McCrea v Jones

CITATION : McCrea v Jones [2003] NSWSC 221 HEARING DATE(S) : 25/03/2003 JUDGMENT DATE : 26 March 2003 JURISDICTION: Equity Division JUDGMENT OF : Master Macready at 1 DECISION : Paragraphs 46 and 47

CATCHWORDS : Family Provision. Application under Family Provision Act by son with cerebral palsy. Consideration of conduct of plainiff towards testator. Order for further provision made. PARTIES : Walter Laurence McCrea v Kerrie Daphne Jones - Estate of Lance Milton McCrea FILE NUMBER(S) : SC 5050/00 COUNSEL : Mr J. Wilson for plaintiff Mr J. Armfield for defendant SOLICITORS : Ross A Derham & Associates for plaintiff Ferrys Law Firm for defendant

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

5050/00 - WALTER LAWRENCE McCREA v KERRIE DAPHNE JONES - ESTATE OF LANCE MILTON McCRAE

1 MASTER: This is an application under the Family Provision Act in respect of the estate of the late Lane Milton McCrea, who died on 3 July 1999 aged seventy-two years. The deceased's wife pre-deceased him and he was survived by his son, the plaintiff and his daughter, the defendant. 2 The deceased's will was made on 4 September 1998, under which he appointed the defendant as executrix. He bequeathed all his real estate to the defendant, subject to her paying $20,000 to the plaintiff. The residue was divided between the plaintiff and three grandchildren, but that was of no use as there was in fact no residue. The estate consisted of a house and land at Pomono Road, Empire Bay which is now worth some $640,000. There is a small amount of cash and some insurance which no doubt went in the costs of administration. 3 The plaintiff's costs on a two day hearing basis were $30,000, and the defendant's $26,388. Fortunately the costs will be somewhat less as the case was able to be sensibly contained to a hearing of one day. 4 It is necessary to deal with a little of the history of the family in order to put the matter into perspective. The deceased was born on 3 December 1926 and the defendant, his eldest child, was born on 15 August 1952. The plaintiff, the son, was born on 20 June 1956. He was born with cerebral palsy, he has hearing defects and speech defects. 5 In 1966 the deceased and his wife, Daphne, purchased ten acres of land at Pomono Road, Empire Bay. In 1970 the defendant married her first husband and she had twins in 1973 and a third child in 1979. She separated from her husband in 1981 and divorced him a year or two later. 6 After that she commenced a relationship with Leslie Jones, who is now her present husband. The deceased and his wife in 1985 subdivided the Empire Bay property into three parts. They used the proceeds of sale of the smallest block to purchase a house for the plaintiff at Davistown at a cost of $46,000. 7 At about the same time the defendant and Leslie Jones moved on to the property at Empire Bay and commenced to live with the deceased and his wife. They effected various improvements which included building a mobile home for them on the land. 8 In 1990 the plaintiff obtained some work cleaning cars and for a while in 1991 he started work as a cleaner at Old Sydney Town. In 1995 he stopped work and has never worked since then. Since that time he has been on a disability pension. 9 In 1996 the defendant and her husband bought and organised the building of a one bedroom dual occupancy next to the parents' home. 10 In 1998 the deceased's wife was diagnosed as suffering from mesothelioma and the defendant cared for her until she died. I have already referred to the will of the deceased, which was made on 4 September 1998. 11 Daphne McCrae died on 3 November 1998 and on 10 February 1999 the deceased made a statutory declaration setting out the reasons why he made his will. At that stage he was diagnosed as having cancer of the pancreas. His explanation substantially related to the fact that his daughter and her husband lived there and had assisted him and his wife and had also made substantial improvements to the property. There was no complaint about the plaintiff's conduct made in that declaration. 12 On 25 June 1999 the plaintiff agreed to pay $11,500 out of his share in the deceased's estate to purchase a motor vehicle. The deceased on 3 June 1999. Probate was granted in July that year. From 1999 to 2001 the defendant and her husband carried out more improvements on the Empire Bay property. 13 In late 1999 the plaintiff sold his Davistown property for $146,000 and purchased a cheaper property for $105,000. He cleared some $22,000 in respect of the exchange of properties. 14 The summons in this matter was filed within time. 15 In applications under the Family Provision Act the High Court in Singer v. Berghouse (1994) 181 CLR 201 has set out the two stage approach that a court must take. At p 209 the court said: "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 are no assets from which an order could reasonably be made and making an order could disturb the testator's arrangements to pay creditors." 16 I turn to consider the plaintiff's situation in life. The plaintiff is forty-six years of age, single with no dependants. His current assets consist of his house at 47 Catherine Street, Mannering Park worth $110,000, the car worth probably $11,500, and a bank account of $17. The only liabilities he has are miscellaneous debts totalling $3144. He receives a disability pension of $407.80 per fortnight but says that his expenses are $587 per fortnight. He clearly has been living on his savings, which have decreased from $3684 to $17 between September 2002 and March 2003. 17 As I have mentioned, he was born with cerebral palsy and his doctor has given evidence of what effect this has on him. Effectively, he has been affected since his birth with the defects that that disease causes. There is an effect on his hearing because he has great difficulty hearing. He also has difficulty in speaking and he suffers deformities both in respect of his appearance and also in respect of his gait. Since 1995 he has problems with his shoulders which have been treated by the doctor and, as I have mentioned, he has not worked since then. His condition is obviously such that he receives the disability pension to which I have referred. 18 All these matters referred to by the doctor became obvious when the plaintiff attempted to give evidence before me. 19 The plaintiff's life history illustrates the difficulties he has suffered. He only went to a special school for spastic children until he was about five years of age. He then went to an ordinary primary school for two years, and then the Gosford Primary School. He went to Chatswood High School for his secondary schooling but left at the age of fifteen years. Thereafter he boarded in a hostel for spastic children at Hornsby for about two years. He then lived with his parents at Empire Bay. He says at that time he was frequently punched by the deceased and on one occasion the deceased took a horse whip to him. 20 That allegation cannot be tested as because of the difficulties with the plaintiff's ability to hear and give evidence, he was not cross-examined. It is to be noted that there is no other evidence which corroborates these complaints by the plaintiff. Certainly it is obvious from the other evidence in the case to which I will refer that he started to be become difficult when he was a teenager. That this happened is not surprising. 21 When he was twenty-four years of age he moved to Ettalong and lived in a flat there for two years by himself. He then moved to Umina and lived in a flat for twelve months. He was about twenty-nine years when he moved into the house that his parents purchased at Davistown for him. 22 As I say his only work was from 1991 to 1995 and that was cleaning work. It is clear that he will not be able to work again and he will have to subsist on a disability pension. 23 It is, of course, necessary to consider all the benefits the plaintiff might have received from the deceased in his lifetime. In this case there is the obvious one of the provision for him of a debt-free home during the lifetime of the deceased. 24 There has been a substantial part of the evidence in this case devoted to the relationship between the plaintiff and both his parents. The evidence was given by the defendant, her husband and their children and other relatives. 25 The defendant and her husband were cross examined and I formed the view that they gave their evidence dispassionately and without exaggeration. I prefer their evidence to the untested denials given by the plaintiff. This is particularly so as their account is inherently likely to be true given the plaintiff's difficulties in life and his disabilities. 26 The defendant described the relationship between the plaintiff and his parents in these terms: "26 The plaintiff was born with cerebral palsy and deafness. At the age of about thirteen or fourteen he commenced to show signs of aggression towards my parents and myself. The following are examples of that aggression.

27. On one occasion, in the told house prior to the subdivision of the Empire Bay property the plaintiff and my parents and I were at home. The plaintiff said to my mother, 'Mum, come here and sit down and talk to me.' She then started to move away and he said to her 'Where are you going?' My father said to the plaintiff, 'Leave your mother alone'. The plaintiff then yelled to my father, 'You bastard. I am going to kill you." My father said to me, 'Get out'.

28. On another occasion when the plaintiff was approximately eighteen years old my mother was in the kitchen with him. An argument was occurring between the plaintiff and my mother, when my father said to him 'Stop arguing with your mother'. The plaintiff then picked up a chair and broke it over my father's head. The two of them then began to scuffle and the plaintiff then produced a knife. Bot of them moved towards the garage and the plaintiff punched a hole in the wall. My father then locked the plaintiff out of the house.

30. The plaintiff would only watch Channel 10 on television. He would become angry if anyone would attempt to change the channel. On one occasion my father was watching television and it was a channel other than Channel 10. He then turned the television off and the two of them had an argument. During a number of these arguments I heard the plaintiff say to my father 'I am going to kill you'.

31. I was present on many occasions when the plaintiff was present demanding my mother's absolute attention. By way of illustration the plaintiff would often walk into a room and say in a loud voice to my mother 'I want to talk to you'. He would tell anyone who was in the room 'Get out'. This happened regularly. On many occasions I observed my mother turn away from the plaintiff and speak to my father. The plaintiff would then move to my mother's head and say to her 'You look at me when I am talking to you.'

During the period whilst the plaintiff was living in rented accommodation at Umina and Ettalong he would visit my parents at the Empire Bay property. This occurred approximately once a week or sometimes more often. When he arrived he would bip the horn on his car to attract my mother's attention. He would not come into the house when my father was present. My mother would then go and sit in his car with him for as long as two hours." 27 After the death of the plaintiff's mother in 1998 the plaintiff never visited the deceased again. 28 I have no doubt that the plaintiff was as difficult as the defendant describes, and that this caused immense distress to his mother and made his relationship with his father very strained. His father had the terrible task of trying to protect the woman he loved and not cause a total breach of the relationship with his son to whom he no doubt felt a strong moral responsibility as a result of his disabilities. 29 The fact is that the deceased himself recognised that he had a responsibility to provide additional funds to the plaintiff, as is evidenced from the terms of the will. 30 Although the plaintiff caused distress to the deceased, this fact has to be taken into account tempered by the fact that the plaintiff probably cannot be expected to control his emotions as would a normal adult. 31 I turn to consider the situation of the defendant. The defendant is married and aged fifty. She has children who are not dependant and appears to be in good health. She and her husband own a property at Empire Bay which has a value of $640,000, a car worth $32,000, savings of $10,000 and a property on the Gold Coast recently purchased for $335,000. This totals $1,017,000. The liabilities include the total cost of the Gold Coast property of $335,000 plus another loan of $150,000, a total of $485,000. Their equity is therefore $532,000. 32 Both the defendant and her husband work, and the defendant earns $391 per week and her husband earns $600 per week a total of $991. They say their expenses are somewhat more than this but they apparently are able to manage. The Gold Coast property is rented and substantially covers the repayment on that borrowing. 33 Clearly, both are managing in the present situation whilst they are both working. The property on the Gold Coast seems to have been purchased with a view to being ultimately used in retirement. 34 Importantly, there were many contributions to the estate property by the defendant and her husband. In 1985 they purchased the mobile home for $27,000 and put it on the property. They put in an above ground pool worth $3000 and made some extensions around that of $10,000. The total of those is $40,000. Between 1985 and 1996 there were fences and stables erected at a cost of $30,000. In 1996 they created dual occupancy in the main house at a cost of $90,000. Thus the contributions of the defendant and her husband came to a total of $160,000, and these are very substantial. 35 Since the transfer to the defendant as beneficiary further funds have been spent on the property. There was an in-ground pool costing $30,000, verandah extensions of $50,000, carpeting of the home, and detailing of $8000, a total of $75,000. All this means they in fact increased the value of the property by approximately $200,000 according to the valuer. 36 Obviously the defendant had a good relationship with the deceased and was the one who was responsible for caring for him once he became ill and had to go to hospital. 37 In order to decide this matter it is necessary to see how the plaintiff says he was left without adequate and proper provision for his maintenance, education and advancement in life. 38 The plaintiff has asked for a legacy of $150,000. It is said he needed some cash reserves to meet unforeseen contingencies, such as repairs to the car, or its replacement in due course. There is also reference to the deficiency in respect of the day to day living expenses. 39 Unfortunately in this case there was no attempt by the plaintiff to try and quantify what would be an appropriate lump sum to make up for the deficiency in his income. The court is in a situation where it really is being asked to guess at what might be an appropriate award. 40 The defendant in submissions refers to what was said by Young CJ in Eq, in Shearer v. The Public Trustee, and Hawke v. The Public Trustee, unreported, NSWSC 29 March 1998, where his Honour said: "The community's attitude is not to be judged by a feeling as to whether it is morally wrong for a person to leave property otherwise than to her spouse or children. One must really look at the obligations to provide for persons who have some dependants.

Where the applicant is a spouse it is nowadays usually thought that to leave a spouse with a mere right of residence is insufficient provision. However, that is not the case with children, as far as I am aware it has never been said by any court that it is an obligation that the community expects that a mother will leave her child in a position where the child has a house of his or her own." 41 His Honour's reference to the fact that the community normally never expects a child to be left with a debt-free home is obviously true, but that was a case where the plaintiffs did not suffer from the difficulties of the present plaintiff. 42 The difficulty is that the plaintiff really does need accommodation, and the deceased recognised this during his lifetime and was fortunate to be able to provide for that accommodation. One of the difficulties is that I do not know whether the defendant can borrow more, or whether their home will have to be sold if some order is made. Notwithstanding this fact, it seems to me that the plaintiff still has a need for some funds. He has virtually nothing other than his home, and clearly he needs something to at least help him over some years, and perhaps allow him to manage his finances in a better way. 43 I am reluctant to make any great inroads into the defendant's property because of the substantial benefits that they have given to the deceased and the way they have in fact increased the value of the property. 44 In the circumstances, it seems to me that an order of a legacy for the plaintiff in the sum of $65,000 would be appropriate. The estate has been distributed and therefore I have to consider the question of notional estate. Section 27 of the Family Provision Act is in the following terms: "(1) On an application in relation to a deceased person, the Court shall not make an order designating property as notional estate of the deceased person unless it has considered: (a) the importance of not interfering with reasonable expectations in relation to property;

(b) the substantial justice and merits involved in making or refusing to make the order; and

(c) any other matter which it considers relevant in the circumstances.

(2) In determining what property should be designated as notional estate of a deceased person, the Court shall have regard to: (a) the value and nature of property the subject of any relevant prescribed transaction or distribution from the estate of the deceased person;

(b) where in relation to any such prescribed transaction, consideration was given, the value and nature of the consideration;

(c) any changes over the time which has elapsed since any such prescribed transaction was entered into, any such distribution was made or any such consideration was given in the value of property of the same nature as the property the subject of the prescribed transaction, the distribution or the consideration, as the case may be;

(d) whether property or the same nature as the property the subject of any such prescribed transaction, any such distribution or any such consideration could, during the time which has elapsed since the prescribed transaction was entered into, the distribution was made or the consideration was given, as the case may be, have been applied so as to produce income; and

(e) any other matter which it considers relevant in the circumstances." 45 It is important to consider the question whether there are any reasonable expectations which may be interfered with by the making of an order for notional estate. In this case the defendant has known since before the death of the deceased that a challenge to the will was likely and thus any expenditure thereafter was at their risk. The expenditure before the date of death was not made as a result of some promise by the deceased. I have considered all the evidence placed before the court and the considerations that are necessarily involved in the making of an order. I bear in mind the particular matters to which I have earlier referred. I note there has been no evidence of an ability to borrow but it should be possible. I note there has been an increase in the value of the property. Substantially this has come from improvements made by the defendant to the property, but it also has in part occurred because of inflation. 46 The orders I make are as follows:

1. I order that the plaintiff receive a further legacy of $65,000. 2. I designate the defendant's interest in 42 Pomono Road, Empire Bay as notional estate to the extent necessary to satisfy order 1 and order 3. 3. Subject to submissions, I order that the plaintiff's costs on a party and party basis, and the defendant's on an indemnity basis, be retained out of the notional estate. 47 So far as interest is concerned, I order that interest will run on the legacy at the rate provided for under the Wills, Probate and Administration Act 1898 from a date three months from today. I stay the operation of the order for payment of the legacy and costs for a period of twenty-eight days.

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