or so years and he no longer has the help of Rebecca in this task. Fortunately, as a result of the joint tenancy he now has Rebecca's share of the house to assist him in this regard. 37 It is plain that the children will have some needs for their education and the funds from the insurance proceeds would be of assistance. 38 Cameron has a legal and moral responsibility to house and protect the children. The question is whether in the context of this estate any further provision for the children is appropriate. The circumstances include the fact that Cameron has a moral responsibility to Shannon and her children and a legal and moral responsibility towards the child they are expecting. The provision of a home for this large family is of great importance. Cameron is, of course, contributing to the family's home from his share of the former home and Shannon has contributed the deposit of $62,000, stamp duty of $23,410 and the balance of the purchase price of $18,776.50. Cameron and Shannon both have a substantial stake in the new property in their own right. 39 From a practical point of view, the new family is functioning well and is off to a good start. The affidavits of Maureen Hay, the deceased's sister (Ms Hay's unsworn affidavit was tendered as evidence during the hearing) and Michelle Kempson, the deceased's cousin, attest to observing Emily and Chloe in their new family unit. Both witnesses state that the children appear to be happy and adjusted to their new circumstances. There were no objections to this evidence. There is always the possibility of a separation or another tragedy such as the death of the father. In such an unlikely event there are remedies under the Family Law Act 1975 (Cth) and the Succession Act that are designed to protect the children's future. 40 I do not think it is appropriate to make an order for any future provision for contingencies for the children. They have only been left without provision for their immediate and small education needs and there is effectively no actual estate after provision for costs. 41 Under section 76(e) of the Act, the superannuation monies can be designated as notional estate. 42 Section 87 of the Act provides: "87 General matters that must be considered by Court The Court must not make a notional estate order unless it has considered the following: (a) the importance of not interfering with reasonable expectations in relation to property, (b) the substantial justice and merits involved in making or refusing to make the order, (c) any other matter it considers relevant in the circumstances." 43 On these matters the real difficulties are caused by the impact of costs on the available cash resources. 44 Cameron has taken the step of extending the home at a time when the proceedings could have been or were commenced. Therefore he took the risk that there might be an application for provision from the deceased's estate and in these circumstances there can be no expectations that need to be taken into account. 45 In my view, on the merits of the matter justice requires there to be an order for a small provision for Chloe and Emily's education needs. The evidence of this need is not given but it is obvious that some order should be made. 46 Another matter to be considered is the reasonableness of the present proceedings. 47 It was suggested that the tutor brought proceedings, inter alia, in an attempt to punish Cameron for being unfaithful to the deceased thus causing Cameron and the deceased's subsequent separation. The tutor denies this and I accept her denial. She was motivated by practicalities and a desire to protect the children from any future break up of the family. During re-examination, Mr Liebhold questioned the tutor about her motivation for bringing the proceedings: "Q. Finally, my friend put to you that your reason for bringing these proceedings was firstly a wish to punish the defendant and secondly on the basis that you dislike his current partner. You responded "no. That is not the reason"? A. This is not the reason. Q. Can you tell the Court the reason? A. The reason is anybody can have a split up. These girls, I think should get some money out of this, put it on Cameron's house or whatever. We're not asking to sell his house. It is not the first affair Cameron has had so whose to know this is going to last. It might last 20, it might last 5, it might last 12 months. That's my opinion. Becky worked all the time for this money since she was 16 years of age. She unfortunately didn't have a Will…. As far as I'm concerned Becky's estate money is the girls, part of, any way. Cameron might be using it to house his new partner and her 3 children but they are already benefiting by Becky's death because I only believe, I'm lead to believe, Shannon got $135,000 out of her husband and her split up. With that, if she wasn't with Cameron, she wouldn't have enough money to buy herself another property with her 3 kids." 48 However, in the circumstances there was no basis for her to prosecute these proceedings for a charge on the property and for a large fund for contingencies. 49 On 1 November 2010, Cameron made an open offer to settle the proceedings on the following basis: "1. That the Defendant be appointed as the Administrator of the estate of Rebecca Anne Hay ("the deceased") pursuant to s 91 of the Succession Act 2006 (NSW) for the limited purpose of these proceedings.

2. That the sum of $59,788.51 being a accrued superannuation and death benefit of Rebecca Anne Hay be declared notional estate of the deceased ("the superannuation").

3. That the Plaintiffs costs in the sum of $18,000 be paid from the superannuation.

4.                    4. That each of Chloe Anne Cabban and Emily Kate Hay have transferred to them and equal shares the superannuation less those costs referred to in 3 above and those sums be held in trust by an independent trustee until they each attain the age of 18 years.
   

5. That the Defendant's is to bear his own costs of the proceedings. Our client is prepared to consider any reasonable variation of these proposed orders. " 50 The defendant's offer was not accepted. 51 I will make an order for $35,000 from the superannuation funds to be held in trust for Chloe and Emily until they attain the age of 18 years to be available with full powers of advancement. 52 The parties can address how the terms of the trust and the superannuation monies can, to the extent necessary, be designated as notional estate. 53 Given the small amount of the order for provision, I propose to cap the tutor, Kathleen Hay's costs at $25,000 that are to be paid out of the superannuation moneys. 54 There has been no grant of administration in this estate. Sections 58 and 59 of the Act are as follows: "58 When an application may be made (1) An application for a family provision order may be made whether or not administration of the estate of the deceased person has been granted. Note. Administration may be granted for the purposes of an application for a family provision order (see section 91). (2) An application for a family provision order must be made not later than 12 months after the date of the death of the deceased person, unless the Court otherwise orders on sufficient cause being shown. An application is taken to be made on the day it is filed in the Court's registry" "59 When family provision order may be made (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 (b) in the case of a person who is an eligible person by reason only of paragraph (d), (e) or (f) of the definition of eligible person in section 57 - having regard to all the circumstances of the case (whether past or present) there are factors which warrant the making of the application, 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. Note. Property that may be the subject of a family provision order is set out in Division 3. This Part applies to property, including property that is designated as notional estate (see section 73). Part 3.3 sets out property that may be designated as part of the notional estate of a deceased person for the purpose of making a family provision order.

(3) The Court may make a family provision order in favour of an eligible person in whose favour a family provision order has previously been made in relation to the same estate only if: (a) the Court is satisfied that there has been a substantial detrimental change in the eligible person's circumstances since a family provision order was last made in favour of the person, or (b) at the time that a family provision order was last made in favour of the eligible person: (i) the evidence about the nature and extent of the deceased person's estate (including any property that was, or could have been, designated as notional estate of the deceased person) did not reveal the existence of certain property ( the undisclosed property ), and (ii) the Court would have considered the deceased person's estate (including any property that was, or could have been, designated as notional estate of the deceased person) to be substantially greater in value if the evidence had revealed the existence of the undisclosed property, and (iii) the Court would not have made the previous family provision order if the evidence had revealed the existence of the undisclosed property.

(4) The Court may make a family provision order in favour of an eligible person whose application for a family provision order in relation to the same estate was previously refused only if, at the time of refusal, there existed all the circumstances regarding undisclosed property described in subsection (3) (b)." 55 There is no requirement in s 59 that there is a grant of probate as a condition on the power to make an order. This was not the case under the provisions of s 7 of the Family Provision Act 1982. That section specifically required there to be a grant of an administration before the Court could make an order under that section. Part 77, r 60 (now repealed) of the Supreme Court Rules 1970 required the administrator to be joined as a defendant and the administrator was subject to a duty to make an affidavit in accordance with Pt 77 r 59 (see Underwood v Underwood (McLelland J, Supreme Court of New South Wales, 2 March 1990, unreported), Leue v Reynolds (1986) 4 NSWLR 590 at 596 to 597 and Hewitt v Gardner; Hewitt v Gardner [2009] NSWSC 705 at [18]). 56 The absence of a requirement is contemplated by the terms of s 58(1). However, s 91 of the Act is in these terms: "91 Grant of probate or administration to enable application to be dealt with (1) This section applies if an application is made by a person for a family provision order, or notional estate order, in respect of the estate of a deceased person, or deceased transferee, respectively, in relation to which administration has not been granted. (2) The Court may, if it is satisfied that it is proper to do so, grant administration in respect of the estate of the deceased person or deceased transferee to the applicant for the purposes only of permitting the application concerned to be dealt with, whether or not the deceased person or deceased transferee left property in New South Wales. (3) The granting of administration under the Probate and Administration Act 1898 does not: (a) prevent the Court from granting administration under this section, or (b) unless the Court otherwise orders, affect any previous grant of administration under this section. (4) The provisions of the Probate and Administration Act 1898 apply to a grant of administration under this section, and to the legal representative of the estate, in the same way as they apply to a grant of administration under that Act and the legal representative of any estate for which such a grant has been made." 57 Perhaps the reason is to facilitate dealing with the deceased's property to give effect to the Court's orders. In Re Estate Harriett Cassel [2000] NSWSC 294, Young J said at [7] to [10] the following, "7 The practice of the former Probate Division was to make a grant under s 41A whenever there was evidence that an eligible person requested it. The reason for this is that the Court has taken the view that the purpose of the section is merely to enable Family Provision Act applications to be made within 18 months of the date of death and the section was inserted so that defendants could not frustrate the proceedings by delaying the taking out of a grant. This is reinforced by the Supreme Court Rules. Part 78(26A) provides that an application for a grant will be in Form 105A. This form is drafted on the assumption that the person to get the grant is either the plaintiff being the eligible person, or the plaintiff on behalf of the eligible person, presumably in a situation where the eligible person is under a disability. 8 The grant under s 41A is not a grant entitling the grantor to administer the estate in any way at all. It is a grant purely to get over the barrier that would otherwise prevent an application being made under the Family Provision Act . 9 Accordingly, what usually occurs in this sort of case is that a grant is made to the plaintiff who is about to bring proceedings under the Family Provision Act. The Court, when hearing those proceedings, then needs to appoint a person to represent the estate under Part 8 rule 16, or some other rule under Part 8. 10 All this seems rather pointless. A grant is made purely to remove the barrier to the Family Provision Act claim. It does not provide for the administration of the estate, provide authority for anyone to enquire as to the deceased's assets or the identity or wishes of the beneficiaries. It is left to the plaintiff to make a series of applications, (1) to the Probate Court for a grant; and (2) to the Equity Court for directions as to who should be a representative defendant. These costly applications confer no real benefit on anyone. It may well be that s 41A should be amended or the Family Provision Act amended so as to permit applications to be made without a grant, provided that the Court is able to appoint a person to represent the estate." 58 The section seems to be directed at overcoming the difficulties to which his Honour has referred. It would also allow the transfer of the insurance monies as required by this judgment and it would enable Cameron to call for the insurance monies to meet his own costs and to continue the extensions to the home. 59 I would be prepared to make such a grant if the formalities are completed or the matter can be referred to the Registrar in Probate to complete the grant. 60 I direct the parties to bring in short minutes. **********

13/12/2010 - Minor typographical amendments - Paragraph(s) 226 and 47

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