Notional Estate
76The notional estate provisions of the Act are dealt with in Part 3.3 of the Act. However, in s 3 of the Act, "notional estate" of a deceased person is defined as meaning "property designated by a notional estate order as notional estate of the deceased person". "Notional estate order" means "an order made by the Court under Chapter 3 designating property specified in the order as notional estate of a deceased person".
77It has been said, in respect of the notional estate provisions in the former Act, that an applicant for provision "may now apply in the same proceedings for orders for relief and designating property as "notional estate" thereby compelling the "disponee" of a "prescribed transaction" to provide money or property for the purpose of making financial provision for the applicant": Kavalee v Burbidge; Hyland v Burbidge (1998) 43 NSWLR 422 at 441. (Although the terminology in the Act is different, the same principle applies under the Act.)
78Rosalind Croucher in "Contracts to Leave Property by Will and Family Provision" after Barns v Barns [2003] HCA 9 [2005] SydLawRw 12; (2005) 27(2) Sydney Law Review 263 has commented on the notional estate provisions of the former Act:
"The introduction of the notional estate provisions brought to the forefront the distinction of 'estate versus notional estate' that had been implicit in the decisions on the legislation prior to the introduction of the Family Provision Act 1982 (NSW). It made explicit in the legislation that 'estate' and 'notional estate' were different. Things subject to contracts (like mutual wills) were not within the definition of 'estate'. To bring such property within the legislation required now the application of the complex procedures and definitions of 'notional estate'. This requires a particular kind of transaction, an absence of relevant consideration, a defined time frame in which the transaction took effect and a range of other matters to be considered before property can be designated as notional estate and made the subject of an order for family provision under the Act."
79In New South Wales Law Reform Commission Report 110 (2005) - Uniform Succession Laws: Family Provision, at paragraph 3.1, "notional estate orders" are described as "orders issued by the Court which are intended to make available for family provision orders assets that are no longer part of the estate of a deceased person because they have been distributed either before or after the deceased's death (either with or without the intention of defeating applications for family provision)".
80In Galt v Compagnon (NSWSC, 24 February, 1998, unreported) Einstein J, at 21, said that notional estate was "a complex concept" but shortly described it as "property which would have become part of the deceased's estate, had it not been dealt with, or had it been dealt with, by the deceased in a particular way, and in particular circumstances, prior to his, or her, death".
81Section 63(5), relevantly, provides that a family provision order may be made in relation to property that is not part of the estate of a deceased person if it is designated as notional estate of the deceased person by an order under Part 3.3 of the Act.
82Importantly, the power to make a notional estate order does not arise unless the Court is satisfied that (a) the deceased person left no estate, or (b) the deceased person's estate is insufficient for the making of the family provision order, or any order as to costs, that the Court is of the opinion should be made, or (c) provision should not be made wholly out of the deceased person's estate because there are other persons entitled to apply for family provision orders or because there are special circumstances (s 88).
83Furthermore, the Court must not designate as notional estate, property that exceeds what is necessary, in the Court's opinion, to allow the provision that should be made, or, if the Court makes an order that costs be paid from the notional estate under s 99, to allow costs to be paid as ordered, or both (s 89(2)).
84Section 74 of the Act provides that "relevant property transaction" means a transaction, or circumstance, affecting property and described in s 75 or s 76. "Property" includes "any valuable benefit".
85Section 75 of the Act provides:
"(1) A person enters into a relevant property transaction if the person does, directly or indirectly, or does not do, any act that (immediately or at some later time) results in property being:
(a) held by another person (whether or not as trustee), or
(b) subject to a trust,
and full valuable consideration is not given to the person for doing or not doing the act.
(2) The fact that a person has entered into a relevant property transaction affecting property does not prevent the person from being taken to have entered into another relevant property transaction if the person subsequently does, or does not do, an act affecting the same property the subject of the first transaction.
(3) The making of a will by a person, or the omission of a person to make a will, does not constitute an act or omission for the purposes of subsection (1), except in so far as it constitutes a failure to exercise a power of appointment or disposition in relation to property that is not in the person's estate."
86Section 76 of the Act then provides a description of some, but not all, of the circumstances that constitute the basis of a relevant property transaction for the purposes of s 75. Any such circumstance is "subject to full valuable consideration not being given". Importantly, a distinction must be drawn between "valuable consideration" and "full valuable consideration": see, for example, s 76(4) of the Act.
87Important, also, is the omission of the words "in money or moneys worth" after "full valuable consideration" which had appeared in s 22 of the former Act. Furthermore, the phrase "is not given" rather than "is not received" is also significant.
88The expression "subject to full valuable consideration not being given", in my view, has the effect of imposing a requirement, wholly separate from the result, which is property being held by another person or subject to a trust.
89One such circumstance identified in s 76(2)(f)), is if the deceased enters into a contract (full valuable consideration not having been given) disposing of property out of his, or her, estate, whether or not the disposition is to take effect before, on or after, her, or his, death, or under her, or his, will, or otherwise.
90The test whether the consideration given is full valuable consideration or not is not set out in the Act. The expression has been said "to connote some elasticity": Re Marriott, decd [1968] VR 260 at 269.
91The meaning of the expression has been the subject of discussion in a number of cases under the former Act and other legislation, which were referred to by Young J (as his Honour then was) in Wade v Harding (1987) 11 NSWLR 551 at 554-555. His Honour concluded that in determining whether full valuable consideration was given for an act, or omission, for the purpose of s 22 of the former Act, it was legitimate to look to the nature of the transaction and consider whether what was given is a fair equivalent for what is received.
92His Honour referred to Attorney-General v Earl of Sandwich [1922] 2 KB 500, in which Lord Sterndale, MR said, at 517:
"Hamilton, J, in the case to which I have referred [Attorney-General v Boden, [1912] 1 KB 539, at 561], states that the way to answer this question is not necessarily to estimate the value of the thing granted and the consideration, and ascertain whether they exactly agree, but to look at the nature of the transaction and consider whether what is given is a fair equivalent for what is received. I think this is correct, and, looked at in that way, I think what the defendant received was a fair equivalent for what he gave, and that he received full consideration, according to the terms of the section."
93Scrutton, LJ, at 520, also accepted this as a proper test.
94Although Wade v Harding was overruled in Cetojevic v Cetojevic [2007] NSWCA 33, the way in which the expression was described by his Honour was not the subject of disapproval in the Court of Appeal.
95Respectfully, I adopt these views as to the meaning of that expression. I accept that "full valuable consideration" means such valuable consideration as amounts to, approximates, or is broadly commensurate with, or is a fair equivalent of, the value of that for which it is given.
96Whether full valuable consideration is given is a question of fact and involves no exercise of discretion. In my view, the court should determine the question applying a commonsense approach and "avoiding finely balanced mathematical computations involving the value of normal exchanges of support in the domestic sense": Jelley v Iliffe [1980] EWCA Civ 4; [1981] 2 All ER 29.
97Yet, as said earlier, the omission of the words "in money or moneys worth" raises the question whether, in the appropriate circumstances, personal services by way of care and attention, which are motivated by love and affection, moving to the deceased, can, as a matter of law, count as full valuable consideration given to her or him, under the Act.
98However, assuming that it does, balancing the value of imponderables, such as companionship and other personal services, on which the court has somehow to put a financial value, against the consideration that is shown in a contract in which the deceased disposes of her, or his, property, is likely to be a hard task. No doubt, for this reason, the value of the property the subject of the contract and the full valuable consideration given for it do not have to exactly agree. As was said in Re Wilkinson (deceased); Neale v Newell [1978] 1 All ER 221 at 224:
"It is not very easy, when one is dealing with the question of what is full valuable consideration, to measure in purely financial terms the sort of things which the applicant was doing for the deceased and the sort of thing which the applicant represented to the deceased, namely a companion, someone to talk to and maybe to argue with, someone to be about in the house so that she was not all alone. Somehow, it seems to me, I have to measure those matters in order to see whether, fairly looked at, they were a full valuable requital or return for that which the applicant received from the deceased.
The evidence as to the latter matter is quite plain, that is the whole of the household expenses, the provision of the accommodation and rates, everything of that sort as well as the grocery bills and the other items which went to make up the domestic regime were wholly and exclusively, outside the ambit of purely personal expenditure of the applicant, paid for by the deceased. So on the one hand one has the measure on the receiving side of what has to be considered as to whether it is or is not a full valuable consideration for the other. I do not, of course, know the standard at which these ladies lived; I cannot put any precise amount of money on that provision. It was, however, a full provision; the whole of the household was run at the expense of the deceased.
Returning to that, during the period which I think is the relevant one, for reasons which I indicated earlier in this judgment, namely the years immediately before the deceased's death, that is to say the years after 1973 at least, what the applicant did was a share of the light housework and cooking with the deceased; I take that to mean an equal share. She also helped the deceased to dress herself, and was available as a companion, in the sense of being about so that her sister was not lonely and, if there was anything in it (I doubt whether there was very much), suffered the disadvantage of being for one reason or another, I do not know the reason, disturbed in the night. I have to decide, as I understand it, whether if one puts a financial value on those items, in my judgment irrespective of whether there is or is not contractual obligation to provide those services or suffer those detriments, one finds a full valuable requital for the board and lodging which the applicant was provided with wholly and exclusively at the expense of the deceased. With considerable uncertainty I express the conclusion that that was not a full valuable consideration."
99The onus of establishing that full valuable consideration was not given, it seems to me, lies on the party asserting that proposition. Where, however, that party establishes a prima facie case of inadequacy of the valuable consideration given, the evidential burden will pass to the other party to establish that there was, indeed, consideration given, and the extent of that consideration.
100Where, for example, as here, the Transfer of the Brighton-Le-Sands property disclosed a monetary consideration (the purchase price), but it is common ground that no part of that monetary consideration was paid by the Defendants to the deceased at the time, an evidential onus passes to them to demonstrate that there was full valuable consideration given to her.
101In determining the answer to the question, I am inclined to the view that when the relevant transaction involves a contract for the disposition of the deceased's property, the first inquiry must always be, what is the actual value of that property? The second question is whether the monetary consideration, if any, identified in the contract, is commensurate with that value. The next question is what consideration is given by the other party or parties to the deceased? The final question is whether the consideration given amounts to full valuable consideration?
102Where the monetary consideration identified in the contract the subject of the relevant property transaction is the actual value of the property being disposed of by the deceased, but all of that consideration is not given to the deceased, there may be some difficulty in establishing that "full valuable consideration" has been given, even if other consideration, in money or moneys worth, is provided by the person, or persons, to whom, or for the benefit of whom, the contract is made, or by any other person. In those circumstances, the monetary value of the other consideration given to the deceased should be the subject of evidence.
103Section 77(1) provides that for the purposes of Chapter 3 of the Act, a relevant property transaction is taken to have effect when the property concerned becomes held by another person, or subject to a trust, or as otherwise provided by the section. Sub-section (4) provides that a relevant property transaction that involves any kind of contract for which valuable consideration, though not full valuable consideration, is given for the deceased to enter into the transaction is taken to be entered into, and take effect, when the contract is entered into.
104Section 78 of the Act provides:
"(1) The Court may make an order designating property as notional estate only:
(a) for the purposes of a family provision order to be made under Part 3.2, or
(b) for the purposes of an order that the whole or part of the costs of proceedings in relation to the estate or notional estate of a deceased person be paid from the notional estate of the deceased person.
(2) The Court must not make an order under subsection (1) (b) for the purposes of an order that the whole or part of an applicant's costs be paid from the notional estate of the deceased person unless the Court makes or has made a family provision order in favour of the applicant."
105Section 80(1) provides that the Court may, on application by an applicant for a family provision order, or on its own motion, make a notional estate order designating property specified in the order as notional estate of a deceased person, if the Court is satisfied that the deceased person entered into a relevant property transaction before his, or her, death and that the transaction is a transaction to which this section applies.
106Section 80(2) provides for the section to apply to the following relevant property transactions:
(a)a transaction that took effect within 3 years before the date of the death of the deceased person and was entered into with the intention, wholly or partly, of denying or limiting provision being made out of the estate of the deceased person for the maintenance, education or advancement in life of any person who is entitled to apply for a family provision order;
(b)a transaction that took effect within one year before the date of the death of the deceased person and was entered into when the deceased person had a moral obligation to make adequate provision, by will or otherwise, for the proper maintenance, education or advancement in life of any person who is entitled to apply for a family provision order which was substantially greater than any moral obligation of the deceased person to enter into the transaction;
(c)a transaction that took effect or is to take effect on or after the deceased person's death.
107It is not essential that the applicant be able to rely upon the provisions of more than one of the subparagraphs identified. It is sufficient if he or she is able to establish the matters in any of them.
108Section 80(2)(a) requires the relevant property transaction to be entered into with the intention, wholly or partly, of denying or limiting provision being made out of the estate of the deceased for the maintenance, education or advancement in life of any person who is entitled to apply for a family provision order. Interestingly, the section does not identify whose intention it is, but it must be the deceased's intention that is to be proved: Hildebrandt v Soncini [2007] NSWSC 1227 at [21] - [28].
109In Hinde & Hinde and Anor [2008] FamCA 24, Carmody J, in another context, said:
"The ordinary natural meaning of the word "intends" is to mean, to have in mind. Relevant definitions in the Shorter Oxford English Dictionary show that what is involved is the directing of the mind, having a purposeful design. Intention is not the same as motive or desire. A person may do something fully intending to do it without desiring it at all. Euthanasia is an example. A motive is having a reason to do or not to do something. It is a subjective state of mind which can not be conclusively established as a fact except perhaps by truthful admission."
110However, more than mere contemplation by the deceased is necessary. In Cunliffe v Goodman [1950] 2 KB 237, a decision of the English Court of Appeal, Asquith L.J., again, in another context, considered, in some detail, the meaning of the term "intention". His Lordship said at 253:
"An 'intention', to my mind, connotes a state of affairs which the party 'intending' - I will call him X. - does more than merely contemplate. It connotes a state of affairs which, on the contrary, he decides, so far as in him lies, to bring about, and which, in point of possibility, he has a reasonable prospect of being able to bring about, by his own act of volition. X. cannot, with any due regard to the English language, be said to 'intend' that it shall be a fine day to-morrow. At most he can hope or desire or pray that it will. Nor, short of this, can X. be said to 'intend' a particular result if its occurrence, though it may be not wholly uninfluenced by X's will, is dependent on so many other influences, accidents, and cross currents of circumstance that not merely is it likely not to be achieved at all, but, if it is achieved, X's volition will have been no more than a minor agency collaborating with, or not thwarted by, the factors which predominately determine its occurrence."
111Whether the deceased has the necessary intention is a question of fact to be decided upon consideration of all the circumstances. One might expect there to be some language, written or oral, used, or adopted, by the deceased, from which the court is able to find, as a fact, the necessary intention prior to, or at, the time of, the relevant property transaction.
112It is the intention with which the transaction was entered into, rather than the effect of that transaction, which is important. If that intention cannot be established, that the effect of the transaction is to wholly or partly, deny, or limit, provision, does not matter. It is not enough that the relevant property transaction has that particular result. In other words, what the subsection requires is not cause and effect, but intention and effect: Wilson v Wright (NSWSC, 25 February 1992, unreported), per Windeyer J.
113Section 80(2)(b), requires a comparison of "the moral obligation to make adequate provision, by will, for any eligible person ("a person who is entitled to apply for a family provision order") with "the moral obligation of the deceased to enter into the relevant property transaction", without full valuable consideration having been given. The latter expression focus upon moral obligation surrounding the particular transaction in question.
114The expression "moral obligation" is no more than a simple and convenient way of referring to the obligation resting upon a deceased to make a wise and just assessment of the interests of any person who is able to ask to be taken into account in determining what adequate provision for proper maintenance, education and advancement in life, should have been made for him or her: Collicoat v McMillan [1999] 3 VR 803.
115With this in mind, it is difficult to read the words "the moral obligation of the deceased to enter into the property transaction" literally. In determining whether this element is satisfied, the moral obligation of the deceased owed to any eligible person must be compared with the moral obligation to enter the transaction for the benefit of the party, or parties, to whom the property of the deceased is disposed by the relevant property transaction, and who does, or who do, not give full valuable consideration. If there was, then, a substantially greater moral obligation for the deceased to preserve the estate for the benefit of any eligible person to whom the deceased had a moral obligation to make adequate provision for his, or her, proper maintenance, education or advancement in life, than to arrange his, or her, affairs with the result that the property would be disposed of out of his, or her, estate, the sub-section would be satisfied.
116Unlike s 80 (2)(a), the deceased's intention is irrelevant in making this assessment: Ebert v Ebert; Ebert v Ebert [2008] NSWSC 1206 at 133.
117The court's decision must be made having regard to the circumstances at the time of entry into the transaction, since, in its terms, s 80(2)(b) requires an assessment of any competing moral obligation "when" the deceased entered into the transaction.
118The word "substantially" is one of indefinite meaning and lacks precision. The word is quantitatively imprecise, but it must be given its natural meaning, which I take to mean real and not trivial, minimal, imaginary, ephemeral, or nominal.
119However, by adding the word "substantially...", the section requires the relevant moral obligation to any eligible person to be of real substance, compared with the moral obligation to enter the relevant property transaction.
120Using the facts of this case, I must consider, since each of the Plaintiffs, is a child of the deceased, whether the deceased, in about June 2009, had a moral obligation to make adequate provision for his, and her proper maintenance, education and advancement in life, which was substantially greater than her moral obligation to transfer the Brighton-Le-Sands property to the Defendants, in circumstances where she had made a Will in which she had provided for that property to pass to them as tenants in common in equal shares.
121It is not necessary to discuss s 80(2)(c) of the Act.
122Section 80(3) provides, so far as is relevant:
"(3) Property may be designated as notional estate by a notional estate order under this section if it is property that is held by, or on trust for:
(a) a person by whom property became held (whether or not as trustee) as the result of a relevant property transaction, or
(b) ...
whether or not the property was the subject of the relevant property transaction."
123Section 83 of the Act relevantly provides that the Court must not, merely because a relevant property transaction has been entered into, make an order under s 80, unless the Court is satisfied that the relevant property transaction, or the holding of property resulting from the relevant property transaction, directly or indirectly disadvantaged the estate of the principal party to the transaction or a person entitled to apply for a family provision order from the estate or, if the deceased person was not the principal party to the transaction, the deceased person (whether before, on or after death).
124The effect of a notional estate order is that "a person's rights are extinguished to the extent that they are affected by a notional estate order" (s 84).
125The Court's power to make a notional estate order is also circumscribed by other sections. Section 87 provides:
"The Court must not make a notional estate order unless it has considered the following:
(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,
(c) any other matter it considers relevant in the circumstances."
126In John v John [2010] NSWSC 937 at [118] - [120], Ward J said:
"[118] What amounts to "reasonable expectations in relation to property" was considered in Petschelt v Petschelt [2002] NSWSC 706, at [68], by McLaughlin M (as the Associate Justice then was), who said:
That phrase does not, however, indicate the person by whom those reasonable expectations are held. Clearly the Court must consider the reasonable expectations of the First Defendant in relation to property. By the same token, however, the Court should also consider the reasonable expectations of the Deceased herself in relation to property, and also, possibly, the reasonable expectations of the Plaintiff.
[119] In D'Albora v D'Albora [1999] NSWSC 468, at [53], Macready M (as the Associate Justice then was) gave examples of the circumstances which might give rise to reasonable expectations for the purposes of this section:
Under s 27(1)(a) the Court has to consider the importance of not interfering with the reasonable expectations in relation to the property. Such reasonable expectations may well occur in a number of circumstances. For example, a beneficiary who receives a property may have spent money on the property or worked on the property ... Another common area where one often sees in this matter is where there is a promise in relation to the property and the acting by an intended beneficiary on the fact of that promise.
[120] Similarly, in Wentworth v Wentworth [1992] NSWCA 268, Priestley JA, with whom Samuels AP and Handley JA agreed, referring to the "more general precautionary provisions" in ss 26 and 27 of the Family Provision Act, said:
S 27(1) for example, says the Court shall not make an order designating property as notional estate unless it has considered, amongst other things, the importance of not interfering with reasonable expectations in relation to property. If someone is in possession of property, otherwise than by gift, after having given up something of equivalent value in order to obtain that property, it would be entirely reasonable for that person to expect to remain in possession of it."
127The "substantial justice and merits" referred to in s 87(b) of the Act are linked to the making, or refusing to make, an order designating property as notional estate: Smith v Woodward (NSWSC, Macready M (as his Honour then was), 9 September 1994, unreported).
128The position of the persons entitled to apply for a family provision order from the estate, as well as the persons involved in the relevant property transaction, should be considered in respect of s 87(b) and (c) of the Act.
129Section 89(1) of the Act, relevantly, provides that in determining what property should be designated as notional estate of the deceased, the Court must have regard to (a) the value and nature of any property the subject of a relevant property transaction; (b) the value and nature of any consideration given in a relevant property transaction; (c) any changes in the value of property of the same nature as the property referred to in paragraph (a), or the consideration referred to in paragraph (b), in the time since the relevant property transaction was entered into; (d) whether property of the same nature as the property referred to in paragraph (a), or the consideration referred to in paragraph (b), could have been used to obtain income in the time since the relevant property transaction was entered into; and (e) any other matter it considers relevant in the circumstances.
130If the Court has made, or proposes to make, a family provision order designating certain property as notional estate, s 92 of the Act enables the Court, on application by a person who offers other property in substitution ("the replacement property"), to vary the notional estate order by substituting the replacement property for the property designated as notional estate by the order, or make a notional estate order designating the replacement property as notional estate instead of the property proposed to be designated as notional estate by such an order, as appropriate. However, such an order may only be made if the court is satisfied that the replacement property can properly be substituted.