HORNE V. HORNE [2001] NSWSC 50

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

NO. 4907 OF 1998 HORNE V. HORNE ESTATE OF PEGGY IRENE PHELAN

1 The late Peggy Phelan died on 30 September 1997. She was a widow and had no children. The plaintiff, Patrick Horne, is the son of the deceased's brother, Athol Horne. The defendant Percy Horne, also called Mick, is another brother of the deceased. 2 The deceased left the following assets. Firstly, there was a house in Tamworth, which was ultimately sold for $115,000; and there was furniture in that house. There was a Westpac term deposit containing about $52,000, and also a savings account containing about $6,000. There was a Ford Falcon motor vehicle, which was ultimately sold for about $26,000; and there was some cash, which may have been around $30,000. Finally, there was some jewellery. 3 By her last will dated 17 June 1992, the deceased appointed the defendant her executor. She left the house and contents to the defendant on trust to permit the plaintiff to reside in it and use the contents during his life and, subject thereto, left the house and contents to the defendant. The residue of the estate was left to the plaintiff. 4 In these proceedings the plaintiff seeks further provision under the Family Provision Act. 5 The plaintiff was born on 21 May 1952. When he was about five years old, he was diagnosed as being mildly retarded. It seems that he left school when he was about six years old, and that he did not thereafter attend school. From the late fifties or early sixties, he lived with the deceased and her husband, firstly at Long Jetty and later at Tamworth. It seems clear that he was in effect treated by them as if he had been their own child. 6 In 1968, he was granted the invalid pension. In about 1984, he gradually became blind, and thereafter came to rely increasingly upon the deceased for her help and support. In 1992, the deceased's husband died. The deceased died on 30 September 1997, and probate of her will was granted to the defendant on 13 November 1997. 7 The deceased's jewellery and cash had been kept by her in a safe in her house, and it appears that the plaintiff and defendant had the only keys to that safe. It appears that there was also about $8,000 cash of the plaintiff's kept in that safe. It appears to be common ground that, shortly after the deceased's death, the defendant took some jewellery from the safe, and also took about $7,000 in cash to pay funeral expenses and legal expenses connected with the probate application. It appears common ground that he also took a wallet containing $1,600 of the plaintiff, and that he later returned that wallet to the plaintiff. It also appears that there was in the safe at that time a further $6,400 of the plaintiff's, and perhaps another $20,000 to $25,000 of the deceased's. 8 The plaintiff continued to live in the deceased's house until April 1998. In January 1998, he went with his sister Pam Devir and her husband John Devir for a holiday with them at their home on the Gold Coast. In April 1998, he went to live with them. 9 At about that time, items from the house were taken by the plaintiff and/or Mr and Mrs Devir. It appears that some of these items belonged to the plaintiff, and some of them apparently were part of the estate. Among the items taken was the safe, but at that stage it seems clear that there was only the plaintiff's $8,000 in the safe, or at least that is what the plaintiff claims. 10 At about this time, the plaintiff also received about $50,000 from an account in his name with Esanda, about $54,000 from the deceased's bank account or accounts, and about $26,000 being the sale proceeds of the deceased's car. Out of all these amounts received or held by the plaintiff, $115,000 was paid to Mr and Mrs Devir, or companies associated with them. It appears that of this, $10,000 was used for clothes and effects for the plaintiff, and $105,000 was used to purchase an interest in Mr and Mrs Devir's home, namely, a one quarter interest held through a trust. 11 There is at present a mortgage of around $570,000 over that home in favour of a bank, and it is said that the home is worth about $800,000. Mr and Mrs Devir apparently also own three commercial units at the Gold Coast, which may be worth between $600,000 and $750,000, but there is a mortgage on those units of around $489,000. 12 Since April 1998, the plaintiff has continued to live with Mr and Mrs Devir. He says he wishes to continue to do so. They say they are willing to continue to look after him and have made provision for him in their wills, though they would not say what provision. It seems that the plaintiff now has very little in the way of savings. He is still in receipt of a pension, which he has called a blind pension. 13 Some time in or before August 1998, the deceased's house was put up for sale and this was ultimately sold in December 1998 for $115,000 or thereabouts. At about the same time these proceedings were commenced, an application was made for an injunction, and thereafter, out of the proceeds of sale of the house, $20,000 was released to be applied towards the executor's costs of these proceedings, and the balance was retained to be available for any order that was made in these proceedings. It appears that there is now about $101,000 available in that way. 14 There are some facts as to which there is dispute, which I need to determine. 15 The plaintiff says that, when he was living in the deceased's house after her death, he was lonely and receiving little assistance, and also that he received telephone calls from the defendant pressuring him to leave the house, which caused him to change the telephone number and have a silent number at that house. The defendant denies this: he denies making such telephone calls, and there is evidence to the effect that the plaintiff was receiving appropriate support from relatives. 16 There is evidence from the defendant and the defendant's witnesses to the effect that the plaintiff acknowledged that the money held in the deceased's bank account was intended to go to the defendant, and that at first the plaintiff agreed to this happening, but that later the plaintiff was paid this money and refused to give it to the defendant. 17 Next, it is submitted for the plaintiff that I should infer that the defendant took $20,000 to $25,000 in cash from the deceased's safe. However, I note that no application is made for any order that the estate be reimbursed by such amount. The plaintiff also submits that the defendant was in breach of his duty as executor in taking the jewellery which he took, though again in relation to this matter no application is made for an order that the estate be reimbursed. The defendant for his part says that he was requested by the deceased to distribute the jewellery to the deceased's nieces, and that this is what he did. 18 I find it difficult to assess the plaintiff's evidence. He does appear to be mentally handicapped, and his evidence was at times less than clear. I do not have the impression, however, that the plaintiff is in any way dishonest. 19 I consider that there were unsatisfactory aspects to the defendant's evidence. At one stage in an affidavit he appeared to deny having taken the jewellery, although this may have been the result of a mistake. He did, it seems, attempt to get the proceeds of the deceased's bank account paid to him. Even if he believed that this had been intended by the deceased, this was contrary to his obligations as an executor, and in so far as the plaintiff may have acceded to that proposition, the defendant in accepting that was dealing with a very vulnerable person, by reason of the plaintiff's mental condition and his blindness. 20 There are other errors in affidavits put on by the defendant, namely, an assertion to me that money in the safe was counted in his presence by another person, and another assertion that, after certain items were taken from the house in about April 1998, there was nothing left in the house. In cross-examination he admitted that he said to Mr Devir in a conversation that he would smash the jewellery rather than return it, and that he was unhappy in relation to the house because he would get no benefit from it, yet those matters appear to have been denied by him in his affidavit. The defendant's evidence was also somewhat unsatisfactory in relation to times at which he had a mobile phone. 21 The findings that I make then in relation to the matters I have identified are these. I accept that in the period after the deceased's death the plaintiff was unhappy and lonely living at the house. I accept that he did receive phone calls from the defendant, when the defendant communicated the defendant's unhappiness that the defendant would not have the benefit of the house so long as the plaintiff was living there, and that put the plaintiff under some pressure. I am unable to find one way or the other as to whether the plaintiff actually acknowledged an entitlement of the defendant to the money in the deceased's bank account. There is some evidence corroborating the defendant on this, but, by arrangement and with a view to minimising costs, those witnesses were not cross-examined. I note that this acknowledgement was at some stage supposed to have been made in the presence of a solicitor then acting for the defendant, namely Nigel McCann, and that that solicitor was not called to give evidence. However, as I have said, it still seems to me to be unsatisfactory that an executor should be dealing with a person with the disadvantages of the plaintiff, with a view to securing for himself money which under the will plainly went to the plaintiff. 22 Having regard to the seriousness of the allegation about actually stealing $20,000 to $25,000 in cash from the safe, I am not able to draw the inference that the defendant did do this. I am satisfied that the plaintiff did not receive that money, but there are other alternatives consistent with the evidence. There was at least one other person who had access to this money at various times and, as I have said, I cannot draw the adverse inference against the defendant. 23 In relation to the jewellery, it could be submitted that the jewellery was part of the contents of the house; but I think the better view is that the jewellery should not be regarded as part of the contents of the house referred to in the will. The will showed an intention that the plaintiff have the use of the house and contents for his life, and it does not seem reasonable that the deceased would have intended to give the plaintiff use of the jewellery during his life, and then have the jewellery go to the defendant. I think the jewellery should be regarded as caught by the residuary gift to the plaintiff. 24 I accept the defendant's evidence that he was at some stage requested by the deceased to distribute the jewellery among the nieces. That would not of itself excuse the executor for dealing with the estate in a way inconsistent with the will, but it has some bearing on the view I take generally of the defendant's conduct. 25 There is no dispute that the plaintiff is an eligible person within the meaning of the Family Provision Act. He lived with and was dependent upon the deceased for at least 35 years. I think it is fair to regard the plaintiff as being treated in substance as a son of the deceased. 26 Mr Marshall for the plaintiff submitted that, although the plaintiff's present needs were being provided for essentially by Mr and Mrs Devir, there was a real risk that they would not be able to continue to do so indefinitely into the future, and there was a real risk that the money he had paid to them or their companies would be lost. He submitted that in those circumstances the provision made for him is now inadequate for his proper maintenance, and that in the absence of competing claims of similar weight he should now have the benefit of the amount left in the estate. Mr Marshall has provided written submissions and I will leave those with the papers. I need not repeat them in this judgment. 27 Mr Cameron for the defendant has also provided written submissions. He submitted that certainly as at the death of the deceased the provision made for the plaintiff was not inadequate: it provided in effect for continued residence in the house, the continuing availability of neighbours and relatives to assist him, as had been happening particularly in the latter part of the deceased's life when she through ill health was unable to contribute much to his care. In addition, he had the benefit of money in the order of $126,000. If the resources available to the plaintiff were now inadequate for the plaintiff's proper maintenance, Mr Cameron submitted, that was because the plaintiff had moved from the house and had given the money to Mr and Mrs Devir. The present inadequacy of the resources Mr Cameron submitted were thus in no way the result of inadequate provision having been made in the will. In support of that submission he referred me to In the Estate of Guthrie (1983) 32 SASR 86, particularly at 98 to 99. 28 Accordingly, Mr Cameron submitted the essential requirement under s 9 of the Family Provision Act had not been made out. In any event, Mr Cameron submitted that there was no occasion to make any order, because there was no particular area concerning the plaintiff for which provision ought to be made. The money in the estate could not provide a home for the plaintiff, and no identifiable need for particular equipment had been identified. 29 In my opinion, under s 9 of the Family Provision Act the question that has to be addressed is whether the provision made by the deceased for the plaintiff is or is not inadequate for his proper maintenance at this time, not at the time of the death of the deceased. It may well be that, looked at at the date of the death of the deceased, the provision would be seen as adequate at that time, substantially for the reasons Mr Cameron has given. 30 In my opinion, subsequent events have left the plaintiff without resources which are adequate for his proper maintenance, and this does raise the question put by Mr Cameron whether this lack of present resources can fairly be characterised as meaning that the provision made by the deceased is now inadequate for the plaintiff's proper maintenance. Certainly, if a present lack of resources were wholly due to considered decisions made by an applicant for relief under the Family Provision Act, it may well be that inadequacy of provision would not be shown. 31 In this case, however, it seems to me that the present inadequacy of resources available to the plaintiff are due to problems experienced by the plaintiff in residing in the house provided by the deceased, and to loss of money through his entering into deals with Mr and Mrs Devir which he did not understand and which, having regard to his disadvantages, he could not reasonably be expected to understand. In those circumstances I think it can fairly be said that the provision made by the deceased is now inadequate for his proper maintenance. 32 Turning to the question of whether an order should be made, I accept that other relatives of the deceased, including particularly the defendant, had moral claims on the deceased by reason of their close relationship with her and by assistance which they had given her during her life. However, there is no evidence of any financial need in any of these persons. I think the moral claim of the plaintiff, having regard to his disabilities and the nature of his relationship with the deceased, does outweigh any competing moral claims. 33 The need that I think has been demonstrated by the plaintiff is a need to be protected against the significant risk that Mr and Mrs Devir will not in the future be able to continue to provide him with a home and to support him as they have been doing. I accept that they intend to try and do so, but having regard to their financial situation as it appears in the evidence in this case, there appears to me to be a substantial risk that they may become financially wholly unable to do so. Any provision which is made for the plaintiff should I think be protected. Mr and Mrs Devir have not been party to these proceedings, and the conscionability or otherwise of their deals with the plaintiff have not been fully investigated in these proceedings. It seems to me that, if any provision made to the plaintiff is put at his disposal, there is a substantial risk that it could go towards the operations of Mr and Mrs Devir. 34 Before deciding precisely what protection should be put in place, it is relevant to consider the amount which will be involved. As I have indicated, there is $101,000 left in the estate. There is no application that the estate be reimbursed for the jewellery. $20,000 has gone to the defendant's solicitors on account of costs. There is evidence from the defendant that, in addition to that $20,000, the defendant's costs and disbursements up to the finalisation are $27,200. There is evidence from the plaintiff that the costs and disbursements of the plaintiff's solicitors are a little in excess of $55,000, without any charge having been made in relation to the solicitor's costs of the hearing itself. 35 Even these costs are a little less than they might have been. At the pre-trial directions, I foreshadowed that I might make an order limiting the amount that could be charged against the estate, and the parties have commendably kept the issues in this case to a minimum, so that the case has concluded within two days rather than the four days that had originally been set aside for it. However, it is alarming that, if the costs indicated are charged against the estate, there will only be about $18,000 left which could go to the plaintiff if I in effect order the whole of the remainder of the estate to go to the plaintiff. 36 Before giving this judgment, I foreshadowed that I might limit the costs to be charged against the estate to $60,000, and divide that between the plaintiff and defendant in a way which seemed to me to be reasonable. 37 Mr Cameron for the defendant submitted that the defendant was obliged to incur substantial costs in the proceedings, because the plaintiff did not lead appropriate evidence about what had happened to the plaintiff's money, and what the true financial dealings between the plaintiff and Mr and Mrs Devir had been and what the true financial position of Mr and Mrs Devir was, and in those circumstances the defendant was put to considerable costs in investigating those matters. Indeed, Mr Cameron submitted, the case actually put forward by the plaintiff originally was quite different from the case as it appeared at the hearing, and it was entirely appropriate that the defendant attempted to investigate these matters. He submitted that appropriate disclosure of these matters at an early stage by the plaintiff would have reduced the costs incurred. 38 Mr Marshall for the plaintiff submitted that the defendant had behaved unreasonably in various ways in the proceedings. He submitted that, in refusing reasonable requests to provide an undertaking not to distribute proceeds of sale of the house, the defendant had caused costs to be incurred in an interlocutory application; and the defendant had increased costs, he submitted, in attempting to join Mr and Mrs Devir as parties to the proceedings. He submitted that, in refusing to mediate unless the plaintiff's money was restored to the plaintiff by Mr and Mrs Devir, he had in effect made an expensive contest unavoidable. He submitted that the defendant had acted improperly, at least in relation to the jewellery, which should be taken into account. 39 I think there is force in the submissions on both sides. The basis on which I have found for the plaintiff is quite different from the plaintiff's case as originally made out in the plaintiff's affidavits. I think, having regard to the basis on which I am finding for the plaintiff, and having regard to the close apparent co-operation between the plaintiff and Mr and Mrs Devir in bringing the application, there should have been clear, full and frank disclosure of those matters very early in the plaintiff's case. On the other hand, it does appear to me that the defendant was unco-operative in relation to what would happen to the proceeds of sale, and the defendant was unsuccessful in an application to join Mr and Mrs Devir, against which no appeal was brought. 40 However, in my opinion, when only $120,000 was in issue, there was an obligation on the parties and their legal advisers to ensure that costs were not disproportionate. On the whole it seems appropriate to me to limit the costs payable out of the estate to $60,000, and to order that $30,000 of that go to each of the plaintiff's and the defendant's legal advisers. 41 As the defendant has already had $20,000, that means the defendant will get an extra $10,000. Whether the defendant's solicitor seeks to recover more from the defendant will be a matter between the defendant and his solicitor. Whether the plaintiff's solicitor seeks to recover more from assets available to the plaintiff through money that may become available to the plaintiff, or possibly from Mr and Mrs Devir, is a matter to be dealt with between the plaintiff's solicitor and the plaintiff and Mr and Mrs Devir. 42 I think the appropriate protection is to order that the amount be paid to the Public Trustee or, if for any reason that is not practicable, to some other trustee, coupled with an order that no capital be paid to the plaintiff without the leave of the Court. Of course, in any application for leave by the trustee, it would not be necessary to join any party. 43 I order that, in lieu of any entitlement of the plaintiff to jewellery which has been distributed by the defendant and to any cash in the deceased's safe not otherwise received by the plaintiff, the plaintiff receive the amount held in an account set up by agreement between the parties at about the time of commencement of these proceedings, subject to the costs order. 44 I order that $10,000 from that account be paid to the defendant's solicitors on account of the defendant's legal costs and disbursements, and that $30,000 be paid from that account on account of the plaintiff's legal costs and disbursements. 45 I order that the balance be paid to the Public Trustee on behalf of the plaintiff, and I order that there be no distribution of capital of that amount to the plaintiff without the leave of the Court. 46 I note that these orders are on the basis that $20,000 already released to the defendant's solicitors may be applied to the defendant's legal costs and disbursements, and I vacate any existing costs order. 47 I reserve liberty to apply if any problem arises in relation to the trust which I have identified. 48 Exhibits may be returned. ***********

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