Theoctistou v Theoctistou

Supreme Court of NSW|2013-10-04|Before: Lindsay J

INTRODUCTION 1George Theoctistou ("the deceased") died on 3 August 2011, aged about 84 years, leaving a will dated 1 February 2011, probate of which was granted by this Court to his widow (the defendant) on 11 October 2011. 2By his will, the deceased left $50,000 to each of his four adult sons ($200,000 in total) and the residue of his estate to the defendant, now aged about 86 years. 3The deceased was twice married, with two sons by each marriage. The plaintiff is the eldest of the deceased's sons, a child of the first marriage. 4Each of the deceased's other three sons has notice of these proceedings, in which the plaintiff claims family provision relief, under Chapter 3 of the Succession Act 2006 NSW in relation to the distributed estate of the deceased, but none of them has joined the plaintiff in making a claim for relief. 5The estate of the deceased was distributed by the defendant between 4 November 2011 and 8 February 2012 at a time (within 12 months of the deceased's death) when it remained open to the plaintiff, under s 58 of the Succession Act, to make an application for relief under s 59 of the Act without having to apply for an order for an extension of time. 6On 4 November 2011 two home units owned by the deceased in Military Road, Merrylands (respectively Lots 4 and 5 in Strata Plan 52121) were, by registration of a transmission application, transferred to the defendant. 7On 8 February 2012 the defendant paid to each of the deceased's four sons the pecuniary legacy of $50,000 due to him under the will. 8Because the estate of the deceased has been distributed, the plaintiff cannot succeed in these proceedings unless he obtains an order, under Part 3.3 of the Succession Act, for the designation of property as notional estate of the deceased: ss 63(3) and 63(5). 9The plaintiff invites the Court to make an order (by reference to ss 78, 79, 87 and 89 of the Succession Act) for designation of the two former home units of the deceased (Lots 4 and 5 in Strata Plan 52121) as notional estate. 10That property is registered in the name of the defendant, personally, as the holder of an estate in fee simple, unencumbered. 11The plaintiff expressly disclaimed any claim for an order that other property be designated as notional estate. 12The hearing of the plaintiff's claim for relief was conducted on the basis that the only interests in competition, upon consideration of the plaintiff's claim for family provision relief, are those of the plaintiff (as an adult son of the deceased) and those of the defendant (as the widow of the deceased, a dutiful wife throughout a long and happy marriage). 13The interests of other persons eligible to make an application for family provision relief (that is, the deceased's first wife and his three sons other than the plaintiff) may be disregarded by virtue of s 61 of the Succession Act. All four of those persons have had notice of the present proceedings. None of them has made an application for relief. Although rules of court requiring service of formal notice of proceedings have not, in terms, been complied with in relation to the deceased's first wife and the second son of his marriage to her, I am satisfied that it is appropriate to order that compliance with those rules of court be dispensed with.

THE ESTATE OF THE DECEASED 14The deceased left an estate valued, for probate purposes, at $919,532, comprising: (a)the two home units in Military Road, Merrylands, each with an estimated value of $300,000, together valued at $600,000; (b)funds totalling $203,532 standing to the credit of accounts with the National Australia Bank; (c)a debt said to be owed by the plaintiff, in the sum of $100,000, referable to a payment made by the deceased to the plaintiff's bank (the ANZ bank) in or about February 2007; (d)a 1996 Mercedes C 200 valued at $12,000; and (e)four silver bars valued (in total) at $4,000. 15There is a theoretical debate about whether the $100,000 paid out by the deceased for the benefit of the plaintiff should be characterised as a loan or as a gift. 16Nothing turns upon the correct characterisation. That is because the parties are agreed that: (a)the defendant has, at all material times, treated the payment as "irrecoverable". (b)if the payment did ever give rise to a debt owed by the plaintiff to the deceased, any liability that the plaintiff may have had in respect of it has been extinguished by operation of ss 14 and 63 of the Limitation Act 1969 NSW and the effluxion of time. (c)the true, and only, significance of the payment in these proceedings is that it was a conferral of a substantial benefit on the plaintiff by the deceased, during the lifetime of the deceased, as the father of the plaintiff. 17If (as it should be) the $100,000 "debt" said to have been owed by the plaintiff is disregarded, the deceased left an estate valued, for probate purposes, at $819,532. 18He died with no significant debts. 19After his death the defendant, as his executrix, paid debts (referable to a Supreme Court filing fee, legal fees and funeral expenses) totalling $17,378. The deceased's net distributable estate, in fact distributed, may be said to have had an estimated value of about $802,154 at the time of distribution. 20The defendant has since paid other expenses on behalf of the deceased's estate so allowance has to be made for that. 21Nevertheless, in practical terms, after allowing for the $200,000 paid to the deceased's sons, it can be fairly said (and counsel for the defendant accepted) that, in substance, the defendant received from her late husband's estate those two home units. 22It should also be noted, incidentally, that: (a)the former matrimonial home of the deceased and the defendant (in Elsinore Street, Merrylands) jointly owned by them, passed to the defendant by way of survivorship; and (b)the current market value of the deceased's home units is of the order of about $360,000 each (according to a kerbside appraisal in evidence suggesting a "reasonable current sale price" would be in the range of $350,000 to $370,000). 23The costs incurred by the parties in the conduct of these proceedings, up to and including judgment, have been estimated at about $100,000 in total, each party having incurred a liability for about $50,000.

FAMILY RELATIONSHIPS 24The deceased's first marriage was short lived. He married Mary Coleman in or about 1951. They separated in or about 1955. Mary subsequently re-partnered and lives with her partner, now of many years standing, in Queensland. 25There were two children of the deceased's first marriage: (a)the plaintiff, born in 1952 and now nearly 61 years of age; and (b)his brother, Michael, born in 1955 and now aged about 58 years. 26The deceased married the defendant (on the plaintiff's seventh birthday) in 1959. 27There were two children of that marriage: (a)Alister, born in 1960 and now aged about 53 years; and (b)Peter, born in 1965 and now aged about 48 years. 28After his parents separated, and during his youth, the plaintiff lived variously with his father (the deceased); his father and the defendant (his stepmother); and his paternal grandparents. He had no contact with his mother (the deceased's first wife) until he was aged about 22 years, although he is in regular contact with her now. 29The plaintiff had a close and loving relationship with his father throughout his life. 30That relationship might well have been more distant than the one enjoyed by the deceased and the sons of his second marriage; but, if so, that can be readily explained by: (a)the course of the deceased's two marriages; (b)the respective dates of birth of the deceased's four sons; and (c)the fact that the plaintiff moved out of home (that is, the home of the deceased and the defendant) when he first married, at the age of about 22 years. 31Factors that tell strongly in favour of a strong familial bond between the plaintiff and his father are: first, the deceased's provision of $100,000 to the plaintiff in February 2007 when he was in need of assistance because of having suffered a stroke in December 2006 and having been caught, with his wife, in a failing business venture; and, secondly, the ostensibly equal treatment of all four sons of the deceased in his will. 32The plaintiff has been twice married. 33Between 1974 and 1995 or thereabouts he was married to his first wife. They separated in 1993. The plaintiff has three children by that marriage: a son born in 1977; a daughter born in 1978; and a second son born in 1980. He has six grandchildren. 34He married his present wife, Neryl, in 1996. There are no children of that marriage. Neryl has no children otherwise. 35Neryl gave evidence in support of the plaintiff's claim for family provision relief. They were both cross-examined.

THE PLAINTIFF'S PERSONAL CIRCUMSTANCES 36The plaintiff was educated at State schools to school certificate level before leaving formal, full-time education. 37He served an apprenticeship as a sheet metal worker, completed two years or so after he first married. He worked in the sheet metal industry for about five years before taking up carpentry. With additional TAFE studies, he worked as a handyman for real estate agents for about eight years. Thereafter, for about 20 years, he worked with State Rail as a labourer. 38Between 2002 and 2008 or thereabouts he and his present wife, Neryl, conducted a patisserie business in a shopping centre. It was that business that failed, leaving them with a residual debt of about $127,500. 39They own their home (in MacDougall Crescent at Hamlyn Terrace), presently valued at about $400,000, but they (jointly) owe about $230,760 on their home loan. The property is treated as joint property, but it is registered in Neryl's name alone. 40The plaintiff also owes about $9,510 (in total) on three credit cards. His wife owes about $25,000 (in total) on four credit cards. 41They owe a little money on one of the two cars they own, but their net asset position is fairly represented in these figures. Neryl has superannuation entitlements, prospectively, but she cannot presently access them. 42They live in straitened financial circumstances, saddled with large debts (just under $400,000 in total) which they are struggling to service, let alone to repay, in circumstances in which they are both in poor health, with a limited capacity to earn income, and no immediate prospects for substantial improvement. 43The plaintiff earns about $204 net per week from part time work as a cleaner but his health is such that he cannot be expected ever to work full time. He is, more or less, largely dependent on his wife. She earns about $650 net per week in permanent part time work for Coles and, when she can get it, part time work in the home care industry. Their total household income (of about $845 net per week) is significantly less than their regular weekly expenditure of about $1,383 per week. 44They were cross-examined on a basis that accepted that, as things presently stand, they are going backwards financially. Their current mortgagee, Macquarie Bank, has agreed to a temporary reduction of loan repayments to assist them but, unless they can obtain other assistance, that is unlikely to continue indefinitely. 45They appear to me, both of them, to be conscientious working-class people who have tried, and are continuing to try, to do the best they can with the hand they have been dealt. 46Counsel for the defendant invited me to make findings adverse to their credit. I decline to do so. I am satisfied that they are both honest people, doing the best they can, working together to deal with adversity, and determined to survive. 47The plaintiff's ability to manage his affairs is heavily dependent on the availability of the assistance provided to him by his wife. He is not a person, presently, "incapable of managing his affairs" in a technical sense, but he is heavily dependent upon her. 48That was manifest during the course of his giving evidence, when he became frustrated (and, at times, prone to use of inappropriate language) when confronted with comparatively mild but persistent cross-examination. 49He is not presently in receipt of a disability pension but he does appear to have a disability - a factor to be taken into account in deciding whether he has been left without adequate provision - and, if so, questions of relief generally. 50A dominant feature of his life continues to be the ill health he has experienced since, and one might infer as a result of, the stroke he suffered in December 2006, not assisted by a recent diagnosis of cancer in his right eye requiring surgery.

THE DEFENDANT'S PERSONAL CIRCUMSTANCES 51The defendant is in a much stronger financial position than the plaintiff, largely as the result of the joint efforts of the deceased and herself working in business over many years up to and including about 2005. 52At her age, naturally, she suffers some ill-health and contemplates that she may, in time, move into nursing home accommodation. 53However, she continues to live at home and plans to continue doing so. One of her sons, Peter, lives with her for about half of each week (when he is in Sydney on business) but she is generally able, and determined, to fend for herself. 54She lives off the income of her investment properties. 55In her own right, she owns three home units in the same block of units in which the deceased's units are located: she owns Lots 6, 7 and 8. Each one of those units appears to have a value equivalent to the value of each of the deceased's units. Conservatively, each unit is worth $300,000. They may be worth about $360,000 according to the recent kerbside appraisal in the evidence. 56The former matrimonial home of the defendant and the deceased is, conservatively, valued at $500,000. A kerbside appraisal in evidence suggests that it may be more realistically valued in the range between $650,000-$700,000. 57None of the real estate owned by the defendant is encumbered by a mortgage. She owes no debts of any significance. 58On the contrary, she maintains a cash reserve in two bank accounts: which presently have a combined credit balance of about $176,500. 59She has that reserve despite having recently assisted each of her two sons with "loans": (a)in the 12 months to mid-October 2012 she lent them a total of $230,000: she lent Alister $130,000 to assist him in building a house; she lent Peter $100,000 to assist him with his accommodation; and (b)on 15 July 2013 she lent Peter another $50,000 to help him with development of his home. 60These loans demonstrate, objectively, the amplitude of resources available to the defendant vis-a-vis her current, and any anticipated future, needs.

ANALYSIS 61These proceedings are to be determined through an application of the text of Chapter 3 of the Succession Act 2006 NSW to the facts of the case, accepting that: (a)that involves an element of evaluation referable to contemporary community standards (Andrew v Andrew (2012) 81NSWLR 656); (b)although a grant of family provision relief to an adult son does not require proof of some special need as a gloss on the text of the legislation, the community does not generally expect a parent to look after his or her child for the rest of the child's life and into retirement: Wheat v Wisbey [2013] NSWSC 537 at [128], especially at subparas (c), (e), (f) and (g) per Hallen J; and (c)as is often illustrated (and as the defendant in these proceedings notes) by reference to Luciano v Rosenblum (1985) 2NSWLR 65 at 69 - 70, the welfare of a widow, in the wake of a long marriage, is a prime consideration. 62In approaching the tasks required by the text of the Succession Act, I am mindful that, in their submissions, both parties have drawn attention to the two-stage process discussed in Singer v Berghouse (1994) 181 CLR 201 at 209 - 210, as well as the observations about that process in Andrew v Andrew. 63By analogy, the first stage corresponds with s 59 (1)(c) of the Succession Act, and the second with ss 59 (2) and 60 (1)(b): Charmock v Handley [2011] NSWSC 1408 at [46] - [50]. 64As a child of the deceased, the plaintiff is plainly an "eligible person", entitled as such to make a claim for family provision relief: Succession Act, s 57 (1)(c) and 59 (1)(a). 65His application for that relief was made within the time limit set by s 58 of the Act. The deceased died on 3 August 2011. The proceedings were commenced by a summons filed on 1 August 2012, two days before expiry of the 12 month limitation period prescribed by s 58. It was not necessary for the plaintiff to apply for an extension of time under the section. 66Considering the position at the present time, as mandated by s 59 (1)(c) of the Act, I am satisfied that adequate provision for the proper maintenance, education or advancement in life has not been made for the plaintiff by the will of the deceased. 67In reaching that conclusion I take note of the case law that informs the meaning of the expressions "adequate" and "proper" in this context as words relative to the context of the particular case: Pontifical Society for the Propagation of the Faith v Scales (1962) 107 CLR 9 at 19. 68The short point is that, through no fault of his own, the plaintiff has been left on the verge of destitution, despite the capacity of the deceased, subject to a consideration of the important competing claims of his widow, to make further provision for his son. 69In my assessment, the plaintiff is a dutiful son who, through a business misadventure and a medical crisis, that together adversely affect his capacity to earn his keep, finds himself on the verge of penury without any immediate prospect of escape or amelioration unless given assistance by, or on the account of, a father who, dealt a better hand, prospered. 70The deceased's ability to make a new life, and to expand his family, with the defendant (and her ability to participate in that process and the material success that accompanied it) depended, in part, upon the acquiescence of the plaintiff living, as he did, with his paternal grandparents, as well as the deceased and the second chapter of his family, through the plaintiff's formative years. 71As the deceased recognised by his provision of assistance to the plaintiff in and about February 2007, he owed to the plaintiff the moral obligations of a father with a child (albeit an adult) in need. 72Those obligations were not spent by the provision of $100,000 in 2007 or by the provision of a legacy of $50,000 in his will, amounts not insignificant in themselves, but substantially less than what is necessary to allow the plaintiff a chance, with the aid of his wife, to break free of the continuing threat of poverty. 73The estate of the deceased having been distributed, it is necessary to turn attention to whether property should be designated as notional estate: Succession Act ss 59 (2), 63 (3), 63 (5) and 73 (2); Charnock v Handley [2011] NSWSC 1408 at [71] and [92]. 74An order for the designation of property as notional estate can only be made, consistently with s 78 of the Succession Act, for the purpose of: (a)a family provision order to be made under Part 3.2 of the Act, including ss 59 (2) and 60; or (b)a costs order to be made pursuant to s 99 of the Act, subject to s 78 (2). 75Each of the deceased's home units is available for designation as notional estate because the defendant became registered proprietor of them, and she holds them, as a result of her distribution of the deceased's estate: Succession Act, s 79. 76Section 87 of the Succession Act provides: "87 General matters that must be considered by Court (cf FPA 27 (1)) The Court must not make a notional estate order unless it has considered the following: (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, (c) any other matter it considers relevant in the circumstances." 77Upon a consideration of s 87 (a), it is important to take into account the fact that the defendant distributed the deceased's estate before the expiry of the time within which it was open to the plaintiff to make an application for family provision relief. Moreover, she transferred the deceased's home units to herself well in advance of paying the plaintiff the legacy to which he was entitled under the deceased's will. 78As the deceased's wife, and business partner, and as a member of the same family as the plaintiff, she must have been aware of his poor health (arising largely from the stroke he suffered in December 2006) and of his straitened financial circumstances (arising from the failure of his business contemporaneously with his stroke). 79Viewing the question objectively, any expectations she may have had vis-a-vis her inheritance of the deceased's home units, must have been qualified by a countervailing possibility, if not expectation, that the plaintiff might lay claim to them on an application for family provision relief. 80Upon a consideration of s 87 more broadly, other factors taken into account include the facts that: (a)through her business and family property arrangements with the deceased, the defendant had, or may not have unreasonably had, a sense of moral entitlement to ownership of his two home units (of which, at one time, she was registered with the deceased in co ownership); (b)the deceased has left the defendant well provided for: through the right of survivorship he allowed her to enjoy in ownership of their matrimonial home as joint tenants; and through the structure of their respective land holding entitlements, referable to the block of units in which, at his death, she owned three units to his two; (c)even if both of the deceased's home units were to be appropriated to an order for family provision or to payment of the costs of these proceedings, the defendant would be left well resourced for an 86 year old widow; (d)to deny relief to the plaintiff, in personal and financial need, would be to condemn him, and his wife upon whom he is largely dependent, to a very real prospect of destitution as well as unrelenting ill-health. 81Attention must also be given to the requirements of s 89 of the Succession Act including, particularly, those of s 89 (2). A designation of property as notional estate should go no further than is necessary. 82With all these factors in mind I return to a consideration of s 59 (2) of the Succession Act, read with s 73 (2) and remind myself of the checklist of factors for which s 60 (2) of the Act provides, and to which I have had reference. 83Having regard to the facts presently known to the Court (as required by s 59 (2) of the Act), and applying current community standards (as I perceive them to be), I determine that so much of the two home units formerly owned by the deceased (namely, Lots 4 and 5 in Strata Plan 52121) should be designated as notional estate of the deceased as necessary to satisfy a charge on that property: (a)to pay to the plaintiff, in addition to the provision made for him in the will, a legacy of $250,000; and (b)to pay out of that property the plaintiff's costs of these proceedings, assessed on the ordinary basis. 84This amount of relief will not enable the plaintiff to pay out all his debts, but it will enable him, with the ongoing assistance of his wife, to manage his crippling indebtedness. It will also leave to the defendant something close to half of the value of the property she inherited from her late husband's estate, not counting her interest in the matrimonial home. 85I do not regard the fact that the plaintiff is an adult son of the deceased as a factor which, on the facts of this case, is an impediment to his success in the proceedings. Where a child, even an adult child, falls on hard times, and where there are assets available, the community may expect a parent to make provision for the child so as to keep destitution at bay: Wheat v Wisbey [2013] NSWSC 537 at [128] (c). 86Nor do I regard the fact that the defendant is a widow of a long and happy marriage as a factor, again on the facts of this case, that stands against the making of a family provision order in favour of the plaintiff. The standard to which she appealed in submissions, by reference to Luciano v Rosenblum, has been well satisfied by the provision that the defendant and the deceased appear, collaboratively, to have made for her in the structure of their property holdings. 87Having regard to the nature of the property available for the payment of the defendant's costs (namely, property owned by her), I make no award for the payment of her costs of the proceedings.

ORDERS 88I make the following orders and notations: (1)Order that any outstanding requirement for service of notice of these proceedings on any person, other than the plaintiff, who may be eligible to make an application for family provision relief in relation to the estate or notional estate of the deceased, be dispensed with. (2)Order that the land being lots 4 and 5 in Strata Plan 52121 be designated as notional estate of the deceased so far as may be necessary to satisfy orders 3,4 and 5. (3)Order that, in addition to the provision made for him in the Will of the deceased, the plaintiff receive from the notional estate of the deceased a legacy of $250,000.00. (4)Order that the legacy bear interest (at the rate prescribed for legacies by the Probate & Administration Act 1898, s 84A) commencing on a date three months from today, if and to the extent not paid before that date. (5)Order that the plaintiff's costs of these proceedings, assessed on the ordinary basis, be paid out of the notional estate of the deceased. (6)Order that the notional estate of the deceased be charged with the obligations of the defendant, as the executrix of the deceased, to pay the amounts payable pursuant to orders 3, 4 and 5. (7)Note that the intent of these orders is that the legacy for which Order 3 provides is to be paid within three months of today. (8)Reserve liberty to apply for any orders that may be necessary to give effect to, or to enforce, these orders. (9)Order that exhibits and subpoenaed material may be returned forthwith; any exhibits returned must be retained intact by the party or person that produced the material until the expiry of the time to file an appeal, or until any appeal has been determined.

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: 30 October 2013

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