Supreme Court of the ACT|2013-11-29

Kulczycki v Public Trustee [2013] ACTSC 230 (29 November 2013)

[2013] ACTSC 230 (29 November 2013)

EQUITY - equitable estoppel - statements made by mother to son - where son resided in property and paid expenses - whether intention was that house be a gift to son or left to son in will - estoppel not made out

FAMILY PROVISION AND MAINTENANCE - application by two of testator's adult children - modest estate consisting of family home - where testator bequeathed family home to one son - deteriorating health of other son - appropriate orders as to costs - issue of reasonableness of costs left to assessment

Baychek v Baychek [2010] NSWSC 987

Brown v Grosfeld [2011] NSWSC 1429

Cooper v Dungan (1976) 50 ALJR 539

Crossman v Riedel [2004] ACTSC 127

Dillon v Public Trustee of New Zealand [1941] AC 294

Fifteenth Eestin Nominees Pty Ltd v Rosenberg [2009] VSCA 178; (2009) 24 VR 155

Forsyth v Sinclair (No 2) [2010] VSCA 195; (2010) 28 VR 635

Geoghegan v Szelid [2011] NSWSC 1440

Hogan v Hogan [2013] NSWSC 1405

Jvancich v Kennedy (No 2) [2004] NSWCA 397

Lieschke v Lieschke [2003] NSWSC 743

MacGregor v MacGregor [2003] WASC 169

McCosker v McCosker [1957] HCA 82; (1957) 97 CLR 566

Moore v Moore [2004] NSWSC 587

Pontifical Society for the Propagation of the Faith v Scales [1962] HCA 19; (1962) 107 CLR 9

Schaefer v Schuhmann [1972] AC 572

Sherborne Estate (No 2) [2005] NSWSC 1003; (2005) 65 NSWLR 268

Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201

Smith v Taylor [2006] NSWSC 162

Tobin v Ezekiel [2011] NSWSC 571

Waltons Stores (Interstate) v Maher [1988] HCA 7; (1988) 164 CLR 387

AND: PULIC TRUSTEE FOR THE AUSTRALIAN CAPITAL TERRITORY (AS EXECUTOR OF THE ESTATE OF KATARYNA KULCZYCKI)

2. The Public Trustee is to have its costs paid on an indemnity basis from the estate.

3. Except as provided in order 2 there is no order as to costs.

4. The orders in relation to costs do not take effect if any party notifies my associate within 7 days that it wishes to tender evidence in relation to costs or make further submissions in relation to costs.

AND: PUBLIC TRUSTEE FOR THE AUSTRALIAN CAPITAL TERRITORY (AS EXECUTOR OF THE ESTATE OF KATARYNA KULCZYCKI)

1. Michael Kulczycki is entitled to provision out of the estate of $95,000 which:

(a) if after payment of the other liabilities of the estate there remains no residue is provision which is to be borne by the interest of Peter Kulczycki in the devise under clause 3 of the will; or

(b) if there is any residue under the will is to be borne first by the interests of Peter Kulczycki and Michael Kulczycki in the residue and then by the interest of Peter Kulczycki in the devise under clause 3 of the will.

2. Liberty is reserved to the parties to apply in the event of any difficulty in giving effect to these orders, including for further orders to give effect to order 1.

3. Michael Kulczycki's costs are to be paid on a party and party basis out of the estate.

4. The Public Trustee is to have its costs paid on an indemnity basis from the estate.

5. The orders in relation to costs do not take effect if any party notifies my associate within 7 days that it wishes to tender evidence in relation to costs or make further submissions in relation to costs.

AND: PUBLIC TRUSTEE FOR THE AUSTRALIAN CAPITAL TERRITORY (AS EXECUTOR OF THE ESTATE OF KATARYNA KULCZYCKI)

2. The Public Trustee is to have its costs paid on an indemnity basis from the estate.

1. Kataryna Kulczycki died on 9 January 2012, aged 84 years. The principal asset of her estate is a property in Narrabundah. Three proceedings have been brought in the Court in relation to her estate. There is a claim by Peter Kulczycki, one of Kataryna's four sons, for a declaration that Kataryna Kulczycki held the Narrabundah property on trust for him. There are also two claims under the Family Provision Act 1969 (ACT) ("the Act") brought against the estate, one by Peter Kulczycki and one by his brother Michael Kulczycki. Michael is another son of the deceased.

2. Because most of the persons referred to in these reasons have the surname Kulczycki, I have in these reasons generally referred to them by their first name. I do so without intending any disrespect but simply for ease of reference.

3. Kataryna Kulczycki and her husband Wasyl Kulczycki married in 1947 in Germany. Originally from the Ukraine, they emigrated to Australia. They had four sons together, Joseph Kulczycki born in 1946, Michael Kulczycki born in 1948, Peter Kulczycki born in 1953 and Tony Kulczycki born in 1957.

4. In 1960 Kataryna and Wasyl bought a residential property in Narrabundah ("the Narrabundah property"). They lived there with their family.

5. In 1976 Kataryna and Wasyl made wills which left their estates to each other or, in case the other pre-deceased the testator, left Peter and Tony all their real estate and the balance of their estate divided equally among their four sons.

6. In 1981 Kataryna and Wasyl lent Michael and his wife Joanne Kulczycki $8,000 in order to assist them to purchase a house.

7. In December 1983 when Michael and Joanne sold the house they repaid the amount of the loan as well as repaying an additional sum from the proceeds of the house, a total of $19,820.41. How this figure was arrived at is not disclosed by the evidence.

8. In 1981 Wasyl and Kataryna gave Tony and his wife Debra, who had just bought their first home, money to concrete part of their driveway and garage. In 1984 Wasyl and Kataryna lent $25,000 to Tony and Debra to pay out the balance of their mortgage. This represented almost half the cost of the house. The amount was repaid in 1986 or 1987.

9. In 1986 Michael and Joanne moved to Brisbane where they bought a house. In October 1988, Wasyl died.

10. In 1989 Peter married his wife Nilda and moved in with Kataryna to the Narrabundah property. In November 1989, Kataryna moved to Melbourne to live with her new partner, Harry Tantala. Peter and Nilda lived at the Narrabundah property and paid the rates and utilities associated with the property.

11. On 9 March 1993 Kataryna executed a will leaving the Narrabundah property to Peter and the residue of her estate to her four sons.

12. On 27 October 2000 Kataryna executed her last will. That will appointed Joseph and Michael as the executors, left the Narrabundah property to Peter and the residue of her estate to her four sons.

13. In 2003 Kataryna began suffering from dementia. In 2003, because of her dementia, she separated from her de facto partner, Harry, and returned from Melbourne to live in the Narrabundah property with Peter and his family. By that time, Peter and Nilda had two children, Melanie and Sarah born in 1991 and 1995.

14. In June 2004 Peter applied to the Guardianship and Management of Property Tribunal for a manager and guardian to be appointed for Kataryna. In October 2004 the Tribunal appointed Peter and Joseph as Kataryna's plenary guardians and managers.

15. In May 2005 the Tribunal appointed the Public Advocate as Kataryna's plenary guardian and the Public Trustee as her financial manager.

16. In February 2007 Kataryna moved into a nursing home. In September 2007 the Guardianship and Management of Property Tribunal directed Peter to pay board at the rate of $200 per fortnight and outgoings for the Narrabundah property.

17. In 2011 Kataryna's oldest son Joseph died aged 65. On 9 January 2012 Kataryna died aged 84 years.

18. On 30 January 2012 Michael renounced his position as executor of Kataryna's will in order that he be in a position to make a claim against the estate.

19. In February 2012 letters of administration were granted to the Public Trustee.

20. In September 2012 Peter filed his proceedings claiming that the Narrabundah property was held on trust for him (SC 308 of 2012). In February 2013 Michael filed his claim under the Act (SC 53 of 2013) and in June 2013 Peter filed his claim under the Act (SC 227 of 2013).

21. Peter has pleaded that from various times on various dates on or after 1989, Kataryna, Joseph, Michael and Tony jointly and severally represented and assured the plaintiff that if he remained in the house and paid for the outgoings, its maintenance and improvement that the property would be transferred to him at no cost. It is then alleged that when Kataryna moved to Melbourne in 1989 it was agreed between Peter and Kataryna that he would meet all statutory charges and maintain the property and would not pay rent because the property belonged to him. He pleads that he acted in reliance upon the representations that had been made in residing at the property, paying the statutory charges and maintaining and improving the property. He also says he acted in reliance upon the representations in not acquiring property in his own right. He says that by reason of that reliance he would incur loss and detriment if the representations were not fulfilled and that the estate is estopped from denying that the plaintiff has a beneficial interest in the property. He seeks a declaration that as at the time of her death Kataryna held the property on trust for him and an order requiring the executor convey the property to him.

22. Peter and Nilda both gave evidence that shortly after their marriage in 1989 they decided to buy a home. They discussed this with Kataryna who said according to Peter:

Why do you want to move out? I have given money to all my sons to buy a house, I haven't given you money because I want this house to be yours. I don't want you to move out.

23. At the time that she moved to Melbourne, Peter offered to pay rent and she said:

Why would you pay rent? This is your house. It is already paid off, it is your house I want you to have it, just pay all the bills. Harry and I will stay with you whenever we come to Canberra.

24. In cross-examination Peter gave the following evidence:

In one of your affidavits, you said that on a number of occasions, your mother said to you words to the effect, Peter, this is your house. You can do whatever you like with the house, just look after it and pay the bills. Do you remember saying that in your affidavit?Yes, sir.

Now, do we take it from your evidence that your mother said this to you on a number of occasions since 1989?Yes, sir.

How many times would she have said that to you, was it more than five?Yes, sir.

Do you remember the last time that she would have said that to you?No, sir.

So, she still owned the house when she was saying these things to you?Yes, sir.

And she was saying to you that in return - she was saying you can live there, but in return, you look after the place and pay the bills?That's correct.

The reason your mother said on all those occasions that she wanted you to look after the house and pay the bills is because she still regarded it as her house, would you agree?That's correct, yes.

25. Later in cross-examination it was suggested to him that he and his wife would not have considered buying and moving into a house of their own and then the transcript continues:

Well, you are saying that your mother had, in 1989, your mother had given you the property, that's what you are telling the court, is it?I am telling the court my mother promised me the property. She never give it to me at that stage.

26. The statutory charges and outgoings for the property remained, up until her death, in his mother's name.

27. Nilda's affidavit evidence was to similar effect, namely, that shortly after getting married they proposed to purchase a home and Kataryna said:

28. Further, at the time she moved to Melbourne and Peter suggested that they pay her rent she said:

why would you pay rent - the house is yours - just look after it pay all the bills, besides Harry and I will stay with you when we come to Canberra.

29. In cross-examination she was asked about why she and her husband would consider purchasing another house if it had already been given to them. The transcript records:

And the reason you were thinking of doing that, the reason you and Peter were considering that over the years from time to time, was that because the house you were living in, in Narrabundah, wasn't your house. It was Peter's mother's house. That's right, isn't it?Yes.

So you and Peter actually recognised that the house you were living in wasn't yours?What I can understand, sir, is we would like to buy a house, but my mum said we don't have to buy house because that house that we're living is - will be ours when she die.

Well, you were allowed to live there rent-free, provided you took care of the place and paid the bills. That's right, isn't it?Yes, sir.

But it wasn't yours to keep, was it?Well, as she said, when she dies, that will be Peter's. That was a promise.

She said that you could just keep living where you are, provided you---?Yes. We don't have to move. Just leave it in there. The house is being paid for. We offered rent, and she didn't take it. She said the house is paid. "You don't have to pay rent. Just pay the bills, and maintain the house." That's what she said.

And she said that in 1989? Yes, since I came to Australia, that house was promised to Peter.

30. Harry and Kataryna visited Canberra three or four times a year, for significant periods, often over a month at a time. On those occasions they resided at the Narrabundah house. When staying with them, Peter and Nilda met their day to day expenses, principally food.

31. Peter's evidence was that "on numerous occasions" his mother said words to the effect of: "Peter, this is your house. You can do whatever you want with the house, just look after it and pay the bills."

32. Peter gave evidence that as a consequence of the availability of the Narrabundah house neither he nor Nilda purchased any other real property. He and Nilda have maintained and improved the property by undertaking various works, namely, installing a new kitchen including new appliances, repainting the interior of the house on three occasions, painting the exterior windows and guttering, installing new gutters and fascia on the house and garage, installing a water tank and a pump, installing gas heating, retiling the bathroom, refurbishing the toilet, retiling parts of the interior of the house, installing new curtains and blinds, refurbishing the rear room, installing new fencing, installing a pergola and an outdoor paved area, installing carport sheds and undertaking some landscaping. The evidence did not disclose the cost of these improvements or the value that they added to the property. The retiling and installation of gas heating were undertaken by Peter in order to better accommodate his lung problems.

33. Peter and Nilda have also paid the rates and utilities bills since 1989.

34. From 2003 until she moved into a nursing home in 2007, Kataryna lived with Peter and his family. She suffered from Alzheimer's disease. Peter records her as being difficult to care for as she suffered all of the normal symptoms of the disease including a changing personality, loss of memory, unwillingness to cooperate and paranoia. She could not be left on her own and required 24-hour care. Whenever Peter or Nilda travelled interstate they took her with them. He records that his mother visited Michael in Brisbane on only two occasions since 1986. Nilda also participated in caring for Kataryna. She described it as all consuming, extremely demanding and at times very difficult. That was particularly so because Kataryna was frequently disorientated and often paranoid. Peter arranged for her to move into Jindalee nursing home in 2007 when it became obvious that they could no longer care for her.

35. The two occasions when Kataryna visited Michael were in 1999 when Peter flew with his mother and Harry to Brisbane for about a week. The second occasion was in October 2004 when, following a tribunal hearing, Michael agreed to take her to Brisbane for six weeks. She was there for a shorter period and returned to live with Peter's family. He visited her in Canberra when he attended hearings of the Guardianship and Management of Property Tribunal in 2004, 2005 and 2006.

36. In the period between 1989 until 2004, Peter and Nilda had a good relationship with Peter's brothers. However, significant animosity arose in 2004 when Peter sought a guardianship order from the Guardianship and Management of Property Tribunal. From that time the relationship with his brothers soured. In approximately 2007 Peter obtained protection orders against each of his brothers. The evidence does not clearly explain the source of the animosity although it is clear that his three brothers resented him having the benefit of living rent free in the house and the benefit under the will of inheriting the house upon Kataryna's death.

37. Michael gave evidence directed, in addition to providing general background, to three distinct areas. First is the proposition that Peter told him during a visit to Queensland in about 2004 that:

(a) "I'm living at Mum's house and I'm not paying rent. I'm living like a king";

(b) "I don't spend my money because I'm using Mum's money";

(d) "I went to Melbourne to try to get Mum to sign the house over to me but she wouldn't. I want to sell it. I'll have $300,000 in the bank and I'll live like a king" to which Michael replied "what will Mum do" to which Peter replied "I don't care, it is not my problem".

38. To similar effect, Peter is alleged to have said either on the telephone or in person to Michael "on numerous occasions since [their] father died" words to the effect:

(a) "I am living in Mum's house for nothing. By the time I'm finished you will all ... get nothing. I am going to spend all Mum's money. You will get nothing";

(b) "I took $20,000 out of Mum's bank account to go to the Philippines. I was treated like a king over there".

39. Second, the evidence was to the effect that on numerous occasions the deceased told him that her estate would be split between her four sons.

40. Third, there is also some evidence alleging that in the period 2003 to 2007 Peter and his wife did not adequately care for Kataryna.

41. Michael's wife, Joanne gave evidence to similar effect in relation to the $20,000 to go to the Philippines and in relation to statements to the effect that everything would be split four ways between Kataryna's sons. She also gave evidence corroborating the allegations about an alleged failure to care for Kataryna.

42. The evidence of Lucy Hills, the daughter of close friends of Wasyl and Kataryna, provides evidence of a good relationship between Kataryna and Peter and his wife. She also states that on numerous occasions in the 1980s Wasyl and Kataryna said words to the effect "we helped the other boys with their homes, they have got a home, this home is for Peter". She was not required for cross-examination.

43. The plaintiff also read the affidavit of Mac Welch who emigrated from New Zealand to Australia in 1988 and settled in Canberra. He and his family became close friends with Joe Kulczycki and his family including Kataryna. He describes his associations with the family including during the decline in Kataryna's mental state as Alzheimer's disease took effect. He records that he was told by Kataryna on several occasions, "Peter would inherit the house". He was not required for cross-examination.

44. An affidavit of Tony was also sworn relating to a number of matters, most significantly explaining that in about 1983 his parents provided him and his ex-wife with funds to concrete part of the driveway and garage at his house as well as the $25,000 to pay out the balance of their mortgage. He said that approximately 3 years later he and his wife saved the $25,000 and repaid it to his parents. That is corroborated by an affidavit of his now ex-wife Debra Tighe. Whilst I accept the evidence of Tony and his wife as to the financial arrangement relating to the house these are issues more relevant to the family provision claim. Both Tony and Debra Tighe also gave oral evidence.

45. The affidavit of Joseph Tallarita, a solicitor, relates to the circumstances in which Kataryna made her final will in 2000. He gives evidence that he assessed her ability to understand English and, had it been necessary, would have ensured that there was an interpreter present, but decided that it wasn't necessary. He also records that because the principal asset was to be given to Peter, he advised her that such a will may cause disagreement in the family and she then offered to set out an explanation in a supplementary statement the reasons for making the will that she did. That statement, which is signed and dated the same day as her will, namely, 27 October 2000 includes the following:

3. I have not bequeathed all my property to all my children equally for the following reasons:

(a) During my lifetime I gave my son Slavko [Tony] Kulczycki, approximately $35,000.00 to purchase a house in Monash, in the Australian Capital Territory.

(b) During my lifetime I gave money to Michael Kulczycki to purchase a house in Duffy, in the Australian Capital Territory. I do not recall the precise amount.

(c) During my lifetime I gave money to Joseph Kulczycki to purchase a house in Page, in the Australian Capital Territory. I do not recall the precise amount.

(d) All of my children, except Peter Kulczycki, own a house and are financially comfortable.

46. Mr Tallarita was not required for cross-examination and I accept that the 2000 will was made in the circumstances that he described.

47. As between the evidence of Peter and Nilda on the one hand and Michael, Joanne, Tony and Debra on the other, my findings are as follows.

48. I do not need to make specific findings about whether the plaintiff said words to Michael and Joanne as they described in their evidence. I do not accept that the matters put forward in the evidence of Michael, Joanne, Tony and Debra Tighe significantly undermine the credibility of Peter and Nilda. Peter and Nilda's evidence about what was said to them was consistent both with what physically occurred, with what is evidenced by Kataryna's will and the evidence of Mr Tallarita which is unchallenged.

49. I accept Tony's and Debra Tighe's evidence about the payments relating to their house.

50. As to the other evidence given by Tony, Michael and Joanne, I consider that it is likely that this evidence is influenced by the general animosity that exists between the brothers. It does not, in my view, impact on the credibility of Peter and Nilda in relation to what was said to them by Kataryna. I do not accept that Kataryna said to them words that indicated that she intended to leave the whole of her estate equally to her four sons. That would be inconsistent with her long held intention expressed in her wills of 1993 and 2000. However, it is explicable on the basis that the residue of her estate was intended to pass equally to her four sons. Whether that subtlety was not conveyed or has been lost amongst the intra-familial hostility is not necessary to determine. In so far as the evidence impliedly contained an allegation of misappropriation of $20,000 by Peter from his mother's account, I am not satisfied, having regard to the seriousness of the allegation, that the evidence establishes that this occurred.

51. I do not accept the evidence of Michael and Joanne in so far as it implied a lack of proper care of Kataryna. It appeared to me that this evidence reflected a willingness on their part to interpret events in the worst possible light because of their hostility to Peter and his family. The willingness to allow personal hostility and suspicion to colour his evidence was illustrated by Michael's assertion, without any evidence to support it, that the 1976, 1993 and 2000 wills were "all lies, the lot of them" and his expressed opinion, once again without any basis established by the evidence, that those involved in the preparation of the 2000 will were "lying".

52. I do not accept the submissions made by Michael that the reliability of Peter's and Nilda's affidavit evidence was undermined by the fact that some passages in their affidavits were almost identical. Rather than being evidence of collusion in giving evidence, it was clear to me that this was as a result of poor drafting of the affidavits by the lawyers acting for Peter and Nilda. It was apparent that amongst the various affidavits that were read for the purposes of the three proceedings, there had been some cutting and pasting from one affidavit to another, followed by modification to a greater or lesser extent. It was apparent that Nilda's affidavit had been drafted in a manner which led her to depose to some matters, such as her level of household expenditure in the family provision proceedings, which she was really in no position to give any evidence. Based on these aspects of the affidavit evidence, Michael made an attack on their credibility. I do not accept that the drafting of the affidavits did reflect adversely on the credibility of Peter or Nilda. I accept that their evidence as to what was said by Kataryna was honest evidence based on their recollections. However the submission made by Michael was one reasonably open to him based on the drafting of the affidavits. Had appropriate care been taken in the drafting of the affidavits by his lawyers, such an attack would not have been available.

53. The parties approached the case in a similar manner to that which was adopted in Lieschke v Lieschke [2003] NSWSC 743, namely, that the estoppel claim could be dealt with on the basis of the test for promissory estoppel articulated by Brennan J in Waltons Stores (Interstate) v Maher [1988] HCA 7; (1988) 164 CLR 387, rather than any more precise dissection of the principles applicable. In Lieschke Austin J said at [31]-[34]:

The species of equitable estoppel that may confer an equitable interest in land is sometimes called "proprietary estoppel". In Ramsden v Dyson (1866) LR 1 HL 129, Lord Kingsdown said (at 170):

"The rule of law applicable to the case appears to me to be this: If a man, under a verbal agreement with the landlord for a certain interest in land, or what amounts to the same thing, under an expectation, created or encouraged by the landlord, that he shall have a certain interest, takes possession of such land, with the consent of the landlord, and upon the face of such promise or expectation, with the knowledge of the landlord, and without objection by him, lays out money upon the land, a court of equity will compel the landlord to give effect to such promise or expectation."

There is a reasonably close analogy between the case envisaged by Lord Kingsdown and the present case, if one substitutes "landowner" for "landlord".

This doctrine, which is capable of being used to complete an otherwise imperfect gift (Dillwyn v LLewelyn [1862] EngR 908; (1862) 4 De GF & J 517 [45 ER 1285]), has been explored and applied in recent Australian cases such as Riches v Hogben [1985] 2 Qd R 292, Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 and Giumelli v Giumelli [1999] HCA 10; (1989) 196 CLR 101 (and for a recent English application, see Gillett v Holt [2001] Ch 210). The tendency of some recent Australian judgments is to bring together the historically separate strands of equitable doctrine within a single overarching doctrine (Verwayen at 411; Giumelli at 549). Such a unified doctrine would emphasise the common characteristics of those strands, reformulating them in a comprehensive set of principles (see Priestley JA's judgments in Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466, 472 and Austotel at 610, and also Wykes v Samilk Pty Ltd [1998] Aust Contract R 90-097), and also emphasising the breadth and flexibility of remedies evident in Giumelli.

This is not an appropriate case for any deeper investigation into whether unification has been achieved and if so, what is the shape of the emerging principles. Counsel for both parties were content to treat the observations of Brennan J (as he then was) in Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387, at 428-9, as a sufficient statement of principle for present purposes. His Honour said:

"In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff's reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs."

54. In Lieschke the central part of the evidence for the plaintiff was that in about 1975, his father approached him with a council rate notice to the land in his hand. His father handed the rate notice to the plaintiff and said "That's yours now. You pay the rates." The plaintiff understood his father to mean that the property was then his. His evidence was that from the time of this conversation until about five years later when he retired from farming, his father continued to conduct his farming operations over the land in question ("Welcome West" and "Welcome East"), and it was only after he retired in about 1980 that the plaintiff was able to farm both of these properties for himself alone.

55. His Honour said of that situation at [35]-[37]:

Here, I have held that Ferdinand's statement in 1975 that the land was Lester's induced Lester to expect that his father would transfer the land, and therefore caused Lester to expect that he would become the owner of Welcome West in substitution for Ferdinand. The statement, accompanied by the handing over of the rate notice, was in such definitive and irrevocable terms as to cause Lester to assume that his father was thereafter not free to withdraw his representation. Brennan J's first and second ingredients were therefore satisfied.

As counsel for Desmond and Pamela emphasised, a representation or other inducement must be clear if it is to ground an equitable estoppel. It appears from the remarks of Mason and Deane JJ in Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406, at 436, that the standard of clarity to be achieved is no less than the standard of clarity for a variation of contract, and may be higher. Even so, my view is that Ferdinand's statement in 1975 satisfies that test. It was brief but it was unambiguous. It clearly conveyed the idea that as from that moment, Welcome West belonged to Lester, and he should therefore pay the rates from then on.

In assessing whether the ingredients of equitable estoppel are present, one must take a common sense view of the representations and their likely effect on the hearer. In many situations, a statement by a landowner saying to another that the land is his would not be treated as anything more than a mere statement of intention to make a gift, not effective until perfected by transfer. Here it is the circumstances in which the statement is made, between father and son in respect of farming land and accompanied by the delivery of the rate notice, that elevates the statement into a form of representation capable of being acted upon so as to alter the rights of the parties.

56. The plaintiff referred to the decision in Smith v Taylor [2006] NSWSC 162, a case which referred to Lieschke at some length. In that case, parents had said to their daughter and son in law, "we want to give you... the back part of our land to - so you can subdivide and then build eventually a dwelling at the back". The plans for subdivision proceeded, the parents signing the relevant consent to the development application. The father, who survived his wife had even before he died signed a transfer of the land for one dollar but the transfer had not been completed because the relevant plans had not been finalised. The daughter established that the estate was estopped from denying that the testator was bound to complete the transfer and hence, so too was the executor.

57. The position contended for by the plaintiff is analogous to that found to exist in Lieschke. The issue is whether or not the statements by Kataryna to Peter and Nilda should be treated as anything more than a statement of intention to make a gift not effective until perfected by transfer or whether or not it was sufficiently unequivocal and immediate so as to be able to be acted upon and alter the rights of the parties. In other words, whether or not the property was to be Peter's immediately or whether the representation was one that Peter would be left the property in Kataryna's will.

58. In my view, it is clear that there was never any intention to make an immediate gift. The evidence of Peter and Nilda quoted at [24], [25] and [29] indicates that what Kataryna intended and what they understood her to intend was that the Narrabundah house would be left to Peter in her will and hence available to him as a beneficiary of her estate. There was no intention on Kataryna's part to make any immediate transfer of her interest in the property to Peter. That is made clear by the fact that:

(a) she placed conditions upon the occupation of the property by Peter and his family, namely, maintaining the property and paying the bills on her behalf;

(b) those conditions were as an alternative to the payment of rent which was offered by Peter, something that would not have been necessary had an immediate transfer been intended or understood to have occurred;

(c) Peter was required to make it available to Harry and herself when they wished to stay in Canberra not merely as a matter of goodwill but as a matter of entitlement;

(d) she took no steps to complete a transfer during her life time;

(e) consistently with it remaining in her beneficial ownership, she specifically disposed of the property under her will.

59. The statements by Kataryna that the house was his or theirs need to be understood in the context of these conditions as indicating the intention to allow Peter to continue to use the property on conditions and subject to Kataryna's needs.

60. Therefore I am satisfied that there was no representation that Peter was the owner of the property. Rather, the representations made were that Peter would inherit the property. I am also satisfied that that is what in fact both Peter and his wife assumed as a result of the representations. That was the effect of their evidence. Kataryna acted consistently with the representations that she made, leaving the house in her will to Peter. She has therefore fulfilled the assumption rendering it impossible for Peter to establish an estoppel.

61. The difficulty so far as Peter is concerned is that this exposes his entitlement to the property to a claim under the Family Provision Act. That was made clear by the decision of the High Court in Barns v Barns (2003) 214 CLR 169. That case decided that even where there is a contract to leave particular property to a person in a will, that does not have the effect of removing the property from the pool of assets that may be the subject of a claim under the South Australian family provision legislation. In doing so it resolved the conflict that existed between Dillon v Public Trustee of New Zealand [1941] AC 294 and Schaefer v Schuhmann [1972] AC 572. By preferring the approach in Dillon it treated a person who has contracted with the deceased to have the deceased leave property to the person by will as a beneficiary under the will rather than a creditor of the estate. The decision in Barns is equally applicable to the ACT legislation and applies by analogy to a claim of estoppel as opposed to contract: see Fifteenth Eestin Nominees Pty Ltd v Rosenberg [2009] VSCA 178; (2009) 24 VR 155 at [34].

62. The result is therefore that the claim by Peter for a declaration that the property is held on trust for him and an order transferring it to him must fail. Rather, the property having been left to him in will, it is subject to the hazards of Michael's claim under the Family Provision Act.

63. The evidence of the Public Trustee estimates that the value of the estate after the payment of the Public Trustee's legal costs in the present proceedings would be approximately $700,000. For the purposes of these two claims the principal asset of the estate is the house at Narrabundah. The estimated value of the estate is arrived at as follows:

(b) Legal costs of estate in current proceedings $37,200

64. The value of the Narrabundah property was not subject to valuation evidence but the estimate of $675,000 provided by the Public Trustee was the only evidence as to valuation of the property. There was some evidence as to the valuation of properties in Narrabundah in an affidavit of Michael Kulczycki but that was at such a level of generality that it was not useful. While recognising that on the evidence before me there is some uncertainty as to the value of the Narrabundah property, I have relied upon the estimate provided by the Public Trustee in assessing the overall value of the estate.

65. Should costs other than the costs of the estate be payable out of the estate then that would further reduce the amount available for distribution to beneficiaries. The usual order would be for the executor to have its costs paid out of the estate on an indemnity basis. If either plaintiff is successful then the usual order would be that the costs be paid on a party and party basis out of the estate. Because of its relevance to the likely value of the estate available for distribution, I asked the parties for their estimates of the costs of the proceedings. These estimates, as I understand them, include, so far as is relevant, all of the costs of the relevant party in relation to each of the three proceedings. Therefore they will tend to overstate, particularly in relation to Peter, the costs that may be recoverable on a party and party basis if the costs are limited to one or more of the family provision proceedings. However they provide an indication of the likely impact of costs and are set out below:

66. I note, at this stage the apparent disproportion of the estimate of Michael's fees not only to those of the other parties but also to the nature of the case. Of course, these figures are only estimates. Depending upon the result of Michael's and Peter's family provision claims and the terms of any order in relation to costs, the costs and disbursements, if payable out of the estate, will be subject to assessment unless otherwise agreed by the parties. Plainly enough, costs is an issue which I will need to return to. However for present purposes these estimates indicate that, if the executor's legal fees are paid out of the estate the value of the estate available for distribution at the end of the hearing will be $698,144 and if the whole of both other parties' fees are paid, on a party and party basis from the estate then only $459,498 would remain.

67. Michael is married to Joanne. The details of the loan of $8,000 and its repayment are set out in paragraphs [6]-[7]. Michael and his wife own a property in Runcorn in Queensland. It has a value of approximately $480,000. As at November 2012 it was subject to a mortgage of approximately $92,000. Michael and his wife have two children Alicia, who is 36 years old and Andrew, who is 34 years old. Alicia has a daughter who is 18 years old and both live with Michael and his wife at the Queensland home.

68. Michael and his wife are directors and shareholders of a company called MJ & Joanne Kulczycki Pty Ltd. The company operates a concrete truck which is contracted to deliver concrete for Rinker Australia Pty Ltd. The value of that company is a matter to which I will return to below.

69. Michael suffers from chronic heart disease and in August 2011 underwent heart surgery. While he worked as a truck driver up to that date, as a consequence of his heart condition he has been unfit for work and has not worked since. The most recent medical evidence in relation to his condition indicates that he has ischaemic cardiomyopathy with moderate global reduction of systolic function. His condition means that he is not to drive a commercial vehicle or operate heavy machinery. As a consequence the company has engaged relief workers to drive the concrete truck. He also suffers from type two diabetes, the severity of which is not disclosed by the evidence, has undergone minor surgery for a knee condition and has undergone cataract surgery in November 2012.

70. Michael receives a disability support pension from Centrelink of some $582.40 per fortnight. His taxable income for the year ending 30 June 2012 was $400 and the company's taxable income for that year was zero. He has approximately $81,000 in superannuation and has all the usual living expenses.

71. Michael's wife Joanne is aged 63. She was employed by the company doing some of its administration. However she is no longer so employed. She receives a carer's payment and allowance from Centrelink being a total of $696 per fortnight. She has approximately $68,000 in superannuation.

72. Michael and Joanne's weekly income is $639 whereas their expenses are $841. I do not accept the submission made by Peter that the expenses identified were in fact paid for at the expense of the company. The evidence was that while some personal expenses have been paid by the company those expenses are taken into account by the accountant so that company and individual liabilities were each appropriately accounted for. There was also evidence, consistent with Michael and his wife spending more than they earn, that over the last nine months their loan to the company shown in the accounts has been reduced to zero and the company is now shown as having lent money to them.

73. In relation to the value of the business there were two competing accountant's reports tendered. Both experts were cross-examined on their reports. The issue between the parties was whether or not to place a value on the company that extended beyond the value of its assets. Ms Clutterbuck placed a value on the contract at 10% of the annual profit made from the contract. Given that it had four years to run she placed a value on the contract of $21,504. She added this value as goodwill to the other assets of the company. She ultimately arrived at a valuation for the company of $128,828 which, taking into account amounts owed by Michael and Joanne to the company was reduced to $108,057. On the other hand, Mr Thynne assessed the value of the company on the basis of the capitalised value of future maintainable earnings. He calculated the maintainable earnings at $25,740. Having regard to the single client of the business and the limited duration of the contract, he considered a capitalisation rate of 40% to be appropriate. He calculated the net value of the company at $64,350. This business value was less than his assessed value of the tangible assets of the company and he therefore considered that the goodwill of the company was nil. As a consequence, he had assessed the net value of the assets of the company to be $36,856 and after taking into account the amount owing by Michael and Joanne to the company ($20,771) that amount was reduced to $16,084.

74. Most of the difference between the experts can be explained by three matters:

(a) whether or not any value should be added to the value of the assets on account of the existence of the contract;

75. As to the first issue, I prefer the approach of Mr Thynne. His approach based on assessing the value of goodwill based on the extent of future maintainable income, takes better account of the value of the assets that need to be deployed in earning income than the approach of Ms Clutterbuck, which simply adds a percentage of the profit to the value of the company. It is an approach which, in my view, is more likely to be adopted by any prospective purchaser.

76. The value of the concrete truck adopted by Ms Clutterbuck is $125,000. This is based upon an estimate by Michael and Joanne Kulczycki of between $120,000 and $130,000. The precise circumstances in which the the estimate was produced is not clear although it appears to be based upon a website listing from January 2013 of a comparable truck for sale for $135,000. Mr Thynne adopted a value of $95,000 based on an estimate provided to the company on 9 July 2013 by Bill Browning of Rocklea Truck Sales Pty Ltd, a man stated to have 42 years experience as a truck salesman/dealer/valuer. Mr Browning's valuation was tendered without objection and he was not cross-examined. The discrepancy between the two estimates is unexplained. I prefer the evidence of Mr Browning, who appears to have the relevant expertise to assess the appropriate value of the truck. With the limited evidence as to how the estimate made by Michael and Joanne was produced I am not prepared to treat it, as Mr Crispin, counsel for Peter, invited me to, as a formal admission of value by Michael.

77. As to the ute, I am satisfied that it should be included as an asset of the company. Its purchase price in September 2009 was $39,275.99. Ms Clutterbuck included it as an asset at the bottom end of the range indicated on the website Redbook.com.au, namely, $30,295 to $43,490. The Redbook information in evidence was not model, location or mileage specific. I consider it unlikely that a work vehicle purchased new for $39,275 would be able to be sold for $30,395 some four years later. Mr Thynne gave evidence that the Redbook valuation did not specify whether the valuation was based on a private sale, wholesale sale or trade-in price, and that in his experience, Redbook values were "usually about six months out of date". While I consider it appropriate that the ute be included as an asset of the company, having regard to the evidence of Mr Thynne and the generality of the Redbook material that was in evidence, I think a lower value is appropriate. In my view it is likely that its value does not exceed $25,000.

78. As a consequence, the net value of the company as assessed by Mr Thynne of $16,084 needs to be increased by $25,000 to take account of the ute, giving a net value of $41,084.

79. As a consequence the financial position of Michael and his wife Joanne is as follows. Michael's net assets (excluding house and company) $93,410. Joanne's net assets (excluding house and company) $110,637. Their house is worth approximately $480,000 and has a mortgage of approximately $97,000. For reasons which are unexplained the mortgage has gone up from around $92,000 to the current figure since November 2012. As worked out above, the company is worth $41,084. Therefore total net assets are approximately $628,000.

80. Peter Kulczycki was born on 29 September 1953 and is presently 60 years old. He commenced employment with the Australian Capital Territory Electricity Authority in 1979 as a spray painter. He was engaged as a spray painter until 1989 when he ceased work due to a lung condition caused by exposure to paint solvents (chronic isocyanate exposure). Between 1989 and 1991 he worked as a trades assistant helping electrical fitters. Between 1991 and 2005 he was engaged as a lawn mower. He ceased employment in 2005 due to his health. He received a net figure of $72,000 upon his termination comprised of an eligible termination payment and payout of accrued leave. His evidence (which was not challenged) was that he has suffered from a number of conditions. The evidence was not detailed enough to explain the nature of some of the conditions, when these conditions occurred or precisely how each currently affected his abilities or quality of life. Nevertheless the conditions he deposed to suffering were set out in his affidavit as:

e. oteoarthritis (left knee and previous injury with surgery);

f. contracture muscles (left knee - related to gout and left hip contracture), septicaemia, osteomylitis (acute right 3rd toe);

j. amputation (right middle with split skin graft in 2010 and then right 5th toe in 2011);

k. cerebrovascular accident (February 2010), fracture (right 1st, 2nd, 3rd toe);

r. pneumonitis (hypersensitivity due to exposure to isocyanate);

81. These conditions leave him constantly tired, short of breath and with ongoing pain in his shoulder and lower limbs. His health is in a precarious state and he has a reduced life expectancy.

82. Currently Peter's' source of income is benefits from Comcare. As a consequence of his level of disability, he has received a series of lump-sum payments from Comcare, in addition to receiving compensation from Comcare which will cease when he turns 65. Three of the payments for permanent impairment have related to shortness of breath due to solvent exposure. Comcare accepted in 2009 that he had a 70% whole person impairment due to that condition. Between 1997 and 2009, he received $109,172.61. He also received an additional payment in 2009 due to a cervical spine condition.

83. Neither he nor his wife Nilda have any real property beyond their household effects and two motor vehicles with a total value of $48,000 in relation to which a $23,000 personal loan remains outstanding. He has cashed his superannuation entitlements of approximately $110,000 rolling over a portion of that into another fund, resulting, after tax in a balance of $47,625. An amount of $55,000 was kept as cash, $30,000 of which was invested with the Commonwealth Bank. Due to his financial position, age and health conditions, he obviously has limited capacity to borrow funds to purchase a home. His household expenses include all of the usual household and domestic expenses.

84. His wife, Nilda has a permanent part-time position working at a supermarket. She earns around $600 per week after tax.

85. The financial position of Peter and his wife is that their weekly expenses are approximately $1,137 and their combined net incomes are $1,232. As will be apparent their financial position is quite finely balanced but significantly more favourable than that of Michael and Joanne.

86. Peter's net assets are approximately $117,000. Nilda's net assets are approximately $77,000. The total is therefore $194,000.

87. Section 8(2) of the Family Provision Act permits the making of an order where "adequate provision for the proper maintenance, education, or advancement in life of the applicant is not available" under the will of the deceased.

88. The relevant date for that determination is "as at the date of the order": s 8(2).

89. The two stage approach that is to be applied is that set out in Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201 at 209-210:

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. ([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) [1951] HCA 44; 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.

90. The first stage of this two stage process involves a question of fact, even though it involves an exercise of value judgments: Singer at 210. The second stage does involve the exercise of a discretion in the accepted sense: Singer at 211.

91. The distinction between the terms adequate and proper has been discussed in a number of authorities summarised in Hogan v Hogan [2013] NSWSC 1405 at [64]- [71], "adequate" provision being an assessment of the quantum provided having regard to what might amount to the standard set as being "proper".

92. As to the words "maintenance, education and advancement", in the present case the relevant term is "advancement". Advancement is not confined to advancement in a claimant's younger years. Rather it is a phrase of wide import and cannot be limited to the early period of a child's life because the Act applies to children of any age: McCosker v McCosker [1957] HCA 82; (1957) 97 CLR 566 at 575.

93. The lack of reserves to meet demands, particularly of ill-health, which become more likely with the advancing years can be a factor in determining whether or not adequate provision has been made: MacGregor v MacGregor [2003] WASC 169; Crossman v Riedel [2004] ACTSC 127 at [49].

94. It is not appropriate to endeavour to achieve "an overall fair" disposition of the deceased's estate, nor is it appropriate to put all the testator's children in a position where each receives much the same benefits as the others, or in a position where after receiving benefits and adding them to what they had before, each is in much the same position: Gorton v Parks (1989) 17 NSWLR 1 at 6. Similarly it is necessary for the Court to guard against reforming the testator's will according to what it regards as a proper total distribution of the estate rather than restricting itself to its proper function of ensuring that adequate provision has been made for the proper maintenance, support and advancement of a claimant: Cooper v Dungan (1976) 50 ALJR 539 at 542; Pontifical Society for the Propagation of the Faith v Scales [1962] HCA 19; (1962) 107 CLR 9 at 19.

95. Section 8(2) of the Act provides the relevant criteria for the Court to consider when making an order under the Act.

96. There is nothing of particular significance under this heading. Contrary to the submissions made by Mr Crispin, I do not consider that there is anything in Michael's conduct of the proceedings that would be significant and adverse to his character or conduct.

The nature and duration of the relationship between the applicant and the deceased

97. Both applicants are the sons of the deceased. It is clear that Peter had a closer relationship with his mother as a consequence of living with her until 1989 and, more importantly, caring for her during the period from 2003 to 2007.

Any financial and non-financial contributions made directly or indirectly by or on behalf of either or both the applicant and the deceased to the acquisition, conservation or improvement of any of the property or financial resources of either or both persons

98. Peter made contributions to the conservation and improvement of the Narrabundah property. Those improvements are described above at [32]. The value of those improvements or the extent to which they improved the value of the property is not clear. Peter has had the very significant benefit of living in the property and avoiding the need to pay rent or make mortgage payments towards the acquisition of a home. During the period from 2007 to 2012 when he did pay some board that was at a substantially discounted rate. The value of that contribution by the deceased to his financial position cannot be accurately assessed but it is clearly very significant.

99. Michael did not make any significant contributions to the property. He was the beneficiary of a loan of $8,000 in 1980 which would have been of significant assistance at the time of the purchase of a home but this amount and additional funds (making up a total of $11,820.41) were repaid from the proceeds of the sale of the house in 1983.

Any contributions (including any in the capacity of homemaker or parent) by either the applicant or the deceased to the welfare of the other, or of any child of either person

100. Peter and his family made a significant contribution to the welfare of the deceased in the period when they cared for her between 2003 and 2007. I accept the evidence of Peter and Nilda that the burden of caring for Kataryna in that period was a very significant one as she was significantly and increasingly affected by Alzheimer's disease. Michael visited his mother three times during the period from 2003 and she stayed with him briefly in Brisbane in 2004. He kept in regular contact with her by telephone. In the period 2004 to 2007, this involved calling around two or three times per month when she was living with Peter or in the nursing home.

The income, property and financial resources of the applicant and the deceased

101. The value of the estate available for distribution is set out above ([63]-[66]) as are the income, property and financial resources of Peter [80-86] and Michael [67-79].

The physical and mental capacity of the applicant, and the deceased (during his or her life), for appropriate gainful employment

102. As indicated above, Peter was employed as a spray painter but suffered work related disabilities for which he has been receiving compensation. His disabilities have been long standing - having first received compensation for a 25% "whole person impairment" for the condition relating to solvent exposure in 1997. Michael appears to have had the capacity to engage in employment up until the time when his heart conditions became manifest in 2011. The details of his capacity for employment up until running the concrete truck business of M&J Kulczycki Pty Ltd were not disclosed by the evidence.

The financial needs and obligations of the applicant and the deceased (during the life of the deceased)

Kulczycki v Public Trustee [2013] ACTSC 230

At a glance

Court

Decision date

Source

Judgment (239 paragraphs)

Kulczycki v Public Trustee [2013] ACTSC 230 (29 November 2013)

Parties

Legislation Cited (6)

Cases Cited (14)