Davidson v Sampson

Supreme Court of NSW|2012-05-01|Before: Stevenson J

Background and family details 1These proceedings concern the estate of the late Penelope Jane Boorne, who died on 12 September 2010 at the age of 49. 2For convenience and without intending any disrespect, I shall refer to the parties involved by their first names. 3The plaintiff, Tobias Boorne Davidson ("Toby") is the only child of the deceased ("Penny"). 4Toby was born in mid 1998 and is now 13, almost 14. 5Toby brings these proceedings by his tutor, Neale Davidson ("Neale"). Neale is Toby's natural father. 6Neale met Penny whilst they were at school. For 21 years, between 1981 and 2002, they lived together in a de facto relationship. They separated in 2002. 7Their only child was Toby. Toby was four years old when Penny and Neale separated. 8During their relationship, Penny and Neale purchased a property in Naremburn. In about 1990 Penny and Neale sold the Naremburn property and purchased a property in Cremorne ("the Cremorne Property") for $440,000. 9On 15 September 2008, Penny and Neale came to a property settlement pursuant to which, amongst other things, Penny retained the Cremorne Property. 10In January 2006 Penny commenced living with the defendant, Steven Sampson ("Steve"). On 20 September 2008 Penny and Steve married. Steve had previously been married and has two non-dependant adult children, Daniel (now aged 29) and Bradley (now aged 28). 11Steve is the executor of Penny's last will. The last will was made on 29 October 2008. By this will, Penny left her entire estate to Steve. Probate was granted on 22 December 2010. 12Penny had made two earlier wills, to which I will refer below. 13On 18 February 2010 Penny and Steve exchanged contracts to purchase a property at Wollstonecraft ("the Wollstonecraft Property"). At around the same time Penny entered into a contract to sell the Cremorne Property. 14Settlement of the sale of the Cremorne Property and purchase of the Wollstonecraft Property occurred on 18 June 2010. The entire net proceeds of sale of the Cremorne Property were used to purchase the Wollstonecraft Property. There was a balance required to make up the deficit necessary to purchase the Wollstonecraft Property. 15Steve's contribution to that short fall was in the order of $475,815 (including agents' commission on the sale of the Cremorne Property, stamp duty on the purchase of the Wollstonecraft Property, and legal and other costs). Steve borrowed $400,000 from Suncorp to partly fund these costs. 16In circumstances that I shall discuss further below, the Wollstonecraft Property was purchased in the name of Steve alone. 17Penny is survived by her siblings, Susan Boorne ("Susan") and Michael Boorne ("Michael"), both of whom have given evidence in the proceedings, as well as by her mother Jill Boorne ("Jill") and by her father John Boorne ("John").

The claims made 18Toby seeks an order pursuant to s 59 of the Succession Act 2006 ("the Act") for his maintenance, education and advancement in life out of the estate, or the notional estate of Penny. 19Toby also seeks a declaration that Penny's notional estate includes the Wollstonecraft Property, or such part of the Wollstonecraft Property as represents Penny's interest in the Cremorne Property. 20Although Neale is, arguably, an "eligible person" in respect of Penny's estate (see below), he makes no claim in relation to it. The issues in the proceedings 21The following issues arise in the proceedings: - (a)Does any part of the Wollstonecraft Property comprise Penny's notional estate; (b)Has Penny made adequate provision for Toby in her will; and (c) Should provision be made for Toby pursuant to s 59 of the Act.

Penny's estate 22Penny's actual estate comprises cash on deposit, some funds in the nature of superannuation, a car, some jewellery and furniture. 23The net value of Penny's actual estate is in the order of $230,000, after deduction of Steve's costs, as executor (on an indemnity basis), and assuming deduction of Neale's costs of his application for provision for Toby (on a party/party basis). 24From 2006 until Penny's death, Penny's mother, Jill, gave Penny approximately $230,000, with instructions that the money was to benefit Toby. The evidence does not reveal what proportion of that money Penny retained at the date of her death. However, it seems probable that some part of Penny's net estate comprises these funds.

Penny's wills 25Penny made wills on 16 May 2002, 25 September 2008 and 29 October 2008. 26By her will of 16 May 2002, Penny left the whole of her estate to Toby. 27In late September 2008 Penny was diagnosed with lung cancer. 28At around that time Penny had a conversation with Steve in which she said: - "I want to leave all of my assets including our home to you Steve, so that you and Toby will be okay. I want you to look after Toby for me and you'll need the house if you stop working or get ill or something, you can always sell the house to get money to live on". 29By her will of 25 September 2008 (made five days after her marriage to Steve), Penny left her estate to Toby and Steve equally, and appointed Steve as Toby's guardian. 30Two days later, on 27 September 2008, in Steve's presence, Penny announced to her mother, Jill, and her siblings Susan and Michael, that she had been diagnosed with lung cancer. 31Susan said that Penny said something to the effect: - "It is my intention that everything I have, including my home, is to go to Toby should anything happen to me. I want Steve to continue living in Toby's home and I do not want Toby becoming a difficult teenager and kicking Steve out of his home. With that in mind I have had to consider this in my will. A few days ago I changed my will to reflect my intentions. I also fear that Neale will try to make a claim on my estate - I do not want Neale to come at me or Toby for my money." 32Michael gave evidence to similar effect. 33Susan and Michael were challenged in relation to this evidence. At this time, Penny had just made a will leaving half of her estate to Toby and half to Steve. It is curious, in those circumstances, that Penny would tell her family that she intended to leave everything (including her then home, the Cremorne Property) to Toby. Nonetheless, Susan and Michael gave clear and, in my opinion, credible evidence about what Penny had said on this occasion. I accept their evidence. 34A month later, on 29 October 2008 Penny and Steve entered into a contract for wills pursuant to which they agreed to make mutual wills. On the same day, each made a will. 35As I have mentioned, in that, her final will, Penny left her entire estate to Steve. 36In his will, Steve, relevantly, left the Cremorne Property to Toby. The Cremorne Property was then (and remained) the property of Penny. Presumably, this provision in Steve's will was made on the assumption that Penny pre-deceased him and that, by operation of Penny's will, Steve came to own the Cremorne Property at the time of his death. 37As we shall see below, Steve made a further will on 29 October 2010 (nearly two months after Penny died) leaving, inter alia, 75 per cent of the Wollstonecraft Property to Toby.

The purchase of the Wollstonecraft Property 38The purchase price of the Wollstonecraft Property was $2.052 million. 39When Penny and Steve exchanged contracts to purchase the Wollstonecraft Property on 18 February 2010, both Steve and Penny were named as purchasers. 40About two months later, in late April 2010, Penny was removed as a purchaser. 41Steve gave evidence that Penny said: - "I don't want Neale to get his hands on any of our property; I know what he is like. If anything happens to me, he will try and take [the Wollstonecraft Property] off you and Toby...If we purchase [the Wollstonecraft Property] in your name would you make sure Toby is looked after?" 42According to Steve, Penny added: - "Well you may need money to live on too, so you'll have an asset to sell or equity to access if you need to". 43Steve says that he assured Penny he would look after Toby and that he would contribute $550,000 to the purchase of the Wollstonecraft Property. He said to Penny: - "As I will be putting in about that sort of money towards the purchase of Wollstonecraft, what about I leave to Toby 75% of whatever equity there is left in Wollstonecraft on my death or, if we have to down-grade and purchase another property, I will leave him 75% of whatever equity I have in that property when I die." 44Penny then said: - "That sounds fair to me Steve. Promise you'll look after him for me?" 45Steve said that he would do that. 46In cross-examination, Steve gave the following evidence: - "Q. ...And in relation to the Cremorne property you had no legal interest in that Cremorne property, did you? A. No. Q. And in early 2010 you and Penny were looking to purchase another property, right? A. Yes. Q. And that other property was the Wollstonecraft property? A. It ended up being the Wollstonecraft property. Q. At that stage Penny was concerned about Neale, and by Neale you understand I mean Mr Davidson, you understand that, don't you? A. Yes I do. Q. Yes. And she was concerned with Neale getting his hands on her property, right? A. One of her concerns, yes. Q. Yes. And she wanted to arrange things so that she would not end up with assets in her estate that Neale could get his hands on, right? A. Yes. Q. And she was concerned that Neale might make a family provision claim, right? A. Yes. Q. And the discussions that you had with Penny in that period between February 2010 and June 2010 when the properties were settled, you know what I mean by that, don't you? A. Yes. Q. Were discussions designed to come to a way whereby Penny would be divested of her equity in the Cremorne property to you to defeat Neale's claim? A. Yes, as well as discussions regarding the future of Toby and adequate equity for him, for me to utilise for him." 47Three things emerge from this evidence. 48First, it was Penny who made the suggestion that, in effect, she be removed as a purchaser of the Wollstonecraft Property and that the purchase proceed in Steve's name alone. She wished to divest herself of her equity in the Cremorne Property. She did so to avoid Neale getting "his hands on the property" and taking it "off [Steve] and Toby". 49Second, Penny contemplated that it may be necessary for Steve to sell the Wollstonecraft Property for the reason that "you may need money to live on". 50Third, Steve contemplated the possible need to "downgrade" and purchase another property. 51Together, the last two matters show, in my opinion, that Penny and Steve contemplated the possibility that Steve's financial circumstances might change for the worse and necessitate the sale of the Wollstonecraft Property. In that event, Steve's promise to leave 75 per cent of the Wollstonecraft Property to Toby on Steve's death would translate into a promise to leave Toby 75 per cent of "whatever equity" Steve might have in any such "downgraded" property. 52As a result, in about late April 2010, Steve and Penny instructed the solicitors acting on the purchase to remove Penny's name from the contract. 53In the meantime, on 25 March 2010, Penny exchanged contracts to sell the Cremorne Property for $1.73 million. 54As I have mentioned, the sale of the Cremorne Property, and the purchase of the Wollstonecraft Property were settled simultaneously on 18 June 2010. 55In substance, Penny's contribution to the purchase of the Wollstonecraft Property was the entire net proceeds of sale of the Cremorne Property. Steve contributed the balance. 56Thus Penny's contribution to the purchase of the Wollstonecraft Property was approximately 75 per cent, and Steve's contribution was approximately 25 per cent. 57After completion, Steve became the sole registered proprietor of the Wollstonecraft Property. 58Penny died less than three months later, on 12 September 2010.

Notional estate 59As I have mentioned, Toby seeks a notional estate order in respect of the Wollstonecraft Property. 60Recently Ball J said in Ogburn v Ogburn [2012] NSWSC 79 at [66]: "... It is not possible to divorce the question whether a notional estate order should be made from the question whether a family provision order should be made. A court can only make a notional estate order if and to the extent the order is necessary to satisfy family provision order. However, one of the matters the court needs to take into account in deciding whether a family provision order should be made is the size of the deceased's estate, including the size of the potential notional estate". 61Therefore, before considering the questions of the adequacy of the provision made for Toby, and any orders needed to address any inadequacy, I will consider the question of whether or not, as Neale submits, that part of the Wollstonecraft Property as was purchased using the proceeds of sale of the Cremorne Property represents Penny's notional estate. 62The Act requires that the Court be satisfied as to a number of statutory requirements before a notional estate order can be made. 63I will consider each of these requirements in turn.

Section 88(b): is Penny's estate insufficient to make provision? 64First, by reason of s 88(b) of the Act, the Court has no power to make an order concerning a notional estate unless satisfied that the deceased person's estate is insufficient to make an appropriate order for provision. 65Penny's net actual estate is in the order of $236,000. 66I am satisfied that Penny's estate is insufficient to make an appropriate order for Toby's provision. 67Toby is not yet 14 and has significant needs. 68Neale has calculated that Toby's financial needs (for accommodation, education, hobbies, outgoings, sports and personal expenses) between now and when he turns 18 and 25 will be in the order of $1.396 million and $1.905 million respectively. 69Steve does not dispute these figures. 70Penny's net actual estate is, plainly, not sufficient to meet these needs.

Section 75(1) and s 80(1): "relevant property transaction" - has "full valuable consideration" been given? 71Second, by reason of s 80(1) of the Act, the Court can make a notional estate order designating property to be the notional estate of a deceased person if the Court is satisfied that the deceased person entered into a "relevant property transaction" before his or her death, and that the transaction is one to which s 80 applies. 72The expression "relevant property transaction" is defined in s 75(1) of the Act. A person enters a "relevant property transaction" if that person does "any act that (immediately or at some later time) results in property being ... held by another person ... and full valuable consideration is not given to the person for doing ... the act". 73On 18 February 2010 Penny and Steve exchanged contracts to purchase the Wollstonecraft Property for $2.052 million. At that time, they both contemplated that the bulk of the purchase price of the Wollstonecraft Property would come from the proceeds of sale of the Cremorne Property. 74Penny's "act" of entering into a contract in the circumstances was an act that would result in Steve holding property, namely a joint interest with Penny in the Wollstonecraft Property. 75Further, in late April 2010, Penny agreed that her name be removed from the contract to purchase the Wollstonecraft Property. That further act had the result that, from the date of completion of the purchase of the Wollstonecraft Property (18 June 2010), Steve held the Wollstonecraft Property absolutely. 76The question is whether Steve gave Penny "full valuable consideration" for the doing of these acts. 77The question of "full valuable consideration" was recently considered by Hallen AsJ in Kastrounis v Foundouradakis [2012] NSWSC 264. His Honour said (at [95] - [98]): - "I accept that 'full valuable consideration' means such valuable consideration as amounts to, approximates, or is broadly commensurate with, or is a fair equivalent of, the value of that to which it is given. Whether full valuable consideration is given is a question of fact and involves no exercise of discretion. In my view, the court should determine the question applying a commonsense approach and 'avoiding finely balanced mathematical computations involving the value of normal exchanges of support in the domestic sense': Jelley v Illiffe [1980] EWCA Civ 4; [1981] 2 All ER 29. Yet, as said earlier, the omission of the words 'in money or moneys worth' raises the question whether, in the appropriate circumstances, personal services by way of care and attention, which are motivated by love and affection, moving to the deceased, can, as a matter of law, count as full valuable consideration given to her or him, under the Act. However, assuming that it does, balancing the value of imponderables, such as companionship and other personal services, on which the court has somehow to put our financial value, against the consideration that is shown in a contract in which the deceased disposes of her, or his, property, is likely to be a hard task." 78I quite agree. 79Mr Bradford, who appeared for Steve, submitted that when considering what consideration Steve gave Penny for the "acts" to which I have referred, I should have regard to the whole "transaction", in particular, I should have regard to the promises that Steve made Penny, concerning Toby's care. 80The authorities to which Hallen AsJ referred make it clear that such matters are capable of amounting to "consideration" for this purpose. 81I agree with the following analysis given by Hallen AsJ in Kastrounis v Foundouradakis at [101]: - "In determining the answer to the question, I am inclined to the view that when the relevant transaction involves a contract for the disposition of the deceased's property, the first enquiry must always be, what is the actual value of that property? The second question is whether the monetary consideration, if any, identified in the contract, is commensurate with that value. The next question is what consideration is given by the other party or parties to the deceased? The final question is whether the consideration given amounts to full valuable consideration?" 82In this case the actual value of the property acquired by Steve was its purchase price; $2.052 million. No monetary consideration is identified in the contract as being given by Steve. 83The evidence suggests that he contributed approximately 25 per cent of that consideration: something in the order of $500,000. 84Steve gave further "consideration" in the form of the promises to which I have referred. 85Mr Bradford submitted that the calculations prepared by Neale as to Toby's future financial needs gave some guidance as to the value of those promises. 86Neale's calculations suggest that, leaving aside hypothetical accommodation costs, Toby's future financial needs for his education, hobbies, outgoings, sports, personal expenses and provision of a motor vehicle will be in the order of $150,000 between now and when he is 18, and $655,000 between now and when he is 25. 87Assuming these figures to be correct and, assuming that Steve has an obligation to, and in fact expends such funds, the result would be that the total "consideration" given by Steve would be something in the range of $650,000 ($500,000 contribution to the Wollstonecraft Property + $150,000 for Toby) to $1.155 million ($500,000 contribution to the Wollstonecraft Property + $655,000 for Toby). 88On the other hand, as I have said, Steve has acquired the entirety of the Wollstonecraft Property. There is no evidence of the current value of that property. However, it is common ground that its likely current value is in the order of its purchase price: $2.052 million. 89In my opinion this demonstrates that, on no view of the matter, can it be said that Steve has given "full valuable consideration" for the "acts" which have led to the to the "relevant property transaction".

Section 77: "when did the relevant property transactions" take effect? 90Third, s 77(4) of the Act provides that a "relevant property transaction" that involves "any kind of contract for which valuable consideration, though not full valuable consideration, is given for the person to enter into the transaction is taken to be entered into and take effect when the contract is entered into". 91In this case, the "relevant property transactions" took place on 18 February 2010 (when Penny agreed that Steve could purchase the property equally with her), and in late April 2010 (when Penny agreed that she be removed as co-purchaser of the property.) 92Either way, for the purposes of s 80(2), the transaction took effect within one year of Penny's death.

Section 80: moral obligation to make adequate provision 93Fourth, the Court can only make a notional estate order in respect of a "relevant property transaction" if that transaction is one to which s 80 applies. 94Section 80 applies in the circumstances set forth in s 80(2). Subsections 80(2)(a) and (b) are potentially relevant and are in the following terms: - (2) This section applies to the following relevant property transactions: (a) a transaction that took effect within 3 years before the date of the death of the deceased person and was entered into with the intention, wholly or partly, of denying or limiting provision being made out of the estate of the deceased person for the maintenance, education or advancement in life of any person who is entitled to apply for a family provision order, (b) a transaction that took effect within one year before the date of the death of the deceased person and was entered into when the deceased person had a moral obligation to make adequate provision, by will or otherwise, for the proper maintenance, education or advancement in life of any person who is entitled to apply for a family provision order which was substantially greater than any moral obligation of the deceased person to enter into the transaction." 95In my opinion, it is arguable that subsection 80(2)(a) applies. 96The transaction took place within three years of Penny's death and was, the evidence reveals, entered into by Penny, partly at least, to deny or limit the provision to be made out of her estate in favour of Neale. 97Mr Bradford submitted that Neale was not a "eligible person" for the purposes of s 57 of the Act and was therefore not a person "entitled to apply for a family provision order" for the purpose of subsection 80(2)(a). Mr Bradford submitted that, for that reason, the latter subsection was not enlivened. 98For the reasons that follow, it is not necessary for me to decide this question. However, I am inclined to accept Mr Meek's submission that Neale was, in all probability, a person to whom subsection 57(1)(e) applied. It is likely he is a person who was "at any particular time" "wholly or partly or dependant" on Penny and, at that or any other time, he was a member of her household. Mr Meek pointed out that Neale and Penny lived together for approximately 21 years. He submitted that it was inevitable that, at some point during that period, Neale would have been "wholly or party dependant" on Penny. 99However that may be, I think it clear that Penny had a moral obligation to make adequate provision for Toby which was substantially greater than any moral obligation she had to enter into the "relevant property transaction" and, for that reason, subsection 80(2)(b) applies. 100The "relevant property transaction" took effect within one year of Penny's death. 101In Kastrounis v Foundouradakis (supra) Hallen AsJ said (at [114] and [115]): - "The expression 'moral obligation' is no more than a simple and convenient way of referring to the obligation resting upon a deceased to make a wise and just assessment of the interests of any person who is able to ask to be taken into account in determining what adequate provision for proper maintenance, education and advancement in life, should have been made for him or her: Collicoat v McMillan [1993] 3 VR 803. With this in mind, it is difficult to read the words 'the moral obligation of the deceased to enter into the property transaction' literally. In determining whether this element is satisfied, the moral obligation of the deceased owed to any eligible person must be compared with the moral obligation to enter the transaction for the benefit of the party, or parties, to whom the property of the deceased is disposed by the relevant property transaction, and who does, or who do, not give full valuable consideration. If there was, then, a substantially greater moral obligation for the deceased to preserve the estate for the benefit of any eligible person to whom the deceased had a moral obligation to make adequate provision for his, or her, proper maintenance, education or advancement in life, than to arrange his, or her, affairs with the result that the property would be disposed of out of his, or her, estate, the sub-section would be satisfied." 102Subsection 80(2)(b) calls for a comparison to be made between the moral obligation to make provision, and the moral obligation to enter the "relevant property transaction". 103In my opinion, there can be no doubt that Penny had a moral obligation to make adequate provision for Toby. This was Penny's view. That is made clear by Steve's evidence of Penny's entreaty that Steve "look after" Toby. It is also made clear by Penny's statement to her siblings and mother on 27 September 2008, when she announced to them her diagnosis with cancer, that she intended "everything" to go to Toby. 104On the other hand, what "obligation" did Penny have to enter into the "relevant property transaction"? That is, what "obligation" did Penny have to agree, on 18 February 2010, that Steve be an equal joint purchaser with her of the Wollstonecraft Property and then, in late April 2010, that the purchase proceed in Steve's name alone, with the result that he became the sole proprietor. 105In effect, Penny has gifted her interest in the Cremorne Property to Steve. 106This is how Steve sees it. He gave the following evidence: - "Q: You have in effect ended up with most of Penny's equity in relation to the Cremorne property, do you agree with that? A: Yes, Penny did - yes, that's correct, Penny did give that to me." 107It was Penny's suggestion that the "relevant property transaction" be entered into. 108Penny wished the purchase of the Wollstonecraft Property to proceed in Steve's name alone to avoid Neale "getting his hands on" the Wollstonecraft Property. It is true that Penny sought, and obtained, an assurance from Steve that he would "make sure Toby's looked after" and that Steve promised to leave Toby 75 per cent of the equity in the Wollstonecraft Property, or its replacement. It is also clear that, at this time, Penny was gravely ill and, for obvious reasons, concerned about Toby's future wellbeing. 109But I cannot see that Penny had any obligation, let alone any moral obligation, to act this way. 110The evidence suggests that, to a very large extent, Penny was motivated by a desire to quarantine the Wollstonecraft Property from any possible claim by Neale, rather than by any desire to provide Steve with a quid pro quo for the promises that he made. 111No doubt Penny was wishing to act in the best interests of her new household, including Toby. But it does not follow, in my opinion, that she obliged to act as she did. 112In those circumstances my conclusion is that subsection 80(2)(b) is enlivened, and the fourth requirement is thereby satisfied.

Section 83: disadvantage to the estate 113Fifth, by reason of subsection 83(1)(a) of the Act, I must not make an order under section 80 unless satisfied that, amongst other things, the "relevant property transaction" disadvantaged Penny's estate or Toby's entitlement to apply for a family provision order. 114In my opinion the relevant property transaction did disadvantage the deceased estate. It divested the estate of something in the order of $1.5 million. 115It also disadvantaged Toby in my opinion, because Toby was left to make a family provision claim and to invoke the notional estate provisions in the Act to access the funds on which Penny clearly intended he would have the benefit.

Section 87: general matters to be considered 116Sixth, s 87 of the Act provides that the Court must not make a notional estate order unless considering: - "(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 matters it considers relevant in the circumstances". 117So far as "reasonable expectations" are concerned, it is clear that Toby has "reasonable expectations" in relation to the Wollstonecraft Property. His mother invested her whole estate in the property and was vitally concerned that it be used for Toby's benefit. 118I accept that Steve, too, has "reasonable expectations" in relation to the property. Penny agreed that it should be purchased in his name based on the arrangements to which I have referred. 119As to the "substantial justice and merits" of making the order, it seems to me to be plain that those matters favour the making of the order so that assessment of the adequacy of provision for Toby can be made free of the complication caused by Penny's desire to quarantine her assets from any application for provision that might be made by Neale. 120Other relevant circumstances are the fact that Steve is now in a relationship with Nicolette Marlow ("Nicolette") and that Nicolette, and her son (who is a school friend of Toby's) are now living at the Wollstonecraft Property. A further factor is the terms of Steve's will of 29 October 2010, and his understanding of it. 121I will deal with both those matters below, but so far as they are relevant to whether a notional estate order should be made, they cause me to incline to make such an order.

Section 89: determination of property to be subject to notional estate order 122Finally, when determining what property should be designated as notional estate, I must have regard to the matters enumerated in s 89 of the Act and must not designate as notional estate property that exceeds that which is necessary. 123The matters that s 89 calls to be considered are, in my opinion, dealt with in what I have already said in this judgment.

Decision as to notional estate 124In all these circumstances, in my opinion, Penny's notional estate includes that part of the current value of the Wollstonecraft Property as represents Penny's investment of the proceeds of sale of the Cremorne Property in it. 125There is no evidence before the Court as to the current value of the Wollstonecraft Property. However, it is common ground that its value is likely to be much the same as on the date of settlement, 18 June 2010. 126I therefore conclude that Penny's notional estate includes a 75 per cent interest in the Wollstonecraft Property.

Family provision principles 127I turn now to Toby's claim for provision. 128As Penny died on 12 September 2010 the applicable legislation for dealing with Toby's family provision claim is the Act, rather than the now repealed Family Provision Act 1982. 129However, it is common ground that the principles developed in the case law under the Family Provision Act will, for the most part, be applicable to claims under the Act: see Hulme v Graham [2010] NSWSC 1281 per Hallen AsJ. 130There is no dispute that Toby, as Penny's son, is an "eligible person" within the meaning of s 57(1)(c) of the Act. 131The key provision of the Act is s 59. The test to be applied under this section is a two-stage test: Singer v Berghouse (No 2) (1994) 181 CLR 201. 132The first stage is a question of fact, namely whether Penny has made adequate provision for Toby's proper maintenance, education and advancement in life. 133The aim of the first stage is to assess whether the Court can make an order for provision. As Hallen AsJ said in Lajcarova v Todorov [2011] NSWSC 522: - "Unless the court comes to the conclusion that inadequate provision has been made, it is not empowered to make an award. This is commonly referred to as 'the jurisdictional question'. At this stage, the court will consider whether it can make an order for provision for the maintenance, education and advancement in life of a particular applicant". (at [79]; emphasis in original). 134The second stage, should it arise, involves an exercise of discretion. The Court must assess whether provision ought to be made in Toby's favour. 135The object of the second stage is to assess whether the Court should make an order for provision. As Hallen AsJ said in Lajcarova v Todorov:- "At the second stage, the court determines whether it should make an order, and if so, the nature of any such order, having regard to the facts known to the court at the time the order is made. The fact that the court has a discretion means that it may refuse to make an order even though the jurisdictional question has been answered in the applicant's favour." (at [84]; emphasis in original). 136Although Hallen AsJ was then considering a claim under the Family Provision Act, there was no suggestion before me that I should adopt a different approach. 137It is clear that the determination of the second stage involves similar considerations to that of the first stage: Singer v Berghouse (No 2) at 209-210. 138Section 60(2) of the Act sets out the matters to which the Court may have regard when determining whether to make a family provision order, namely: - "a) any family or other relationship between the applicant and the deceased person, including the nature and duration of the relationship, (b) the nature and extent of any obligations or responsibilities owed by the deceased person to the applicant, to any other person in respect of whom an application has been made for a family provision order or to any beneficiary of the deceased person's estate, (c) the nature and extent of the deceased person's estate (including any property that is, or could be, designated as notional estate of the (deceased person) and of any liabilities or charges to which the estate is subject, as in existence when the application is being considered, (d) the financial resources (including earning capacity) and financial needs, both present and future, of the applicant, of any other person in respect of whom an application has been made for a family provision order or of any beneficiary of the deceased person's estate, (e) if the applicant is cohabiting with another person-the financial circumstances of the other person, (f) any physical, intellectual or mental disability of the applicant, any other person in respect of whom an application has been made for a family provision order or any beneficiary of the deceased person's estate that is in existence when the application is being considered or that may reasonably be anticipated, (g) the age of the applicant when the application is being considered, (h) any contribution (whether financial or otherwise) by the applicant to the acquisition, conservation and improvement of the estate of the deceased person or to the welfare of the deceased person or the deceased person's family, whether made before or after the deceased person's death, for which adequate consideration (not including any pension or other benefit) was not received, by the applicant, (i) any provision made for the applicant by the deceased person, either during the deceased person's lifetime or made from the deceased person's estate, (j) any evidence of the testamentary intentions of the deceased person, including evidence of statements made by the deceased person, (k) whether the applicant was being maintained, either wholly or partly, by the deceased person before the deceased person's death and, if the Court considers it relevant, the extent to which and the basis on which the deceased person did so, (l) whether any other person is liable to support the applicant, (m) the character and conduct of the applicant before and after the date of the death of the deceased person, (n) the conduct of any other person before and after the date of the death of the deceased person, (o) any relevant Aboriginal or Torres Strait Islander customary law, (p) any other matter the Court considers relevant, including matters in a) any family or other relationship between the applicant and the deceased person, including the nature and duration of the relationship." 139These matters are capable of relevance to both the first and second stages referred to above, as Hallen AsJ pointed out in Andrew v Andrew [2011] NSWSC 115. 140His Honour said: - "[53] It can be seen that s 60(2) enumerates 15 specific matters which the court may take into account, together with 'any other matter the court considers relevant', for the purposes of determining eligibility, whether to make a family provision order, and, if so, the nature of any such order. There is no mandatory command to take into account any of the matters enumerated. None of the matters differentiate in their application between classes of eligible person. Similarly, there is no distinction based on gender. [54] Considering each of the relevant matters does not prescribe a particular result, and whilst there is likely to be a substantial overlap in the matters that the court may take into account when determining the answers to what is posed in s 60(1), those matters are not identical. For example, when considering eligibility under subs (1)(a), many of the matters in ss (2) will be largely, if not wholly, irrelevant. [55] Furthermore, consideration of some of the matters in s 60(2) not only permits, but requires, a comparison to be made between the respective positions of the applicant and of other eligible persons as well as of the beneficiaries named in the deceased's will, whilst others do not. Importantly, also, many of the matters in ss (2), of themselves, are incapable of providing an answer to the questions posed in s 60(1). [56] Leaving aside the question of eligibility, the matters referred to in s 60(2) may be considered on "the discretionary question", namely whether to make an order and the nature of that order. Importantly, under s 60(2), attention is drawn to matters that may have existed at the deceased's death, or subsequently. [57] This does not mean, however, that some of the matters referred to in s 60(2) will not be relevant to the jurisdictional question to be determined at the first stage. I am comforted in reaching this conclusion by the following comments made in Singer v Berghouse (at 209-210). '... 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 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.' [58] And by the comments of Callinan and Heydon JJ in Vigolo v Bostin (at 230-231): 'We do not therefore think that the questions which the court has to answer in assessing a claim under the Act necessarily always divide neatly into two. Adequacy of the provision that has been made is not to be decided in a vacuum, or by looking simply to the question whether the applicant has enough upon which to survive or live comfortably. Adequacy or otherwise will depend upon all of the relevant circumstances, which include any promise which the testator made to the applicant, the circumstances in which it was made, and, as here, changes in the arrangements between the parties after it was made. These matters however will never be conclusive. The age, capacities, means, and competing claims, of all the potential beneficiaries must be taken into account and weighed with all of the other relevant factors.'"

General principles 141In addition to the above matters, there are some general principles that are relevant in this case. 142First, freedom of testamentary disposition remains a prominent feature of the Australian legal system: Lajcarova v Todorov at [91]. 143Furthermore, the Court must be vigilant in guarding "against a natural tendency to reform the deceased's will according to what it regards as a proper total distribution of the estate rather than to restrict itself to proper function of ensuring that adequate provision has been made for the proper maintenance and support of an applicant": Cooper v Dungan (1976) 50 ALJR 539 at 542.

Assessment of adequacy of provision 144Section 59(1)(c) of the Act does not define the norm by which the Court must determine whether the provision is inadequate for the applicant's proper maintenance, education and advancement in life. 145As Hallen AsJ said in Laidlaw v Kellie; Laidlaw (bht NSW Trustee & Guardian) v Rusiti [2011] NSWSC 740: - "The question would appear to be answered by an evaluation that takes the court to the provision actually made in the deceased's Will [...] on the one hand, and to the requirement for maintenance, education and advancement in life of the applicant on the other". (at [43]) 146Penny made no provision for Toby in her will. 147Mr Bradford submitted that, nonetheless, adequate provision had been made by Penny for Toby by reason of the fact that Penny had obtained from Steve the April 2010 promises set out at [41] to [45] above. 148Mr Bradford submitted that I should find that the promises gave rise to a trust of the kind referred to by the Court of Appeal in Marshall v Carruthers [2002] NSWCA 47 and that this gave rise to an: - "enforceable obligation to look after Toby for as long as he can and to leave 75% of the equity in the Wollstonecraft Property or any other property which he might later acquire with the proceeds from that property, to Toby on his death." 149Mr Bradford submitted that Steve had, from April 2010, acted in accordance with the promises he made Penny at that time. Mr Bradford pointed to the fact that Steve has supported and cared for Toby since then (including for the period since Penny's death) and, since Penny's death, has made his will of 29 October 2010 pursuant to which he bequeaths 75 per cent of his interest in the Wollstonecraft Property to Toby together with a 1/3 interest in the residue of his estate.

Steve's care for Toby 150I wish to make it clear in this judgment that, based upon the evidence before me, I have no reason to doubt Steve's intention to keep the promises he made to Penny in April 2010, nor his commitment to the care and maintenance of Toby. 151Steve first met Toby in 2004 when he commenced his relationship with Penny. Toby was then five years of age. From January 2006 Steve and Penny began to live together on a full time basis. Steve has lived in the same household as Toby since then. 152Toby has lived with Steve at the Wollstonecraft Property since Penny died. 153Steve has given evidence that he provided considerable financial support to Penny and Toby during Penny's life. There is some dispute on the evidence as to the extent of that support. I do not find it necessary to resolve that dispute. I accept that it has been not insignificant. 154In the months prior to Penny's death, Steve says he helped Toby with his homework each evening, watched television with him and supervised his other activities. Steve coached Toby's soccer team and said that he has been involved with Toby's schooling, almost on a daily basis, since 2010. Steve has arranged for Toby to see a school counsellor to help him during Penny's illness and, since her death, and has regularly consulted with Toby's teachers in order to monitor his progress at school. 155Steve says that Toby has said to him that he wishes to continue to live with Steve, but that he wishes to see his father, Neale, regularly. 156Steve has said that he intends that Toby continue his secondary schooling at the Marist College in North Sydney. 157Toby's year 7 report shows he is progressing well, to at least a satisfactory standard, and often to a high standard. He is described as a polite student with a cheerful disposition who is well respected by his peers and teachers. 158It seems that Toby's school results have improved since 2010. 159Toby is able to walk to and from school, which is situated approximately 700 metres from the Wollstonecraft Property. 160At the Wollstonecraft Property, Toby has his own room. Steve has given evidence that when Toby is old enough, he will have the option of moving into self contained accommodation at the Wollstonecraft Property and that he will be free to live there for as long as he likes, if that is what he wants to do. 161Apart from ongoing counselling, required by the Family Court, it appears that Toby has no current health or personal issues. 162In all these circumstances, I have no reason to doubt Steve's commitment to Toby's best interests, nor, so far as future circumstances permit, that Steve intends to maintain a close and loving relationship with Toby. 163In particular I wish to make it clear that I do not accept the submission, made on Neale's behalf by Mr Meek that Steve "cannot be trusted, if left to his own devices, to ensure that Toby gets the sort of provision which the deceased wished to have". 164Nor do I have any doubt that Neale, as Toby's father, is also committed to ensuring Toby's best interests. 165The reason I am focusing on Steve's position is in order to evaluate Mr Bradford's submission that the promises made by Steve to Penny in April 2010 have the result that, in effect, Penny has made adequate provision for Toby and that accordingly, as Mr Bradford submits, there is no reason for the Court to intervene. 166Neale has brought proceedings in the Family Court seeking orders that Toby live with him. Those proceedings were commenced in 2010. 167Orders have been made in the Family Court concerning Toby's living arrangements. The current order is that made on 6 October 2011. It provides that Toby live with Neale on each alternate weekend and for half of the school holidays and that otherwise, Toby continues to live with Steve. The proceedings in the Family Court have been stood over until July 2012.

Steve's 29 October 2010 will 168As I have mentioned, this will was made about two months after Penny died. 169Pursuant to that will Steve makes the following provisions: - "3. I GIVE the following legacies and specific bequests: (a) My Antique Tudor watch to my son, DANIEL STEVEN SAMPSON; (b) My Graham watch to my stepson TOBIAS BOORNE DAVIDSON; (c) The properties known as [xxx], Maroochydore, Queensland and [xxx], Noosaville, Queensland to my children, DANIEL STEVEN SAMPSON and BRADLEY JARED SAMPSON, as tenants in common in equal shares; (d) The property known as [xxx], Wollstonecraft in the State of New South Wales to my Trustee UPON TRUST to be sold and the net proceeds are to be divided as follows: (i) 75% to my stepson TOBIAS BOORNE DAVIDSON upon attaining the age of twenty five (25) years; and (ii) 25% to be divided equally between such of my sons, DANIEL STEVEN SAMPSON and BRADLEY JARED SAMPSON, as survive me. 4. I GIVE the residue of my estate, both real and personal and wherever situated, to my Trustee to sell, call in and convert into money such part or parts thereof as do not consist of money and to stand possessed of my ready money, together with the proceeds of such sale, calling in and conversation, UPON TRUST to be divided equally between such of my children, DANIEL STEVEN SAMPSON and BRADLEY JARED SAMPSON, and my stepson, TOBIAS BOORNE DAVIDSON, as survive me and attain the age of twenty five (25) years." 170Pursuant to this will, and consistently with his April 2010 promise to Penny, Steve agrees to leave Toby a 75 per cent interest in the Wollstonecraft Property. 171However, as was pointed out to Steve in cross-examination, the will does not completely fulfil Steve's promise to Penny as it does not provide that Toby will receive a 75 per cent interest in any property purchased using the proceeds of the Wollstonecraft Property. It will be recalled that, in their April 2010 conversation, Penny and Steve contemplated that there may be a need to "downgrade" accommodation. It was agreed that, in that event, Steve would leave Toby 75 per cent of his interest in such subsequent accommodation. 172The effect of Steve's 29 October 2010 will is that the proceeds of sale of any such substitute property would fall into residue and would be divided equally between Toby and Steve's sons, Daniel and Bradley. 173In that regard Steve gave the following evidence in cross-examination: - Q. So if the Wollstonecraft property was sold and another property was purchased, apart from the gift of residue in cl 4, this will doesn't deal with any other property that might be bought, as it were, in substitution for the Wollstonecraft property or downgraded from the Wollstonecraft property, would you agree with that? A. Yes. Q. And if fact, under the residue clause, if there was anything left over that would be divided equally between your two children, Daniel and Bradley and Toby, right? A. Yes. Q. So rather than getting 75 per cent of the equity in some substituted property, he would end up with about 33 per cent of residue, right? A. Yes. Q. The will you have currently made does not reflect your promise? A. It reflects my intention. Q. You say the will you have made reflects your current intention, is that right? A. Yes." 174Mr Meek submitted that this evidence shows that Steve intended that his 29 October 2010 will not reflect his April 2010 promise to Penny. Mr Meek pointed to Steve's statement that his will "reflects my intention". 175However, the strong impression I gained when Steve was being cross-examined about this aspect of his will, was that Steve was surprised to realise that the will did not cater for a "downgraded property" in a manner that he and Penny had contemplated. The manner in which Steve gave the answer "It reflects my intention" made clear to me that he meant something to the effect "I intended that it did". 176I find that, although the 29 October 2010 will has the effect I described, it is not one that Steve intended and was not one that Steve appreciated until the matter was drawn to his attention in cross-examination. 177In light of these developments, I was told during argument that Steve intended to alter his will to correct this aspect and that Steve was prepared to offer an undertaking that he would not revoke any such revised will. 178I accept that this is Steve's intention. 179However what this aspect of the evidence shows is that the best made plans can go awry. Had Steve's attention not been drawn to this problem with his will, and had the Wollstonecraft Property been sold and a substitute property purchased and Steve then died, the result would have been fundamentally different to that contemplated by Steve and Penny and, to a significant degree, adverse to Toby's interest. 180Mr Meek submits that even if Steve were to alter his will to ensure it accords with his promise to Penny concerning Toby's share of a "downgraded property", as things currently stand, Steve could adversely affect Toby's position by selling the Wollstonecraft Property and purchasing a replacement property worth very much less. 181There is no suggestion in the evidence that Steve has any intention to act in this way. However, as I discuss below, Steve's circumstances may change. 182In my opinion these are matters relevant to my consideration of Mr Bradford's submission that there is no necessity for the Court to intervene.

Nature of the trust arising from the April 2010 promise 183Mr Bradford submits that Toby's interests are safe, as the promises made by Steve to Penny give rise to an "enforceable obligation" on Steve. 184I accept that an unequivocal promise made by, for example, a wife to a husband that, after the husband's death, the wife would "look after" their child is capable of giving rise to a trust on property left by the husband to the wife in favour of the child. 185Thus in Marshall v Carruthers (supra) Hodgson JA (with whom Young CJ in Eq and Palmer J agreed) held that a trust arose in favour of a child over property bequeathed by his father to his mother in circumstances where the following conversation took place between the father and the mother: - "[HUSBAND]: 'My will provides for my entire estate to go to you [the wife]. I won't be changing it. I want you to inherit everything and look after it for [the son] until you think he's old enough to look after it for himself. If anything happens to you before I go, it is all to go straight to [the son]. I don't want this trouble with the marriage to affect my relationship with [the son]. I want to properly provide for his future financial security. Do you understand?' [WIFE]: 'Yes, I understand. I will look after it for him.'" (at [11]). 186In these circumstances, Hodgson JA concluded: - "In my opinion, the facts [set out above] ... are such as to give rise to a trust of the property given to [the wife] under the will in favour of [the son] absolutely. Although there is a measure of uncertainty in the words, the general effect of them is in my opinion clear. In my opinion equity would not permit [the wife] to hold that property in any way beneficially. Although there is reference to holding property for [the son] until [the wife] thought he was old enough, in my opinion, the trust that the conversation would constitute would be an absolute trust which [the son] could put an end to, so as to obtain full possession of the trust property, once he attained eighteen. That the circumstances are sufficient to give rise to such a trust is supported in my opinion by cases such as Voges v. Monaghan (1954) 94 CLR 231, In Re Snowden [1979] Ch. 528, Brown v. Pourau [1995] 1 NZLR 352." 187However, it appears to me that the facts in this case are not as clear as those in Marshall v Carruthers. 188Although Steve promised Penny that he would "look after" Toby, the arrangements between Penny and Steve also contemplated that, if Steve became ill, or needed money to live on, he could sell or encumber the Wollstonecraft Property (see [28] and [42] above). He and Penny thus contemplated that, if necessary, Steve could erode his current (and thus Toby's prospective) equity in the property - or its replacement. 189The arrangements between Penny and Steve also contemplated, as I have mentioned, the possibility that it would be necessary for Steve to "downgrade" and purchase another property, in which event Steve agreed to leave Toby 75 per cent of "whatever equity" Steve had in that property when he died. 190For that reason, any trust that arose by reason of the April 2010 conversation between Steve and Penny would be subject to those matters and would, to that extent, be uncertain. 191These matters must be taken into account when considering Mr Bradford's submission that, by reason of the April 2010 promises, there now exists an "enforceable obligation" on Steve. It seems to me that it is by no means clear that any satisfactorily enforceable obligation exists. 192Mr Bradford has informed me that, in addition to the undertaking concerning his will to which I have referred, Steve is also prepared to undertake to not further encumber the Wollstonecraft Property. 193I accept that this proposed undertaking reflects Steve's current intentions. However, the proffered undertaking does not, in my opinion, answer the concerns I have expressed above.

The uncertainties ahead 194Mr Bradford's submission is that, in all the circumstances, I should be satisfied that Penny has, in effect, made adequate provision for Toby and, for that reason, the Court should not intervene by making an order for provision. 195Acceptance of that submission would result in the dismissal of Toby's application for provision. 196In that event, were circumstances to change in the future, Toby would, for all practical purposes, be precluded from making any further application for provision. 197This is because the effect of subsections 59(3) and (4) of the Act is that, if an application for provision is refused, a further application for provision can only be made if there is "undisclosed property" in Penny's estate. There is no suggestion in the evidence of any such "undisclosed property". 198If things remain as they are, it does seem that Toby's financial position is reasonably secure. But things may not remain as they are. Ill health may befall Steve. Steve's financial circumstances may, for other unpredictable reasons, change. 199Toby is only 13. Potentially, he has many years of financial dependence ahead of him. 200And, very recently, there has been one most significant change in Steve's (and Toby's) life. 201On about 1 February 2012, Steve commenced a de facto relationship with Nicolette. Steve met Nicolette because her son, Benjamin, is a school friend of Toby's at the Marist College. 202Nicolette and Benjamin are now living at the Wollstonecraft Property with Steve and Toby. 203I make no criticism of this arrangement. It will be for the Family Court to make such adjustments to Toby's living arrangements as may be called for. I express no view about that matter. 204However, this development shows that there is, at least, the potential for Steve's priorities to change to accommodate the needs and obligations of all the participants in this new blended family arrangement. 205As I said during the course of the hearing to the parties, I have no doubt that all of the participants in this litigation are united in their desire to promote and protect Toby's best interests. 206When considering whether Penny has made adequate provision for Toby in her will, I must bear the same matters in mind. 207Penny has made no provision for Toby in her will. In all of the circumstances I have outlined, my conclusion is that the making of no provision for Toby was not adequate and that, accordingly, the Court should make provision for Toby's benefit.

What provision should be made? 208The provision proposed by Mr Meek for Toby is as follows: - (a)by way of immediate provision, a lump sum of $150,000 to be held in trust by Susan and Michael until Toby is 21. I am told that both Susan and Michael would consent to acting as trustee; (b)by way of deferred provision, 60 per cent of the proceeds of sale of the Wollstonecraft Property on terms that: - (i)the Wollstonecraft Property not be further encumbered; (ii)the property is to be sold at a fair market price by private treaty or auction within six months of the later of Toby ceasing to reside at the property or turning 21. 209As I have set out above, the net value of Penny's actual estate is likely to be in the order of $230,000. 210Mr Meek's proposal would have the effect that something like 65 per cent of Penny's actual estate would be held by Susan and Michael on trust for Toby. This would have the effect that this fund would be administered by her siblings, and as Penny wished, independently of Neale. 211It would also mean that, in effect, Steve retains, ultimately, 40 per cent of the net value of the Wollstonecraft Property (in circumstances where his contribution to that property was in the order of 25 per cent). 212In all the circumstances, my opinion is that this proposal is moderate and well judged. 213Mr Bradford submits that the proposal does not take into account what he described as Steve's strong competing claim in relation to Penny's estate. Mr Bradford points out that Steve and Penny lived together for around six years and were married for two of those six years. Mr Bradford also points to the contribution that Steve has undoubtedly made by way of caring for Penny during her illness and caring for Toby then and since. 214On the other hand, Steve is in receipt of income of approximately $190,000 per annum. He has substantial assets other than his interest in the Wollstonecraft Property including superannuation of approximately $240,000 and two properties in Queensland which have a net value in the order of $550,000. 215My opinion is that Mr Meek's proposal takes adequate account of Steve's competing claim in respect of Penny's estate.

The result 216In all the circumstances, I propose to make an order for provision to the effect of that proposed by Mr Meek, on Toby's behalf. 217I invite the parties to prepare documentation, including short minutes, to give effect to that proposal. 218The short minutes should provide for the cost of the proceedings. 219Subject to further argument, I propose to order that Steve (as Penny's executor) have his costs from the estate on an indemnity basis, and that Neale (as a successful applicant for provision) have his costs from the estate on a party/party basis.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 May 2012

At a glance

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Judgment (24 paragraphs)

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Cases Cited (10)