Johnson v Smith

COUNSEL : L Ellison SC and S Fraser for defendant

• 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

287050/2009 - ANDREW ROBERT STUART JOHNSON v KAREN ELIZABETH SMITH (Estate of the late Andrew Arnold Johnson) JUDGMENT 1 His Honour: This is an application under the Family Provision Act 1982 ("the Act") in respect of the estate of the late Andrew Arnold Johnson who died on 5 July 2007 aged 79 years. The deceased was survived by his widow Frances Madge Johnson and three adult children. Andrew Robert Stuart Johnson, a son, is the plaintiff in these proceedings and a daughter Karen Elizabeth Smith is the tutor of the deceased's widow who is now incapable. The other son, David Johnson has been given notice of the proceedings and he makes no claim. 2 The deceased died intestate and letters of administration were granted to Karen Smith on 4 March 2009. Given the size of his estate the whole of the estate passed to the deceased's widow. Assets in the estate 3 The deceased's principal asset was his interest as joint tenant with his widow in the matrimonial home at Lindfield. That asset, along with some other cash assets, passed to his widow by survivorship. At the date of death the deceased owned some vacant land at Chain Valley Bay which has been sold. The land was affected by heritage and other orders and was not suitable for building. After the sale of the land and payment of some costs in this matter the estate of the deceased has been reduced to cash and amounts to $57,807.56. This sum is after payment of $57,262.50 on account of the defendant's costs. In addition the defendant has incurred a further $28,200 in costs in respect of the hearing. 4 The plaintiff represented himself in these proceedings. There is no evidence of legal costs incurred by him in this matter. Family history 5 The deceased was born in January 1928 and his widow Frances Johnson in April 1925. They married in 1958. They had three children. The plaintiff, Andrew Robert Stuart Johnson was born July 1962. Shortly after the death of the deceased in July 2007 his widow, Frances Johnson left the Lindfield property and became a fulltime resident at Graythwaite Nursing Home on 30 July 2007. 6 On 17 September 2007 a Financial Management Order made in respect of Frances Madge Johnson in favour of Karen Elisabeth Smith who was appointed the manager of Mrs Frances Madge Johnson's estate. The appointment was subject to the provisions of s 25M of the Guardianship Act 1987which require directions to be given by the Protective Commissioner for any steps to be taken other than actions necessary to protect the assets of the estate. 7 On 13 March 2008 there was a decision by the Public Guardian on an application which was made by the plaintiff in these proceedings. The plaintiff who since the death of the deceased and for may years previously had lived in the Lindfield property, wished his mother to return home to live with him so he could care for her. The Public Guardian made a decision on 26 February 2008 for Mrs Frances Madge Johnson to continue living in the high-level care facility, Graythwaite Nursing Home, and not return to live in the community in the care of her son, Mr Andrew Robert Stewart Johnson. 8 The deceased's widow, by her tutor, Karen Smith, commenced proceedings by way of statement of claim in the Equity Division being proceedings 2304 of 2008. The defendant was the plaintiff in the proceedings which was for the recovery of amounts said to have been paid by the widow on 17 May 2007 while she was allegedly incapacitated. There was a cheque for $270,000 drawn in favour of the Andrew Johnson and the deceased and another cheque for $270,000 drawn in favour Andrew Johnson. These funds came from some property which had been sold by the deceased's widow. 9 The matter was heard by Foster J in this Court and he gave judgment on 9 June 2009. His Honour made orders for the return of funds and gave judgment for Frances Madge Johnson by her tutor Karen Elizabeth Smith in the sum of $100,055.18 against Andrew Johnson. There were orders for costs against Andrew Johnson. 10 There has been an appeal by Andrew Johnson to the Court of Appeal. As submissions have not been made by Andrew Johnson the appeal has not been fixed for hearing. 11 The summons in these proceedings was filed on 31 January 2008 which was within time provided for under the Act. An amended summons was filed on 15 December 2009 which claimed some inappropriate orders but was a claim for provision out of the notional estate of the deceased. Eligibility 12 The plaintiff is a son of the deceased and is an eligible person. In applications under the Act the High Court in Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201 has set out the two-stage approach that a court must take. At page 209 the following was said: "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 Ltd [1938] AC at 476. 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.

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 (1951) 82 CLR 645, 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." Plaintiff's situation 13 The plaintiff is 51 years of age. He is single with no dependants. He lives in the deceased's former home at Lindfield. He receives an invalid pension. He has not worked since the year 2000. 14 The plaintiff has little in the way of assets. He has some liabilities. He owes $100,055.18 together with interest pursuant to the judgment of Foster J. He owes Navado Lawyers $30,857.68 for legal services until 20 August 2008 and he has credit card debts totalling $1,805.25. In addition there are outstanding costs in respect of costs orders in the proceedings before Forster J and of course there may nor may not be costs made against him or in his favour in the appeal proceedings. 15 The plaintiff gave little evidence about his medical condition. It is apparent from his own history that at times he has been admitted to hospital for psychiatric assessment. The evidence suggests that he had sleep apnoea in 2007. The relationship between the plaintiff and the deceased appears to have been one whereby the plaintiff had been dependent from time to time upon the deceased and on his mother for his accommodation. For period of time he lived in Melbourne where he worked. However, by 2000 he had ceased work and he returned to the Lindfield home to live with the deceased where he cared for both his parents over the subsequent years. 16 It is necessary to consider the situation in life of others having a claim on the bounty of the deceased. In this case the only relevant person is the deceased's widow. The deceased's daughter, Karen Smith, makes no claim for provision nor does her brother who has been notified of the proceedings. Deceased's widow 17 The deceased widow, Frances Madge Johnson, is 84 years of age. She resides in the Aldersgate Nursing Home where she was admitted on 24 December 2008. Dr C Ovadia, general practitioner, responsible for Mrs Johnson's treatment, gave evidence that she presently suffers from Alzheimer's disease which has worsened over the period since her admission. In his letter of 27 January 2010 he said the following: "She is totally incontinent of bowel and bladder. She needs assistance in feeding, she is confused in place and time and not recognising the people around her and she resists being handled and helped and hates to be showered. She is at high risk of falls as she has an unsteady gait at times. She is restless and wanders all day. She requires a high level of care of a multidisciplinary team. Her condition will continue to deteriorate and she will become more dependent. My opinion is that she is unable to be looked after at home and she needs the team care provided in a nursing home." 18 Dr Ovadia was cross-examined by the plaintiff and from his evidence it was plain that the widow, Frances Madge Johnson, will never return to live in the Lindfield property. 19 Mrs Johnson's assets are as follows: (a) the property at Balfour Street, Lindfield - estimated value $1.450,000.00, unencumbered;

(b) term deposit account with Commonwealth Bank of Australia - credit balance $55,000.00;

(c) term deposit account with Commonwealth Bank of Australia - credit balance $76,923.69; (d) operating account with Westpac - credit balance $24,258.75; (e) Reward Saver account with Westpac - credit balance $101,555.56; (f) term deposit account with Westpac - credit balance $300,000.00; (g) shares in Telstra, Commonwealth Sank of Australia, Suncorp- Metway Limited and IAG Limited - value $33,099.27; (h) account with the NSW Trustee - credit balance $107.79; (i) shares in Fodder King of nominal value; (j) amount due under judgment of Foster J - $100,055.18. 20 Mrs Johnson receives the following income: (a) Commonwealth Superannuation Pension - $33,744.36 per annum;

(b) interest earned on term deposits - estimated $26,673.00 per annum; (c) interest earned on Bank accounts - estimated $900.00 per month. 21 This totals $61,317.36. 22 Mrs Johnson's outgoings are $43,372.90 which includes nursing home fees of some $34,802.04. 23 In addition Mrs Johnson has an income tax liability for provisional tax of $4,746.95 for current financial year ending 30 June 2010. When the Lindfield property is sold that expense will increase. Lindfield property 24 Mr Robert Whelan, a building consultant, inspected the Lindfield property and his report is before the Court. The report indicates that maintenance of the house has been neglected for many years and many areas require removal or replacement. In his opinion the cost of renovating the building to an acceptable standard within the existing walls would be likely to exceed $500,000 and probably much more depending on the standard of fittings and finishes specified by the renovators. 25 Given that Mrs Johnson will not be able to return to live in the Lindfield property, subject to the plaintiff's claim, it would seem that the property will have to be sold as there is no suggestion that it would be economical to spend more than $500,000 on renovations prior to sale. 26 There is no doubt that the deceased and his widow had a long and happy marriage of almost 50 years. Discussion 27 In his approach to this case the plaintiff sought to suggest that there were many matters to be investigated concerning the conduct of his sister, Karen Smith. Some matters which he sought to raise are irrelevant to these proceedings. The plaintiff did however appreciate that the purpose of the proceedings was to provide for him. Under the Act the Court can only make an order in favour of the plaintiff if he has been found to have been left without adequate and proper provision for his maintenance, education and advancement in life. In his affidavit of 16 February 2010 he expresses his needs in these terms:

"(a) title or joint title with my mother of 11 Balfour Street Lindfield as payment of my mother's assurances since 1992; ` (b) joint title with my mother of the Deceased's remaining estate and notional estate as property my mother needs free family management of for her benefit;

(c) joint title with my mother of the Deceased's remaining estate and notional estate for management and preservation of assets for future needs of the Deceased's domestic family as their circumstances change; and

(d) joint title with my mother of the Deceased's estate to fulfil the Deceased's intentions stated in May and June 2007." 28 Although I raised the matter with the plaintiff at the hearing, he did not put forward a case for some other accommodation other than the accommodation he sought in the Lindfield property. 29 In his submissions the plaintiff referred to a "contractual arrangement" he had with his parents that he had been promised the Lindfield property after they had died. There was no evidence of any document in which the deceased or Mrs Johnson signed which would bind them in respect of such a matter. 30 The plaintiff gave that evidence that in 1994 his mother had said to him that the property she owned before the Lindfield property was purchased was "available for your use. You are to inherit it." When there was a proposal for the sale of that home and the purchase of the present Lindfield property the plaintiff gave evidence of conversations he had when his mother asked him to inspect the house. She said, "The house isn't much but the land has some value and it will help set you up. I want this to be your father's and my final home, and for you to have it afterwards." 31 On 10 May 2007 in the context of some "do it yourself" will kit from the Post Office the deceased said to the plaintiff, "I want to leave everything to you in my will". 32 The defendant submitted that given the 50 year marriage between the deceased and his widow that his widow was entitled to have the benefit of the former matrimonial home and the assets which she has at present and this should take priority over the obvious need of the plaintiff. 33 Under s 9 of the Act the Court has to have regard to the matter as at the time of the hearing and, accordingly, it is plain that the plaintiff's mother has no need for the home at Lindfield. 34 In McGrath v Eves [2005] NSWSC 1006 Gzell J referred to the courts approach to the question of moral duty when considering claims by children to be provided with funds for a house. He said: 67 When it comes to children, as Young J observed in Shearer v The Public Trustee , NSWSC, unreported, 23 March 1998, it has never been said by any court that the community expects a mother to leave her children in a position to have a house of their own. That observation applies equally to a father. And in Gorton v Parks (1989) 17 NSWLR 1 at 7, Bryson J pointed out that there is no special principle that able-bodied adults earning a living have no claim, his Honour pointing out that such a proposition in relation to resources of any size was quite erroneous.

68 In Barbara Mayfield v Suzy Carolyn Lloyd-Williams [2004] NSWSC 419 at [109]-[110], White J, having referred to this passage, went on to observe that there was no rule to the effect that proper provision for an adult and presently able-bodied child did not extend to providing him or her with a house or money to buy one. His Honour noted that instances in which this had occurred included Re Buckland, deceased [1966] VR 404 and Ogden v Green [2003] NSWCA 352.

69 White J's decision was upheld by the Court of Appeal in Lloyd-Williams v Mayfield [2005] NSWCA 189. In the course of his judgment, Bryson JA at [31] pointed out that there were features to the case that were rarely encountered in claims under the Family Provision Act 1982 and rarely encountered together. First, the value of the shares designated as notional estate was very large in comparison with the estates ordinarily encountered. Secondly, because the appellant was otherwise amply provided for, the further provision ordered by White J could have no adverse effect on her wellbeing. Thirdly, the applicant did not have any needs in terms of lack of present provision for necessities and amenities of life on an ordinary scale of needs as understood in the community generally.

70 It was submitted that Mayfield was distinguishable by the absence of these features in the instant circumstances and because the appellant in Mayfield had filed no financial evidence and put forward no competing financial or other needs for the Court to consider.

71 There are differences of fact between Mayfield and the present case. But they do not affect the central proposition that there is no rule to the effect that proper provision for an adult and presently able-bodied child does not extend to providing him or her with a house or money to buy one. That proposition was not criticised by the Court of Appeal. Indeed, at [32], Bryson JA observed that it was open to White J and altogether appropriate to look well beyond needs when interpreting and applying community standards to decide what provision the court ought to order. 35 Even without the sale of the Lindfield property it is plain that the income which Mrs Johnson now receives is in excess of her outgoings. However, the margin is not great. It is also plain that it is inappropriate for Mrs Johnson to make repairs to the property and it should be sold in order to avoid continuing deterioration. I do not think that the plaintiff's claim for a house should prevail. He does not need such a large house and even though he may have deserved the provision of more modest accommodation he has not made that claim. 36 After the sale of the property one would expect a further increase in Mrs Johnson's income and a consequent increase in her tax liabilities. However, there would be substantial funds in excess of $2,100,000 held by her. The other matter of note which was put forward by the defendant is the fact that under the will of Mrs Johnson her son, Andrew Johnson, will inherit a one third share of her estate. There is, of course, the possibility of a change in this provision under s 18 of the Succession Act given Mrs Johnson's mental state. However, in the circumstances of this case it would be unlikely that any such application would be successful. This is a substantial asset which Andrew Johnson would expect to receive in due course. His mother's life expectancy is 8.6 years. 37 There was no analysis of the likelihood of success of the plaintiff's appeal from the judgment of Foster J. The plaintiff suggests that he may have some benefits if he succeeds but that result would reduce any claim which he now may have. I will consider the matter on the basis that the appeal will not be successful. There is no indication of when it is likely to proceed to a hearing and so some small costs order may be made against the plaintiff. In addition he has an unquantified liability in respect of the costs order made against him by Forster J. It would be unlikely that the amount would be quantified before disposition of the appeal. 38 The plaintiff has some obvious needs if the house is sold. One is for accommodation and the other is to meet his present liabilities. His accommodation can either be in rented premises or in some other premises which may be purchased for him. Unfortunately, the plaintiff has not put forward any evidence of the cost of alternative accommodation and instead he focused on the case which he wished to propound in these proceedings. In these circumstances the Court can only provide some capital sum which might assist him with accommodation by way of rented premises. When considering an appropriate amount the fact that he will inherit substantial funds on the death of his mother should be taken into account. 39 In the circumstances an award in favour of the plaintiff is appropriate. 40 It will be necessary to designate property as notional estate to meet any order. 41 Section 27 of the Family Provision Act is in the following terms: "(1) On an application in relation to a deceased person, the Court shall not make an order designating property as notional estate of the deceased person unless it has considered: (a) the importance of not interfering with reasonable expectations in relation to property; (b) the substantial justice and merits involved in making or refusing to make the order; and (c) any other matter which it considers relevant in the circumstances. (2) In determining what property should be designated as notional estate of a deceased person, the Court shall have regard to: (a) the value and nature of property the subject of any relevant prescribed transaction or distribution from the estate of the deceased person; (b) where, in relation to any such prescribed transaction, consideration was given, the value and nature of the consideration; (c) any changes over the time which has elapsed since any such prescribed transaction was entered into, any such distribution was made or any such consideration was given in the value of property of the same nature as the property the subject of the prescribed transaction, the distribution or the consideration, as the case may be; (d) whether property of the same nature as the property the subject of any such prescribed transaction, any such distribution or any such consideration could, during the time which has elapsed since the prescribed transaction was entered into, the distribution was made or the consideration was given, as the case may be, have been applied so as to produce income; and (e) any other matter which it considers relevant in the circumstances." 42 It was suggested in argument that the widow of the deceased would have had an expectation of receiving the Lindfield house under the principles in Luciano v Rosenblum (1985) 2 NSWLR 65. However, given the widow's mental state such an expectation does not exist but more importantly in a case where the widow is now living permanently in a nursing home, the widow's need is security in the nursing home. The substantial justice and merits require some small amount to be provided to the plaintiff in the manner I have indicated. 43 I think it is appropriate that the plaintiff receive a legacy of $400,000 out of the notional estate being property of his mother. A sum of up to $200,000 of this may be set off against the amounts he may owe to his mother and the balance is to be paid to the plaintiff. 44 The defendant's costs are to come out of the remaining actual estate. 45 I direct the parties to bring in short minutes to reflect my judgment. **********

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