Evans v Perpetual

Judgment (9 paragraphs)

[1]

JUDGMENT 1HIS HONOUR: This is an application under the Succession Act 2006 in respect of the estate of the late Heather Fawcett Bovill who died on 19 March 2010 aged 98 years. 2She was survived by two children. They were her adopted daughter, Merilyn, the plaintiff who is aged 57 years and Dugald the son aged 69 years. 3Dugald brought proceedings as well but they have been resolved and discontinued.

[2]

THE LAST WILL OF THE DECEASED 4This was made on 20 December 2006 and appointed Dugald and the defendant as executor. Dugald has how resigned. Under the will, the deceased gave personal items to Dugald and the rest of her estate was to be held on protective trust in two successive life estates. The first was for Merilyn the plaintiff and the second was for her disabled son Luke who is now 29 years of age. The remainder interest after the life estate was to be held for Dugald's three children who are presently aged 43, 41 and 38 and if they all predeceased the last surviving life tenant then for the surviving grandchildren. 5The relevant provisions of the will are as follows: 6(a) To pay or apply so much of the income thereof as my Trustee in its absolute discretion shall deem necessary for the proper maintenance education benefit and advancement of my daughter MERILYN ANN EVANS during her lifetime AND in the exercise of my Trustee's discretion it is my wish that my Trustee pay or apply only so much of the income of my residuary estate as shall not prejudice any pension or other social security benefit to which my said daughter shall be entitled but my Trustee may disregard this expression of my wishes if compliance with those wishes would leave(in the opinion of my Trustee) my said daughter without adequate provision for her maintenance education benefit and advancement AND I DIRECT THAT income not applied shall be accumulated and shall form part of the capital of my residuary estate. (b) My Trustee may pay or apply in its absolute discretion at any time or times and from time to time any part or parts or the whole of the capital of my residuary estate to or for the benefit of my said daughter MERILYN ANN EVANS if (in the opinion of my Trustee) her means shall be insufficient to maintain her in reasonable comfort or if she shall be faced with medical surgical nursing or other charges of an onerous or ongoing nature AND I DECLARE that in the exercise of my Trustee's discretion my Trustee shall have regard to my wish that the interests of my said daughter shall be paramount and, if necessary, to the total exclusion of any successive life interest and interest in remainder. (c) ON AND FROM the first vesting date my Trustee shall pay or apply so much of the income of my residuary estate as my Trustee in its absolute discretion shall deem necessary for the proper maintenance education benefit and advancement of my grandson LUKE EVANS (who has learning difficulties and is likely to always require professional supervision)during his lifetime AND in the exercise of my Trustee's discretion it is my wish that my Trustee pay or apply only so much of the income of my residuary estate as shall not prejudice any pension or other social security benefit to which my grandson shall be entitled but my Trustee may disregard this expression of my wishes if compliance with those wishes would leave (in the opinion of my Trustee) my said grandson without adequate provision for his maintenance education benefit and advancement AND I DIRECT that income not applied shall be accumulated and shall form part of the capital of my residuary estate. (d) My Trustee may pay or apply in its absolute discretion at any time or times and from time to time any part or parts or the whole of the capital of my residuary estate to or for the benefit of my said grandson LUKE EVANS if (in the opinion of my Trustee) his means shall be insufficient to maintain him in reasonable comfort or if he shall be faced with medical surgical nursing or other charges of an onerous or ongoing nature AND I DECLARE that in the exercise of my Trustee's discretion my Trustee shall have regard to my wish that the interests of my said grandson shall be paramount and, if necessary, to the total exclusion of any interest in remainder. (e) ON AND FROM the second vesting date my Trustee shall pay or transfer my residuary estate to such of the children of my said son Dugald Bruce Saywell Barrack as shall survive the second vesting date and live to attain the age of twenty-five (25) years and if more than one equally between them as tenants in common PROVIDED ALWAYS THAT if none of the children of my said son shall live to take a vested interest in my residuary estate then for such of the remoter issue of my said son as shall be living at the second vesting date or the date of death of the last survivor of my said son and his children (whichever shall last occur) and if more than one equally between them per stirpes." 6The first vesting date is defined as the date of death of Merilyn and the second vesting date is the date of death of Merilyn and Luke. 7The deceased had over the years since the early 1980's made many wills containing similar provisions to what are found in the present will. In addition the deceased made statements of her reasons for so providing. For example in a statutory declaration sworn on 2 December 1983 she said the following. "The reasons for leaving my residuary estate in the manner above described are as follows: (a) My daughter Merilyn has not proved to be able to handle business affairs and has been disposed to giving money to other persons rather than retaining it for her own benefit and that of her children. Merilyn has been separated from her husband for approximately six years. Her husband has been living in a de-facto relationship with another woman, but nonetheless he or his family have and may continue to bring influence to bear on Merilyn to obtain money. Each arty to the marriage has a child out of wedlock. Merilyn's husband to my knowledge has never commenced divorce proceedings. My daughter has advised me that she has not commenced divorce proceedings as her husband has indicated that he would claim custody of the children if she were to do so. (b) I have provided income for life (rather than capital) to my daughter Debra as she has proved to be vulnerable to people requesting money and has lent money imprudently without any guarantee of it being repaid. She has lost her life savings. I fear that she has not curbed this vulnerability. (c) Both my daughters have proved to be imprudent in relation to money matters insofar as they have not resisted requests from other persons for money where there was little guarantee of it being repaid. 8In a letter dated 5 September, 1997, to her son she said. 'I have this day made a new will appointing you as the Executors and Trustees thereof. I have not left an outright interest to my daughter Merilyn Ann Evans as I consider this would not be in her best interests. Merilyn has had learning difficulties throughout her life and I believe she could be easily persuaded to part with money set aside for her benefit. Her condition is more fully described in a letter which should be in file with Perpetual Trustee of a former General Manager of that company, Mr Ben Scobie. In all the circumstances I consider that the provisions made for Merilyn are appropriate and that she has been left with proper provision for her immediate and long-term needs. Income is available to her and, if necessary, you have power to advance capital for certain purposes. In the unlikely event that Merilyn were to make a claim upon my Estate it is my wish that you use this letter and whatever other evidence is necessary to support the terms of my Will as I am convinced that the provisions made for her are in her best interest. The letter is confidential to you to be only used in the event that a claim is made upon my Estate. 9These statements were admitted as evidence of the deceased's belief but not as evidence of the facts contained therein. I will return to this aspect later.

SITUATION IN LIFE OF MERILYN 16Merilyn is 57 years of age, single and has three children. Only her son Luke aged 29 years lives with her and is dependent upon her and will be so for the rest of his life. She has been divorced since 1978 and has little or no contact with her former husband. She has no assets apart from old furniture and personal effects. Fortunately, the only monies she owes are $11,896 which is owed to Debra's trust. It was funds advanced to her some years ago to provide one of the sons with a car for the family's use. Merilyn herself does not drive. 17Her income consists of Centrelink, a carer's pension of $858.80 per fortnight or $22,328.80 per annum. It was only on 25 July 2011 that she started to receive $80 per week from the defendant pursuant to the trust established under the will. This is $4,160 per annum making her total income then $26,488.80. 18Since submissions in these proceedings the defendant has offered to pay $200 a week plus $5,000 per annum for a holiday. This brings the total income up to $31,988. Her expenses include the outgoings on the home which is owned by the Debra trust. The trustee of that trust is The Trust Company. Luke makes some small contribution to expenses and as a result her expenses are $13,636 per annum or $262.23 a week. They were plainly tailored to her subsistence level of income which only allowed her to spend $200 per fortnight for both their food and groceries. Once she received the $80 per week she described her changed spending habits as follows: "Since receiving the $80 a week I don't have any more savings. I just haven't worried as much about things like grocery shopping. I don't necessarily get the cheapest item, sometimes I get food that is nicer and a bit more expensive than the cheapest option. Also I have bought one or two items of clothing for myself." 19Merilyn lives in a home in Penrith which is owned by the trustee of the trust set up by the will. The terms of the trust are as follows: (c) As to the remaining five (5) of the said ten (10) equal shares of my residuary estate (hereinafter called "the Fund") my Trustee shall invest the same in the manner hereinafter authorised and shall pay so much of the income and if necessary, so much of the capital as my trustee shall determine in its absolute discretion to be for the benefit education maintenance and advancement of my sister Merilyn Evans of 15 McGann Place Cranebrook, New South Wales and her children with my Trustee having absolute discretion to determine the amount and propositions to be paid or applied to or for each of them on a needs basis (it being my wish, but not a binding trust, that any distributions to her children shall be as equal as possible subject always to my primary concern that my Trustee shall provide for the welfare of my said sister as a paramount consideration and, if necessary, to the exclusion of her children) AND ON AND FROM the date of death of my said sister or if she shall have predeceased me, the date of my death (which last occurring date is hereinafter called the vesting date) my Trustee shall pay or transfer the Fund or what shall then remain of it) to such of the children of my said sister as shall survive the vesting date and as shall attain or have attained the age of twenty-one (21) years and if more than one equally between them as tenants in common PROVIDED ALWAYS THAT, if any of my said nephews and nieces shall not survive the vesting date or having survived the vesting date shall not live to attain a vested interest in the capital of the funds, leaving a child or children surviving the vesting date or born after the vesting date who shall attain the age of eighteen (18) years such last mentioned child or children shall take and if more than one equally between them the portion of the Fund which his her or their parent would have taken had such a parent survived the vesting date and lived to attain a vested interest therein AND I DECLARE that until the vesting date:- (i) It is my wish, but without creating a binding trust or obligation, that in the exercise of its discretion my Trustee pay or apply only so much of the income derived from the Fund as shall not prejudice any pension or other social security benefits to which my said sister and/or her children shall be entitled but my Trustee may disregard this expression of my wishes if compliance with those wishes would leave (in the opinion of the my Trustee) my said sister and/or her children or any of them without adequate provision for their maintenance education benefit and advancement in life and I direct that income not applied as aforesaid shall be accumulated and shall be deemed to form part of the capital of the fund; (ii) IF in the opinion of my Trustee the income of the fund shall be insufficient at any time to permit my said sister to live in the manner to which she has been accustomed my Trustee in its absolute discretion may advance part or even the whole of the capital of the funds for her benefit, it being my desire that the interests of my said sister shall be paramount and, if, necessary, to the inclusion of any other beneficiaries of the fund; (iii) My Trustee shall be empowered to use the whole or any part of the funds for or towards the purchase or acquisition in the name of my Trustee of any real estate property or other interest in real estate or any share or other interest conferring a right of residence in real estate for the purpose of permitting my said sister to have the use and occupation thereof free of rent but subject to such conditions as to payment of rates taxes and other outgoings and maintenance and other matters as my Trustee in its absolute discretion shall determine." 20As can be seen it follows the pattern of her Mother's will except that the remainder interest is held for Merilyn's three children including Luke. The home is valued at $310,000 to $340,000. The problem that has occurred is that the only asset of the trust is the house so Merilyn has to meet the rates electricity and insurance. That has been happening for years. Plainly The Trust Company will have an entitlement to commission over the years which has not been paid. The plaintiffs' solicitors endeavoured to find out what are the trustees unpaid fees and the trustees attitude to selling the house and either buying a new one or holding the proceeds for the plaintiff. In an entirely unhelpful response The Trust Company has ignored the first question and refused at this time to give any assistance at this time on the other questions. Unfortunately the plaintiff did not give permission to the present defendant so they could inquire to find out similar information. 21Plainly however if The Trust Company decides to sell the house and deduct fees owing to it (whatever they might be) they will be obliged to hold the proceeds pursuant to the trust to pay an income to the plaintiff and then to the capital for her children. 22There is no suggestion, here, in the evidence the plaintiff did not have a good relationship with the deceased and obviously enough she did not contribute anything to the estate of the deceased.

MERILYN'S CLAIM 27The plaintiff seeks a lump sum of $1,000,000 with the balance to be held for Luke on a protective trust under the will. An alternative case was put that Merilyn should receive a lump sum of $140,000 so that she can repair the Penrith house, have a holiday and have a fund for unexpected contingencies plus receive an annuity of $70,000 per annum payable monthly. The evidence suggests there this would leave $300,000 in present value terms for Luke on Merilyn's death, assuming she lives for another 27 years. Luke will perhaps then receive a third of Debra's estate which is presently valued as I have indicated above subject of course to any deductions for commission, by the Trustee. 28The claim for an entitlement to the $1,000,000 is founded on the basis that there is no reason for a protective trust. There is no evidence that Merilyn has in the past been improvident in the management of her money or is easily importuned although plainly the deceased thought this was the case. She does however have difficulty writing letters and has to obtain the help of friends in order to write them. Fortunately she can read. She has not worked since her marriage and she has never had to manage investments. She says that she would take advice from professionals but I would think that she would not have the abilities to assess whether that advice was appropriate or whether someone was taking advantage of her. 29The trust provision for the welfare payments were correctly criticised on the basis of what has been said on these matters in this court. In , Whitmont v Lloyd (unreported, Supreme Court of NSW, Bryson J, 31 July 1995) His Honour said the following: "The protection of public funds from claims by indigent persons is not a purpose of family provision legislation but they are incidentally protected by the legislation, which was not enacted solely for protection of private interests and serves public policy: See Dillon v. Public Trustee of New Zealand [1941] AC a AC at 303, 304, and observations, not uniform in their import in judgments in Lieberman v Morris [1944] HCA 13; (1944) 69 CLR 69. In my opinion, the availability of age pensions and other social benefits is a circumstance which should be regarded, and particularly in small estates it may be appropriate to leave an applicant wholly or partly dependent on them or to mould the provision made so that their availability is preserved in whole or in part. The acceptance of benefits for which statue law provides is in every way legitimate, involves no social stigma and incurs no disapproval from the Court. It is not the court's task to be vigilant to throw burdens off public funds and on to private estates. Still it is true that the legislation has a public policy purpose and it is not appropriate that where there is wealth in an estate it should be directed away from the less fortunate and successful of the eligible persons so as to enhance their claims to social benefits and maximise the resources of others; the court should not disregard the interest of the public in public funds, which can receive incidental protection from the workings of this legislation. Where wealth is available it should be used to meet needs for maintenance, education and advancement of eligible persons. The significance of social benefits is related to the available resources. In my understanding this expresses the view of 0 which this Court administers the legislation". (Bold emphasis added). 30Another assumption, in the plaintiff's submission for this lump sum was that the plaintiff would provide for Luke until he died. She gave no evidence of her testamentary intention if she did have a large capital sum at her disposal when that occurred. 31There is however a jurisdictional problem with the submission seeking a large lump sum. That is there is no evidence as to why she needs an income of either $50,000 or $70,000 per annum. There is no evidence of her present or future income needs. The only evidence of future capital needs is $74,810 for repairs of which I accept, $54,810 is appropriate and the need for a holiday of $10,000. Plainly, there would be some funds necessary for emergencies before the trustee could advance her some money. 32Another difficulty in the case is the plaintiff's ambivalence about her accommodation. She said in her affidavit: "The other option is that I could buy a new house, the current house isn't very nice. It is draughty and old and it needs a lot of work. It probably makes more financial sense to buy a new house than spend a lot of money on the existing house. I am still thinking about whether I want to do that though because Luke has special needs and a move will require a lot of careful planning to make sure he copes with it okay and is near the amenities that he needs". 33She still has not made up her mind and put anything forward about any new house and its suitability for Luke. In this regard I am reminded of what was said by Sheller JA with the concurrence of Cripps JA in the Court of Appeal in Singer v Berghouse 23 July 1992. He said: "I must say that I find it extraordinary that the appellant presented scant or no evidence as to her present income and outgoings or as to her intentions or needs for the future or as to what lump sum provision applying appropriate discount tables would be required to meet these claims or needs, if they existed. In my opinion, in the circumstances of this case, for the court, in the absence of any such evidence, to make an order for the payment to be the appellants of a lump sum is to do no more than act on speculation and contrary to the prohibition contained in s9 (2) of the act, to alter the deceased's disposition of his property in the absence of proof that he has inadequately provided for the appellant". 34These comments were echoed in Evans v Levy [2011] NSWCA 125 . At [38] Young JA (with whom Campbell JA and Sackville AJA agreed)said, inter alia: "The court has to be presented with adequate evidence before it can make an order under the Act. Time and time again the court has been denied what would appear to be very basic material required to support a claimants' case". 35At [43] His Honour said, inter alia: "Again, it must be said that if plaintiffs in these case are to be properly served, the court must be given sufficient details of the claim and sufficient evidence to back up that claim". 36It seems to me, that there is no evidentiary basis to support the claim for a million dollar lump sum. The matter however is more complex because of the claim of Luke on the testator's bounty. It is important that his rights are preserved not only on the death of the plaintiff at age 85 but also in case there be an untimely early death of the plaintiff. The defendant has helpfully put on evidence of modelling the trust capital depending on the different outcomes required. 37Scenario number 1 is that the trust portfolio pay Merilyn $200 a week for living expenses and $5,000 per annum for holidays expenses. On that basis, the trust capital is preserved and the portfolio value in 28 years time, will be $6,314,605 (or $2,835,476 in present value figures). 38Scenario number 2 provides for the trust portfolio to pay Merilyn $25,000 immediately for capital improvements, $200 per week for expenses and $5,000 per annum for holidays. That preserves the trust capital leaving the trust in 28 years time to have a value of $6,207,085 (or $2,787,196 in the present value terms). 39Scenario number 3 is that when Merilyn dies the trust could buy a property for Luke for $350,000 in today's dollars (or $758,360 in future dollars) and $200 per week for living expenses. That, also, shows, the capital being preserved over the period of trust and that in present value terms $8,828,746 until available. 40Scenario number 4 relates to what was the plaintiffs' alternative submission: That was to pay Merilyn $140,000 immediately and $70,000 per annum indexed by inflation. What that does is shows a depletion of the trust capital so that in 28 years time it would be $668,038 (or in present value terms $299,971). 41What can you deduced from this is that the alternative claim by the plaintiff will leave only minimal capital to cover Luke after his mother dies in 28 years time. In the meantime he will be totally dependent upon his small income and his mother for support and the provision of a residence. The death of his mother will mean that he will not have enough to buy a house from the Debra trust. Scenario number 3 suggests that if $350,000 is now used to purchase a home for the plaintiff the trust could still pay $200 per week to the plaintiff and then to Luke and maintain a healthy capital at Luke's death. Although Luke is not an eligible person his disabilities require the court to put his claim on a nearly similar level to that of his mother. In particular the court should try and guard against some unforeseen or unfortunate incident such as an early illness or death of his mother which means that he will have to be supported by the trust. Any substantial reduction now in the capital of the trust would put the position in support of Luke in these circumstances at risk. 42The provision of $140,000 now to the plaintiff will not put Luke's interests at risk. If the plaintiff wishes to spend funds on the trust property it would be at her risk and it would be her decision to be made. I am sure she could make an assessment of whether she wishes to do that. There should also be provision for the plaintiff to be provided with a home if, for some reason, the Debra trust is not able to keep that home. 43In my view I think that an appropriate solution, is, in general terms as follows:

That there be a legacy to the plaintiff of $140,000.
That the trust be varied to: (a) provide for an annuity for the plaintiff of $200 per week indexed to increase with inflation; (b) a discretion to pay further amounts of income over and above the annuity to the plaintiff. (c) removal of the pension and social security restrictions in the terms of the trust; (d) provide for power to use part of the fund for the housing for Merilyn and/or Luke; (e) permit the trustee in exercising its discretion to pay income to have regard to the income received from the Debra trust by the plaintiff. 44I would anticipate the usual costs order that the trustee's costs be paid on an indemnity basis and the plaintiff's costs be paid on the ordinary basis out of the estate. 45I direct the parties to bring in short minutes.

At a glance

Court

Decision date

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Judgment (9 paragraphs)

Parties

Cases Cited (4)