Mahon v Permanent Trustee Company Ltd

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

5892/02 KATHERINE GAI MAHON -v- PERMANENT TRUSTEE COMPANY LIMITED JUDGMENT 1 MASTER: These are proceedings under the Family Provision Act 1982. 2 By summons filed on 12 December 2002 the Plaintiff, Katherine Gai Mahon, claims an order for provision for her maintenance and support pursuant to section 7 of that Act out of the estate of her late father Laurence Michael Mahon (to whom I shall refer as "the Deceased"). During the course of the hearing the Plaintiff sought and was granted (without opposition by the Defendants) leave to amend prayer 1 in the summons by deleting the words "and support" and substituting in lieu thereof the words ", education and advancement in life". 3 The Deceased died on 21 October 1987, aged fifty-seven. He left a will dated 1 August 1978, probate whereof was on 22 September 1988 granted to Burns Philp Trustee Company Limited, the executor named in that will. In consequence of the provisions of the Burns Philp Trustee Company Limited Act 1990, it would appear that the duties and responsibilities of Burns Philp Trustee Company Limited in respect to the estate of the Deceased devolved upon Permanent Trustee Company Limited, the Defendant to the present proceedings. 4 By his will, the Deceased gave his clothes, furniture and household and personal effects to the Plaintiff (a gift which, apparently through its incompetence and blatant disregard of the express testamentary provisions of the Deceased, the named executor did not carry into effect). The will then provided that the income of the residuary estate should be paid to the Plaintiff until she attained the age of thirty years, and that upon her attaining that age or upon her prior death the residue of that estate should be paid to St Vincent de Paul's Boys Orphanage, "BUT if such Orphanage is not in existence on the date on which my said daughter attains thirty (30) years of age or on the date of her prior death, then the residue of my Estate should be paid to the CHRISTIAN BROTHERS of 156 The Avenue, Parkville, Victoria". 5 The inventory of property filed in support of the application for probate discloses the assets of the estate as totalling about $95,000, the only significant items being a home unit situate at and known as 9/8 Avon Road, Dee Why ($80,000) and the interest of the Deceased in an accountancy practice ($10,000). 6 The details set forth in that inventory of property appear to be both misleading and incomplete. 7 At the present time the Defendant holds the following assets in the estate of the Deceased:

Property situate at and known as 9/8 Avon Road, Dee Why $330,000

Moneys owing by the Plaintiff as a result of overpayment $15,708

Moneys owing to the estate by the Trustee (due to incorrect coding of subaccount) $3,492

TOTAL: $704,653 8 The Defendant disclosed the following liabilities of the estate:

Legal fees owing to solicitors and Counsel up to and including 17 March 2004 $16,987

Estimated additional legal fees up to and including the hearing $10,000

Estimated income tax for the financial year ended 30 June 2004 and accountants fees $1,500

Estimated outgoings in relation to the property at Dee Why, including Counsel rates, strata levies, insurance and water rates up to 30 June 2004 $500

Payment due to Plaintiff due to incorrect coding of subaccount $3,375

TOTAL: $60,301 9 At the outset of the hearing it was agreed that the present value of the home unit situate at and known as Unit 9, 8 Avon Street, Dee Why, was $335,000. In consequence, therefore, the total value of the assets of the estate should be increased by $5,000, to $709,653. 10 In calculating the value of the estate available for distribution, the costs of the present proceedings must be taken into consideration, since the Plaintiff, if successful, will be entitled to an order for her costs out of the estate; whilst the Defendant, irrespective of the outcome of the proceedings, will also be entitled to an order for costs. It has been estimated that the costs of the Plaintiff of the present proceedings will total about $34,000, plus GST. 11 In addition, disbursements already incurred totalled $2,179. That is, as I understand it, the totality of the Plaintiff's costs of the present proceedings (including GST) will be of the order of $40,000. 12 The Defendant's costs (which are included in the foregoing list of liabilities) total almost $27,000. 13 Upon my calculation, therefore, the value of the estate available for distribution will be of the order of $604,000. However, upon the Plaintiff's calculation, the adjusted net value of the estate is in the range of about $590,000 to $600,000. It is probably preferable to adopt the lower figure in approaching the value of the estate available for distribution. 14 The Plaintiff, who was born on 3 March 1973, is presently aged thirty-one. The Deceased was married only once, in 1970, to Rosemary. The Plaintiff was the only child of that marriage. The Plaintiff's parents separated in 1974, when the Plaintiff was aged only eighteen months. It will be observed that the will of the Deceased was made when the Plaintiff was only five years of age. 15 Upon the separation of her parents the Plaintiff resided with her mother. The Plaintiff completed her primary and secondary schooling at Wollongong. Upon leaving school she entered her chosen career in the merchant navy. She secured a cadetship with Howard Smith, and enrolled in a maritime college in Launceston, Tasmania, in January 1991. 16 At the outset of that course the Plaintiff lived in a residential college. In 1993 the Plaintiff and her mother purchased for $72,000 a two bedroom home unit property at 49 Parkland Parade, Newham (which I gather to be located near Launceston). When the Plaintiff (who owned a 24 percent interest in the company, Eric Andrews Pty Limited, which conducted the Deceased's accountancy practice) received a capital distribution of $43,200 on 31 March 1999, in consequence of the winding up of that company after the sale of residential property in Redfern of which that company was the owner, the Plaintiff used that sum to repay the housing loan on the Newham apartment, which in consequence is now unencumbered. The Plaintiff then resided in that apartment for the remainder of her course, when she was not at sea. 17 The Plaintiff remained in the employ of Howard Smith, until 1999, working in and from Australia. However in that year she decided that it would be in her best interests to travel to the United Kingdom, in order to advance her career there. 18 The Plaintiff obtained employment with James Fisher Tankships, Burrow-in-Furness, Cumbria. She presently has a visa for four years, which will expire in June 2004. She intends to renew that visa in order to work for another two years in the United Kingdom, before returning to Australia. She is a resident of the United Kingdom for tax purposes. However, because she spends 183 days out of the country at work or on leave each year, she does not have to pay, and has not paid, any tax in the United Kingdom. 19 The Plaintiff resigned from her employment with James Fisher Tankships in February 2003, in order to resume full-time studies to obtain the tertiary qualifications necessary for appointment as a ship's master. That course, at South Tyneside College, Newcastle, England, continued until March 2004, when the Plaintiff successfully completed her course and obtained qualifications which will enable her to be employed firstly as a chief officer. After twelve months as a chief officer, the Plaintiff will be qualified to be a master of a vessel up to a certain size. 20 At the time when she commenced the proceedings in December 2002 the Plaintiff's income in the United Kingdom consisted of monthly earnings of 2,200 pounds, together with dividends from Sterling Bonds of 7 pounds, 66 pence a month. At that time her assets in the United Kingdom consisted of investments totalling 8,500 pounds), together with moneys in bank accounts, totalling 13,000 pounds. 21 The Plaintiff's income in Australia at that time consisted of her interest in the estate of the Deceased, averaging $1,585 a month; a one-half share of the rent from the apartment at Newham, averaging $116 a month, and dividends upon Telstra shares. 22 The Plaintiff's Australian assets consist of a one-half interest in the Newham property (to which a value of $85,000 was ascribed, thus giving to the interest of the Plaintiff therein a value of $42,500); a rent account, jointly with her mother, $1,300; personal bank account, $14,000; moneys lent to her mother, $5,000; superannuation entitlements, $34,000; 400 shares in Telstra, $1,800. 23 The Plaintiff estimated her monthly outgoings in the United Kingdom as totalling 1,282 pounds, 50 pence. Those outgoings included holidays in an amount of 339 pounds a month. In that regard, it was necessary for the Plaintiff in order to preserve the tax free status of her income, to be out of the United Kingdom for two weeks of every four week leave period. 24 Although, as I have already recorded, the Plaintiff does not pay any tax in the United Kingdom, she does pay income tax in Australia. 25 According to the Plaintiff, she was with the Deceased whilst she was a young girl, for one weekend each month and for one week of each school holidays. The Plaintiff said that she and her father had a close and loving relationship. The Deceased was punctilious in his payment of child maintenance for the Plaintiff to the Plaintiff's mother. The Plaintiff was enabled to save money whilst she was studying at Launceston, particularly as a result of the income which she was receiving from her father's estate. When the Plaintiff was aged twenty, she was enabled from those savings and with financial help from her mother, to purchase, together with her mother the home unit at Newham. 26 At the present time the Plaintiff is not in employment, although since completing her tertiary qualifications in mid-March of this year she has been seeking an appropriate position. She is optimistic of obtaining employment, but at the time of the hearing had not yet done so. 27 The Plaintiff's present assets in the United Kingdom consist of investments totalling about 4,900 pounds, and $US6,380, as well as moneys in bank accounts totalling about 2,150 pounds. Since March 2003 the Plaintiff has expended 17,000 pounds of her savings upon maintaining herself during her maritime college course and paying various expenses associated with that course (including the cost of the course itself, 1,000 pounds; personal and educational requirements (for example, computer, printer, stationery), 1,300 pounds; household requirements, 773 pounds; holiday expenses of the nature already referred to, 3,380 pounds; employment expenses, 600 pounds). The Plaintiff has also expended 702 pounds in travelling to Australia in respect to the present proceedings, and has deposited $13,000 in her solicitor's trust account in respect to the legal costs of the present proceedings. 28 The Plaintiff's Australian income for the most recent financial year was $7,134 (consisting essentially of income received by her from the estate of the Deceased, together with her share of the rent from the Newham apartment). 29 It will be appreciated that since the present proceedings were not instituted within the prescribed period of eighteen months from the death of the Deceased, she must seek an extension of that period pursuant to the provisions of section 16 (especially subsection (2) thereof) of the Family Provision Act. 30 It was the evidence of the Plaintiff that she did not make the application within the prescribed period, because she was unaware of her rights in that regard. It must be appreciated that the Plaintiff was aged only fourteen at the time of her father's death. She said that from what she had been told by her mother at that time she was entitled to the entirety of the income from her father's estate, even after attaining the age of thirty years. The Plaintiff said that it was only in 1996 when she made her own will, being professionally assisted in that regard by the present Defendant, that she found out that her foregoing understanding of the situation is incorrect. Apparently the Plaintiff became aware only in July 2002, from information which her mother had obtained from Mr Peter Francis Daly, the solicitor for the Plaintiff in the present proceedings, that she was able to make a claim, but that it would be necessary for her to seek an extension of time. The Plaintiff, who was in the United Kingdom at that time, gave instructions to Mr Daly on 20 September 2002 by way of facsimile transmission, to proceed with such a claim. 31 The Plaintiff is a single woman, with no present marriage prospects. However, according to her affidavit evidence, she will "entertain [any such prospects] if they arise". 32 Evidence was placed before the Court on behalf of the Defendant by Paul Gordon Harvey Linossier, Chief Executive Officer of MacKillop Family Services Limited, which entity (pursuant to the provisions of the MacKillop Family Services Act 1998, being an Act of the Parliament of the State of Victoria) "receives from trustees of property given for charitable purposes, bequests or benefits which have been directed to St Vincent de Paul's Boys Orphanage of Cecil Street, South Melbourne". 33 Mr Linossier gave evidence concerning the nature of the child welfare work which is carried on by MacKillop Family Services Limited at St Vincent de Paul Boys' Orphanage. The care for needy and orphaned boys is a major part of that work. Mr Linossier has made inquiries through the records relating to the orphanage and has ascertained that the Deceased was a resident of that orphanage in South Melbourne. However, he has been unable to locate any specific record of the Deceased making any other gift or donation to the orphanage or its activities. The Deceased, who had been born on 6 September 1930, was admitted to the orphanage on 1 June 1941 by his father, his mother having died on 9 January 1940. The Deceased's four sisters were also placed in a similar establishment conducted by the Sisters of St Joseph at Leichhardt in Sydney. The Deceased left the St Vincent's Orphanage on 5 June 1946, having been resident therein for just five years, in order to reside with one of his sisters in Sydney. 34 According to Mr Linossier's evidence, the MacKillop Family Services Limited continues to provide care for the most needy children and families, and in particular for children in the need of care because of the death, absence or other inability of their parents to provide such care. There are always more demands on MacKillop Family Services Limited from needy children and families than can be provided. Any funds which might come to that entity from the estate of the Deceased would be applied for the charitable purpose that corresponds with or is similar to the charitable purpose for which the funds were given. The work which MacKillop Family Services Limited continues to provide includes care for children without parental support in residential units; education for children in the need of special educational services; and a wide range of programs for children and families in need. Mr Linossier said that there continue to be increasing demands on the services of that entity, both in terms of the number of referrals and of the complexity of the issues engaged. 35 It is in the light of the foregoing facts and circumstances that the Court must proceed to a consideration of the claim of the Plaintiff. 36 I have had the benefit of receiving written outlines of submissions from Counsel for the respective parties. Those written outlines will be retained in the Court file. 37 The Plaintiff as a child of the Deceased is an eligible person within paragraph (b) of the definition of that phrase contained in section 6(1) of the Family Provision Act. As such she has the standing to bring the present proceedings. 38 The only other eligible person in relation to the Deceased is the Plaintiff's mother. She, although served with a notice of claim, has not sought to make a claim on her own behalf. No affidavit evidence has been filed by the Plaintiff's mother. However, I infer from the Plaintiff's own evidence that her mother supports the Plaintiff's claim. 39 The testamentary provisions of the Deceased in favour of the named beneficiary doubtless reflect the gratitude and recognition of the Deceased for the upbringing which he received during the five years whilst he resided in the St Vincent de Paul's Boys Orphanage, from the age of almost ten to the age of almost fifteen. 40 Nevertheless, it must be recognised that that entity is not an eligible person in relation to the Deceased. Its competing claim upon the beneficence of the Deceased can be grounded only upon the fact that it was the chosen object of the testamentary beneficence of the Deceased after the Plaintiff attained the age of thirty. 41 It should be recognised that the Deceased had a primary obligation to the Plaintiff throughout her childhood. He appears, during his lifetime, to have fulfilled that obligation. Nevertheless, the early and unexpected death of the Deceased, at the age of fifty-seven, had the effect that the Plaintiff was to a very large extent dependent upon the income from the estate of the Deceased, and upon the competence and integrity of the named executor in administering that estate and carrying out the testamentary provisions of the Deceased. I have already recorded that Burns Philp Trustee Company Limited, the named executor, to whom probate of the will was granted, in flagrant violation of its obligations as executor, failed to carry out the testamentary provisions of the Deceased, totally failing to carry out the terms of clause 3 of the will (in respect to the gift to the Plaintiff of all the clothing, furniture and household personal effects of the Deceased). Further, it would appear that the information given by that executor to the Plaintiff, through the medium of the Plaintiff's mother, and by way of correspondence with her mother's then solicitor, Mr Daly, concerning the effect of the terms of the will and the nature of the assets was inadequate, if not incorrect and misleading. Mr Daly conceded under cross-examination that at that time, in 1988, he was not aware of the eighteen months limitation period. 42 I have already referred to the fact that the present proceedings were not instituted within the prescribed period of eighteen months from the death of the Deceased, and to the fact that the Plaintiff by her summons seeks an order for the extension of that period. 43 Subsection (3) of section 16 of the Family Provision Act precludes the Court from making an order for such extension unless "sufficient cause is shown for the application not having been made within that period". 44 In Massie v Laundy (unreported, 7 February 1986), Young J (as he then was) held that the factors relevant to a determination of whether "sufficient cause" is established include the following: (a) Is the reason for making a late claim sufficient?

(b) Will the beneficiaries under the will be unacceptably prejudiced if the time were extended?

(c) Has there been any unconscionable conduct on either side which would enter into the equation? 45 In the instant case the Plaintiff was for a period of four years from the death of the Deceased still an infant. The relevance of that status of infancy was considered by Cohen J in Dare v Furness (1998) 44 NSWLR 493. His Honour said, at 500, The mere status of a plaintiff as an infant is obviously not itself a sufficient cause for an application not being made within the prescribed period. In my opinion it is a factor which must be taken into account when the court is considering the sufficiency of the reason for delay in the bringing of the proceedings. In particular, where a parent or guardian of the child has caused or contributed to the delay, but there are some reasons to explain it, then the fact that the child was at all times dependent upon the acts of that parent or guardian will be a fact to add to the reasons in considering whether there has been a sufficient cause shown for the delay. 46 The Defendant, in opposing an extension of the prescribed period, pointed to the fact that the Plaintiff was clearly satisfied by the provision which until relatively recent times she understood had been made for her under the terms of her father's will, that is, that she would continue after she attained the age of thirty (and presumably for life) to receive the income from her father's estate. That fact, however, is a further reason explaining why the Plaintiff did not institute the proceedings within the prescribed period. (The present Defendant, as trustee of the estate of the Deceased, appears also to have been under the impression that the Plaintiff was entitled to receive income from the estate after attaining the age of thirty years, since it continued to pay such income to her, and now seeks to recover $15,708, being the amount of such overpayment.) 47 I consider that the Plaintiff's status of infancy, together with her lack of knowledge of her rights to bring a claim under the Family Provision Act establish the reason why the present proceedings were not instituted within the prescribed period. There can be no suggestion that the beneficiary under the will will be unacceptably prejudiced if time were extended, since the Plaintiff had not attained the age of thirty at the time when the proceedings were instituted, and thus the beneficiary had not become entitled to call for a distribution to it of the estate. There has certainly been no suggestion of any unconscionable conduct on the part of either the Plaintiff or the beneficiary. There was in my view a very considerable degree of unconscionable conduct, as well as incompetence, on the part of the named executor (which, presumably, claimed and received payment of commission during the period from the death of the Deceased until the enactment of the Burns Philp Company Limited Act 1990). 48 Accordingly, I am satisfied that, in the event that the Plaintiff has otherwise established an entitlement to an order for provision, that entitlement should not be defeated by the fact that the Plaintiff did not institute the present proceedings within the prescribed period. 49 The Plaintiff at the time of the hearing had just succeeded in obtaining her qualification which will enable her ultimately to be employed as a ship's master. She would thus appear to have reasonable prospects of future employment in such a position. However, she is presently unemployed, and has spent 17,000 pounds sterling in pursuing full-time tertiary studies in order to obtain that qualification. The Plaintiff's savings are modest, and her other assets consist now of only a small superannuation policy and a half interest in the Newham home unit. 50 Whilst the Plaintiff will, in her chosen career, inevitably work at sea, it is her desire to have a base in either Sydney or Wollongong, to be near her mother, who resides at Wollongong. The Plaintiff has no capital sum which would enable her to purchase such a residence. She does not propose to reside in Tasmania. 51 I consider that it is a laudable desire on the part of the Plaintiff that she obtain a residence. The Plaintiff seeks that she receive the Dee Why home unit, so that she can reside therein. She also seeks a lump sum, to assist her in general living expenses, until she obtains satisfactory employment, and to provide for unexpected contingencies. 52 It would appear to be impractical, in the light of the Plaintiff's chosen career, for her to reside in the Newham home unit in which she is a half owner. I am in agreement that it is appropriate that the Plaintiff should be enabled to have a residence in reasonable geographical proximity to her mother. 53 Accordingly, I consider that the Plaintiff has established an entitlement to receive the Dee Why home unit (recognising that its present agreed value is $335,000, that being considerably more than the value of the Newham home unit). If the Plaintiff and her mother were to dispose of the Newham home unit, the Plaintiff would receive about $67,500 (or slightly less). In my conclusion, therefore, any lump sum which she might be entitled to receive out of the estate of the Deceased should be in a relatively modest amount. I consider, in all the circumstances, a legacy in the sum of $40,000 would be appropriate. Such a sum would tide her over until she obtains appropriate employment in her chosen career, and would provide for unexpected contingencies. That would then leave in the estate an amount of about $215,000 for the beneficiary. In those circumstances the competing claim of the beneficiary upon the testamentary bounty of the Deceased cannot have the effect of reducing, let alone extinguishing, an order for provision for the Plaintiff of the nature which I have proposed. 54 I make the following orders:

(1). I order that the time for the institution of these proceedings be extended up to and including 12 December 2002.

(2). I order that, in addition to the provision made for her by the will of the late Laurence Michael Mahon ("the Deceased"), the Plaintiff receive: (a) the home unit situate at and known as Unit 9, 8 Avon Street, Dee Why, and

(b) the sum of $40,000, such sum not to bear interest if paid on or before 21 July 2004, and if not so paid to bear interest at the rates prescribed for unpaid legacies under the Wills, Probate and Administration Act 1898.

(3). I order that the costs of the Plaintiff on the party and party basis and the costs of the Defendant on the indemnity basis be paid out of the estate of the Deceased.

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