Shields v Shields

Family History 7The deceased was born in December 1914. She had three children and her son Charles was born in July 1938. Her son Rodney was born in March 1940. Her husband died at the age of 51 on 5 December 1966. 8The first defendant married in 1968 and unfortunately that marriage ended when he lost all his assets in a downturn in the economy in the 1980s. He remarried in 1994 but was divorced from his 2nd wife in 1997. 9The plaintiff had lived in a home at Point Piper with his wife and in April 2002, he sold it for the sum of $1,075,000. The mortgage on it for $40,000 was discharged and the balance of the funds were divided between himself and his wife apparently to reflect their entitlements to the sale price. His wife received $600,000 and he received the balance. Thereafter, the plaintiff's wife purchased a half share in a unit in Gardiners Rd Bondi Junction from her son. Since that time, she and the plaintiff have resided there in the unit. The son does not charge them any rent and effectively the plaintiff has accommodation in this unit for life. 10On 2 September 2004 the deceased made her last will which I have referred to above. At this stage, the plaintiff was still in good employment as he was a solicitor involved with various companies and authorities in the liquor industry. No doubt this is why no provision was made for him in the deceased's will. 11In 2006, the deceased's condition was such that she had to be placed in a nursing home and this occurred in June of that year when she was placed in Lulworth House. 12On 24 September 2007, the plaintiff and his sister Jeanette Mandy were appointed attorneys for the deceased by the Guardianship Tribunal. 13In November 2008, the plaintiff ceased employment as a consultant and services manager for the Australian Hotels Association and retired. In 2009, he applied for and received a part pension of $286.63 per fortnight. He did not receive the full pension because of his wife's assets. 14As I have mentioned, the deceased died on 12 October 2011. Probate was granted on 16 December 2011 and on 23 February 2012, a notice of intended distribution was placed in the newspapers in accordance with the prescribed form. The summons in this matter was filed on 7 May 2012 and, as I have mentioned, the first defendant paid the deposit on Congewai on 11 May 2012, exchanging on 16 May 2012. The summons was actually served on the 4th defendant on 17 May 2012 and this was the first notice of any claim. The six month period after which an estate may be distributed, provided for in s 93 of the Succession Act, had already expired on 12 April 2012.

Eligibility 15The plaintiff was a son of the deceased and accordingly is an eligible person. The terms of the deceased's will made no provision at all for the plaintiff. 16In applications under the Family Provision Act 1982, the High Court in Singer v Berghouse (1994) 181 CLR 201 has set out the two-stage approach that a court must take. These comments were equally applicable to claims under the Succession Act. 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' and 'proper' and the interrelationship which exists between 'adequate provision' and 'proper maintenance' etc were explained in Bosch v Perpetual Trustee Co Ltd. The determination of the first stage in the two-stage process calls for an assessment of whether the provision (if any) made was inadequate for 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." 17However, as a result of Andrew v Andrew [2012] NSWCA 308 the situation is, somewhat different. In that case, Barrett JA said that the two stage approach adapted under the Family Provision Act still applied to claims under the Succession Act. Basten JA held that a two stage approach was not necessary. The President thought it was an analytical question of little consequence. In the circumstances of this uncertainty, I will consider it on both bases.

The plaintiff's situation in life 18The plaintiff is now 74 years of age, married with no dependants. He lives as I have outlined before in a home owned by his wife and his son. The plaintiff has few personal assets being only personal effects having a value of $5,000. He has liabilities for a credit card debt of $25,377.11. However, it is plain that the plaintiff has lived on his superannuation entitlements, the last of which he received in November 2011. His current pension is the sum of $301.90 per fortnight or $7,849.40 per annum. 19His wife Gail has her one half interest in the Gardiner St unit worth $301,000, household items worth $5,000, bank accounts of $64,000 and a motor vehicle worth $12,000. She has applied her superannuation to a pension account and receives $1,800 per month income by way of pension and $603.80 per month by way of the Commonwealth Aged Pension. The plaintiff's wife has recently had a benign brain tumour removed and fortunately is doing well. 20The plaintiff's son pays for some of the outgoings of the Gardiner St unit such as electricity and rates and the plaintiff and his wife share the cost of other expenses. The unit has two bedrooms and the plaintiff and his wife occupy separate bedrooms. The plaintiff stated that he continued to share accommodation with his wife as he had nowhere else to go and cannot afford alternative accommodation. He is dependent on his wife and son for his accommodation. 21The plaintiff himself has had major bypass surgery in 2001. He suffers from ischaemic heart disease, type 2 diabetes and has a mild cognitive impairment. This latter matter was investigated by the Healthy Brain and Aging Clinic. He is no longer able to drive and his short term memory problems and his history suggest that it is quite unlikely that he will be able to work again. Last year he tried to obtain work but could not do so. 22It is plain that the plaintiff, like his brother, had a good relationship with the deceased for her life. The plaintiff was the deceased's enduring guardian, along with his sister, and held the deceased's power of attorney from September 2004 until her death in 2011. 23Both the plaintiff and defendant have done a lot for their mother, spending copious amounts of time with her over the last years of her life when she was suffering many difficulties in the nursing home. It was unfortunate that these events were the subject of some falling out between the brothers. Plainly, there is nothing which has impacted upon each son's relationship with their mother.

Situation in life of the defendant Rodney Shields 24Rodney is 72 years of age and is single with no dependants. His children have gone their own way in life and I note that in this case they have filed no evidence in relation to their financial circumstances or the relationship which they had with the deceased. In these circumstances I can take it that they do not wish the Court to take these matters into consideration in deciding the plaintiff's application. 25Rodney, like his brother Charles, was a solicitor and had practised in a number of positions although he retired in August 2001. He then commenced a mortgage consulting business which was successful until the global financial crisis, when he lost all his funds and superannuation. 26The defendant has effectively no assets apart from personalty and owes $20,000 to a friend, which he borrowed to complete the works on the property which was purchased by the estate. He receives a pension of $760 per fortnight. 27I have already dealt with the relationship between the defendant and deceased and I note particularly the attendance every night of the defendant on his mother in the last year of her life when she was in a nursing home. 28He, like his brother, did not contribute to the estate of the deceased and he also received a substantial benefit from the deceased during her life. For the last 10 years of her life, the deceased had a life interest in a home unit which she was not occupying. Accordingly, the defendant had the use of that for those 10 years without having to pay any rent. After the deceased's death, his right to occupy ceased and he had to pay rent at the rate of $570 per week. Although this is 2011 rental it gives some indication of the nature of the benefit which he received for the years before.

Discussion and evaluation 29I have earlier referred to the fact that in my view, the property that was purchased by the defendant and one of his sons is held as an asset in the estate of the deceased. I should record that the defendant suggests that in fact there has been a distribution of the estate which was made in circumstances where the protection provided by s 93 of the Succession Act would give protection to the defendant. As is obvious from the timetable which I have recounted before, at the time that he entered into the contract for the purchase, he did not have notice of his brother's claim. 30Section 93 of the Succession Act is in the following terms: (1) The legal representative of the estate of a deceased person may distribute the property in the estate if: (a) the property is distributed at least 6 months after the deceased person's death, and (b) the legal representative has given notice in the form approved under section 17 of the Civil Procedure Act 2005 that the legal representative intends to distribute the property in the estate after the expiration of a specified time, and (c) the time specified in the notice is not less than 30 days after the notice is given, and (d) the time specified in the notice has expired, and (e) at the time of distribution, the legal representative does not have notice of any application or intended application for a family provision order affecting the estate of the deceased person. (2) A legal representative who distributes property of the estate of a deceased person is not liable in respect of that distribution to any person who was an applicant for a family provision order affecting the estate if the legal representative did not have notice at the time of the distribution of the application and if: (a) the distribution was made in accordance with this section, and (b) the distribution was properly made by the legal representative. (3) For the purposes of this section, notice to the legal representative of an application or intention to make any application under this Chapter must be in writing signed in accordance with rules for the signing of documents by a party in proceedings under the Uniform Civil Procedure Rules 2005. Note. On the enactment of this subsection, rules for the signing of documents by a party in proceedings were contained in Rule 4.4 of the Uniform Civil Procedure Rules 2005." 31Although the section is directed towards protection of the result of a distribution, in my view there was no distribution. However, this does not mean that what has been done may arguably be outside the powers of the defendant trustees. 32The will of course gives a power to invest in any real estate in Australia. In the past, the purchase by a trustee of a house for the purpose of providing accommodation for a beneficiary was not within such a power. See In the Will of Sheriff [1971] 2 NSWLR 438 where it was held that a clause giving powers to invest in freehold property did not authorise the purchase of a freehold home for the beneficiaries to live in. 33That restriction was legislated against by the introduction of s 14DA of the Trustee Act 1925 which is in the following form: "(1) Without limiting section 14C and subject to the instrument (if any) creating the trust, a trustee may: (a) purchase a dwelling-house for a beneficiary to use as a residence, or (b) enter into any other agreement or arrangement to secure for a beneficiary a right to use a dwelling-house as a residence. (2) Despite the terms of the instrument (if any) creating the trust, a trustee may, if to do so would not unfairly prejudice the interests of other beneficiaries, retain as part of the trust property a dwelling-house for a beneficiary to use as a residence. (3) A dwelling-house purchased, retained or otherwise secured for use by the beneficiary as a residence may be made available to the beneficiary for that purpose on such terms and conditions consistent with the trust and the extent of the beneficiary's interest as the trustee thinks fit. (4) The trustee may retain a dwelling-house or any interest or rights in respect of a dwelling-house acquired under this section after the use of the dwelling-house by the beneficiary has ceased. (5) In this section, dwelling-house includes: (a) any building or part of a building designed, or converted or capable of being converted, for use as a residence, and (b) any amenities or facilities for use in association with the use of a dwelling-house." 34In Jacob's Law of Trusts in Australia, 7th ed (2006), LexisNexis Butterworths at [1822], that authors state, in relation to the purchase of a dwelling house under s 14DA, that: "Despite the terms of the instrument (if any) creating the trust, a trustee may, if to do so would not unfairly prejudice the interests of other beneficiaries, retain as part of the trust property a dwelling house for a beneficiary to use as a residence. A dwelling house purchased, retained or otherwise secured for use by the beneficiary as a residence may be made available to the beneficiary for that purpose on such terms and conditions consistent with the trust and the extent of the beneficiary's interest as the trustee thinks fit. The trustee may retain a dwelling house or any interest or right in respect of a dwelling house acquired under these provisions after the use of the dwelling house by the beneficiary has ceased." 35In this respect, the legislation represents a more expansive approach than that revealed in decisions on investment clauses in trust instruments such as In the Will of Sheriff. 36In Garrett v Yiasemides [2004] NSWSC 828, Campbell J (as he then was) said: "[Section 14DA] is wide enough to authorise trustees investing trust moneys in the purchase of a fractional interest in the land, and in advancing the money towards the erection of a house on it, to secure for a beneficiary a right to use the house as a residence, provided always that in so doing the trustees observed their obligations of prudence." 37The plaintiff submitted that the deceased's will gave power to the trustees to invest in real estate but that it was not a general power such that it authorised the trustees to purchase real estate for the purpose of allowing the life tenant to occupy it rent free. 38The plaintiff also submitted that there was no power in the will to allow the trustees to apply any of the capital of the deceased's estate to satisfy the personal debts of the defendant. The defendant conceded in cross-examination (T43.15) that rental arrears of $6,270 were paid out of money from the estate, with the consent of the executors, as well as $2,700 to pay the cost of removalists. These monies were paid after these proceedings had commenced. 39The will provides for the defendant to receive a life interest only in the deceased's estate. The plaintiff submits that contrary to the terms of the will, the defendant appears to have used a substantial proportion of the deceased's estate for his own benefit. 40Section 14C of the Trustee Act, which sets out the matters to which a trustee is to have regard when exercising their power of investment, says: "Without limiting the matters that a trustee may take into account when exercising a power of investment, a trustee must, so far as they are appropriate to the circumstances of the trust, if any, have regard to the following matters: (a) the purposes of the trust and the needs and circumstances of the beneficiaries, (b) the desirability of diversifying trust investments, (c) the nature of, and the risk associated with, existing trust investments and other trust property, (d) the need to maintain the real value of the capital or income of the trust, (e) the risk of capital or income loss or depreciation, (f) the potential for capital appreciation, (g) the likely income return and the timing of income return, (h) the length of the term of the proposed investment, (i) the probable duration of the trust, (j) the liquidity and marketability of the proposed investment during, and on the determination of, the term of the proposed investment, (k) the aggregate value of the trust estate, (l) the effect of the proposed investment in relation to the tax liability of the trust, (m) the likelihood of inflation affecting the value of the proposed investment or other trust property, (n) the costs (including commissions, fees, charges and duties payable) of making the proposed investment, (o) the results of a review of existing trust investments in accordance with section 14A (4)." 41In excess of $70,000 has also been expended on improvements to the Congewai property since its purchase in May 2012. This expenditure was made after notice of the plaintiff's claim had been served on the 4th defendant on 17 May 2012 and the plaintiff's summons served on the first defendant on 31 May 2012. 42The effect of this expenditure has been to exhaust the estate of all available funds at a time when the trustees knew that the plaintiff was making a claim on the deceased's estate. As provided in s 14C(1)(k), the trustees must have regard to the aggregate value of the estate when exercising their power of investment. 43In my view, by allowing the expenditure on the Congewai property since its purchase, and the payment of the defendant's personal expenses of $8,970 out of the estate, at a time when the trustees had notice of the plaintiff's application, the 2nd, 3rd and 4th defendants have not acted prudently in terms of their obligations as executors and trustees of the deceased's estate. 44In D'Albora v D'Albora [1999] NSWSC 468, I discussed the consequences where the defendant made a distribution before the expiration of the period allowed for claims under the Family Provision Act 1982. In that case, the defendant did not have any notice of the plaintiff's claim at the time of the distribution. The property purchased by the defendant from the distribution was held to be notional estate to the extent necessary to pay the legacy for the plaintiff ordered by the court. 45In this matter, I am of the view that there was no distribution. Whilst the defendant did not have notice of any claim before purchasing the Congewai property, he did have notice of the plaintiff's claim before expending over $70,000 on the property. As I have said above, this expenditure was imprudent and outside of the powers of the defendant trustees. Although there is no cash remaining there is no reason why an order should not be made for a provision out of the total net value of the estate for the plaintiff, if so decided by the Court. 46The financial position of both the plaintiff and the defendant is precarious. They each receive the Commonwealth Aged Pension and neither own any real property nor any other property of any significant value. They are both beyond retirement age and neither have any significant superannuation entitlements. They both have limited prospects of earning capacity due to their health and age. 47The plaintiff and his wife appear to be living separately and apart under the same roof. The plaintiff is dependent on his wife and son for his accommodation and he does not appear to receive any additional financial support from his wife. The plaintiff's wife has her own income from superannuation and a part pension but she has little in the way of assets other than her 50% share in the Gardiner St unit. She is not in good health. 48In Taylor v Farrugia [2009] NSWSC 801, Brereton J said, of a claim by adult children on a deceased parent's estate, that: "58 Generally speaking, the community does not expect a parent to look after his or her children for the rest of their lives and into retirement, especially when there is someone else, such a spouse, who has a prime obligation to do so. ... But where a child, even an adult child, falls on hard times and where there are assets available, then the community may expect parents to provide a buffer against contingencies; and where a child has been unable to accumulate superannuation or make other provision for their retirement, something to assist in retirement where otherwise they would be left destitute. It is no longer the case, if it ever was, that an adult child has to establish a special need before obtaining provision from the estate of a deceased parent. 59 The Court's attitude to the eligibility for means tested pension benefits of eligible persons and beneficiaries varies, depending on the circumstances of the case. Ordinarily, a testator makes a will and provides for those who have a claim on the testator without regard to the claimant's eligibility for a pension. However, in a small estate where there are competing claims, a testator, and this Court on an application under the Act, may take into account the eligibility of a claimant for a pension as a means of deciding how such limited benefits as are available from the estate should be shared between claimants, and how those benefits might be structured." 49It was submitted by the defendant that the deceased had told him when she made her last will of 2 September 2004, that the reason she was leaving nothing to the plaintiff was that he had received a lot of help from her earlier in his life and that he had good employment prospects and needed no further funds. The previous will of the deceased, dated 25 July 1990, left her entire estate to her grandsons, the 2nd, 3rd and 4th defendants. The defendant submitted that it was clear from the difference between the 1990 will and her last will that the deceased had made a deliberate decision to provide for the defendant, and in both wills had decided to make no provision for the plaintiff. 50It was submitted by the plaintiff that whatever his earning capacity and financial position may have been, particularly in September 2004 when the deceased made her last will, s 59(2) of the Succession Act makes it clear that the court has to have regard to the facts know to the court at the time the order is made. While the plaintiff does have the benefit of free accommodation, he has no earning capacity and is an elderly plaintiff that has "fallen on hard times": Taylor v Farrugia at [58]-[59]. 51There was no evidence advanced of any provision for the plaintiff made by the deceased during her lifetime. This is in contrast to the substantial benefit the defendant received by being able to live rent free for 10 years in the unit in which the deceased had a life interest. After her death in 2011, the defendant was then charged rent of $570 per week. 52A testator is entitled to make no provision for children in certain circumstances. In Ford v Simes [2009] NSWCA 351, Bergin CJ in Eq stated that: "71 It is one thing to make provision for a child, even an adult, where the Court is able to better balance the obligations of the testator with the adequacy of the provision made by the testator. However in my view it is very important for the maintenance of the integrity of the process in these types of applications that this Court acknowledge once again the entitlement of testators, in certain circumstances, to make no provision for children: The Pontifical Society for the Propagation of the Faith and Saint Charles Seminary, Perth v Scales [1962] HCA 19; (1961) 107 CLR 9." 53The plaintiff does not claim that he has any sort of entitlement to an equal share of the deceased's estate. However, the plaintiff seeks an order for a provision in the amount of one third of the net distributable estate. 54The defendant submits that the deceased intended the defendant to be the primary object of her testamentary bounty. As the estate is small there are not enough funds available to provide for any contingency for the plaintiff without sacrificing the interests of the defendant. 55The defendant also submits that any gift up to $30,000 will not be for the proper maintenance, education or advancement in life of the plaintiff as it will simply be used to pay off the plaintiff's credit card debt and that there are simply not enough funds to provide for any contingency for the plaintiff without sacrificing the interests of the defendant who was the primary object of the deceased's bounty. 56Counsel for the plaintiff directed me to the decision of Carroll v Cowburn [2003] NSWSC 248 where Young CJ in Eq said that simply because there is a concern that a plaintiff might squander any order provided to them, this was no reason to not make a provision and that the circumstances merely go to the form of that order. In this case, I am not convinced that the plaintiff will use any money he receives other than wisely. 57It was further submitted by the defendant that his claims on the estate are slightly stronger because the financial resources available to him are less in circumstances where his and the plaintiff's future prospects and needs are similar. He submits also that his relationship with the deceased was closer. 58The plaintiff is the beneficiary of free accommodation and is able to share the cost of non-residential expenses with his wife. However, he receives a reduced pension and he is dependant on the magnanimity of his wife and son for his accommodation. 59The defendant has no access to free accommodation without the Congewai property and has no one to share expenses with. However, he does receive the full aged pension. 60In my view, the plaintiff has been left without adequate and proper provision for his maintenance, education or advancement in life. 61So far as the amount of the provision is concerned, the only imprudent expenditures are the sums paid after notice of the plaintiff's claim 62In my view after taking into account all the circumstances, the plaintiff should receive a legacy of $60,000.

Orders 1)I order that the plaintiff receive a legacy of $60,000 from the estate of the late Dorothy Sheezel. 2)Such legacy is to bear interest at the rate provided for in the Probate and Administration Act 1898 from three months after this judgment. 3)I will hear the parties on costs. 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: 07 December 2012