Hammond v Hammond

Supreme Court of NSW|2007-02-21|Before: Young CJ

CITATION : Hammond v Hammond [2007] NSWSC 106

DECISION : Unless further submissions lead to different view of construction of will, FPA proceedings to be dismissed. Costs of all parties out of estate.

CATCHWORDS : SUCCESSION [198]- Will- Construction- Gift to brother on condition that he ensures testator's son "never wants for anything"- Whether the condition gives rise to an equitable personal obligation- If so, whether brother has accepted the gift- Personal liability of the brother enforceable by way of injunction or an order for equitable compensation.

LEGISLATION CITED : Family Provision Act 1982 Protected Estates Act 1983

Abraham v Alman (1826) 1 Russ 509; 38 ER 196 Batt Anns (1841) 11 LJ Ch 52 Bective (Countess) v Federal Commissioner of Taxation (1932) 47 CLR 417 Broad v Bevan (1823) 1 Russ 517; 38 ER 198 Gill v Gill (1921) 21 SR (NSW) 400 Jackson v Hamilton (1846) 9 Irish Equity R 430; 3 Jo & Lat 702 CASES CITED : Muschinski v Dodds (1985) 160 CLR 583 Re Boning [1997] 2 Qd R 12 Re Hodge [1940] Ch 260 Re Moore (1886) 55 LJ Ch 418 Re SBH [1936] NZLR 756 Re Williames (1885) 54 LT 105 Singer v Berghouse (1994) 181 CLR 201 Williams v Williams [1987] 2 Ch 12

John Joseph Hammond (by his next friend Sabina Hammond) (P1) PARTIES : Luke John Hammond (P2) Chere Anne Hammond (P3) Terence Sydney Hammond (D)

COUNSEL : E Petersen (P) L J Ellison SC and P Bolster (D)

SOLICITORS : Michael Corrigan (P) Marando Solicitors (D)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3490/05 - HAMMOND v HAMMOND JUDGMENT 1 HIS HONOUR: These proceedings initially involved claims by three children of the late Donald John Hammond for provision out of his estate under the Family Provision Act 1982. Two of those claims have been settled (claims made by Luke and Chere) and I need only make a decision in respect of the first plaintiff, John Joseph Hammond. 2 The deceased died on 25 March 2005 aged 63. He was married on 2 March 1973. He and his wife Sabina had three children, Luke born on 23 March 1974, Chere, 3 October 1975 and John, 23 June 1977. The deceased separated from his wife in October 1987 and they divorced in 1991. 3 The deceased made a holograph will, undated, probate of which was granted to the defendant, the deceased's brother, on 21 July 2005. The will gave a caravan and a legacy of $30,000 to a friend, Maureen, and then proceeded: "To my children Luke, Chere & John I bequeath to each the sum of $100 (one hundred dollars) each. They never concerned themselves about me when alive so I consider in death they should not worry. I loved them dearly & I cannot understand why they treated me so brutally. The remainder of my estate is to go to my brother on the condition that he ensures John my youngest son never wants for anything. I further request that in caring for John his mother Sabina will never have access to any of my money. I will not place a caveat on Terry regarding the family home. Dad never wanted it to be sold - I leave the decision to Terry. I may see you all in paradise. Love Don XXX".

(Terry is the defendant, Terence Sydney Hammond) 4 The deceased left an estate of approximately $650,000. This figure is based on his home at 25 Rawson Road, Greenacre, being valued at $385,000. It may only be worth $372,500 in which case one would say that the gross estate must be discounted by a further $12,500. The other major asset is $364,901 in superannuation, which strictly speaking, is not an asset in the estate but is payable by the Trustee of the Superannuation Scheme to a beneficiary in its discretion. I have been urged that this money be treated as notional estate. 5 The settlement between the parties other than John Hammond is that each of Luke and Chere should receive a legacy of $130,000. Counsel for John indicates that he does not oppose his brother and sister getting more than the $100 left to them in the will, and that if any abatement is to take place it should first take place against the gift to Maureen. I am told that the defendant's costs are $60,000 and the plaintiff's $31,500, so that if one left undisturbed the settlements to Luke and Chere and the legacy to Maureen, one would be looking at an estate of somewhere between $450,000 and $466,000 available to make an order in favour of John. The executor is going to claim commission and he suggests that 4% on capital, namely $26,000, would be appropriate allowance for this. I make no comment at this stage. 6 The plaintiff is a person who suffers from Downs Syndrome. He is an incapable person who is suing by his mother. The plaintiff's condition requires considerable medical expenses and his ability to earn income is virtually nil. His counsel, Mr Petersen, suggests that whilst he should not receive the whole estate, he is entitled to a very large proportion of it to meet his life's requirements. 7 I will deal with this matter in more detail later. However, I might be permitted to remark at this stage that it has become a rather unhealthy approach to many of these cases to be given the sort of evidence that one would be given in a third party insurance case where, theoretically, there is an unlimited fund, and a person is seeking compensation for a wrong. In a claim under the Family Provision Act there is a very finite sum and not only has one to consider the plaintiff's situation, but one also has to consider the situation of other persons whom the testator should have had in mind as beneficiaries. Accordingly, when one is dealing with a relatively small estate of under $500,000 it is a waste of money to obtain evidence that a permanent housekeeper would cost $50,000 a year for 10 years because even if that was factually correct, it would be more or less irrelevant because there is just not the money available to pay for that sort of care. 8 The first question to ask is whether the will has left John without provision as ought in the circumstances to have been made for him by the testator. 9 In Singer v Berghouse (1994) 181 CLR 201, 208 and following, the High Court made it clear that to carry out its duty under the Family Provision Act the court is to carry out a two-stage process: "The first stage calls for a determination of whether the applicant has been left without adequate provision for his or her proper maintenance, education and advancement in life. The second stage, which only arises if that determination be made in favour of the applicant, requires the court to decide what provision ought to be made out of the deceased's estate for the applicant." 10 The basic question to be asked in this case with respect to the first stage is whether the provision for the plaintiff in the will that his uncle Terry is under an enforceable equitable obligation to ensure that John never wants for anything is a proper provision for John. 11 The High Court in Singer at 209-210 said: "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 applicant and the deceased, and the relationship between the deceased and other persons who have legitimate claims upon his or her bounty." 12 The condition imposed on the defendant could not be said to constitute a trust. The question is whether it is sufficient to amount to an enforceable equitable condition. That is not a condition of forfeiture but a condition which a court of equity would, in order to govern the conscience of the defendant, enforce by way of injunction or an order for equitable compensation. 13 Jacobs, Law of Trusts, 7th ed [234] truly says: "There is also the class of case where the condition relates to the enjoyment of the property by the donee after accepting it. In such cases, the gift may be construed as imposing a personal equitable obligation on the donee to make the necessary payment to such other person … . In so far as the gift is construed as imposing a personal equitable obligation on the donee, it is directly enforceable in equity by that other person, who, unlike a cestui que trust or chargee, has no rights in rem against the property, but, unlike a mere chargee, has a personal right against the donee … ." 14 Jacobs says at [238]: "It is submitted that in the case of such a personal equitable obligation the rights of the obligee could, paradoxically, in some circumstances be greater than those of a cestui que trust or mere chargee, in that the donee of the property could be required to perform the obligation even if it cost the donee more than the value of the property." 15 The situation appears to be that the defendant seems to have accepted the property and the obligation to care for John. I use the word "seems" because there was very little argument put to me about whether the condition in the will amounted to an equitable personal obligation. What was put to me was that the moral obligation of the defendant to care for John was sufficient provision. In the last part of the cross-examination and in re-examination, the defendant said that he was committed to providing money for John provided that Ms Sabina Hammond, John's mother, was nowhere near the funds passing from the estate to John. The defendant said that was what was in the will. In re-examination he was asked whether he had received any application on behalf of John for the payment or the use of any of the monies of the estate. He answered "No" and then was asked: "Q. If bona fide representations were put to you, of either receipts or invoices would you consider them and if appropriate pay them? A. Most certainly, if they were considered necessary to John I would have paid them."

He also indicated that although he felt there would be some difficulties in he and Sabina Hammond agreeing on many matters, he would be prepared to discuss John's problems or needs with her. 16 In my view the mere fact that the defendant was under a moral obligation to John would not be proper provision for John because circumstances could easily change and relationships sour. However, it would seem to me that if there was an equitable personal obligation on the defendant to use the money, then proper provision would have been made for John because virtually the whole estate, or even after the orders in favour of the other children a substantial portion of the estate, would be protected. Indeed, I would agree with what Jacobs says at para [238] and that is, that if the defendant accepted the property it may well be that he would be obliged to pay out for John even more than the value of the estate. 17 The question then is whether the so-called condition in the will amounts to a binding equitable personal obligation. 18 The leading Australian case is the decision of Harvey J in Gill v Gill (1921) 21 SR (NSW) 400. 19 In that case the defendant had been given by the testator the testator's farm at Dumaresq Island on the Manning River "on condition that he keep the homestead as a home and provide board and residence for his sisters". Harvey J said at 406 and following that the question before him was whether the condition was too vague and uncertain to be enforced. However, he distinguished between conditions of forfeiture where the court requires certainty so it is possible at any given moment to say where the estate is vested and conditions in equity setting out a personal obligation. In the latter class of case there is a personal obligation that flows from the equitable doctrine that a person cannot approbate and reprobate under the same instrument. In such a case there is no higher degree of certainty than that required for the creation of a trust. His Honour considered that in Gill's case he should declare the equitable obligation but was not satisfied that any loss had been suffered by the plaintiff as at that point of time. 20 The nature of these conditions was considered by Brennan J in a dissenting judgment, though one which is non controversial so far as principle is concerned, in Muschinski v Dodds (1985) 160 CLR 583 at 599 and following. In that case a de facto couple purchased a piece of real estate at Picton. The woman put in the majority of the purchase money, but the man promised to put in the proceeds of his divorce settlement which were thought to be substantial (but in fact were not) and do certain work. Brennan J at 605 said: "A condition annexed to a gift may be either of two kinds: a condition involving a forfeiture for non-fulfilment or a condition creating merely a personal obligation to fulfil it. A donee who takes a gift to which a condition of the latter kind is annexed incurs an equitable obligation to perform the condition. … A condition which creates a personal obligation may be enforced in equity by an order for compensation or, where appropriate, by a decree of specific performance … ". 21 Brennan J strongly relied on a passage from the judgment of Lindley LJ in Williams v Williams [1897] 2 Ch 12, 19. 22 The nature of these conditions was again examined by White J in Re Boning [1997] 2 Qd R 12. So far as is relevant for the present case, the gift was to Greenpeace Australia Ltd upon condition that the monies be used for Greenpeace International activities. Her Honour found that this was an enforceable equitable condition. 23 The key problem in the instant case is whether the words "on condition that he ensures John … never wants for anything" are sufficiently certain to be enforced by the court as an equitable personal obligation. It is clear from the cases, particularly Gill v Gill, that the degree of certainty required is not as great as when one is dealing with a condition of forfeiture. However, there are boundaries which have been noted in Gill v Gill as the same as that required for the creation of a trust. One needs therefore to go to the cases to see more precisely where the boundary is to be drawn. 24 Many of the reported cases (and there are not many reported cases in this area) deal with situations where the condition was that the donee pay money to a third party so, in Re Hodge [1940] Ch 260, the testatrix gave her estate to her husband on condition that he pay an annuity to her sister; see also Rees v Engelbach (1871) LR 12 Eq 225. 25 In Re Williames (1885) 54 LT 105, the English Court of Appeal had to deal with a will where the testator gave his real property to a series of life tenants on condition that they effect repairs. His widow was the first life tenant and it was admitted that she failed to keep the premises in repair, but it was argued that she was not liable for permissive waste. However, Kay J at first instance and the Court of Appeal held that it was a condition; she had accepted the gift and she had to pay. 26 In Re Moore (1886) 55 LJ Ch 418, the gift was to the executor "in trust for my sisters Margaret … Caroline … and Helen … on condition that they will support Maria Moore … . They are hereby enjoined to take care of my nephew John … as may seem best in the future." 27 Kay J held that the condition to support Maria Moore was sufficiently definite. However, when contrasted with the condition to Maria Moore, the words of the second condition, "as may seem best in the future" were too vague. 28 That case is to be contrasted with a case referred to by Kay J, namely Broad v Bevan (1823) 1 Russ 517; 38 ER 198. The will there provided: "I give and bequeath unto my daughter Ann … the sum of £5 a year for her life … . I also order and direct my son Joseph to take care of and provide for my said daughter Ann during her life." 29 Joseph was the executor and residuary legatee. It was argued that as the amount to be paid by Joseph to take care of and provide for Ann was uncertain, the direction that Joseph take care of Ann failed. However, Plumer MR referred the matter to the Master to enquire what would have been the proper maintenance for Ann and, the Master having certified it was six shillings per week, he made an order in that amount. This was confirmed by Lord Gifford MR. 30 In Abraham v Alman (1826) 1 Russ 509; 38 ER 196, the will provided that Isaac Jacobs was to have £60 per year, but was to provide for two of the testator's granddaughters, Sarah and Esther. The tutor for Sarah and Esther moved that the administrator be directed to pay them such sum as might be considered adequate for their maintenance. Lord Gifford MR held that the benefaction was too uncertain and distinguished Broad v Bevan on the basis that Broad v Bevan involved a direction that the donee take care of and provide for the plaintiff. 31 In Batt v Anns (1841) 11 LJ Ch 52, the will provided that the testator left his illegitimate son, Thomas under the protection of his wife, Ann, to be by her apprenticed and taken care of, and to be provided for to the best of her judgment, as long as the said Ann remains unmarried. It was held by the Lord Chancellor that the son was entitled to maintenance out of the testator's estate if the estate were sufficient and ordered an enquiry as to its sufficiency. See also Jackson v Hamilton (1846) 9 Irish Equity R 430; 3 Jo & Lat 702. 32 The cases were considered in New Zealand in Re SBH [1936] NZLR 756. The testator, an American, had bigamously married another woman in Bermuda whilst his first wife was still alive. In his will he made the following provision for his bigamous wife (whom he had by then divorced): "I wish my trustees to make such provision for her maintenance as the exigencies of the funds will permit and requiring the beneficiaries to contribute to her support." 33 Ostler J said at 758: "If the will had merely provided for the maintenance of CMH, then I think the bequest would have been good upon the principle that id certum est quod certum reddi protest : see Broad v Bevan; Jackson v Hamilton; and Batt v Anns ; but in this case, assuming the word 'wish' is a word of direction, the duty cast upon the trustee is not to make provision for her maintenance out of the estate, but to make such provision for her maintenance as the exigencies of the fund will permit."

His Honour held that that was too uncertain. 34 The case is to my mind a borderline one. 35 In his Kriewaldt lecture for 2006, reported as "Reciprocal Duties of Bench and Bar" in (2007) 81 ALJ 23, 33, Heydon J noted that there was a judicial duty to give parties natural justice and that if there was a point of law not advanced in argument or a finding of fact which might surprise the parties, proper notice should be given, as "a party who loses on a point on which that party was never heard will experience an intense and justifiable sense of grievance, particularly if the court could have avoided the error if the party had been heard. If a new point of law is identified by the judge after judgment is reserved … the judge should list the matter for further oral argument, or call for written submissions." 36 In the instant case, the matter was heard as part of a running list of Family Provision Act applications. Despite the fact that experienced counsel appeared on both sides, and despite the fact that I raised the matter of a Gill v Gill condition during closing submissions, no submissions were put to me on the point at all. 37 My analysis of the authorities indicates to me that it is more likely than not that the present will does express an enforceable Gill v Gill condition. However, I do not wish to come to a final decision on the point without giving counsel time to have the matter further argued or to make further written submissions if they or either of them so wish. 38 If the condition is a proper Gill v Gill condition and enforceable, the next question is whether the defendant has accepted the gift. If he has accepted the gift (and as I indicated earlier it seems that he has), then if Jacobs is correct at para 238 noted above (another matter on which I have not heard argument), then the defendant is bound to support John even over and above the estate assets. 39 If the condition is an enforceable Gill v Gill condition and the gift has been accepted by the defendant, then there has been no failure to provide for John as he has as much out of the estate as he can get (subject to the legacies to be given by consent order to his siblings which his counsel does not oppose). Accordingly, he has not jumped the first hurdle of the two-stage process and the Family Provision Act proceedings must be dismissed. I would think, however (again without having heard counsel) that I would do so without an order for costs. 40 If there has not been an acceptance of the gift, then as there is no residue clause, presumably there would be a partial intestacy with the result, I think, that the estate would pass to the three children in equal shares, so that each would get something like $210,000. This is more than Luke and Chere were prepared to take by way of settlement so that their proceedings would presumably have to be dismissed. The question would then be whether $210,000 was sufficient provision for the plaintiff John. 41 My current thinking, and in this I have been assisted by submissions of counsel, is that even that amount would have been insufficient. Accordingly, I would then have to go to the second stage of the two-stage process. 42 My present thinking is that the defendant's answer that no-one has ever asked him to meet any of John's needs is insufficient and that unless the defendant sets up a regime whereby there could be a fair bona fide consideration of John's needs under which regime John had an enforceable right to receive maintenance, then I would need to set up a system such as that set up under the Protected Estates Act 1983 whereby the Protective Commissioner, or some other skilful person, would manage a fund on behalf of John. 43 Having seen Sabina Hammond in the witness box, my present feeling is that it would not be an appropriate order to put her in control of the funds. I realise that she is a mother and has a mother's affection for John; I realise too that the testator's desire that she have nothing to do with the money may well have been based on the conflicts that arose between the testator and his former wife during their marriage and I know, too, that when one is dealing with a protected person, the fact that the carer may also benefit from the benefaction is usually not a relevant matter; see Bective (Countess) v Federal Commissioner of Taxation (1932) 47 CLR 417. However, the way in which Sabina Hammond's evidence came across was that it would be too dangerous to allow her to have untrammelled control of John's money. 44 So far as Sabina Hammond's views that a house in Bondi might be purchased for something like $600,000 for John and herself to live in, it would seem on any view of the evidence that this, because of lack of funds, can only be a pipe dream. 45 Accordingly, in my view, if the matter were to stop here the proper thing to do would be to conclude that John has an enforceable equitable right for maintenance from Terry. Accordingly, he has not been left without proper support. His application should be dismissed with no order as to costs and orders made for the provision for Luke and Chere as per the settlement. I would probably also be prepared to make an order declaring the superannuation funds as notional property. 46 However, because of the rule enunciated by Heydon J in his Kriewaldt lecture I will merely publish these reasons and stand the matter over until 1 March 2007 for mention in case counsel wish to argue the matter further, orally or in writing. 47 I would conclude by the comment that even though the matter was in the running list, it is rather odd for the defendant's lawyers to charge $60,000 in a small estate when the principal point at issue was not even argued. It also is odd that any executor could seek to claim 4% capital commission (indeed a large percentage) where he had not even taken the major point open to him. Indeed, no case was referred to on the point during argument: they all had to be found by my own research. 48 However, having delivered myself of those acerbic comments I will merely stand the matter over for mention on the date I have indicated. However, if that is not convenient to counsel, provided my Associate is given at least three days notice some other date for the mention can be arranged. 49 I must emphasise that I am not inviting a reargument of the whole case. I am merely giving the opportunity to the parties, if they wish to do so, (a) to make further submissions on the question as to whether on the proper construction of the will an equitable personal obligation was created in the defendant; (b) consequential matters with respect to that question; and (c) whether, if the plaintiff's case for any capital funds flowing to him as a result of this case should pass to his mother as administrator is rejected, what viable alternative scheme for handling those capital monies is proper.

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