NOVAK-NIEMELA v PERPETUAL TRUSTEE CO LTD and NOVAK-NIEMELA v PERPETUAL TRUSTEE CO LTD

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

1512/01 - MATTI NOVAK-NIEMELA v PERPETUAL TRUSTEE CO LTD - ESTATE OF JAROSLAV NOVAK-NIEMELA

1529/01 - INKERI LAURA NOVAK-NIEMELA v PERPETUAL TRUSTEE CO LTD - ESTATE OF JAROSLAV NOVAK-NIEMELA

JUDGMENT 1 MASTER: This is an application under the Family Provision Act in respect of the estate of the late Jaroslav Novak-Niemela, who died on 14 May 2000, aged 81 years. The deceased was survived by his widow and his only child, both of whom are plaintiffs in these proceedings. I have heard both proceedings together with the evidence in one being evidence in the other. 2 The deceased made his last will on 10 May 2000. By that will he appointed the defendant executor and trustee and made some small bequests. To his wife he gave his clothing, jewellery, articles of personal use and furniture. To his son a legacy of $40,000 and some items of books, clothing and sporting equipment. The balance was left upon a discretionary trust for a period of up to 80 years. The vesting date is 1 May 2080, or such earlier time after the death of the deceased and his wife as the trustee appoints. 3 During the trust period the trustee has a complete discretion to apply income and capital to any one or more of:-

(a) His wife (b) The Salvation Army (NSW) Property Trust (c) His son (d) His grandchildren (e) His great-grandchildren. 4 There are provisions for default sharing of income in the event that there has been no determination in any particular year by the trustee. 5 On the vesting date, whenever that might happen to occur during the next 80 years, his estate will then be distributed as to 60 per cent to the Salvation Army and as to 40 per cent to the grandchildren, with substitution of great-grandchildren. 6 He left a note explaining his will in which he was critical of his son. He had made earlier wills and notes and it is apparent that the deceased did not want any part of his estate to go to his daughter-in-law. I will return later to the deceased's somewhat obsessive reason for this decision. In the prior wills, on a number of occasions he left the whole of his estate to his widow absolutely. 7 The estate comprised the matrimonial home at Hunters Hill, half a home at Copacabana, shares and investments. The home at Hunters Hill has been sold and the estate presently comprises:-

One half of Copacabana $260,000 Proceeds of sale of Hunters Hill $1,080,000 Shares $238,000 Total $1,756,426. 8 Notwithstanding the time since the date of death, the legacy has not been paid and there have been no distributions pursuant to the discretionary trust. 9 The costs incurred to date by the parties are:- Defendant $29,000 Both plaintiffs $48,000 A total of $77,000 10 I will deal with a little of the family history. The widow was born on 20 March 1922. The deceased was born in Switzerland and in 1950 left for Australia. 11 In 1952 the widow left Finland, where she had grown up, for Australia. This was at the request of the deceased, they having met a few years beforehand. 12 In July 1952 they married in Australia. Their son Matti was born on 3 January 1954. 13 In 1961 the property at Hunters Hill was purchased and a house built the following year. 14 In 1968 the land was purchased at Copacabana. 15 The son Matti was brought up by his parents and by 1976 he had completed his BA (Dip Ed). In 1979 he married. 16 In that year, 1979, the deceased retired from his job with General Motors Holden and continued to work in the publishing business. The widow continued working for many years thereafter. 17 The son and his wife, in 1979, moved to Grenfell and they lived in a house there, the son having a teaching position in that city. 18 In 1982 a house was built on the property at Copacabana. 19 On 28 March 1982 the grandchild Emily was born.

20 On 1 August 1985 the grandchild Nicholas was born. 21 It was in 1987 that the deceased's widow eventually retired from teaching. 22 There were a number of wills made in 1988, 1994 and 1999. They were in various different forms and I have already referred to them briefly. 23 In 1997 the deceased was diagnosed with prostate cancer. 24 In May 1999 the plaintiff's widow moved into the Lourdes Retirement Village at Killara. In October of that year the deceased also moved into the same village in an adjoining unit. That was as a result of the plaintiff having purchased the appropriate right to accommodation for him. 25 The last will was made on 10 May 2000 and the deceased died on 14 May. 26 In August 2000 the widow moved to St Catherine's Nursing Home at Bathurst. At this stage both the son and daughter-in-law of the deceased had moved there from Grenfell and were teaching in that city. 27 In December there was a grant of probate and the summons was filed within time. 28 Both plaintiffs are eligible persons and there are no other eligible persons. 29 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 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 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 were no assets from which an order could reasonably be made and making an order could disturb the testator's arrangements to pay creditors."

30 I turn to consider the situation of the widow. She is 80 years of age and lives in a nursing home at Bathurst. She needs a frame to walk and is unsteady in walking. She spends most of her time in a wheelchair. She suffers from ischaemic leuka encephalopathy, thyroid goitre, depression, glaucoma and it is possible she may have to have an operation to remove her thyroid gland. 31 She is, with the help of her son, able to travel to and stay at the holiday home at Copacabana several times a year. She will not be able to live outside the nursing home environment, or a place where she has a carer. 32 Her assets are as follows:- She owns one half of the property at Copacabana worth $260,000. Cash $13,300 A savings account in Finland $170,000 Shares $253,000 Debentures $2,000 A bond which she paid for her accommodation at Bathurst $96,500. Total $794,800. 33 She has no debts. 34 The income from her annuities and superannuation amounts to $1,401 per fortnight and her expenses are $890 per fortnight. She, thus, has a margin of some $511 per fortnight being excess income. 35 It is necessary to look at the relationship between the plaintiff and the deceased. As I have indicated, they met in Europe in 1949. She came to Australia in 1952 at the deceased's request, he having migrated earlier. They married and their only child Matti was born in 1953. 36 The widow took some three years off work when she had Matti as a child but thereafter returned to the work force. Both of them worked hard for many years. 37 There were often disputes between the deceased and the plaintiff about how their son should be brought up. 38 The relationship between the plaintiff and the deceased was, to an extent, affected by their disputes over the bringing up of their son Matti. The majority of the work in bringing up the son fell to the plaintiff, the deceased's widow. 39 The son Matti moved out of home in 1977. This left the plaintiff widow in a somewhat difficult situation. Her husband continued to berate her for the soft way in which he alleged she had brought up their son. Effectively, she had to try and cope with the somewhat difficult time she had with the deceased. That is not to say that their life was not without its pleasures. 40 In 1979 the deceased retired from teaching and he continued in his spare time to work on book publishing, which is the way he made a substantial amount of his money. 41 They started to travel extensively and between 1965 and the year 2000 there were some 50 trips overseas and elsewhere which the deceased, quite often the plaintiff and occasionally the grandchildren would attend. 42 The birth of the grandchildren Emily in 1992 and Nicholas in 1995 added more difficulties to the relationship. It is apparent that the deceased became obsessed with the naming of the granddaughter Emily and the control which he thought he would be able to exercise over her family concerning her upbringing. 43 It was in 1987 that the plaintiff retired from work. 44 It is necessary also to look at how she has contributed to the estate. It is perfectly plain from her evidence that she contributed her wages and her earnings to their joint ventures. A typical example of her contribution to the family occurred in 1954. The plaintiff had earned some income from doing translations and her husband at this stage was travelling to work by public transport. She used the money that she earned to buy a Morris Minor car so that he could drive to work. He got his driving licence and thereafter he drove to work while the plaintiff herself continued to go to work by public transport. 45 The house and block of land at Hunters Hill was bought from joint savings and the mortgage finance was paid jointly by both the deceased's and widow's savings. 46 There is, thus, a substantial contribution by the widow to the major asset in the estate, which is the property at Hunters Hill. 47 In addition, after 1963 when the deceased left General Motors Holden and started teaching languages at Vaucluse Boys' High School, the plaintiff was able to help in the publishing business typing up articles and drafts. 48 There were more specific contributions which occurred later. In 1999 the deceased insisted that the plaintiff sell a house that she had in Finland, which had been passed down through many generations since the 1800s. Notwithstanding that she did not want to do it, the plaintiff agreed to the deceased's requirement and sold the house. She spent $80,000 to pay the bond for her husband's room at Lourdes next to her. 49 After the sale of some other investments in Finland, she received a number of sums in Australia. She spent some $40,000 of her funds towards the general welfare of the plaintiff and the deceased. 50 It is necessary to see how she says that she has been left without adequate and proper provision for her maintenance, education and advancement in life. There is no doubt that a discretionary trust of the type here employed is not proper provision. In Gregory v Hudson (No 2) 18 September 1997, Young J, in reference to such a trust, said:- "It seems to me that where a wealthy man, with an estate of at least $11 million, leaves the bulk of the benefits to his widow under a discretionary trust over which she has no control, he has not made proper provision for his widow. The community would expect that the widow of such a man would at least have a home in her own name and some capital to which she could resort whenever she felt like it." 51 I have applied those principles before in McCullum v Permanent Trustee [1999] NSWSC 1219. 52 The widow seeks a payment of $1.2 million on the basis that she in some way should receive the proceeds of sale of the matrimonial home. However, that is not appropriate because she cannot live there and it has been sold at her insistence. At present her housing needs have been adequately taken care of as a result of her living in the nursing home at St Catherine's at Bathurst. 53 In her affidavit she particularised a number of different matters which she wanted to have from the estate. The first of these was the other half share of the Copacabana property. She says that over her lifetime she has made significant financial and domestic contributions to the development of that property. Because of her limited accommodation in the nursing home, she finds Copacabana a strong, positive, psychological and emotional alternative from the nursing home environment. She uses it to spend time with her son and his family, which is something that she is now only able to do after the death of the deceased. 54 She says that she needs some $40,000 to pay the rates and taxes for Copacabana over the next 10 years. I would think that given her surplus income, she has adequate funds to be able to meet those. 55 Because Copacabana is built on a sloping site, she wants to do some modifications to the house. There is some dispute about the need for modifications and there is an estimate of some $70,000. Obviously if the property can be modified so that she can enjoy it in a better way, that should happen. 56 She wants to go back to Finland one more time and she will need her son to travel with her to care for her on that trip. The costs associated with such a trip are in the order of $30,000. 57 She needs a special van now to transport her because she has a wheelchair, and the cost of such a van is $66,000. She also needs a wheelchair to be provided at a cost of some $15,000. 58 The total of these particular items is $181,000. 59 I think all the requests are reasonable ones but the only question is whether it is appropriate to make an award which might recognise them in their entirety. This is because she has substantial cash funds and investments available to her, being something in excess of $400,000. 60 Certainly she needs something for contingencies. 61 In my view it is appropriate that she receive a bequest of the estate's share in the Copacabana property and some additional sum by way of legacy but I will, firstly, consider the situation of others. 62 I turn to the situation of her son Matti. He is married, with two children, who are no longer living at home. He works as a high school teacher at Bathurst and earns a gross wage of $61,000. His wife also teaches, earning a wage between $50,000 and $55,000. Their income is less than their expenses at the moment and he obviously needs to reduce his mortgage repayments. In May 2001 their combined income was $2,543 per fortnight and their expenses estimated at $3,122 per fortnight. 63 So far as assets are concerned Matti, with his wife, has a house at Bathurst worth $250,000. They have three cars, one of which is used by their daughter at Newcastle. They have furniture, which is insured for $119,000 and is probably worth something less than that. They have shares worth $31,000 and an entitlement to the legacy which has not been paid of $40,000. 64 Their liabilities are:- Home mortgage $117,000 Personal loan $26,000 Credit card debts $7,000 Total $150,000 65 He has substantial superannuation, having been a teacher, which will be accessible when he is 55 or 60. At 60, for instance, he would be entitled to $1,303 per fortnight, or a lump sum of $325,900. He can take either of these options. His wife has superannuation in the order of $40,000. 66 It is necessary to spend a little bit of time dealing with the relationship between the plaintiff Matti and his father. This is set out in detail in his affidavit, most of which has been admitted. 67 He recalls that in January 1962 they moved to Hunters Hill. He used to attend the local public school and would walk to school. He went to Sydney Grammar from 1964, and that entailed a lot of travelling to and from his home at Hunters Hill. His father took no interest in his Saturday sport and ultimately it was his mother who provided the help that he needed in his education. 68 In 1966 he was taken overseas with his parents when they went for the first trip to Finland. He was taken on a boat trip to Japan at the end of Year 8 and at the end of Year 10 he was taken to New Zealand. 69 He and his father started skiing when he was young and they sometimes played badminton together on Friday afternoons at Sydney University. 70 From the time the plaintiff was in Year 11, when he was aged 16, the deceased and his mother would often travel overseas in Christmas holidays for six weeks or so. He was left at home to look after the house at Hunters Hill and continue his father's publishing business. He would stay with a friend's family for the days over Christmas. Surprisingly, his parents never left him a Christmas present on those occasions. 71 From 1973 he studied at Macquarie University and at this stage he started helping his father with the publishing business. That publishing business took on a new dimension in 1976 when the printers Halstead Press were not able to process the orders and it was necessary to convert part of the Hunters Hill property to a situation where the publishing business could continue. 72 At the end of 1976, the plaintiff and his wife went to the United States of America with his father. He thereafter took up his position at Grenfell. 73 Contact continued between the plaintiff and the deceased, notwithstanding his absence in Grenfell, although the contact in some sense from the plaintiff's father was a bit distant. 74 The birth of their first child, Emily, had a substantial effect on the relationship because it brought out the strong feelings that the deceased had about his rights in such a matter. 75 Clearly, the relationship was strained between 1982 and 1988. 76 There is in evidence a number of letters that were written by the deceased to his son and his wife. In these the deceased made clear that:

(a) He totally disagreed with the Australian principle of family life and that he believed that the family should comprise basically himself, as the oldest male, who would make decisions about the upbringing of his grandchild, notwithstanding the wishes of his children, and

(b) His views were that such rights were to be exercised by the oldest male and that females were considered to have a strong, consultative role in family affairs. 77 He said that he thought that he ought to have the same rights and obligations as if she was his daughter by birth. 78 He insisted on requiring a change of name, which did not happen, and specified different names. The plaintiff coped with this difficulty. 79 He continued to try to maintain contact with his mother, who wanted the contact. It was often frustrated by his father's control over that level of contact. 80 Eventually there was further contact when the plaintiff moved to Bathurst and he would, thereafter, continue to come to Sydney to try and make visits several times a year. His father was travelling overseas extensively and he would insist on having complete control over when such meetings took place. 81 By 1996 the deceased was clearly becoming obsessed with wanting to control what would happen to his wife after he died and he endeavoured to require the plaintiff to agree to do various things on the basis that he would make provision for him in his will. 82 The plaintiff, I might add, has always had his mother's interests at heart, as is demonstrated by the things that he has done for her after his father's death and how he is continuing to look after her. 83 It would seem that shortly before his death the deceased somewhat mellowed and what might be described as more personal contact continued between the plaintiff and the deceased. 84 The plaintiff took long service leave during 2000 to be with his father and was with him when he died. 85 The situation is one where it is perfectly plain that the deceased wished to control and, to an extent, manipulate the members of his family. To his credit, his son did not react badly to those attempts at manipulation. For instance, he obtained advice from psychologists and psychiatrists as to how to cope with his father and resisted any attempts of his father to put him in a situation where he could control him. 86 I myself think that the plaintiff has obviously been a very good son to his father, notwithstanding the demands of his father which, in terms of contemporary Australian life, must have been very foreign to both the son and his wife. 87 The plaintiff has received a small amount of financial support. There was a trip to the USA in 1977; a loan of $1,700 in 1980, which was largely repaid, and a gift in 1998 of $500. The son did not owe his father any money at the date of his death. 88 Importantly, the plaintiff contributed to the estate in assisting with the publishing business. This involved doing a number of matters to keep the business running - sometimes it was a couple of hours a day, sometimes less. He also, of course, had responsibilities for looking after the house while the parents were off overseas. 89 The question that has to be addressed is how the plaintiff says that he has been left without adequate and proper provision for his maintenance, education and advancement in life. The one clear need he has is to pay his debts of some $150,000. He put forward a suggestion that he receive a car to help transport his mother but that clearly is comprehended in her own claim. He needs to paint his house, which will cost $8,000. 90 The main need which he has put forward is his need for some $250,000 in order to acquire a book distribution business. He has, of course, been involved in publishing all his life. He has held part-time jobs in publishing and he has worked as a teacher in librarianship for most of his life. He clearly has a close affinity with the subject. He wants to be able to have book shop which he can pursue for many years beyond his retirement. He says that that would give him financial security and insurance for both himself and his wife. He had enquired of Dymocks and it is apparent that the cost of a book shop would be probably in the order of $500,000, with at least a cash requirement of $250,000. 91 The proposal was criticised in submissions and cross-examination as being premature. I think the prematurity of it really relates to whether or not he can have the funds to be able to do it. Unless he has some funds, he simply cannot contemplate this project. He has made enquiries at Dymocks, he has also checked sites at Bathurst and submitted them to his accountant. I will come back to talk about it but that certainly is an appropriate type of matter to consider. 92 It is necessary to see who else might have a claim on the bounty of the deceased in the present case. The only other person is the Salvation Army (NSW) Property Trust. That Trust obviously performs many good works. They are well known and they do not have to be dealt with in evidence. There is, however, no evidence of contact with the deceased and the Salvation Army during the lifetime of the deceased and it seems that the deceased has just selected it as a worthwhile charity. 93 This brings me back to the question of what are appropriate orders. In this case the estate is in the order of $1.7 million. It is a reasonably sized estate and perhaps could be described as a large estate. 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 4.12." 94 This is particularly apposite to both the deceased's widow and son. As I have mentioned, there have been some 50 overseas trips and the plaintiff widow was included in most of those trips. The son had a number of trips and enjoyed that lifestyle. His trips, of course, were less because of his obligations to study and to his family. 95 The provisions in respect of widows have been dealt with in many cases, including Luciano v Rosenblum (1985) 2 NSWLR 65 and Elliott v Elliott, which was approved by the Court of Appeal on 24 April 1986. There his Honour said:- "Where the marriage of a deceased and his widow has been long and harmonious, where the widow has loyally supported her husband and assisted him to build up and maintain his estate, the duty which a deceased owes to his widow can be no less than to the extent to which his assets permit him to achieve that result; first to ensure that his widow be secure in her home for the rest of her life and that if either the need arises or the whim strikes her she have the capacity to change her home; secondly that she have available to her an income sufficient to enable her to live in a reasonable degree of comfort and free from any financial worry; and, third, that she have available to her a fund to which she might have resort in order to provide herself with such modest luxuries as she might choose and which would provide her with a hedge against any unforeseen contingency or disaster that life might bring." 96 Here the claim by the widow is one in respect of a very long relationship where she has contributed to the building up of the main asset in the estate and she should be entitled to the ordinary, fullest consideration. However, times have moved on and her present situation has to be considered. Her actual needs were adequately provided for and she has some substantial cash reserves available to her. Notwithstanding those cash reserves, I think it is appropriate that she receive the estate's half interest in the Copacabana property and a further legacy. 97 The claim of the son is a reasonable one and in the circumstances of this estate it is appropriate to make provision for what is a classic example of how provision should be made by way of advancement in life. He has received nothing from his father in his lifetime and this is the one opportunity for his father to set him up in life. He has absolutely no right to obtain it from the trustee who may or may not make such a payment. 98 Accordingly, the orders that I make are:- (1) The plaintiff Inkeri Laura Novak-Niemela receive: (a) A bequest of the estate's interest in the property 107 Del Monte Place, Copacabana, New South Wales. (b) A legacy of $100,000.

(2) The plaintiff Matti Novak-Niemela, in lieu of the legacy of $40,000 in the will of the deceased, receive a legacy of $408,000.

(3) Interest on legacies at the rate provided for under the Wills, Probate and Administration Act , to run from one month from today's date.

(4) Costs of the plaintiffs on a party and party basis and the defendant on an indemnity basis, to be paid or retained out of the estate of the deceased. (5) The exhibit may be returned. **********

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