Carroll v Cowburn

4232/02 - CARROLL v COWBURN JUDGMENT 1 HIS HONOUR: The plaintiff, Michael John Carroll, brings these proceedings under the Family Provision Act 1982 for provision out of the estate of his late father William Henry Carroll. 2 William Henry Carroll died on 18 March 2002. Probate of his last will bearing date 8 April 1999 was granted to the defendants on 17 May 2002. 3 The will provided, in the events which have happened, that the testator's property should be divided equally between Sean Carroll and Ella Lee Carroll as shall survive the testator and attain 18 years. At present, Sean is 15, and Ella 12. They are both children of the plaintiff. 4 The testator left only one asset of any moment, his former home at Mayfield. This has been sold and the proceeds invested, half in the name of a trust for Sean, and half in a trust in the name of Ella Lee, each trust having in it approximately $120,000. The evidence shows that the estate's costs of this application are in the vicinity of $16,000 and the plaintiff's solicitor indicates that his costs would be approximately $40,000 including counsel's fees and disbursements. I merely record this evidence without comment. 5 The plaintiff is the only son of the testator and his first wife. The testator was aged 67 years when he died. The plaintiff is 48, having been born in 1955. His mother and father separated when he was five and he spent most of his childhood with his maternal grandparents. 6 The plaintiff is a married man. He has the two children I have mentioned. He lives in public housing in Wyoming near Gosford. He is currently on a disability pension which produces approximately $9,750 per year and his wife receives social services contribution of $17,820 per annum for herself and the children. Thus, he says, the combined net family income is $27,570. The plaintiff has $5 in the bank; his wife has $27 and he has debts totalling about $4,750. He estimates his family's living expenses at $25,750 which includes $2,600 for bus and train fares. 7 In addition to his financial poverty, the plaintiff suffers ill-health. Just what the exact position is is unclear on the evidence, but there is no doubt that the plaintiff has significant health problems. He lost part of a finger in an accident at work, he suffers from diabetes and recently he had an operation to remove a cyst on his brain. He says that he is forgetful and tires very easily. 8 The plaintiff says that he has been left without proper provision by his father, that he was the only child and the only person whom his father should have had in contemplation, and to be left nothing at all when he is in necessitous circumstances plainly calls for an order to be made under the Act. 9 At the hearing before me on 26 March, Mr M Willmott appeared for the plaintiff and Mr D Flaherty appeared for the defendants. On the papers, the present case appeared a very clear case for an order to be made under the Act. However, Mr Flaherty's cross examination was quite effective. It showed the plaintiff to be a person who had made "mistakes" in his affidavit including the "mistake" twice repeated that he had lost four fingers in the accident rather than half a finger. The plaintiff made it plain that he put forward as one of his needs the provision of a motor car, but did not disclose that he was currently disqualified from holding a driver's licence until 2004, and that his wife only held a learner's permit. He did not disclose the fact that he was in gaol for dishonesty in 2002 and had a criminal record, though he did incidentally disclose the fact that he had been in gaol because he mentioned that that is where he had had some treatment for his ills. 10 As a result of this, Mr Flaherty made the valid points:

(a) that the plaintiff's evidence was not to be trusted generally; and

(b) that it was very risky to make any provision for the plaintiff because what evidence there was tended to show that money went through his fingers very easily. 11 This submission related in part to the fact that it appears that as a result of the accident to his hand, the plaintiff received two amounts of worker's compensation totalling $94,000. He says that he paid out his liabilities to creditors including family creditors of $50,000 and had $44,000 left over. Because of his award, there was a preclusion provision preventing him from obtaining social services until November 2001, so that he had to live off the compensation. He gives details of how $33,000 of that $44,000 was spent including a complete family TV stereo home entertainment package of $11,000 and $3,100 worth of games, musical items and entertainment for the children. The plaintiff says that he has had to sell his car for which he only got $1,000; he has had his telephone cut off and he has had to borrow $1,800 from his former solicitor to pay the electricity bills etc. 12 I do not think that the evidence goes so far as to show the plaintiff is a complete spendthrift. However, it does disclose that his ability to handle money is limited and this is probably worse now after his brain operation. I hinted to counsel that I might be more comforted in providing the plaintiff with money if there was some evidence from his wife as to her ability to manage. However, after obtaining instructions, counsel did not call evidence and I can only draw the inference that the wife's ability would be no greater than her husband's. 13 Judges and Masters in this Division have said time and time again that it is incumbent on applicants under this Act to make full and proper disclosure of all relevant facts of which the court can assess their application and also to give fully detailed evidence as to their needs. Despite the very large fees that appear to be charged for this sort of work, more often than not the appropriate material is not before the court. This appears to be acknowledged by the plaintiff's legal team in the present case, though they say there is very great difficulty in getting instructions from the plaintiff about these matters. 14 The plaintiff is living in public accommodation at a rent of about $120 per week. It appears to me that although the plaintiff says that he does not like the area in which he is living, it is a very rough area, it would not be financially clever for the estate to provide him with a house where he would have to pay the rates and taxes, insurance and maintenance which may very well exceed the $6,000 per year that he is currently outlaying in respect of accommodation. In some respects I regret this because it would be a relatively simple matter to make an order that the trustees of the estate purchase a house either in their names as trustees for the plaintiff for life, and then for the children in equal shares as tenants in common, or with the plaintiff having a legal life estate and the children legal estates in remainder. 15 Despite Mr Flaherty's cross examination, the facts show that the plaintiff is a person who has made out his entitlement to an order under the Act. He is the only child of the testator, although there was a rift between them for some 20 years, in latter years there was a relationship between father and son and the community would expect that a father would make provision for a son in the circumstances in which the plaintiff finds himself. 16 The really tough question is what sort of provision should be made. 17 As counsel has reminded me, decisions such as my decision in Bondy v Vavros - 29 August 1988, that of Powell J in Howarth v Reed - 15 April 1991, Master Macready in Smerda v Pavliuk - 27 October 1995 and McLean v Public Trustee [2001] NSWSC 970, point out that merely because there is a fear that a successful plaintiff might squander his or her benefaction is no reason not to provide for the plaintiff by an order made under the Act: this circumstance merely goes to the form of the order. 18 In many cases, as in McLean's case, where the executor is a trustee company or the Public Trustee, a protective trust can be set up. However, in the instant case I do not have any details at all as to the professions of the defendants or of their readiness, willingness or ability to act for many years as protective trustees, or what sort of commission they might reasonably seek for doing so. The amount in the estate is relatively small so that there is little room to manoeuvre in providing for investment managers or for commissions or administration fees. 19 Although the testator should have primarily in mind the needs of his son, nonetheless the interests of the grandchildren who were provided for in the will should be safeguarded as much as possible. 20 In many cases where there is a small estate, the interests of the children (or grandchildren as the case may be), is best provided for by giving their parent a house in which they can live. However, in the instant case that will only be of marginal value. The family has a roof over their heads even if it is not in the most salubrious surrounds, and the provision of an alternate roof over their heads would not supply any ready cash. Although I am not given any substantial evidence on the matter, the provision of even the most basic home on the central coast of NSW would not leave much change out of $180,000 (the estate less the $40,000 costs if those are ordered to be paid). 21 There is an obvious need to provide the plaintiff with some moneys to pay his debts of about $5,000 and to provide a nest egg. The plaintiff also wishes to buy a computer for the family at a cost of approximately $3,000, principally, he says, for the benefit of his children. 22 Although purchasing computers involves the purchase of an asset which will quickly be depreciated down to nil value over 4-5 years, one can see the value to the children as well as the plaintiff in purchasing the computer. Indeed, it might be something that the trustees might have advanced to the children in any event, had they been asked. 23 There is also no real problem in awarding the plaintiff a small legacy of $16,000. 24 Accordingly, there does not seem to me to be any problem in making an order that the plaintiff receive a legacy of $24,000 provided that the trustees are directed to pay to the creditors named in the plaintiff's affidavit, and to Grace Bros in respect of the computer, the amounts listed and to pay the balance to the plaintiff. 25 However, what should happen to the balance of the estate, because $24,000 is hardly going to be sufficient provision for the plaintiff. 26 The plaintiff says that he needs a car. He obviously does not at the moment because no-one could drive it, but it certainly would appear to be a valuable addition to the family once someone can drive in view of the semi isolated area in which the plaintiff lives, one kilometre away from the bus stop. Thus even though a car is a wasting asset, one should in due course be provided. 27 Mr Willmott suggests that money be put aside so that the trustees may provide a car if and when the plaintiff or a competent member of his family is lawfully able to drive. I believe that this is the answer to this part of the problem. 28 Accordingly, on the assumption that there is $220,000 in the estate after paying the executors' costs, and that there will be $40,000 payable for the plaintiff's costs and $20,000 is put aside for a car, and that $24,000 is put aside for the expenses I have mentioned earlier, this reduces the estate to $136,000 after taking account of pressing needs. 29 In my view, the plaintiff has shown himself to be in need and I would think that he was entitled to a greater buffer than the $16,000 for which I have already provided. I think that it would be appropriate to award him a further $16,000 to be paid in 12 months' time so that at no stage in the near future would he have too much capital. The remaining $120,000 would then be held in trust so that each of the testator's grandchildren would take a moiety when they became of age. 30 It may be that there are some factors that need to be taken into account when fine-tuning this order, including the costs that may have to be borne by the trustees in administering the estate for another year or so. If so, either counsel can apply within one month of delivery of these reasons for short minutes to be brought in which more precisely detail the orders that should be made in the spirit of this judgment. 31 I will now pass to deal with two collateral matters before noting the formal orders that I believe should be made. 32 The first of these is the attitude of the defendants. There is a letter in evidence from the defendants' solicitors to the plaintiff's solicitors which reads, in part, as follows: "Counsel has also advised that my clients would be in breach of their duty to the minor beneficiaries if they were to compromise the children's entitlements in any way. As such my clients are not willing to enter into any further negotiations." 33 With respect, that advice, if it were given in that form, is only half right. Whilst it is certainly true that trustees must be very careful to watch the rights of minor beneficiaries, in many cases those rights will not be enhanced by incurring needless costs in litigation. Where there is a claim made under the Family Provision Act and the great probabilities are that it will succeed, trustees may well come to the view that it is appropriate to preserve the corpus of the estate by entering into discussions or participating in mediation so that the inevitable loss to the estate by reason of the claim will be minimised. In cases where there is real doubt, judicial advice can be obtained as to the appropriate course the trustees should take, but these applications should be kept to a minimum because of the cost involved. This is particularly the case with litigation under the Family Provision Act because very often the costs are relatively high yet the amount in the estate is only very modest. 34 In such cases trustees cannot merely say that because there are infant beneficiaries they will not negotiate at all. Where the entitlement of the plaintiff is not clear, the statement I have made still has some application, but has less weight. 35 The other general comment I wish to make is about the level of costs. It has now been over 18 years since I was at the bar and I am doubtless out of step with the current costs of running a legal practice. Legal costs are very high, principally because most of the work has to be done by highly trained people who reasonably expect to be properly remunerated. One sometimes gets the impression in Family Provision Act matters that for the level of fees charged, the work is very sloppily done and that if an hourly rate is being charged, the people who are charging that rate are not sufficiently skilled to be able to deal with this sort of litigation competently, efficiently and quickly. I am not saying that that is so in this case, I am making that as a general comment. 36 Practically speaking, the court has little control over costs in these sort of matters. However, I have in the past indicated that as a prima facie guideline in the exercise of my discretion as to costs, I would rarely, if ever, award costs to a plaintiff in Family Provision Act proceedings greater than the amount which the applicant receives by way of legacy. Thus, if the estate is $700,000 the plaintiff's costs $200,000 and the plaintiff receives of legacy of $50,000 the plaintiff's costs would be capped at $50,000. Mr Willmott, for the plaintiff in the present case, when he thought that guideline might be applied here, said that there was nothing in the rules to justify it. In my view it is a perfectly sound guideline to take into account when exercising the wide discretion for costs in this sort of application. I have applied it before. It does not apply often because there are not many cases where the award is less than the costs, but it seems to me appropriate to republish it as a warning for the future, particularly for those claimants who are not particularly concerned about how much they get out of the estate as long as they ruin it for everybody else. 37 I should add, before dealing with the formal orders, that the testator's first wife was not given notice of the application. However, as the plaintiff's mother she knew what was going on, was present in court and heard the plaintiff's counsel say that she made no claim. Secondly, although I have treated this case as though the plaintiff had no interest under the will, technically speaking, he would take the whole estate on intestacy if neither of his children attained 18 years. There is no sense in disturbing this provision, so that the formal order must be that what he obtains is in addition to the benefit he obtains under the will. 38 I suggest that the formal orders should be as follows. As I said earlier, if either party wishes to put the orders in a more precise form an application can be made to my Associate within one month and I will list the matter for short minutes to be brought in. If no application is made within one month of delivery of these reasons, then the following will be the orders of the court. I direct attention to those who are to make the decision as to whether to restate the orders that it may be preferable for the trustees to pay the moneys due to the plaintiff into the plaintiff's solicitors' trust account with undertakings being given to the court that the plaintiff will not make demands on his solicitors to pay out those moneys except under certain conditions, rather than the trustees continue to hold the money and dole it out in accordance with the orders. 39 The orders thus are:

1. Order that in addition to the benefit provided for the plaintiff under the will of the late William Henry Carroll, the defendants as trustees of that estate, hold the following on trust for the plaintiff:

(a) $5,000 to be paid to the plaintiff's solicitors in order to discharge the debts referred to in para 9 of the plaintiff's affidavit of 26 March 2003 with any balance after payment of those debts to be paid by such solicitors to the plaintiff;

(b) A legacy of $3,000 in order to purchase a computer to be paid to the plaintiff's solicitors for payment out to the plaintiff;

(c) A legacy of $16,000 to be paid to the plaintiff on 30 April 2003;

(d) A further legacy of $16,000 to be paid to the plaintiff on 30 April 2004;

(e) The legacies referred to above shall not carry interest if paid by 30 April 2003 (or in the case of the legacy lastmentioned by 30 April 2004); otherwise to carry interest in accordance with the court rules;

(f) A further legacy of $20,000 to be paid to the plaintiff upon production to the trustees of: (i) an agreement for the purchase of a motor vehicle for the plaintiff at a cost of at least $15,000; and (ii) evidence that the plaintiff or a member of his immediate family is duly licensed to drive a motor car.

2. Order that the costs of the plaintiff and the costs of the defendants, the latter on the indemnity basis, be paid out of the estate.

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