Special circumstances
48 I should add that even if I had granted the application for leave to extend time, under s 28(5)(d) of the Family Provision Act if an order designating property as notional estate is sought in circumstances where the claim is brought out of time, the court must be satisfied that there are special circumstances that would justify the order.
49 It was contended for Craig that his financial circumstances were such that one would conclude, in effect, that the Business was insolvent and that there would be no utility in the making of an order under s 7 of the Family Provision Act in effect designating any property held by Craig as notional estate as that would be to impose a burden on Craig such that he would become bankrupt and unable to meet any order requiring him to make additional provision to Nicole.
50 It was suggested for Nicole that the company accounts were misleading in that nobody could continue a business that was making a constant loss of the kind the disclosed. Craig's response to that was that he was not a quitter, that he had a lease (from which I infer he accepted that he had financial obligations which would not enable him simply to walk away from the Business), and that he was unlikely to be able to sell the Business. There is no evidence on which I can properly find that the accounts of the Business are incorrect or misleading. Even after the discharge of the $450,000 "loan" recorded in the accounts, it is not apparent that the Business would show any material profit.
51 Therefore, there is force in the submission that an order against Craig (given his current financial circumstances) at least insofar as it was involved a charge on his interest in the Business would be likely to have little utility. While Craig does appear to have some assets (aside from his interest in the Business) against which an order could be made, at least in the form of his ownership of or interest in one or more of the motor vehicles referred to in his affidavit, I am not satisfied that Nicole has shown special circumstances to warrant such an order against Craig.
Refusal of application for leave
52 In the absence of any explanation by Nicole for the delay in bring this claim against Craig, and having regard to the views I have formed as to the strength of her notional estate claim (which I discuss later), I refuse the application for leave under s 16(2).
Family Provision Act claim
53 Turning then to Nicole's Family Provision Act claim which was brought within time, the test required to be applied (as outlined in Singer v Berghouse (No 2) (1994) 181 CLR 201) is a two stage test.
54 The first stage is a question of fact, namely whether the provision (if any) made for the applicant is inadequate for his or her proper maintenance, education and advancement in life. An assessment of whether the provision, if any, made was "inadequate"; involves an assessment as to what level of maintenance was appropriate having regard to the applicant's financial position, the size and nature of the estate, the relationship between the applicant and the deceased and the relationship between the deceased and other persons who have legitimate (and in this sense competing) claims upon the deceased's bounty.
55 The second stage, which involves the exercise of discretion, is for the court to assess the proper level of maintenance and adequate provision which should be made. The factors to be taken in account in making such a determination are contributions to the property and welfare of the deceased; the character and conduct of the applicant in relation to the deceased; and the circumstances before and after the death of the deceased (including the extent of the claims of other persons on the estate of the deceased).
What provision was made under the will?
9 August 2006 will
56 Under the will dated 9 August 2006 (after the specific legacies in favour of the deceased's four grandchildren totalling $30,000 and the bequest of the deceased's war service medals to his grandson), the deceased gave all his personal estate to Nicole and declared that the residue of his estate not otherwise dealt with was to be shared equally between his three children.
57 However, it was a "strict and essential condition" for Nicole to receive any gift under his will that she must immediately vacate the Property, if she had not already done so. Clause 4(f) of the will, which imposes this condition, recorded that the deceased had informed Nicole prior to 1 August 2006 that this was his wish.
58 There was evidence before me of a family meeting on 31 July 2006 at which the deceased's solicitor, Mr Peter Kristofferson, made the testator's intentions clear. Clause 12 of the will referred to this meeting:
Upon my instructions, my solicitor, Mr Peter David Kristofferson informed all of my children at a family conference on 31 July 2006 in general terms as to what will be set out generally in my Will and that information is as now more specifically set out in clauses 1 to 7 inclusive and in clause 9 of this Will [excepting only that I previously proposed that an amount of $110,000 described in clause 4(h) were to be $100,000] and I have decided to give the powers as are contained in clauses 8 and 11 and record the other things as are set out in this my Will.
59 As to the meeting on 31 July 2006, in her affidavit made 7 August 2008 Nicole said she recalled the meeting and that she was given little opportunity to speak; she recalled that initially the solicitor, Peter Kristofferson, had made a comment about her personal injury proceedings and that there was discussion about not selling the Property for at least two years for capital gains tax reasons. There was also a discussion at that meeting as to Nicole's suggestion that she rent out some rooms in the house (see paragraph 35 Nicole's affidavit). This seems to have been an idea put forward by Nicole to avoid having to move out of the Property. It did not find favour with the deceased.
60 Mr Kristofferson gave evidence as to that meeting. There was no suggestion that the advice he gave was not independent. His account of the meeting was consistent with what the deceased subsequently did - namely, he revoked the Previous Will to make careful provision for a regime under which Nicole would have to vacate the Property in order to take under the will (and by which Craig would have some financial relief while the business was in difficulties).
61 Nicole gave evidence that, after trying to leave the meeting, she "switched off" (transcript p 42) or shut her mind to what was being said to her, though she had earlier given evidence (transcript p 37) that she was told by the solicitor (Mr Kristofferson) at this meeting for the first time of her father's wish that she leave the Property. This suggests that she well understood (though did not accept) prior to his death that her father wished her to gain a measure of independence by moving out of the family home.
62 Clause 7 of the will reiterated the deceased's concern as to his daughter's lack of independence. It provided:
I am concerned that my daughter, Nicole, must become independent and find permanent employment of some description and I record that I have informed her that she must vacate the house before my death if she is to receive any gift referred to in Clause 4 above of my will.
63 The deceased then gave an exclusive right of occupation of the Property to Craig (and his family) for a period of not less than 15 months and not more than 18 months after his death, subject to the "strict and essential" condition that for Craig to receive any gift under the will he must pay to Nicole or for Nicole's benefit the amount of $150 per week, for the whole period of occupation by him and his family in the Property, and that during that period he must also make mortgage repayments of $150 per week.
64 Clause 9 of the will provided that the Property was to be sold by public auction or by way of private treaty within not less than 15 months and "not less [sic] than 18 months" from the date of the death. This must have been in error. Presumably, the sale period was in fact to be between 15 and 18 months from the date of his death. No point is taken on that issue. It appears that the significance of a sale within 18 months was to avoid capital gains tax becoming payable on the sale of the Property. If so, it may be that the net funds realised on the sale will be less than expected, given the delay in the Property being sold.
65 The will made provision for the balance of moneys from the sale of the Property to be held in trust by the deceased's executor for three years after the Property was sold and invested as provided in Clause 4 (g).
66 It was a strict and essential condition in order for Craig to receive a gift under the will that he must commit within three years of the date of the deceased's death to selling or retaining the Business. If he were to sell the Business, then on completion of the sale he was to give one third of the net proceeds of sale to Brett and one third to Nicole. Alternatively, if Craig chose to keep the Business then in lieu of sale and division, he was to pay the amount of $110,000 to Brett and a further $110,000 to Nicole, such payments to be made on the third anniversary of the deceased's death.
67 Nicole accepted in cross-examination that she was aware of her father's wish that she vacate the Property and that it was a requirement under the will (transcript p 38). She has failed to comply with the condition set out in Clause 4(f). Indeed the commencement of the possession proceedings was for the very reason that Nicole had refused to vacate the family home.
68 Nicole's evidence was that she refused to leave the Property because it was her family home and that if Craig could not meet the interest on the mortgage "bottom line I would have found myself locked out ... then I'd be left stranded with nothing, absolutely nothing if I walk out of that home as well" (transcript p 80). Nevertheless, on a strict application of the clauses of the will, by refusing to vacate the house Nicole has forfeited her right to any legacies or bequests in her favour under the will.
69 There was a suggestion made for Nicole during the hearing that undue pressure had been brought to bear on the deceased in relation to the execution of this will. However, it is clear that the deceased had advice at the time from Mr Kristofferson and that Mr Kristofferson took steps to assure himself that the deceased had the requisite understanding of what he was doing. It was not suggested that Mr Kristofferson (albeit that he was someone who had had a business connection with each of Brett and Craig and a social connection with Nicole in the past) was not giving independent advice in this regard.
70 Both brothers denied any knowledge of the Previous Will until some time after the operative will was executed (transcript p 130 and p 140). Mr Kristofferson's evidence was that, to his knowledge, the brothers were not aware of the Previous Will (transcript p 166).
71 There was evidence of a conversation between Brett and his father over whether Nicole was suitable as an executor (transcript p 140/141) but it is not clear whether that conversation related to the Previous Will (which would suggest Brett did have knowledge of that will) or to the later operative will at a stage when his father was contemplating its terms. Brett's evidence was unsatisfactory on this point in that he did not appear to deny there was a conversation as to whether Nicole was fit to be executor, yet his evidence was that he was not aware of the Previous Will until later and that the first he heard of the operative will was at the 31 July 2006 family meeting. It may be that his evidence can be reconciled if the conversation as to executorship took place after the 31 July meeting but before the will. In any event, this is not a proceeding challenging the deceased's will.
72 The deceased seems to have been conscious of the scope for one or more of his children to seek to exert pressure on him once they knew of the latest will. He included clause 14 in his will as follows:
I further record that I have no desire or intention of changing this will and wish the court to be aware that in the event that I have made a later will or change to this will (which I do not presently wish to or would prefer not to make) will only be changed by Confidential Codicil and simply because I have been hereafter been forced to do so by unbearable pressure exerted on me by one or more of my children.
73 However, clause 14 would suggest that the deceased was concerned about pressure being later placed on him to change that will not that he had felt pressured to change the Previous Will. Mr Kristofferson was not able to say from whom the deceased feared that pressure would be made (transcript p 161). It might be that one could infer the only pressure would be likely to come from Nicole since it was she that was to be required to vacate the Property and she had made clear that she did not want to do so. However, there is no basis for a finding in this regard.
74 The inclusion of clause 14 in my view weighs against the deceased and his solicitor being conscious of any improper pressure at that stage. The instructions leading up to the inclusion of that clause would presumably have caused Mr Kristofferson to be careful to satisfy himself as to the circumstances in which the will itself was being made in August 2006 before arranging for its execution. There is nothing to suggest he did not do so before he proceeded to prepare the final will.
Was the provision made for Nicole inadequate?
75 This question, relevantly, falls to be decided having regard to facts as they exist at the time of the hearing, not at the time of the death (Nicholls v Hall [2007] NSWCA 356 at [40]).
76 In the circumstances which have transpired (solely due, it must be said, to Nicole's refusal to comply with the requirements specified under the will) there is now strictly no provision made for Nicole under the will at all.
77 In passing I note that, as I apprehend the submissions made for Nicole, even if there had been no such condition placed on the legacies in favour of Nicole it would have been contended by her that a one-third share of the residuary estate was inadequate in the circumstances. What Nicole said she thought was fair was a one-third share of the estate (transcript p 80). I infer by this she meant one-third on the assumption that the $450,000 mortgage had already been discharged.
78 As to Nicole's financial circumstances, she is currently on a disability pension and has limited means of support. The status of her personal liability claim is uncertain.
79 The fact that Nicole currently has part-time employment (which involves some lifting of milk crates) suggests that she is capable of some level of employment, although the medical evidence (not challenged) before me was that she is unable to take on full-time employment at least if it involved physical activity such as lifting.
80 As to the size of the estate, unless an order is made designating some property as notional estate, it is likely to be very small (the diminution in its size having been contributed to in part by Nicole's refusal to vacate the Property, after which Craig at some point ceased to meet the mortgage repayments).
81 If, as was suggested by some of the evidence there would be adverse capital gains tax implications if the Property were sold more than 18 months after the death those would also now come into play and may reduce the estate further.
82 As to Nicole's relationship with the deceased, at a personal level Nicole's own evidence was somewhat inconsistent. She described her father as verbally abusive at times (when he drank) but said she had a good relationship with him.
83 There was evidence (denied by Nicole) by Craig that Nicole had kicked her father and by Brett that Nicole had shouted at her father. Both Nicole and Brett were argumentative from time to time in the witness box. There have been falling-outs between all three of the siblings. The impression left with me after the evidence from all three of the siblings (and having regard to clause 6 of the will) was that this was a family not unused to family disputes or altercations and I therefore do not think much weight can be placed on the allegations of misconduct made against Nicole in this regard. The siblings seemed only too ready to cast accusations of misconduct or poor behaviour against each other; and it seems to me there is likely to have been some measure of exaggeration in their respective accounts of events. There was no evidence of any systematic mistreatment by Nicole of her father.
84 There was evidence by Nicole that she had made contributions over the years to the property of the deceased and the welfare of the deceased. Nicole gave evidence as to financial assistance she had given to her parents (when she was about 24 years old) while her parents were in a state of financial difficulty (said by her brother to have been repaid) and by way of contribution to some renovation works in respect of the Property in 1992.
85 Nicole's mother was diagnosed with leukaemia in about 2005 and her father suffered from asbestosis and lung cancer. Nicole gave evidence as to her assistance during her mother's terminal illness, taking her mother to doctor's appointments and visiting her in hospital. She also gave evidence as to similar assistance she had rendered towards her father. Nicole's evidence that she had assisted in cleaning out the house after her mother's death was confirmed by her close friend, Karen McCartin, though Ms McCartin said that she had carried out all of the heavy work as Nicole was not able with her injuries to do that.
86 The level of assistance that Nicole had given over the years was the subject of dispute by her brothers. It was submitted against her that if Nicole and her friend, Ms McCartin, had needed to spend as much time as they said they did cleaning the house after the death of the deceased, the house must have been a "pigsty" before then and therefore Nicole cannot previously have contributed much by way of cleaning of the house. It seems to have been accepted by Nicole (and her friend Ms McCartin) that when her mother was alive it was her mother who undertook the bulk of the household cooking and cleaning.
87 Brett gave evidence that shortly before his father died he had visited his father at the Property and his father had said he had not eaten breakfast because Nicole had not bought him any food. For Nicole, it was submitted that this showed that her brother had assumed she would bear the responsibility for buying the food. There was also testimony (transcript p 59) from Nicole, that she had not had money to pay for food and (transcript p 67) that (denied by Craig), her brother Craig would come and take food from the house. In circumstances where it was not suggested that the deceased was regularly left without breakfast I do not think much weight should be placed on this incident.
88 It does not appear to have been disputed that Nicole did give assistance to her parents (even if that were to a limited extent) in the period leading up to their respective deaths and I do not place weight on the criticisms levelled at her by her brothers in this regard.
89 There was also evidence (transcript p 48) that Nicole was requested by her mother to, and did, provide assistance with the Business to help Craig in around September 2005. While it was said that her assistance there in fact only caused further problems with the Business, I accept that Nicole provided that assistance at the request of, and to help others, in the family. She has no interest in the Business.
90 Therefore, I accept that Nicole did give assistance to her parents over the years while she lived with them in the home. Whether this was greater than any assistance rendered by her brothers over that time (of which there was little or no evidence), does not seem relevant to me to be to the question as to what maintenance would have been adequate or proper for Nicole.
91 The fact that the deceased in his will had clearly turned his mind to Nicole and her needs (albeit forming the view, contrary to Nicole's, that she would best be assisted by gaining a measure of independence and leaving the Property) including a recommendation for her to undergo counselling, confirms that the deceased felt he had some kind of moral obligation to Nicole (as well as to his other children).
92 While the deceased clearly considered it to be in Nicole's best interest to become more independent (and the will provisions were clearly his way of attempting to bring about such a result), he nevertheless seems to have acknowledged that he should facilitate the provision of financial assistance to enable her to do so by way of the corresponding arrangement for Craig to pay her money during that period.
93 I have formed the view that to make no provision at all for Nicole (as the will, by the application of its special conditions now does, even noting that this is her own fault), is not adequate provision for Nicole's proper maintenance having regard to her financial circumstances, disabilities and the fact that (at 43 years of age) she was largely dependent on her parents' bounty for accommodation and support over most of her adult life and is now (having regard to her emotional state in the witness box and her apparent concerns as to bullying/intimidation by her brothers) in a stressed state.
94 Therefore, I find as a matter of fact that inadequate provision has been made for Nicole.
Size of the Estate
95 This brings me to what is comprised by the estate. Absent any order designating property as notional estate, it is very small.
96 Part of what is in dispute between the parties is whether there is any loan repayable to the estate by Craig (or, for that matter, by any combination of Craig, Brett or the Business) in respect of sums advanced by the deceased (and his late wife) and, if not, whether the $450,000 borrowed in April 2006 is a prescribed transaction by reference to which any property held by Brett should be designated as notional estate. The latter issue necessitates some consideration of the circumstances in which the Business was established and Brett's involvement in the Business.
Acquisition of the Business
97 The Business was acquired by Craig and his wife (Valerie) for approximately $170,000. The Contract for Sale of Business clearly discloses that the purchasers were Craig and his wife. There was a dispute as to whether this was in fact Craig's business or whether it was a business in which Craig and Brett were partners. Nicole, in the witness box, asserted that Brett was a "silent partner", although she had earlier referred to the Business in her affidavits as Craig's business and she said in the witness box that it was referred to in the family as Craig's business.
98 There is no dispute that Brett provided finance totalling approximately $255,000 for the Business.
99 Craig's evidence (which was consistent with Brett's evidence) is that in 2004, when he wanted to acquire the Business with a friend of his (Tom Kubulay Kilincer), he asked Brett to loan him money and that on or about 31 March 2004 Brett provided funding of $170,000 to him. Brett refinanced or increased the existing mortgage over his own home of $330,000 to a mortgage of $500,000 in order to do so. A subsequent loan of $85,000 for working capital was obtained from Brett in May 2004 and at that time Brett's mortgage was increased to $585,000.
100 Brett's evidence (corroborated in part by Nicole's own evidence of partial conversations she says she overheard at the time - transcript p 55) was that he was concerned as to the arrangements in relation to Craig's acquisition of the Business because Tom was not putting any money into the Business. Brett took advice from Mr Kristofferson, which resulted in Brett entering into a Deed of Business Arrangement whereby he would take a 20% share in profits after repayment of the loan and after payment of the salary of Craig. Brett denies that he has ever expected to receive anything from the business other than repayment of the loan and interest; and both he and Craig deny that he has received any profits from the Business.
101 The Deed of Business Arrangement was entered into in March 2004 between Craig, Valerie, Brett and Craig's friend (Tom). The deed recited that Craig was purchasing a business "together with the second party [Valerie] and the third party [Brett]" and that the parties wished to make provision for each of Valerie and Brett to have a shareholding and other interests in the business in accordance with the deed.
102 To the extent that this recital might support the conclusion that Brett was acquiring part of the Business, it is relevant to note that the operative part of the deed (see clause 1) makes clear that the capacity in which Brett was participating in the transaction was as a financier. That clause records that the parties agreed Craig and Valerie were purchasing "and the third party [Brett] is financing" the purchase of the Business. It then provided that the Business was to be operated and conducted on the terms therein including:
(a) The first party is purchasing the business together with the second party and third party on the basis set out in this deed.
103 While not wholly consistent with the opening words of clause 1, I think sub-clause (a) should be read as meaning that Craig was purchasing the business, with Valerie and Brett's involvement in the purchase being as set out in the deed. The balance of the deed seems to make clear that Brett's role was no more than to provide funds.
104 Clause 7 provided that after the initial period, after all expenses of the Business and before any profit or drawings from the business, the income would be applied in a minimum amount payable by way of equal monthly instalments to Brett's mortgagee by way of repayment of the principal of the loan. Thereafter, the balance of any trading profits were to be apportioned as to 40% each to Craig and Valerie and 20% to Brett. Tom was to have the right to exercise an option to have a share in any gross pre-tax trading profits exceeding $92,000 per annum (the amount which the vendors had apparently warranted as the expected pre-sale annual income) and a corresponding obligation to contribute to proportionate losses below that figure.
105 Under clause 20 of the Deed of Business Arrangement it was clear that, while each party having an entitlement to share in the profits or losses of the business would be just and faithful to the others or other in all transactions relating to the business, it was only Craig and Tom who were obliged to attend the business during normal working hours. That clause noted that Valerie and Brett "may attend the premises of the Business at any time at their own discretion if they wish and … are free to carry on any other trade, work, profession, and … are entitled to work on a full time or part time basis as employees of any other business, providing such other business is not a competitor of the business".
106 As far as the position of Brett is concerned, the evidence does not support the contention that Brett has a proprietary interest in the Business. Brett is not a shareholder of the company incorporated in July 2004 to carry on the Business. Nor is he a director of that company. As noted, he was not a party to the sale contract. Nor is he a party to the lease of the premises from which the Business operates.
107 The business documentation, executed with the benefit of legal advice from Mr Kristofferson (who was not cross-examined as to this aspect of the transaction) makes it clear that Brett's role was the provision of finance and that Craig was to repay that loan. Only if profits reached a certain level was Craig to pay a share of the profits to Brett (presumably in consideration for the benefit Craig had obtained by the initial advance). At best Brett had a potential claim for moneys owing under the deed if the profits of the Business improved; not an interest as such in the Business.
108 The evidence, even on Nicole's version of events, suggests that Brett's involvement with the Business was no more than casual (occasional visits on the way to and from visits to a friend of Brett's who was in Parramatta Gaol - transcript p 47). On one occasion Brett "spoke to the workers", apparently at the request of the family that he do so. Indeed, Nicole seems to have had more involvement in the Business than Brett by reason of the fact that she worked there for some time prior to Christmas 2005. There is no evidence that Brett took any active role in the company of the kind that might have been expected if he were in fact a business partner.
Subsequent financial arrangements
109 There was apparently a falling out between Craig and Tom in early 2005. Craig continued with the Business on his own. The deceased borrowed $120,000, and took out a mortgage over the Property to secure that loan. The moneys were advanced to Craig on 18 May 2005. Those moneys (and the earlier moneys from Brett) were recorded in the books of the Business as loans. Repayments on the loans taken out by Brett and by the deceased were met out of the income of the Business.
110 There is no dispute between the siblings that in early 2006, when the business was again in a difficult situation, Craig approached his father for assistance. Craig's evidence is that his father discussed this request with his mother and that his father said he would gather the loans (Brett's two, of $170,000 and $85,000, and the deceased's of $120,000) together and put them on his house but that Craig would have to make repayments on the mortgage and that if the house had to be sold then his father and mother would have to move into Brett's place.
111 In February 2006, when the deceased's wife was still alive, she and the deceased applied for a loan of $450,000. On 27 March 2006 the deceased's wife gave the deceased a power of attorney, with which the deceased subsequently executed a mortgage registered over the Property securing the sum of $450,000. That sum was used to discharge the existing mortgage over the Property in respect of the May 2005 ($120,000 loan); to repay the loans Brett had taken out and secured over his own house ($255,000); and to pay a sum of approximately $70,000 to Craig or the Business. Therefore, the increase in the amount advanced by the deceased in April 2006 (having regard to the earlier $120,000 already provide to Craig) was approximately $330,000.
112 Brett's evidence was that he knew nothing about the 2006 refinancing of the loans until about the time it took place (transcript p 138). Brett's account is that Craig told him, before the two loans secured against his home were repaid in April 2006, that his parents were assisting him in refinancing. Brett's evidence was that he discussed that very briefly with his father and that the deceased had said that he (Brett) should not be at risk for Craig's business.