Evans v Perpetual

ESTATE OF THE DECEASED 10Subject to some minor adjustments due to interest received the estate consists of cash of $1,677,914 and shares worth 90 dollars. There are tax liabilities for which a provision of $40,000 has been made. The defendants' costs of the proceedings are $59,451. The plaintiff's costs on indemnity basis are $45,209. They are 25% to 20% percent less on the ordinary basis.

BACKGROUND HISTORY 11The deceased was born in October 1911 and she had two children Dugald who was born in July 1942 and Merilyn the plaintiff who was born, in November 1954. She was adopted and there was also another adopted child, Debra. In the 1970's Merilyn was employed as a pharmacist and then as a nurse aide. She then married and had three children; one of whom is Luke. Luke was born in February 1983 which makes him 29 years of age. 12Her sister, Debra, died in October 1995. That estate of Debra's left a trust in which the plaintiff benefits. The plaintiff, Merilyn, after Debra's death occupied the home owned by the trust at Glebe Place Penrith. 13The deceased's will was executed on 6 January 2001 with a codicil on 20 December 2006. The deceased died as I have said on 19 March 2010. Probate was granted in July of that year. 14In October 2010, Merilyn wrote to Perpetual Trustee, requesting an additional payment of $80 per fortnight but unfortunately received no response. The summons was filed on 18 March 2011.

ELIGIBILITY 15The plaintiff is an eligible person and indeed the only eligible person to have survived the deceased. In applications under the Family Provision Act 1982, the High Court in Singer v Berghouse (1994) 181 CLR 201 has set out the two stage approach the court must take. These comments are equally applicable to the claims under the Succession Act 2006. At p 209 it said the following: " The first question is, was the provision (if any) made for the applicant 'inadequate for (his or her) proper maintenance, education, and advancement in life'? The difference between 'adequate' and 'proper' and the interrelationship which exists between 'adequate provision' and 'proper maintenance' etc were explained in Bosch v Perpetual Trustee Co Limited. The determination of the first stage in the two-stage process calls for an assessment of whether the provision (if any) made was inadequate or 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 relation, the of the relationship between the applicant and the deceased, and the relationship between the deceased and other persons who have legitimate claims upon his or her bounty. The determination of the second stage, should it arise, involves, similar considerations. Indeed, in the first stage of the process, the court may need to arrive at an assessment of what is the proper level of maintenance and what is adequate provision, in which event, if it becomes necessary to embark upon the second stage of the process, that assessment will largely determine the order which should be made in favour of the applicant. In saying that, we are mindful that there may be some circumstances in which a court could refuse to make an order notwithstanding that the applicant is found to have been left without adequate provision for proper maintenance. Take for example a case like Ellis v. Leeder, where there were no assets from which an order could reasonably be made and making an order could disturb the testator's arrangements to pay creditors".

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.

THE SITUATION IN LIFE OF LUKE 23Luke is 29, single and lives with his mother. He has a bank account and saves some money for holidays. His income is a Centrelink pension $671.90 per fortnight and an income from the sheltered workshop of $155.61; that is $827.51 a fortnight or $21,515 per annum. As I said he works in a sheltered workshop and this is five days a week. His mother describes what she has to do for him in these terms: "Luke is 28 years old and he lives with me. I cook most of his meals. I help him to get ready in the morning. I shave him because I am concerned he will cut himself. When we go to the shop I have to help him to pay for the things, he gets confused with notes and change. I try to encourage him to do things independently but I feel he needs someone close by in case something bad happens. When he mows the lawn I need to watch him, keep him on track, and remind him of what to do next. He has never really been diagnosed with a condition as such, like a formal learning difficulty. My understanding is that he just has a very low level of intelligence. Luke works in a sheltered workshop called Sunnyfield Independence. He does things like pack show bags for the recent Easter show." 24That is a quote from her affidavit. It is plain on the evidence Luke will need assistance throughout his life. His life expectancy now is 53 years. His mother, who devotes herself to his care may not be able to do it for ever. She's now 57 with a further life expectancy of 28 years. The only person who may be able to assist are his siblings but the court has no evidence from them or about their circumstances other than that they are married and one has two young children. 25The deceased was very concerned for his future as is evidenced by the provision which she made. That is a substantial provision and similar to that for his mother. The deceased assumed, no doubt correctly, that Merilyn would care for Luke to the best of her ability in her life time. Plainly there was no contribution to the estate by Luke and obviously he had a good relationship as evidenced by the bequest to him. 26The others who may have a claim on the bounty of the deceased are Dugald's children who I have mentioned are 4 43, 41 and 38 years of age. They have put no information before the court about their financial circumstances or their relationship with the deceased. Accordingly the court can assume that they do not wish this to be taken into account. In any event they are unlikely to survive Luke. Their grandchildren, if any, who are in existence have given no information to the Court.

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:

1. That there be a legacy to the plaintiff of $140,000.
2. 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.

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: 29 February 2012