Supreme Court of NSW|1996-09-09

Warren v McKnight [1996] NSWSC 419 (9 September 1996)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

HIS HONOUR: This is an application for summary dismissal of Family Provision Act proceedings, and in the alternative, expedition. It is convenient to begin by outlining some background facts which are either clearly proved or not in dispute.

The plaintiff, Jeremy Warren, is one of two sons of the deceased, Elinor Warren and her husband Geoffrey Warren, their other son being Mark Warren. Geoffrey Warren died on 15th January 1985. His estate comprised shares then worth about $570,000.00, and loans amounting to about $180,000.00. By his will, he gave his wife a life interest in the whole estate, with the remainder to the two sons. Mrs. Warren took the matrimonial home by survivorship.

During the widowhood of Mrs. Warren, Jeremy received about $205,000.00 from his mother by way of gift or advancement from his father's estate, and Mark similarly received about $155,000.00. Elinor Warren made her last will on 17th June 1992. An order was made for management of her estate under the Protected Estates Act on 18th September 1992.

Mrs. Warren died on 24th October 1993. Her assets comprised shares worth about $800,000.00, a unit in Fernbank Village worth about $330,000.00, and proceeds of sale of the matrimonial home amounting to about $400,000.00.

The effect of her will was that the shares of about $800,000.00 went to Jeremy's three children, who are still infants; the unit in Fernbank Village went to Mark; and the proceeds of the matrimonial home went to people who were not family members. Also as a result of the death of Mrs. Warren, the estate of her late husband still in her hands, being shares to the value of about $1 million, went to Jeremy and Mark, that is, about $500,000.00 going to each of them. Probate of Mrs. Warren's will was granted on 27th April 1994.

A question arose as to whether the sale of the matrimonial home prior to death meant that there was an ademption of a gift of the matrimonial home made in her will. Proceedings to determine that question were commenced; and I decided that question in a judgment delivered on 2nd March 1995, to the effect that there was no ademption.

A further question arose as to alleged breaches of trust by Mrs. Warren as trustee of her husband's estate. I gave a decision in that matter on 6th November 1995, which had the result that about $350,000.00 had to be paid from Mrs. Warren's estate to her husband's estate, and that thereby a further sum of $175,000.00 each went to Jeremy and Mark. I also decided that that sum restored to Mr. Warren's estate had to be borne rateably by all the gifts under Mrs. Warren's will, leading to an abatement of the order of one quarter for each gift.

In the result, it appears that Jeremy received about $880,000.00 from his father's estate or by way of gift from his mother, and Mark received about $830,000.00. In addition, following abatement of gifts under Mrs. Warren's will, Jeremy's children would receive about $600,000.00; Mark would receive a sum of about $240,000.00; and the non-family members would receive about $300,000.00 between them.

These Family Provision Act proceedings were brought by Jeremy on 26th February 1996. The time for bringing the proceedings had expired on 24th April 1995. By reason of directions and communications between the parties, it is accepted that prior to the bringing of this application, Jeremy should have filed all the evidence he relies on in chief in support of his Family Provision Act application. Insofar as that evidence relates to his needs, it is very briefly as follows.

With his wife, he owns a matrimonial home in East Fremantle, his half interest being estimated at $200,000.00. Also with his wife, he owns a holiday home, and his half interest is said to be worth $190,000.00. Although this was not included in his affidavit in support of his application, it appears that he holds shares, including shares received from his father's estate, to the value of about $1.2 million. His other assets are said to amount to around $180,000.00. His occupation is that of engineer, and he is employed as a consultant. His affidavit does not disclose what his income is from that occupation, although it is asserted that his income covers his family's expenses. There is evidence led by the defendant that the shares held by the plaintiff bring an income of around $44,000.00 per annum fully franked: as I understand it, that means that, even if he is taxed at the highest rate of income tax, he would be only paying something like ten cents in the dollar tax on that income from his shares.

In relation to need, the plaintiff says that his home needs extensions estimated to cost around $150,000.00, and that he needs to provide for superannuation for his retirement in ten or fifteen years time.

On the question of extension of time, evidence was provided in an affidavit filed in response to this application sworn on 16th July 1996, and pars.3-7 set out the main circumstances relied on in support of the extension, as follows:

3. My brother Mark Warren and I were joined as third defendants in proceedings commenced by Cherry and (sic) Christensen in 1994. We both instructed Messrs. Burridge & Legg solicitors to represent us in these proceedings. The substantial judgment was not delivered by His Honour Justice Hodson (sic) until November 1995 and previously in about June 1995 I was aware that negotiations had occurred between parties to the Christensen litigation and I am informed by Mr. Legg and believe that the representatives for June McKenna were informed in about June that there was a possibility of myself and Mark taking proceedings under the Family Provision Act in relation to my late mother's will.

4. After the Defendant filed his affidavit on 5 April 1995 it became clear to me that my late father's estate would need judicial consideration as well as my mother's estate.

5. Efforts were then directed to the preparation and argument in the Christensen litigation and certain proposals that had earlier been mooted appeared to be no longer pressed.

6. I was informed in or about 16 April 1995 that there was a time limit for the making of Family Provision Act applications of 18 months from the grant of probate. I was not aware that such an action would be brought in the same division or Court as the Christensen claim, and it was not until the decision of Hodgson, J. in November 1995 I realised after speaking to Mr. Legg, that I should not wait until the Christensen matter was completed.

7. In mid-November 1995 I instructed Mr. Legg to consider Family Provision Act proceedings and I am aware that on or about 14 December 1995 Mr. Legg wrote to the solicitors for the Defendant informing the Defendant's solicitors that I was "giving consideration to bringing a claim under the Family Provision Act".

In support of the application, Mr. Slattery QC has provided some written submissions, which I will leave with the papers. He submitted that the financial position disclosed by the plaintiff's affidavit and by the other evidence showed clearly that there was no need, and that the plaintiff had not been left without adequate provision for his proper maintenance. He submitted that a further factor to be taken into account in this regard was that there was around $600,000.00 in the hands of the trustee of Mrs. Warren's estate for the benefit of the plaintiff's three children, so that it was reasonable to expect that he would be relieved from a considerable amount of expense involved in bringing up three children. He pointed out that the $150,000.00 for renovations could be provided by just over three years' after-tax income from his shares, or by the sale of a small parcel of shares. On the superannuation question, Mr. Slattery pointed out that the share portfolio already provided substantial resources towards the plaintiff's retirement.

On the matter of obtaining an extension of time, Mr. Slattery submitted that a case could not be made out by the paragraphs to which I have referred. Those paragraphs did not even assert that the plaintiff did not know prior to April 1995 that there was a time limit. At its highest, the affidavits suggested a self-generated misunderstanding as to the position.

Mr. Hallen for the plaintiff submitted that the Family Provision Act did not contemplate this procedure of summary dismissal, and made it clear that all matters were to be determined as at the time of a final hearing of the matter.

On grounds for an extension of time, Mr. Hallen pointed out that, on his affidavit, the plaintiff apparently initially believed that he had eighteen months from the grant of probate to bring the application, that is eighteen months from April 1994. He pointed to the reference in s.16 of the Family Provision Act to the necessity for sufficient cause in all the circumstances of the case. He submitted that one important factor going to sufficient cause was uncertainty as to the assets of the deceased's estate, the plaintiff's entitlement to assets from his father's estate, and the obligation of his mother's estate to reimburse his father's estate, which uncertainty was not resolved until the giving of judgment in the second set of proceedings I have mentioned in November 1995. He submitted that even now, there was not evidence on by the defendant setting out the assets of the estate, that evidence being required under Pt.70 to be put on within a reasonable time after the commencement of the proceedings.

On the question of the merits of the plaintiff's substantive claim, Mr. Hallen submitted that it was not appropriate to determine the plaintiff's chances of success on the evidence before me today. Not only were all matters required to be determined as at the date of the final hearing, but also the matter should be determined having regard to evidence put on by the executor. Mr. Hallen submitted that the executor was obliged to put on all relevant evidence, whether it supported the plaintiff's case or the defendant's case, and he referred me to statements to that effect in Dijkhuijs v. Barclay (1988) 13 NSWLR 639 at 654-5.

He submitted that it was virtually impossible under the Family Provision Act to say that a case is hopeless until after the full hearing of the case; and he referred me to a case in which a plaintiff with assets of $2.1 million obtained an order out of an estate of $1.7 million, namely Field v. Inglis, Master Macready, 6/2/95. The most that could be said at this stage was that if the plaintiff's financial circumstances do not change, it is more probable that he would fail; but that was a matter on which different judges could take different views.

He submitted that the Court should not be concerned that inability to make summary judgments in Family Provision Act applications meant that estate could be put to considerable expense in defending lengthy proceedings which had no chance of success. He submitted that that problem could, and should, be dealt with by orders for costs in such proceedings after a final hearing.

Turning to the question of extension of time, he pointed out that the delay was only ten months, and that the case was brought only about three months from the determination of the asset position of the estate. No prejudice to beneficiaries had been shown or was relied on, and he referred me to the case of Neil v. Nott [1994] HCA 23; (1994) 121 ALR 148.

On the matter of the absence of evidence of income, Mr. Hallen submitted that it was usual in Family Provision Act proceedings for up-to-date evidence of the financial position of the plaintiff to be put on shortly before the actual hearing. The plaintiff did intend to make the full disclosure of his income. Mr. Hallen submitted that, if I were minded to grant this application on the basis that the plaintiff had not put on evidence of income, he would seek an opportunity to put on such evidence.

It seems to be common ground that there are four factors which can be relevant to the exercise of discretion to extend time for bringing an application under the Family Provision Act. Firstly, the sufficiency of the explanation of delay in making the claim; secondly, would there be any prejudice to beneficiaries; thirdly, has there been any unconscionable conduct by the plaintiff; and fourthly, the strength of the plaintiff's case.

In this application, it appears that there is no suggestion from the defendant that the extension of time would be refused because of prejudice to beneficiaries, or because of unconscionable conduct by the plaintiff. In fact, the submissions were directed to the explanation of the delay, and the strength of the plaintiff's case.

Turning to the explanation for the delay, there is considerable force in Mr. Slattery's submission about the inadequacy of the material in the plaintiff's affidavit; but I think there is also force in Mr. Hallen's submission that quite large uncertainties as to the asset position in the estate, and as to the amounts which the plaintiff would receive consequent upon an adjustment involving payments from this estate to the plaintiff's father's estate, were not resolved until November 1995, that is, already seven months after the expiry of the time for bringing proceedings. It does seem to me that that factor could possibly amount to an explanation of the delay or, in terms of the statute, sufficient cause for the application not being made within time.

As I understand the position, in order for this application to succeed, I would have to be satisfied in terms of Pt.13 r.5 of the Supreme Court Rules that no reasonable cause of action was disclosed on the material provided by the plaintiff, or that the proceedings were frivolous, vexatious or an abuse of process. It seems to me that that does mean, as put in the explanation to that rule in Ritchie, Supreme Court Practice, the plaintiff's case must be shown to be so weak that to permit the proceedings to go to trial would be futile. I do not think I can come to that decision in relation to the explanation for the delay.

Turning to the strength of the plaintiff's case, it seems to me that it is not appropriate to consider this solely in the context of an application for extension of time. It seems to me that, if it is not shown that the plaintiff's case is so weak that it would be pointless for it to go to a full hearing on the merits, considered apart from the question of obtaining an extension of time, then I do not think I would summarily dismiss it because an extension of time is required. It seems to me appropriate just to look at the plaintiff's case on merits, and to come to a view whether, quite apart from any question of extension of time, it is so weak that it should not be permitted to go to trial.

Two preliminary points were made by Mr. Hallen concerning the duty of executors to put on evidence, and concerning the time of this application in relation to a final hearing.

The passage relied on by Mr. Hallen in the judgment of Kirby, P. in Dijkhuijs v. Barclay (1988) 13 NSWLR 639, does support the view that an executor is under a duty to place all relevant evidence before the Court, whether this supports the plaintiff or the defendant; and I note at p.655 in the same case, Hope, J.A. said that, subject to one matter, he otherwise agreed with the reasons the President had given. However, that view was by no means necessary to the decision in the case; and I note that Hope, J.A. does not refer to the particular passage specified. When one goes to the authorities relied on by Kirby, P. in support of his statement, it seems clear to me, with respect, that they do not support the very broad statement to which I have referred.

The first case referred to is the case of In the Will of Lanfear (1940) 57 WN(NSW) 181 at 183 where Williams, J. said this:

In an ordinary case, especially where the estate is a small one, it is the duty of the executors either to compromise the claim, or to contest it and seek to uphold the provisions of the will. For that purpose they should place all the relevant evidence before the Court relating, not only to the case generally, but to any particular circumstances which the Court should take into consideration relating to any particular gift in the will.

That was the passage approved and relied on in the other cases to which Kirby, P. referred, namely Re Hall Deceased (1958) 59 SR(NSW) 219 at 226, and Valijev v. Public Trustee (1974) 2 NSWLR 497 at 503. The point at issue in those three cases was the obligation of the executor to present evidence on behalf of beneficiaries seeking to uphold the will, and the limited circumstances in which it is appropriate for beneficiaries to seek to become involved in such proceedings on their own account.

In my opinion, underlying that principle is the notion that it is the executor who takes an adversary role against the plaintiff, so as to uphold the will and support the interests of beneficiaries. If it were thought that the executor had a duty to bring forward evidence supporting the plaintiff's case, then, in my opinion, the principle that normally beneficiaries should be excluded from taking an adversary role in the proceedings would be very seriously undermined. In my opinion, when one reads the passages relied on by Kirby, P. in Dijkhuijs v. Barclay, it is clear that the obligation of the executor to put forward all relevant evidence is qualified by the words which begin the sentence in question, namely "for that purpose", "that purpose" being to contest the claim and seek to uphold the provisions of the will; and thus it seems to me clear that those three cases all proceeded on the principle that the executor properly takes an adversary role in Family Provision Act proceedings.

For those reasons, I do not accept that the Court is precluded from looking now at whether the plaintiff's own evidence shows a reasonable cause of action, because I do not accept that the executor is obliged to put on material which supports the plaintiff's case.

The second preliminary point which Mr. Hallen made was that, because the Act specifies that the question of adequate provision for proper maintenance should be decided as at the time of the hearing, it was inappropriate to look at the question in a summary judgment application in advance of a fully contested final hearing.

Mr. Slattery submitted that the hearing contemplated by the Family Provision Act for determining the question could be a summary judgment application, having regard to the circumstance that that kind of application is expressly provided for in the Supreme Court Rules. To put the matter another way, the relevant time is when the Court makes a decision which determines the plaintiff's case, whether that be a final hearing or after all the evidence has been put on, or a summary judgment application, such as the present.

I do not think the Family Provision Act should be read as precluding the application of the summary judgment provisions. It does operate in a context where the Supreme Court Act and Rules provides for ways in which disputes can be determined, and one of those ways is by summary judgment applications. I do not think that one can get from the Family Provision Act an intention to preclude the application of that rule.

However, in a matter in which so much is at large, and so much subject to discretion, I would accept that it would be in rare cases that the application of the summary judgment provisions would be appropriate. I think it is fair to say that this case is either such an exceptional case, or at the least, very close to being one. It may also be one of those cases adverted to by Mr. Hallen where, if the plaintiff fails at a final hearing, it would be appropriate that the costs order ensure that the beneficiaries are not disadvantaged at all by the bringing of the proceedings.

It seems to me that it would be very difficult to make a finding that a person with assets which I have indicated, with the income from shares which I have indicated, with some further undisclosed income from professional employment, and whose children have a very substantial provision for them which I have indicated, could be considered to have been left without adequate provision for proper maintenance. If these proceedings went to hearing without the plaintiff giving full and meticulous disclosure of his financial position, and particularly his income, then I am certain that this case would have to be dismissed. However, I am not sure that I can take that step when the plaintiff says that he does intend to disclose the income, and the income, apart from the share income to which I have referred, may just conceivably be such that some suggestion of need might be based on it.

Having regard to the directions and communications between the parties, there is no doubt that that material disclosing income should have been on by now, and I should have been able to deal with this application on that basis. However, I am not, at this stage, convinced that I should not permit the plaintiff an opportunity to rectify this defect. There is some force in what Mr. Hallen says about up-dating affidavits before the hearing; but in my opinion, that does not absolve a plaintiff from putting on full evidence of the plaintiff's relevant financial circumstances when the plaintiff's case in chief is required to be filed.

Subject to further submissions, I am inclined to take this course, namely to order that the proceedings be summarily dismissed unless, within a specified time, the plaintiff puts on affidavits which fully and frankly disclose his complete financial situation, including income and such other matters as I may decide appropriate following submissions. When that affidavit is filed, I would give leave to the defendant either to refer the matter back to me, so that I could complete this judgment on the basis of that further information, or else take such steps as may be appropriate to bring the matter on for final hearing.

I direct that within 21 days, or such further time as may be agreed between the solicitors for the parties, the plaintiff file and serve an affidavit which makes full disclosure of assets and liabilities, income and outgoings, in respect of himself and his immediate family, that is, himself, his wife and his three children, and whether held or received directly or through companies or trusts or otherwise.

I give liberty to the parties to apply by arrangement with my Associate if there is any disagreement about an extension of time for this affidavit. When that affidavit has been provided, the parties may re-list the matter before me by arrangement with my Associate.

Warren v McKnight [1996] NSWSC 419

At a glance

Court

Decision date

Source

Judgment (49 paragraphs)

Warren v McKnight [1996] NSWSC 419 (9 September 1996)

Parties

Cases Cited (3)