McCarthy v McCarthy

Supreme Court of NSW|2009-08-14

CITATION : McCarthy v McCarthy [2009] NSWSC 774

CATCHWORDS : Family Provision. Application by step-son. Estate passed on intestacy to only son. Order for provision made. No matter of principle.

PARTIES : Gregory John McCarthy v Kim William McCarthy (Estate of William Charles McCarthy)

COUNSEL : Mr PM Jeffriess for plaintiff Mr PW Bates for defendant

SOLICITORS : Everingham Solomons for plaintiff Armstrong Legal for defendant

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

Friday 14 August 2009 2712/06 GREGORY JOHN McCARTHY v KIM WILLIAM McCARTHY - ESTATE OF THE LATE WILLIAM CHARLES McCARTHY

JUDGMENT 1 HIS HONOUR: This is an application under the Family Provision Act 1982 in respect of the late William Charles McCarthy who died on 14 November 2004 aged 77 years. The deceased was survived by his son, the defendant and the plaintiff, his step-son. Wills of the deceased 2 The deceased made a number of wills shortly before he became incapable. The wills were made on 10 July 2002, 5 August 2002 and 28 August 2002. Probate was not obtained for these wills and instead the defendant obtained an unopposed Grant of Letters of Administration which resulted in the whole of the estate passing to the defendant. Estate of the deceased 3 The assets in the estate of the deceased comprise the following, with the real estate values being the ones prescribed in the defendant's affidavit of 29 September 2007. Port Macquarie unit $320,000.00 Darling Point Unit $800,000.00 Bangkok unit $137,000.00 Rolls Royce car $ 15,000.00 Speedboat $ 1,500.00 Furniture & other goods $ 21,497.20 Money held by Protective Commissioner & and solicitors $ 21,497.29

Total $1,316,494.29 4 At the date of his death the deceased had monies in bank accounts in Bangkok. After the death of the deceased the defendant obtained a Grant of Letters of Administration in Thailand and recovered the following amounts from the banks in Thailand. 25 November 2005 $200,000.00 12 January 2006 $414,830.75 27 February $1,025,096.62 5 In the evidence before me there was a debate as to whether the amounts of $4,000, $40,000 and $26,000, which were paid in December 2005 into the defendant's bank accounts shortly after he obtained a Grant of Letters of Administration in Thailand, were monies of the deceased. According to the defendant's evidence the monies were from the sale of his business and he denied they were from the deceased's funds in Thailand. Given the state of the evidence, I accept the defendant's version of the evidence on this matter. 6 The defendant has received interest on his accounts which were credited with the monies from Thailand in 2006 and 2007 a total of $55,310.79. He has also received income from the Port Macquarie unit of some $30,000. 7 The defendant says that he has incurred maintenance of the various properties held by the deceased as follows: Port Macquarie unit $32,105.26 Darling Point Unit $64,259.88 Bangkok unit $25,176.84 8 The defendant has also incurred costs searching for other properties of the deceased of $245,157 and other costs of a similar nature of $29,217.79. All these expenses have been paid except for some $35,585. He has his liability for costs in these proceedings. 9 The costs incurred in these proceedings are $170,934.03 for the plaintiff and $268,611.19 for the defendant. The defendant has paid $48,549.03 of his costs. Family history 10 The deceased was born in 1917 and he married Beryl McCarthy in 1949. His son, the defendant, was born in October 1951. The deceased and his wife separated in 1955 and the defendant was left in the care of relatives while the deceased travelled overseas on business. In 1958 the defendant became a boarder at Sydney Grammar. In February 1959 the deceased and his wife's divorce became absolute. 11 In December 1961 the deceased married Shirley Joan Hudson but that marriage only lasted a short time. 12 In March 1973 the deceased married Evelyn Joyce Breize, the plaintiff's mother. Evelyn was born in 1954 and her son, the plaintiff, was born in April 1967. 13 The deceased and Evelyn were together until about 1981 when they separated and on separation the plaintiff went to live with his mother although that was not the end of his relationship with the deceased. At about the time of separation the deceased established a trust referred to in the evidence as "Gregory's Trust." The deceased and Evelyn's divorce became absolute in August 1982. 14 In 1984 the deceased moved from Singleton where he had been farming to Sydney. His former wife remained in the Singleton area with the plaintiff and through a company, Damileaton Pty Ltd, she purchased 640 acres of land in the Singleton area. 15 By 1986 the plaintiff had successfully completed his apprenticeship course in automotive mechanics and boiler making. He turned 21 years of age in 1988 and he says he received $20,000 from the deceased, which was said to be funds from the Gregory's Trust. 16 The deceased had been travelling to Thailand for some years to invest money and in 1989 he purchased a condominium in Bangkok. 17 In 1989 the plaintiff's mother and the plaintiff became registered joint proprietors of a farming property at Kamilaori Highway, Quirindi. The plaintiff did not contribute to the purchase of the property and his mother registered the title in her and her son's name to ensure that it would be out of reach of any partner with whom she might be living and so that it would pass to the plaintiff on her death. 18 In March 1996 the defendant made an application to the Guardianship Tribunal for a financial management order in respect of the deceased. This was because he was transferring large sums of money to Thailand. The application was refused. 19 In 2000 the plaintiff married and he moved from his mother's home to a property in Greenwood Avenue, Singleton which he had purchased in 1997. 20 In June 2002 the deceased was admitted to hospital for six days. The plaintiff was contacted and on discharge the plaintiff stayed with the deceased at his home for two weeks. In the 10 July 2002 will, the plaintiff received two thirds of the estate and the defendant one third of his estate of the deceased. On the same day the deceased gave power of attorney to the plaintiff. On 5 August the deceased revoked the power of attorney and he executed his second will in which he gave the defendant two thirds of his and the plaintiff one third. On 28 August 2002 the deceased executed his third will in which he gave the plaintiff one third, the defendant one third and Darryll Pollard a nephew of the deceased, one sixth and charities one sixth. He gave a power of attorney to Darryl Pollard. 21 On 24 October 2002 Guardianship and Financial Management orders were made in respect of the deceased with his guardian being the Public Guardian. 22 In April 2003 the deceased commenced to reside with the defendant and in that year the Guardianship order was varied with the defendant appointed the guardian instead of the Public Guardian. 23 In April 2004 the deceased moved to reside at a nursing home and he died on 14 November 2004. 24 In June 2005 the plaintiff acquired one of the two ordinary shares in Damileaton Pty Ltd the other being held by his mother. This was to buy out his mother's partner from whom his mother had separated. The plaintiff sold his property at Muswellbrook and he bought the one share for a sum equal to the value of a one third share in the property for $213,000. This was because his mother's partner had only contributed a one third share of the purchase price of the land the company had purchased. 25 The summons was filed on 11 May 2006 which was within time. Eligibility 26 The plaintiff is an eligible person because between 1973 and 1981 he was dependant upon the deceased and he was a member of the household of which the deceased was a member. The defendant does not dispute this and the evidence clearly supports it. 27 However it is necessary under s 9 (1) of the Family Provision Act that the Court shall first determine whether there are factors warranting the making of the application. Courts have dealt with this expression on a number of occasions. In Re Fulop Deceased (1987) 8 NSWLR 679 at 681 McLelland J described that expression in the following terms: "Secondly, the subsection appears to be premised upon a distinction between 'factors which warrant the making of the application' on the one hand, and circumstances which would justify the making of an order granting the application, on the other; otherwise the subsection would be pointless. This means that in a particular case the Court might determine that there are 'factors which warrant the making of the application' within the meaning of the subsection, and yet go on to decide that the application should fail. Since the subsection applies only to certain classes of applicants, it suggests that those classes of applicants need to demonstrate some basis for their claims additional to that required of other classes. The difference between the two sets of classes of applicants, in broad terms, seems to be that the classes not affected by s 9(1) (lawful and de facto spouses and children) are as such generally regarded as natural objects of testamentary recognition by a deceased (of the Wills Probate and Administration Act 1898, s 61B), whereas the classes affected by s 9(1) (former spouses, and some time dependent grandchildren or household members) are as such not generally so regarded. This suggests that the 'factors' referred to in the subsection are factors which when added to facts which render the applicant an 'eligible person' give him or her status of a person who would be generally regarded as a natural object of testamentary recognition by a deceased. That the subsection is directed at a plaintiff's status as applicant in some such sense as this perhaps finds some support in the statutory direction to the Court, in the event that it determines the preliminary question adversely to the plaintiff, not to go on to determine the application, but 'refuse to proceed with the determination of the application.'" 28 In Churton v Christian (1988) NSWCA 23, the Court approved this statement. Priestley JA at page 252, after setting out and approving the statement, added: "To this I would add that although the classes affected by s 9(1) are not necessarily generally regarded as natural objects of testamentary recognition, in some cases members of those classes may, when the circumstances of their relationship with the deceased are set out, immediately be seen to be persons who would be regarded by most observers as, in their particular circumstances, natural objects of testamentary recognition."

29 These principles have been applied at first instance for many years. There has been in recent times further attention to this matter in the Court of Appeal in the case of Brown v Faggoter (Supreme Court of New South Wales, Sheller JA, 13 November 1988, unreported), a decision given on 13 November 1998, which is a decision of Sheller JA, Sheppard AJA and Fitzgerald AJA. Fitzgerald AJA, who seemed to suggest that an application might be warranted if the application has reasonable prospects of success gave the main judgment. This seems to be a somewhat different and perhaps easier test than that which the Court of Appeal approved in Churton v Christian. I will consider the matter on both bases, given that there may be some flux in the state of the law in this regard.

30 From the time the plaintiff commenced living with the deceased in 1973 the deceased referred to him as his son and the plaintiff called him "father." During the time that the plaintiff lived with the deceased the deceased involved himself fully in the plaintiff's life. When the deceased's relationship with the plaintiff's mother ended the deceased created a trust to provide for the plaintiff when he turned 21. There is little documentary evidence of the trust and what little there is suggests the plaintiff received some income which had accumulated in the trust over the years. 31 From the time that the deceased moved to Sydney, the plaintiff and the deceased corresponded frequently. The correspondence is in evidence. The deceased referred to the plaintiff, as 'my dear son Greg' and he usually signed the letters 'Your loving Father'. 32 The deceased was upset on the occasions when the plaintiff did not come to visit when he was expected. It is plain however that the plaintiff continued his association with his father and they had a lot to do with each other over the years from 1981. For example, in the late 1980s the deceased told the plaintiff that he was considering adopting him although this did not happen. The deceased told the plaintiff that he would be making provision for him in his will. 33 Although the wills indicate an intention to benefit the plaintiff I will not have regard to this fact as the parties chose not to obtain probate of those wills due to doubts about the deceased's mental state at the time. However, the factors I have mentioned do indicate that on the traditional test there are factors warranting the making the application. I will now consider the prospects of success. 34 In applications under the Family Provision Act the High Court in Singer v Berghouse [1994] HCA 40 has set out the two-stage approach that a Court must take. At page 209 it said the following:- "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 Limited . The determination of the first stage in the two-stage process calls for an assessment of whether the provision (if any) made was inadequate or 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 where there we no assets from which an order could reasonably be made and making an order could disturb the testator's arrangements to pay creditors". Situation in life of the plaintiff 35 The plaintiff is 54 years of age. He is married with twins aged 7 years. He receives income as plant mechanic from his employment with Hunter Valley Earthmoving Co Pty Limited of $1,433 a week. The company supplies contract mining and earthmoving equipment, maintenance and repair services to Xstrata, the company which owns the Liddell mine. In addition he receives $49 a week as a union delegate and gross rental income of $240 a week from an investment unit. 36 The plaintiff is in partnership with his mother. The partnership carries on grazing operations on his mother's property Quirindi and the property in the Hunter Valley. He does not contribute to the operation of the partnership which has been operating at a loss and he has the benefit as a 50% partner of the deductions for losses over the last few years as a result of the drought. 37 The plaintiff's assets are as follows:

Family home - Singleton $315,000.00 Investment property - Singleton $220,000.00 Share in Damileaton Pty Ltd $350,000.00 Interest in Quirindi jointly owned with his mother $400,000.00 Half share of stock on Quirindi $ 25,500.00 Managed fund and shares $245,758.31 Bank account $ 15,800.00 Superannuation $180,326.00 Motor vehicles $ 17,000.00 38 The plaintiff has liabilities of $231,083.32. 39 Although the plaintiff indicated that his share of Damileaton Pty Ltd in theory gave him an interest in the company of $350,000 the evidence before me suggests that the arrangements between him and his mother is that he only has a one third interest and thus his interest would equate closely to what he paid for it, namely, $213,000. As far as the Quirindi property is concerned the presumption of advancement would mean that he would have an interest unless the clear arrangement between him and his mother is that the property belongs to his mother to do with as she wishes in her lifetime thus rebutting the presumption of advancement. Although his mother has made provision for the plaintiff in her will she does not say this will remain and no doubt she will do what she think is appropriate in due course. 40 So far as the plaintiff's health is concerned he says he has problems with his hips, knees and ankles. He has suffered from migraines and has high blood pressure which needs to be monitored. 41 Dr Anthony Smith, the defendant's expert orthopaedic surgeon examined the plaintiff. In his report dated 20 October 2008 he described the conditions as "simply producing some mild nuisance symptoms" which may increase with time. 42 The plaintiff is concerned about his future employment prospects as his employer's contract with Xstrata expires in 2010. There was evidence from a Vocational Assessor at Direct Solutions Rehabilitation and Occupational Services which would suggest that if the plaintiff were retrenched from his current full-time employment other full-time work would be readily available. 43 As I have mentioned the plaintiff gave evidence that he received $20,000 from the deceased when he turned 21 years from the Gregory's Trust. Although there was substantial effort to uncover documentary evidence to trace the activities of the trust it may be the case that the deceased used the trust as a vehicle for investments for himself and for the trust. For example, deposits were frequently made in the joint names of the trust and other companies of the deceased. There is nothing in the evidence from which I could infer that the plaintiff is entitled to any further interest in the trust or that he has received any further amounts other than that which he concedes he obtained on his 21 birthday.

Situation in life of the defendant 44 The defendant is 58 years of age. He is married and has two adult children who are only modestly dependant on him and his wife. He is retired and lives on an allocated pension of $1,385 per week together with a carer's pension of $49.25 per week. He cares for his wife who has multiple sclerosis. 45 The defendant has the following assets: 7 Paraka Close, Umina Beach (jointly owned with Helen) $420,000.00 54 Helmsman Boulevard, St Hubert's Island (jointly owned with Helen) $625,000.00 Factory at 28 Wollong Street, North Gosford (jointly owned with Helen) $335,000.00 2 Motor vehicles (estimated) $ 36,000.00 Home contents (estimated) $ 90,000.00 Plant and machinery (estimated) $ 42,000.00 Share in Skyfox Aircraft $ 5,500.00 Racing cars $ 25,000.00 Bertram Boat $ 2,000.00 Bank accounts $ 27,500.00 Superannuation investment/allocated pension as at 8.6.2007 $778,800.00 46 The defendant has liabilities of $115,400. He has two motor vehicles, a superannuation investment and the factory at North Gosford. He acquired them from the money in the deceased's estate and in particular the money transferred from Thailand to Australia and deposited to his account. He says his weekly expenses are $1,876.00. 47 The defendant and his step-brother both had a good relationship with the deceased during most of the deceased's lifetime. Because the defendant spent time at boarding school he did not have as close a relationship as he would have wished. The evidence does not disclose any unhappiness in the relationship with either the plaintiff or the defendant until the deceased started to deteriorate at the end of his life. Consideration of how the plaintiff says he has been left without adequate and proper provision for his maintenance, education and advancement in life 48 The four areas advanced by the plaintiff to support his claim that he should be provided with a legacy of $450,000 are as follows: 1. A fund to increase his superannuation, to take account of the possibility of future unemployment or inability to perform his work because of physical infirmity. 2. An amount to repay his current debt of $231,000.00. 3. An amount to provide for the education of his children at a private school. 4. A sum to meet the difference between the value of his current home and a suitable home which would give him more accommodation. 49 It seems to me that given the evidence the plaintiff is likely to be able to obtain further employment if his present employment is terminated. Although he may have some minor difficulties at the present time the evidence does not allow me to suggest that he will not be able to continue working until a normal retirement age. However, his superannuation of $180,326.45 is not substantial. He does have some life insurance and terminal illness cover of $219,239.31 but it is probable that this would not help him during his lifetime. Depending upon the amount in the estate and the other competing claims it may be appropriate to allow some amount to assist him to increase his superannuation. 50 It would assist the plaintiff if he could pay his current debt of $231,000 and an amount for his children would also be of assistance. Although he is meeting their education costs at present the evidence discloses that the fees for the two children at Hunter Valley Grammar School will be $13,376 for year 3 rising to $21,393 for year 12. 51 A contentious matter is the question of providing for a larger home. He has a three-bedroom home and the twins have recently been given a bedroom each. The plaintiff would like to have an additional bedroom to enable his mother and other friends to stay. He would prefer a property where his children could play. The type of house he would like would be in the order of $470,000 and obviously his present house could be sold for $315,000 being a change over price of approximately $200,000 after expenses. Although he puts this matter forward it is not something which is necessary at the present time. A better house is always more desirable and alternative options such as the addition of another bedroom in the downstairs area have not been considered. 52 The defendant's present financial position is as a result of him having received in excess of $1.6 million from the deceased's estate. The estate still contains assets of $1.3 million and, if undisturbed, this will flow to the defendant as well. On the evidence before me the defendant's expenses are not covered by his income so he may need additional funds for this purpose. However, the amount available is large even after taking account of the fact that the defendant has received the amount to which I have referred. 53 The question of what is an appropriate provision in respect of a large estate is dealt with by Young J in Anasson v Phillips, 4 March 1988, where he said the following: "... with a very large estate ... there is a great temptation on a court to be over-generous with other people's money. This is especially so when the court can see that plaintiffs have been very hardly done by at the hands of a domineering testatrix. However, the case should not be approached in this way as the application has to be determined in accordance with the legal principles. These principles include the fact that in Australia there is freedom of a person to leave her property in whatever way she wishes, to love whom she wishes, to hate whom she wishes and there is only when there has been a failure to comply with a moral duty to those who in the community's eyes she should have made proper provision for, that anyone can legally complain about another person's will. Even then, the court has no power to re-write the will, but can only adjust things, in substitution for the testatrix, in such a way as to fulfil her moral duty. If the estate is a large one, the court has a slightly different approach. The basic principles are the same, that is, the will can only be affected to the extent that it is necessary to discharge the moral duty by making adequate provision for the plaintiffs, but where there is a large estate, competition between claimant and claimant, and claimant and beneficiary under the will is much reduced or eliminated. Further, there may be a more liberal assessment of the moral duty owed, to be reflected in what is proper provision for the plaintiffs. In particular, the lifestyle that has been enjoyed by the plaintiffs, because they have been associated with a wealthy testatrix is a relevant factor. These principles all, I think, flow from cases such as Re Buckland (1966) VR 404, especially at page 412." 54 In this case there was a substantial estate as a result of the deceased's own efforts with only minimal contributions from his son and step-son who both assisted in his businesses from time to time. 55 The plaintiff has assets which he can use for some purposes if he wishes. For example he has the investment unit which he can sell if he wishes to increase the size of his home. He does have assets which in the ordinary family situation are not available to him and will not be available to him for many years. These are the assets which he owns with his mother. It would be a great advantage for him to repay the loan which he has outstanding and the amount of his superannuation is not substantial having regard to his age. 56 In the circumstances it seems to me that the deceased did not make proper provision for the plaintiff. In my view proper provision, which ought to be provided, would be a sum which will assist in part with school fees, repayment of the mortgage and some modest increase in his superannuation. This would still leave a substantial fund for the defendant. 57 Appropriate provision for the plaintiff would be a sum of $400,000. 58 I make the following orders:

That the plaintiff receive provision in the sum of $400,000 out of the estate of the deceased.

That the sum of $400,000 bear interest at the rate payable for legacies in the Probate & Administration Act 1898 Act on and from three months from today's date.

The plaintiff's costs on the ordinary basis and the defendant's costs on an indemnity basis are to be paid or retained out of the estate of the deceased. **********

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