Kelly v The Public Trustee

Phillips v Walsh (1990) 20 NSWLR 206 CASES CITED : Australian Hardboards Limited v Hudson Investment Group Limited [2007] NSWCA 104 Vasiljev v Public Trustee [1974] 2 NSWLR 497

Kelly PARTIES : v The Public Trustee

COUNSEL : Plaintiff: P Livers (solr) Defendant: D M Flaherty

SOLICITORS : Plaintiff: Hancock Alldis & Roskov Solicitors Defendant: Solicitor for the Public Trustee

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3871/05 Kelly v The Public Trustee JUDGMENT 1 HIS HONOUR: By notice of motion filed 7 November 2007 the plaintiff moved the court for orders: " Pursuant to order 23 of Court order made on 16 March, 2006 the matter be relisted for further directions regarding implementation of these orders in the event of disputes as to administration thereof. " 2 The reference to orders of 16 March 2006 should have been to orders of 16 May 2006. Those orders were made on an application brought by the plaintiff under the Family Provision Act 1982 (NSW) in respect of the estate of her mother. The plaintiff was the daughter of the deceased. She has two children; a daughter now aged eleven and a son who will shortly be sixteen. I shall refer to them in these reasons as A and B respectively. 3 The effect of the deceased's will was that the deceased's property, which consisted primarily of land and a house in Mavis Avenue, Peakhurst, was left to her grandson B. On 5 May 2006, Nicholas J gave judgment on the application under the Family Provision Act. His Honour found that the plaintiff was entitled to provision under that Act, which should provide her with suitable accommodation for life, subject to an entitlement of each grandchild to reside in the Peakhurst property or any substitute property for as long as they wish to do so. (See judgment at [31] and [32]). 4 His Honour directed that short minutes of order be brought in in accordance with his Honour's reasons. The orders of 16 May 2006 relevantly provide as follows: " 1. In addition to the provisions made for her benefit by the will dated 25 September 2003 ('the will') of ... ('the deceased'), the plaintiff shall have the benefit of the following provision during her lifetime: a. the plaintiff shall have an interest in the property at ... Mavis Avenue, Peakhurst ('the Peakhurst property') permitting her to occupy the Peakhurst property for the remainder of her life or for such lesser time as she requires accommodation therein; b. if at any time the Plaintiff should so request, the executors and trustee of the will ('the trustee') shall use the capital value of the Peakhurst property, the net proceeds of any sale or other disposition thereof, the net proceeds of sale or other disposition of any home or other accommodation for the plaintiff provided in substitution thereof and any net income from any such proceeds for the following purposes: (i) to purchase and hold for her (the Plaintiff's) use and occupation from time to time other homes or accommodation rent free at a net cost to the estate not exceeding the amount provided from time to time by the capital and income above mentioned; ... (iii) in the event that the Plaintiff so requests as provided in order 1b. above the trustee shall not purchase any substitute suitable accommodation for the benefit of the Plaintiff unless the trustee (in his sole discretion) is satisfied that such substitute accommodation is also reasonably suitable to satisfy the accommodation requirements of [B] and [A] (if any) as long as they ( [B] and [A] ) are under the age of 18 years and/or they express a desire to continue to reside with the Plaintiff. ... 2. The trustee shall have the power to sell the Peakhurst property and any substituted home or other accommodation or the rights thereto purchased for the purpose of carrying out order 1 hereto. ... 4. For as long as the Peakhurst property or any substitute property is occupied by the Plaintiff, the Plaintiff must keep it (the Peakhurst or any substitute property occupied by the plaintiff) secured and pay all 'regular outgoings' on it. "

The expression " regular outgoings " was defined in order 5. " 15. The Trustee may sell the Peakhurst property without needing anyone's consent if:- - the proceeds of sale are needed to pay any claim against the Peakhurst property; or - the Peakhurst property is unfit to live in without capital repairs and funds to pay for them are not available; or - the Plaintiff's interest has ended and the beneficiaries entitled to the Peakhurst property do not agree to take a transfer of it. 15A. In the event of sale as described in order 15 herein the trustee shall hold the proceeds of sale of as provided in order 1b. herein. ... 19. Pursuant to Section 10 of the Family Provision Act 1982 ('the Act'), the grandchildren of the Deceased, namely [B] and [A] shall be entitled to reside in the Peakhurst property and any substitute home occupied by the Plaintiff for so long as they wish to or require accommodation therein. ... 23. Liberty to apply in relation to the implementation of these orders or for advice and/or directions as to the carrying out of the purposes referred to above, in the event of doubts, difficulties or disputes as to the administration thereof. "

5 On the application coming on for hearing, the solicitor for the plaintiff identified the particular order which the plaintiff sought as being an order that the defendant purchase a substitute property pursuant to order 1b. of the orders of 16 May 2006 to house the plaintiff and her daughter. Ultimately, the plaintiff's solicitor did not press for an order in those terms. 6 No application was made pursuant to s 8 of the Family Provision Act for additional provision out of the estate of the deceased. Rather, the present application seeks the working out of the orders of 16 May 2006. On such an application, supplemental orders may be made for the purpose of working out or making more efficacious the principal orders. That may involve deciding complex questions, particularly if there has been a change of circumstances from the time the original orders were made. But the exercise of power pursuant to liberty to apply, or a reservation of the matter for further consideration, is not intended to alter the substance of the original orders. Hence, it would not be possible on this application to make an order whose effect was to deprive B of rights afforded to him under the orders of 16 May 2006. (See generally Phillips v Walsh (1990) 20 NSWLR 206 at 209-210 and Australian Hardboards Limited v Hudson Investment Group Limited [2007] NSWCA 104 at [50]-[58]). 7 The change in the circumstances in the present case is that in December 2006, the plaintiff moved out of the Peakhurst property, taking her daughter with her. The plaintiff deposes that the circumstances which led her to that course were that two youths, or perhaps men - the evidence was not clear as to their age - had moved into the house with her son and that between them the house had been vandalised. That the house was vandalised is clear, although the defendant has not determined whether it was vandalised by B or his companions, as the plaintiff contends, or by the plaintiff, as B contended. 8 In February 2007, B also vacated the property. The defendant thereafter caused considerable work to be undertaken to the property to put it in proper repair. The property was sold at auction on 8 September 2007. The net proceeds of sale from the property were in the order of $470,000. 9 The investment planning manager employed by the defendant has deposed that if a substitute property were to be purchased, the maximum amount available to be spent upon it would be $335,000 exclusive of stamp duty, legal costs and associated expenses. The estate currently has funds of about $468,000. The deponent expresses the view that no greater sum could be spent on the purchase of the substitute property whilst providing also a sinking fund to generate the minimum income required to fund normal outgoings and necessary repairs. 10 Under the orders of 16 May 2006, the regular outgoings which the plaintiff was required to pay included the costs of maintaining the property in a reasonable state of repair. However, those costs were not paid by the plaintiff. It would appear that she may not have been able to afford the costs, and it is reasonable that the defendant should set aside an appropriate sum to meet such outgoings and repairs. 11 On 15 June 2007, the defendant wrote to the solicitors for the plaintiff advising that it was proceeding to sell the Peakhurst property. The view was expressed that, by ceasing to reside in the Peakhurst property, the plaintiff's interest in that property had probably come to an end. The defendant said that it was incumbent on the plaintiff "to make application as to directions regarding the disposal of income generated by the sale of the Peakhurst property" and that such an application would need to be supported by evidence as to the current living conditions of the plaintiff and her daughter, setting out their accommodation needs and desires for the future. In the absence of such an application, the defendant advised that it would retain the whole of the net proceeds of sale of the Peakhurst property for the plaintiff's children until they attained eighteen years. 12 On 21 June 2007 the plaintiff, through her solicitors, made a request in accordance with order 1b., that the net proceeds of sale of the Peakhurst property be used to purchase another property for occupation by the plaintiff. The defendant replied by noting that any proposed purchase pursuant to cl 1b.(i) would be subject to conditions in cl 1b.(iii). The solicitors for the defendant said: "... we understand [that] the current relationship between [the plaintiff] and her son [B] is volatile and has led to significant damage to the Peakhurst property, with each party accusing the other thereby necessitating the sale of the property. We do not believe neither [the plaintiff] nor [B] will be in a position to comply with order 1(b)(iii), hence our view that it is incumbent on your client [that is the plaintiff] to make application to the court for directions once the property is sold. " 13 Hence the present application. As noted earlier in these reasons, in final submissions the plaintiff's solicitor accepted that substitute accommodation for the plaintiff must also be such as in the discretion of the defendant is reasonably suitable to satisfy the accommodation requirements of A and B as long as they: (a) are under the age of eighteen; or (b) express a desire to continue to reside with the plaintiff. 14 Both parties were agreed that the concluding words of order 1b.(iii) should be read disjunctively as set out above. That is clearly right. Such a construction is consistent with cl 19. It would, in any event, be surprising if the clause were to be read conjunctively so that the entitlement of minors to accommodation during the period of their minority should depend on their expressing a desire to continue to reside with their mother. 15 The plaintiff's interest in the Peakhurst property was a right of occupancy for her life or for "such lesser time as she requires accommodation therein." The circumstances in which the plaintiff vacated the Peakhurst property in December 2006 did not indicate that she no longer required accommodation therein. 16 In any event, under order 1b. she was entitled at any time to request that the net proceeds of sale of the Peakhurst property be used by the defendant for the purpose of purchasing and holding for the plaintiff's use and occupation from time to time another house or accommodation, rent free, in accordance with cl 1b.(i). Of course, that is subject to the requirements of cl 1b.(iii), but the plaintiff did not cease to be entitled to substitute accommodation because she had vacated the Peakhurst property in December 2006. 17 The fact, if it be a fact, that B may not wish to move into such accommodation with his mother or, if he does move into such accommodation, there may be future friction or tension between the plaintiff and B, does not affect the proper interpretation of the orders of 16 May 2006 nor the plaintiff's rights under those orders. 18 In my view, notwithstanding the events which have happened in relation to the Peakhurst property, the defendant is obliged to purchase from the proceeds of sale of the Peakhurst property, and to hold for the plaintiff's use and occupation, accommodation which she can occupy rent-free, being accommodation which, in the defendant's sole discretion, is also reasonably suitable to satisfy the accommodation requirements of A and B as long as they are under the age of eighteen years, or for so long as they express a desire to continue to reside with the plaintiff. 19 It was common ground that the concept of "accommodation requirements" encompassed factors which were relevant to the work or study which A and B may be expected to undertake. In other words, in the defendant determining what substitute accommodation is reasonably suitable to satisfy their accommodation requirements, the defendant is entitled to take into account where A is going to school, or where B may be working or seeking to work or to study. 20 The plaintiff expressed a desire to the defendant to purchase substitute accommodation for her in the Blue Mountains. No doubt the defendant will take her request into account and the reasons advanced for it. But it will remain a matter for the defendant in its sole discretion to decide what is suitable substitute accommodation and where such accommodation is to be. 21 The orders of 16 May 2006 do not require the defendant to apply the whole of the proceeds of sale of the Peakhurst property towards paying a purchase price or expenses of purchase of substitute accommodation. In my view, the defendant is entitled to set aside a sinking fund as is proposed. 22 The question arose during the course of submissions as to whether a tutor should be appointed to represent the interests of B, or perhaps A and B, on this application. I have concluded that no such order is required. The present application involves the working out of the orders made on 16 May 2006 in proceedings under the Family Provision Act in which the only parties were the plaintiff and the defendant. 23 In Vasiljev v Public Trustee [1974] 2 NSWLR 497 Hutley JA emphasised that in such proceedings it is the responsibility of the executor to protect the interests of the beneficiaries. Just as the defendant represented the interests of the minor beneficiaries in the proceedings before Nicholas J, so it has advanced matters which are relevant to their interests on the present application. As this application is, in a sense, a continuance of the Family Provision Act proceedings, the same principles as to representation apply. 24 I make the following orders:

1. Pursuant to s 63 of the Trustee Act 1925 (NSW) I direct that, in the events which have happened, the defendant is obliged to apply the net proceeds of sale of the property at Mavis Avenue, Peakhurst and any net income from such proceeds after setting aside a reasonable sum by way of a sinking fund to provide income to meet the costs of repairs, towards the purchase of a house or other accommodation for the plaintiff's use and occupation rent-free, being accommodation which the defendant, in its sole discretion, is satisfied is also reasonably suitable to satisfy the accommodation requirements of [B] and [A] (if any) as long as they:

(a) are under the age of eighteen years; or (b) express a desire to continue to reside with the plaintiff, and otherwise to be held subject to the orders of 16 May 2006.

2. For the purposes of implementing order 1, direct that the plaintiff advise the defendant in writing as to the availability of such property for purchase by the defendant and direct that the defendant or his representatives within a reasonable time advise the plaintiff in writing as to the defendant's assessment of the suitability of such property.

3. Order that the defendant's costs of the application be paid from the estate on the indemnity basis and that the plaintiff's costs of the application be paid from the estate on a party/party basis.

4. The parties have the same liberty to apply in relation to these orders as they do in relation to the orders of 16 May 2006.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.