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[2011] NSWSC 246
Supreme Court of NSW
2011-03-22
Macready J
Original judgment source is linked above.
Judgment 1HIS HONOUR: This is an application under the Succession Act 2006 in respect of the estate of the late Lionel Gregory Phegan who died on 6 February 2010. He was survived by his two children, one of whom is the defendant, and his foster daughter who is the plaintiff.
The will of the deceased 2The deceased's last will was made on 18 December 2009 and he appointed the defendant his executrix. He had devised his house in Bay Road, Long Beach on the New South Wales south coast to the defendant and his son Geoffrey Allan Phegan in equal shares. The residue was divided equally between the plaintiff, his foster daughter and his two children. 3There was an earlier will in 1995 which left all of the estate to the three of them equally.
The estate of the deceased 4The estate consists of cash in the sum of $810,680.08 and the home at Long Beach, New South Wales. There is a conflict in the evidence as to the value of the house. The value of the house has been affected recently by changes to legislation. The Coastal Protection Act 1979 has been amended to make provision for the categories of land within the coastal zone according to the level of exposure to coastal hazards. 5The Eurobodalla Shire Council has issued an interim sea level rise adoption policy. The subject land is within that investigation area within the terms of that policy. This means there is no classification yet as to whether the land will be considered high risk, medium risk, or low risk. 6The initial appraisals of the value of the property without taking this affectation into account were varied around the area of $706,000; after changes were put in place there has been an appraisal indicating a value of $630,000. 7There have been valuations prepared on each side. The plaintiff, whose valuation took no account of the change, valued the property in the sum of $780,000. The defendant, which did take account of the change, valued it at $620,000. That appraisal referred to the affectation in these terms: " 10 General comments: The property comprises an older style three bed two bath brick residence. The land is located directly opposite the beach with a sealed Council road in between. This location and view is exceptional within the area and highly sought after. However, in late 2010 Eurobodalla Council have adopted an ' Interim Sea Level Rise Adaptation Policy'. This policy places the subject property in the 'Investigation Area' and due to its location and level, is believed to be in the High Risk Zone. The Policy does not adequately and easily define what the restrictions or results from this policy are. As a consequence the public do not know what will be approved or not approved on these sites and hence are hesitant to purchase land in the Investigation Area, and especially those in the High Risk Zone. One recent sale in Sandy Place of Long Beach, has been affected by this policy when purchases made offers and withdrew these offers after meetings with Council Planners. The sale eventually proceeded with a different purchaser at some 10 to 15% lower than the original offers from two different parties. Therefore we have adopted a reduction in value on the subject property of 10% to take into account the adoption of the policy by Council. We believe in the current market the value of this property has been reduced because the future restrictions on the site are unknown with Eurobodalla Council adopting the new policy. In the future, once more information and process around this policy and its exact restrictions come to knowledge, the value may change further (for the better or worse). However, at this stage it is unknown exactly what restrictions lay on properties within this zone and hence we have adopted a slight decrease in value as a result. Due to a lack of information and knowledge of the restrictions on these properties, we can only value and act with the current information at hand." 8The effect on the value of the land is quite apparent and logical and, accordingly, having regard to the fact that there is a valuation taking this into account, I will adopt a value of $620,000. 9The costs of the parties to the proceedings will fall on the residue. They are, for the plaintiff, $50,000 on the ordinary basis and the defendant $70,000 approximately, totalling $120,000. 10The defendant's costs estimates in the affidavit evidence were predicated on a two-day hearing but the hearing only took one day. Hence there will be a reduction in likely costs. Thus, the likely residue from the estate will fall from $810,680-$690,680 if a costs order is made in favour of the plaintiff. This makes the plaintiff's share a sum of $270,226 down to $230,228 after costs.
Family history 11The plaintiff was born in November 1960 as Julie Mary Zovic at Benally in Victoria. Sometime later she became known as Julie Ann Phegan. She had a very difficult childhood. Her mother was an alcoholic, a schizophrenic and in and out of gaol. On 9 May 1966 the plaintiff was made a ward of the state and remained a ward of the state until her birthday in November 1978. 12On 24 May 1966 the plaintiff was placed in the care of Mrs Phegan, who was the deceased's wife. Initially they lived at Leura and she resided with them until she attained her m ajority. 13In October 1974 the question of adoption was considered. At that stage the plaintiff was 14 years of age. The foster parents, the deceased and his wife, did not wish to proceed at that stage because they thought it better to wait until the plaintiff was a little older and more able to consider the matter objectively with greater knowledge of herself. They wanted to see if she wanted to make the request. 14In August of 1975 there was a suggestion as to the change of the plaintiff's name to that of her foster parents. She wanted more time to think about it. In due course she did. As I have mentioned, she ceased being a ward of the state in November 1978 and at that stage was still living with the deceased and his wife doing the Higher School Certificate at Katoomba High School. 15On 9 December of 1981 she completed her initial studies at Mitchell College at Bathurst and in April 1982 she graduated from that college. 16In the next year she moved to Sydney in Crows Nest and set up a cleaning business. That lasted for a year or so and she sold the business. She moved up to Airlie Beach in Queensland and worked in that area in real estate. 17The deceased and his wife sold their home in the 1980s and moved to Bay Road, Long Beach on the south coast. At about the same time the plaintiff returned from Queensland and lived in Sydney. A year later she became bankrupt over a debt relating to the purchase of a motor car. 18In the early 1990s she spent about seven years doing acting work and have a variety of other casual employments in hospitality and sales. In the late 1990s there was a falling out with her foster parents to which I will refer later. 19In the year 2000 she commenced to work with Qantas. The position she held is not clear but apparently it was something in the office that required her to work with computers. In November 2005 she retired from Qantas on a medical disability pension and received payments until the end of 2007. The payments were 75% of the then current salary which was about $50,000. 20At the end of December 2007 those payments ceased and she received a lump sum payment of $287,625.78 and $5,028.46 in employment entitlements. 21The deceased's wife died on 18 September 2008. In due course the deceased made his will which I have mentioned. On 18 December 2009 and in January of the following year he was admitted to Batemans Bay Hospital and died on 6 February 2010. 22Probate was granted on 10 June 2010 and the proceedings were commenced within time. 23In July 2010 one of the beneficiaries, Geoffrey Allan Phegan, who had an entitlement to commute his pension, decided not to do so and continues to receive his pension.
Eligibility 24The plaintiff was never adopted and, therefore, her eligibility is based on section 57 (1) (e) of the Act. Given that she lived with and was dependent upon the deceased from the age of five years there is no doubt she is an eligible person. 25It is, however, necessary under section 59 (1) (b) of the Succession Act that the Court should first determine whether there are 'factors warranting' the making of the application. This expression has been dealt with by the courts on a number of occasions. In Re Fulop Deceased (1987) 8 NSWLR 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 class is not affected by section 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, section 61B), whereas the classes affected by section 9 (1) (former spouses, and some time dependent grandchildren all 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 renders 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 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 'refused to proceed with the determination of the application.'" 26In Churton v Christian (1988) 13 NSWLR241, the Court approved this statement. Priestley JA at page 252, after setting out and approving this statement, added: " To this I would add that although the classes affected by section 9 (1) are not necessarily generally regarded as natural objects of testamentary recognition, in some cases members of these 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." 27These principles have been applied at first instance for many years. 28There has been in recent times further attention to this matter in the Court of Appeal in the case of Brown v Faggoter , a decision delivered 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 judgement. This seems to be a somewhat different and perhaps an easier test than that which they 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. 29Plainly in this case, given the raising of the plaintiff as their own child for the majority of her childhood, there are factors warranting made out on the traditional basis and I will see if there are prospects of success. 30In 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 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 were no assets from which an order could reasonably be made and making an order could disturb the testator's arrangements to pay creditors."
The plaintiff's situation in life 31The plaintiff' is 50 years of age, single, lives alone in rented accommodation. She has no dependents and her assets consist of the following: 1996 Hyundai Excel motor-vehicle $3,900.00 Cash savings about $98,000.00 588 Qantas share - about $2.30 each $1,352.00 Funds held in trust GHS Legal on account costs of these proceedings $15,019.17 Household effects $1,000.00 Art work (cost price about $10,000) $5,000 Total $124,271.17
32Her income consists of: Disability Pension $1,595.76 Qantas dividends $25 Interest $792.47 Total $2,413.23 per month
33Her expenses are $4,551 per month and she is living on the capital. 34At the end of 2005 she retired from her position at Qantas on medical disability grounds. She received a pension for two years and then at the end, as I have mentioned, she received a permanent disability pay out in the sum of $286,625.78 nett. She lived on that for 18 months before getting a government pension. Thus her savings are reduced to $98,000. Last year they were $199,200 and have been reduced by living beyond her means and by impulse buying which results from her medical condition. 35In her first affidavit the plaintiff described her medical condition in this way: "79. I have experienced depression on and off since my teenage years. I sought treatment in the mid-1990s but I have not followed it up as I do not want to take any antidepressants. 80. My regular symptoms include: I suffer prolonged tiredness and I am easily fatigued. I get seriously depressed, upset and teary. I cannot concentrate for prolonged periods. I feel general aches and pains with flu like symptoms in joints. I have an irritable bowel. I have trouble sleeping. I do not know the reason for my psychological conditions. I had a very difficult life before I was placed with Mum and Dad. I have had trouble forming relationships. I have even refused to acknowledge my actual age sometimes, as I felt a need to hold myself out as younger than I am, in an attempt to expunge my early childhood years. 81. I am currently receiving the following treatment: Acupuncture. Counselling. Massage. Prescription medication for thyroid, insomnia and ulcerative proctitis. 82. I have not been looking for even part-time work of a like nature because my symptoms are such that I only managed from day to day. Some days I have plenty of energy but other days I feel extremely lethargic and have difficulty managing even normal household activities." 36There is also evidence of a thyroid condition which contributes to her condition, and there has been some treatment. There is also evidence of pain in her back, which is being treated with medication. 37The psychological problems which she has are certainly evident and I have no doubt they stem from her early childhood which was quite traumatic. As I mentioned, her mother was a schizophrenic alcoholic who spent time in gaol. The plaintiff was from time to time in foster care before being declared a ward of the state. 38The evidence contains a number of examples of her attempts to deceive people by suggesting she was seven years younger than she is. Unfortunately, this included her treating medical practitioners. However, it does substantiate what she has said in her affidavit about the problems she suffers. 39Although discharged from Qantas as she was disabled there is no current medical evidence of her likely ability to return to the workforce. It may be that once this case is over she may get on top of her problems but I cannot be sure of this. The likelihood of returning to the workforce is not known. 40The plaintiff did not contribute to the deceased's estate. The evidence suggests that from time to time the deceased supplied her with low level contributions for her support on an ad hoc basis when she approached him for money.
The situation in life of Gail Annette Hynes 41The defendant is 53 years of age with two children aged 21 and 18 years. She lives at home and she and her husband have a house worth $650,000 at Long Beach which is subject to a mortgage of approximately $527,000. They have two cars worth $12,000 and superannuation worth $410,000. Their combined salary is $120,000 or $2,307 per week. They suggest that their expenses are in the order of $1,967.50 per week. They gave evidence they found it difficult to get by and could not do all they wanted for their children. However, it should be noted that as a result of the deceased's wife's will, the children have a substantial trust fund containing 9675 BHP shares worth $422,798. They are entitled, as a result of the death of the deceased, to the income of $9,000 per year from that fund. 42Although the trust is expressed not to vest until they are each 30 years, it can be determined when they have both achieved their majority. In addition, the powers of advancement are available to assist the children. That this may need to happen was recognised by the deceased in her will. 43Thus the children of Gail Annette Hynes, the defendant, have adequate provision for their upbringing. 44The defendant and her husband need to spend $30,000 on landscaping and improvements on their home. 45There was plainly a good relationship between the deceased and the defendant. She did not contribute to the estate and the deceased made no provision for her in her lifetime. However, it is be borne in mind that the burden of the assistance to both the parents was borne mainly by the defendant with some smaller assistance from the plaintiff.
The situation in life of Geoffrey Allan Phegan 46Geoffrey is 65 years of age with no dependents. Although he has a bridge partner they do not live together and they are financially independent from each other. His assets consist of savings of $210,000 and a 1995 Volvo motor car with $2,000. His pension payments are $681 per week and his expenses are $593 per week. His health is not good. He suffers from: "IHD (Ischaemic Heart Disease) - I have had a number of stents inserted in surgery in 2009. Hypercholesterolaemia. Castro-oesophageal reflux disease. Chronic sinus / nasal congestion. Anxiety / depression. Post-traumatic stress disorder. Multiple skin cancers. Rotator cuff syndrome." 47He has no home and is presently living in the deceased's home. He also had a good relationship with the deceased. However, he did not contribute to the estate or receive provision from the deceased in her lifetime.
The relationship between the plaintiff and the deceased 48This is a contentious matter in this case. When the deceased made his will in 2009 he gave these reasons for making a reduced provision for the plaintiff:
Amendments 13 April 2011 - change age from six to five Amended paragraphs: 24 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 April 2011
Phegan
Hynes
[2003] NSWCA 3521
(1994) 181 CLR 201
(1981) 2 NSWLR 532
(1989) 17 NSWLR 1