Wilcox v Wilcox

Supreme Court of NSW|2014-02-13|Before: Pembroke J

Introduction 1This is a sorry case brought by two adult grandsons seeking orders that provision be made for them out of their grandfather's estate. The claim of the second plaintiff was settled and requires no adjudication or comment. The claim of the first plaintiff, Robert Wilcox, a 46 year old single man, remains to be resolved. His claim has limited merit but I have reached the conclusion that it is appropriate to make some order. 2The defendant is the executrix and primary beneficiary of her father's will. She is the mother of Robert Wilcox who is her eldest son. The will is dated 21 August 2002. The testator died on 17 January 2010. Probate of the will was granted on 17 October 2011. The inventory of property forming part of the grant of probate, lists assets consisting of real estate, shares in companies and monies on deposit having an estimated or known value of $5,518,176. 3I said enough in my first judgment [2012] NSWSC 1138 to make clear that a substantial basis of Robert Wilcox's claim seems to have been a highly developed and unhealthy sense of entitlement. By his will, his grandfather, the testator, left his direct and indirect interests in a number of pastoral properties at Walgett to the defendant, his daughter. This was reasonable and natural. I have no doubt that the testator anticipated that his daughter would, in all probability, eventually pass on the properties, or a substantial portion of them, to her sons. However, he was content to leave that question ultimately for his daughter's judgment. Unfortunately, instead of waiting for events to run their natural course, the sons sued their mother as executrix of their grandfather's estate, resulting in unquantifiable family discord, substantial cost and considerable hardship. 4This was the context in which I concluded in my first judgment that, even though he was a mere grandson, Robert Wilcox was an eligible person who may apply to the court for a family provision order out of the estate of the deceased within the meaning of Section 57(1)(e) of the Succession Act 2006 (NSW). The purpose of this second hearing was to establish what precise order, if any, should be made. 5I explained the necessity for this further hearing in my first judgment as follows: 27 ... there was an assumption in the plaintiffs' case that only the transfer to them of some or all of their grandfather's agricultural properties would do. They did not, and would not, consider a monetary award which might enable them to provide for their future and to purchase a home in Sydney or elsewhere. This must be part of any consideration of what is adequate and proper. I do not rule it out. And I have misgivings about the ability of the plaintiffs, by themselves, to make a success of a grazing enterprise. 28 But on any view, it is not possible for me to make an informed decision in accordance with the statutory criteria and the exposition of principle explained by the High Court of Australia in Vigolo v Bostin and Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201, without adequate financial information. Counsel for the defendant is in the same unfortunate position as I am. ... ... I have been left in the position of having no means of knowing, and no opportunity of assessing, whether the transfer to the plaintiffs of the three properties of their choice, will achieve the statutory objective, let alone be practical. A wise and just testator would expect nothing less. After all, there is no point setting up the plaintiffs in an agricultural enterprise that is doomed to fail.

Court Appointed Expert 6To facilitate the determination of the question of relief, to limit the costs and to attempt to ensure the just, quick and cheap resolution of the proceedings, I appointed a court expert pursuant to Rule 31.46 of the Uniform Civil Procedure Rules 2005 (NSW). All parties concurred in this decision. And I was informed that the plaintiffs not only approved the identity of the proposed expert but encouraged it. In the result, Mr Graham Peart produced a report to the court dated October 2013. When the report was received, the plaintiffs sought and obtained an adjournment of the further hearing. They did not like Mr Peart's conclusions. However, despite being invited to do so, they did not seek clarification of the report, raise any questions or request a supplementary report. 7The instructions to Mr Peart were relevantly as follows: The court is considering whether the pastoral holdings currently owned, controlled and operated directly and indirectly by Mrs Patricia Anne Wilcox (the mother) should be divided between the mother and her two sons (Benjamin Wilcox and Robert Wilcox). Assuming there were to be such a division, please express your opinion as to whether any particular division of those holdings would be economically feasible and workable, bearing in mind: (a) the production capacity, income potential or other features of each of the respective holdings; (b) the objective of ensuring that any such divided holdings be independently viable; (c) the desirability of attempting to ensure that the mother's quality of life is not diminished. 8I have referred elsewhere to the difficulties that sometimes result from competing experts' reports. In AMP Capital Investors Limited v Parsons Brinckerhoff Australia Pty Ltd [2013] NSWSC 1633 at [29], I said: A tangle of competing experts engaged on behalf of individual parties in orchestrated adversarial combat is frequently an unsatisfactory means of assisting the court to arrive at an appropriate outcome. There is often a better way. In Abbey National Mortgages Plc v Key Surveyors Nationwide Ltd [1996] EWCA0 Civ J0205-1; [1996] 1 WLR 1534 the Master of the Rolls, Sir Thomas Bingham, explained that For whatever reasons, and whether consciously or unconsciously, the fact is that expert witnesses instructed on behalf of parties to litigation often tend, if called as witnesses at all, to espouse the cause of those instructing them to a greater or lesser extent, on occasion becoming more partisan than the parties. There must be at least a reasonable chance that an expert appointed by the court, with no axe to grind but a clear obligation to make a careful and objective valuation, may prove a reliable source of expert opinion. And in Newark Pty Ltd v Civil & Civic Pty Ltd (1987) 75 ALR 350, Pincus J said at 351: Experience suggests that too often expert witnesses display a degree of partiality, whereas the court appointed expert may be expected to be indifferent as to the result of the case. (emphasis added) 9My own view is that the opportunity to have a court appointed expert pursuant to Rule 31.46 is a valuable but under-utilised part of the armoury of the court. Nothing adds to the time and expense of litigation quite as much as that which occurs when individual experts, separately retained and paid for by each of the parties, take up court time by their own adversarial jousting. Not only is the process time-consuming, but the expense of reports prepared by experts in the fields of accounting, engineering, valuation, town-planning and many other areas where courts require sometimes technical assistance, is disturbing. 10A further problem is an occasional lack of objectivity. Despite professing to have read and understood the Expert Witness Code of Conduct, it sometimes seems difficult for an individual party's expert to appreciate that his or her role is to assist the court, not to advocate the case of the party who is paying his or her fees. The difficulty is compounded because experts retained by individual parties frequently become steeped in their client's case. They spend time in conference with the client or its solicitors and counsel; they address questions shaped by them; they submit drafts for their consideration, review and editing; and consciously or sub-consciously, they are inclined to absorb the prejudices, preconceptions and loyalties of the client. 11Another obvious problem is that a multiplicity of individual expert reports, which are not controlled by the court, and which suffer from some of the defects that I have mentioned, results in the process of dispute resolution becoming more complicated and cumbersome that it needs to be - all the while taking up court time that could be made available to other litigants and generating substantial fees for the experts and lawyers. I do not think this is in the interests of justice. It is true that not every case will be appropriate necessarily for the appointment by the court of its own expert, but in my view the majority probably is. And where it is necessary to do so, there are means available to protect the interests of the parties. In this case, for example, the parties were united in approving the identity of the court appointed expert; they were given the opportunity before the hearing to seek clarification of the report, raise questions or request a supplementary report; and they were able to cross-examine the expert. I even asked them to agree on instructions to the expert - which they were unable to do. In a rare case, a party might be given leave to call its own expert if the circumstances justify it and the application is timely. 12I am satisfied in this case, that the court appointed expert, Mr Peart, is a reliable source of independent expert opinion. He is, in my view, experienced, knowledgeable and impartial. I am grateful for his assistance. His conclusion, which I accept, is that division of the aggregated holdings on which the pastoral business is conducted, in order to provide for the transfer of part of the land to the plaintiffs or either of them, was not economically feasible. In the particular circumstances of this case, no division of the holdings would permit either the defendant or her sons to have a viable agricultural unit. 13No doubt partly because of the evidence of Mr Peart, counsel for the first plaintiff stated at the commencement of his address that he did not propose to advance submissions in support of the transfer to the first plaintiff of some or all of the land. He confined his submissions at the conclusion of the hearing to the following two claims: 6. In the further alternative to orders 2 - 5, the [first] plaintiff is to be paid a lump sum and/or instalments of $1,100,000 within 24 months of the date of this judgment (or such other time as the Court considers appropriate). 7. In the further alternative to orders 2 - 6, the [first] plaintiff is to be paid a sum of $40,000 annually from the estate of the deceased, with the annual date for payment being the date 28 days after judgment (or such other time as the Court considers appropriate). 14I do not therefore propose to undertake any detailed analysis of whether it is feasible, contrary to Mr Peart's opinion, to divide the aggregate holdings in some way so as to create separate viable agricultural units. Nor do I need to consider counsel's criticisms of Mr Peart in relation to this central conclusion. The issue of division of the land into economically feasible parcels no longer arises. And in any event, although it did not seem to be fully appreciated, it is complicated by the fact that, as I explain in paragraph [22] below, the estate does not itself own each parcel of land. For practical purposes, the only question of reduction in the land holdings of the estate that arises is that which follows indirectly from proposed Order 6, if I were disposed to make it. It was acknowledged that in order for the estate to make a payment of $1.1 million, part of the land under its control would need to be sold.

Appropriate Order 15For the reasons that follow, I have concluded that the payment of a capital sum of $1.1 million would be too generous and is greater than is necessary to ensure adequate provision for the first plaintiff's proper maintenance or advancement in life having regard to the unique circumstances of the case, the position of the defendant and after giving due weight to the intention of the testator expressed in his will. On the other hand, the payment of $40,000 per annum, is with some qualifications, more appropriate. I will make an order to that effect. I will also make a further order which I explain in paragraph [36] below. 16There is sometimes a misconception by claimants in family provision cases that the court's role is to achieve 'an overall fair' disposition of the deceased's estate. This is wrong and muddled: Gorton v Parks (1989) 17 NSWLR 1 at 6. As Hallen J said in Nicholas v Nicholas [2013] NSWSC 697 at [117]: It is not part of the court's function to achieve some kind of equity between the various claimants. The court's role is not to reward an applicant, or to distribute the deceased's estate according to notions of fairness or equity. Nor is the purpose of the jurisdiction conferred by the Act to correct the hurt feelings, or sense of wrong, felt by an applicant. Rather, the court's role is of a specific type and goes no further than the making of 'adequate' provision in all the circumstances for the 'proper' maintenance, education and advancement in life of an applicant. And in Cooper v Dungan (1976) 50 ALJR 539 at 542, Stephen J stated that the court should be vigilant in guarding 'against a natural tendency to reform the testator's will according to what it regards as a proper total distribution of the estate'. The position applies à fortiori to grandchildren who only have an entitlement to bring a claim in the limited circumstances specified in Section 57(1)(e) of the Act. 17It is true that the assessment of what is adequate 'involves a broad evaluative judgment which is not to be constrained by preconceptions and predispositions': Slack v Rogan [2013] NSWSC 522 at [126]. But as I sought to emphasise in my first judgment at [23]: The court does not simply ride roughshod over the testator's intentions. I have no mandate to re-write the will with a broad brush. The court's power to make an award is limited. The purpose of the discretionary power under Section 59(1) is to redress circumstances where 'adequate provision' has not been made for the 'proper maintenance, education or advancement in life' of the claimant. The adjectives 'adequate' and 'proper' are words of circumspection. They imply no more than is necessary. I should ensure that 'adequate provision', rather than generous provision, is made, having regard to the burden on the defendant. (emphasis added) 18In this case, I have already held that the first plaintiff was an unimpressive witness. He gave further evidence at this hearing that only reinforced my reservations. In particular, he had a wholly unrealistic belief in his ability to own and operate an agricultural property. And he could not shake his deeply ingrained sense that he was destined to take over some or all of his grandfather's grazing enterprise. 19Robert Wilcox's ultimate inheritance of some of the grazing properties may or may not come to pass in the fullness of time. There was some evidence at the first hearing that the defendant's response to the commencement of proceedings against her was to vary her will to exclude her two sons. I was informed that her intention has now changed in the case of the second plaintiff. I do not exclude the possibility that it will, in due course, also change in the case of the first plaintiff. If the defendant does not make adequate provision in her will for the first plaintiff, her estate may face a stronger claim for a family provision order pursuant to the Succession Act than her father's estate has faced in this case. 20But to return to the present. A key aspect of this case is that the testator was, in my view, quite reasonably entitled to take the view that his daughter should receive the entirety of his estate in the first instance and that any further disposition of that property should be left to her judgment. After all, she is a part owner of some of the properties, a shareholder in some of the companies, and an equal partner in the pastoral business. Despite the grandfather's expectation that his grandsons would one day take over the grazing enterprise, things change, life moves on and nothing remains static. The second plaintiff, for example, now has a disability that makes it impractical for him to conduct any grazing operation. One might well think that the best person to judge what is in the best interests of the grandsons, at the appropriate time, is their mother.

Mrs Wilcox & Wangrawally Pastoral Company 21I repeat, for Robert Wilcox's benefit, that the evaluative process that the court undertakes is not a simple comparison of the defendant's net wealth with that of the claimant. The exercise of determining whether a family provision order should be made is a far more limited one; one that is constrained by the statutory criteria set out in Sections 57-60 of the Act and the principles established by the courts in relation to those provisions. I have endeavoured to summarise the appropriate approach in paragraph [17] above. 22The difficulties facing the defendant are an important feature of the evidence and I have taken account of them. The defendant and her father were equal partners in the business known as the Wangrawally Pastoral Company. The business runs sheep and cattle on land consisting of eight parcels. Several of the parcels are adjoining. The four major parcels are on either side of the Walgett Carinda Road. The testator owned the parcels known as 'Newmans', 'Allawa' and 'Uno'. The parcels known as 'Wangrawally' and 'Taylors' are owned by Gidgerygah Pty Ltd. The parcel known as 'Barwon Vale' is owned by the defendant and Sanderson Estates Pty Ltd. The parcel known as 'Punches Plains' is owned by the testator and Gidgerygah Pty Ltd. And the parcel known as 'Gidgerygah' is owned by I F Sanderson Pty Ltd. 23The testator owned the shares in Gidgerygah Pty Ltd; some but not all of the shares in I.F Sanderson Pty Ltd; and some but not all of the shares in the Sanderson Estates Pty Ltd. The shares in those companies not owned by the testator are owned by the defendant. Robert Wilcox seemed to think that all eight parcels of land were 'in play' and were available for distribution to him. His counsel pointed frequently to the evidence of the aggregate value of the properties being $15.2 million. This is not really the point and the valuation figure is misleading. I am, of course, only authorised to make an 'order for provision out of the estate of the deceased person': Section 59(2). I referred in paragraph [2] to the inventory of property belonging to the estate. 24In any event, the court appointed expert, Mr Peart, expressed reservations about the assumed carrying capacity on which the valuations were based, particularly having regard to the drought conditions which have prevailed during the last eighteen months and especially since the date on which the valuations were undertaken. If Mr Peart's pragmatic reservations are taken into account, then the aggregate value of all of the properties, for what its worth, is much less than $15.2 million. He was, as I have said, impartial. 25The security and cash position of the partnership business is as follows. The properties are all heavily mortgaged and cross-collateralized. The mortgages secure a total business debt of $2.565 million with an annual interest cost, until the next rate rise, of almost $200,000. Stock numbers have been reduced progressively as the drought has encroached and feed has diminished. In his October report, Mr Peart predicted a profit after expenses of $106,688 for the year ended 30 June 2014 and $65,691 for the year ended 30 June 2015. He revised these figures when he gave evidence at the hearing because of the continuing drought and the inevitable consequential reduction in the cattle herd. He said '... when I was there on the property in October, the cattle herd had already been cut in half because of the drought, and the drought has only got considerably worse since then'. 26Mr Peart explained that the reduction in cattle numbers will result in reduced income and reduced profit, if any. In fact, Mr Peart's revised predictions were that for the years ended 30 June 2014 and 2015, the pastoral business would more likely suffer losses of approximately $39,000 and $475,000 respectively. In addition to his budget predictions for the years ended June 2014 and 2015, Mr Peart also carried out a ten year historical review of the profit and loss reports of the business. Based on that review, and his own knowledge, he expressed the following conclusions: The ten year review of Profit & Loss reports on the business show that this is a high risk business. Cash reserves or borrowing capacity by mortgage and loans must be available to cover long periods of losses, ie six years in a row 2004 - 2009. (emphasis added) 27There are some other matters that I should mention. Mr Peart's inspection showed 'a rundown farm where little money had been spent on repairs and maintenance in the past. Houses and sheds are in poor condition and many have been damaged by flood water'. The business overdraft is at or near its capacity limit of $330,000. The defendant allows herself drawings from the business of only $1,000 per month. She has already paid on behalf of the estate approximately $185,000 for legal costs in connection with this litigation and $228,736 representing income tax, rates, outgoings and other legitimate expenses for which she is liable as executrix of the estate. Although I have been at pains to point out that the defendant's personal position is not of direct relevance, her individual income tax return for the year ended 30 June 2012 show a modest average annual taxable income for the period 2008 - 2012 of $97,527.

Robert Wilcox 28I should now turn to Robert Wilcox. He has not made a financial success of his life, despite being given a better start than most young men could have expected. Among many other things, his grandfather ensured that he received a sound education and paid his tuition and boarding fees at The King's School. No one is responsible for the position in which Robert Wilcox now finds himself, except himself. He may not own his own home and he may not have made a lot of money from his employment over the years, but he has no one else to blame. His unhealthy sense of entitlement may have constrained his ambition. Like many an expectant heir before him, he has not made the most of his opportunities, imprudently assuming that he and his brother would inherit their grandfather's estate. And, as I said in paragraph [22] of my first judgment, he gave no thought to the priority that his mother naturally deserved. 29Robert Wilcox's current financial circumstances are modest but they are not utterly desperate. In court, he was at all times well-groomed and presentable. He said that he has been in a long-term stable relationship with a country girl from Cootamundra for over ten years. He resides in Darling Point in shared accommodation. He has been self-employed since at least 2001 and has his own ABN. He has been the proprietor of several businesses. These include a mechanical repair and maintenance business and a tree-lopping and maintenance business. Neither business has strictly 'failed' and Robert Wilcox has not been made bankrupt. He simply said that the businesses became 'too hard'. He is in communication with his father who is separated from his mother and lives in Lightning Ridge. His father recently won approximately $1.3 million playing Keno. 30Robert Wilcox clearly has skills and expertise in connection with heavy machinery of the type used in agriculture, mining and for land clearing purposes. However, he seemed to wish to downplay the prospect of being able to make a living in that field. He gave the following affidavit evidence: Although my mechanical skills mean I could obtain work, for example, for a mining company, the income I would earn, although perceived to be generous as an employee under the current tax regime, I would be lucky to earn $100,000 net, whereas running the family agricultural business on my grandfather's estate I could generate income of approximately $2 million to $2.5 million per year. 31In the witness box however, he asserted generally that he could get no work in the mining industry, and made vague statements about the global financial crisis. But there was no adequate evidence of his having tried to secure gainful employment. He said simply that there was no work and that his uncle told him that they were turning people away. I doubt that he was sufficiently motivated to find work. His delusional insistence on his entitlement to own and operate his grandfather's pastoral properties has I suspect, operated as a self-imposed impediment to his advancement in life. 32At least Robert Wilcox has no debts, other than a solitary debt to the Australian Taxation Office, with which I will deal separately. He uses an accounting firm known as Grigg & Bligh-Jones to prepare his financial statements and income tax returns. For the years ended 30 June 2012 and 30 June 2011, his income from contracting fees was $64,983 and $76,454 respectively, from which he employed sub-contractors, hired equipment and expended not inconsiderable amounts on advertising. He owns a motor vehicle which is used in his business and a quantity of tools of trade, most of which is kept in a rented storage facility. 33He currently receives unemployment benefits in the sum of $510 per fortnight. He said that this allowance 'supplements the little bit of money I earn out of the tree business. It helps me pay the rent'. His recourse to the Newstart allowance seems to be intermittent, as and when he thinks it can be justified. He has no current injuries although his counsel wished to emphasise several accidents that he had suffered in the past. They were relatively minor however and even Robert Wilcox did not appear to wish to overstate them. The debt to the Australian Taxation Office is approximately $107,000. I was informed that each time Robert Wilcox goes back on the Newstart allowance, the tax debt is frozen and interest ceases to accrue. Nonetheless, it remains a considerable burden, although I have to say that Robert Wilcox was remarkably unconcerned about it.

Wise & Just Testator 34In these circumstances, I think that a wise and just testator, with knowledge of the circumstances at the date of hearing, would make some limited provision for his grandson. He would prefer to see the debt of $107,000 to the Australian Taxation Office discharged. And, without detracting from the core intention to leave his interests in the companies and pastoral properties to his daughter, he would, I think, wish to ensure that his grandson received a modest income supplement to assist him with the expenses of his life and work. Robert Wilcox himself proposed that, if he were to receive a payment from the estate in the nature of an annuity, its commencement could be deferred for up to two years - in recognition of the harsh drought conditions that currently afflict the pastoral business which his mother is continuing to run. I propose to adopt that suggestion with the additional qualification that the term of the annual payments not be indefinite but that the payments run for seven years from the commencement date. 35This will result in Robert Wilcox being debt free. In addition, if he continues in either business that he has conducted over the last decade, or obtains work in an employed capacity, the annual payment of $40,000 will constitute a modest, yet secure, safety net for a number of years until he is approximately fifty-five years of age. By that stage, his mother, if alive, will be almost eighty years old and his father, if alive, will be older still. I would hope that the damage to family relations would by then have been repaired and that Robert Wilcox's future financial prospects will be improved. 36I do not accept that Robert Wilcox will be unable to obtain gainful employment in the future - especially once he has been forced to recognise that his grandfather's pastoral properties, or some of them, will not for the time being be handed to him on a plate. He has been moderately successful in the past. But since his grandfather's death in 2010, I doubt whether he has tried very hard to maximise his income-earning potential. He has allowed himself to be side tracked by the litigation that he commenced against his mother. In my view, his problem has been a lack of motivation rather than a lack of skill or expertise. I will make an order that he be paid $387,000 out of the estate of the deceased - $107,000 within 90 days and the balance by seven annual instalments of $40,000 commencing on 21 February 2016. 37I am satisfied that the orders that I propose to make will not cause undue hardship to the estate or to the defendant. The evidence satisfies me that they are affordable. I have structured the payments in such a way as to minimise the hardship to the estate. In the aftermath of this litigation, the estate will be required to meet a number of significant expenses, including the costs of the plaintiffs and the defendant, assuming that I make the usual order. There is also the sum of $228,000 that the defendant has already paid on behalf of the estate. Those amounts are and will be greater than the capital sum of $107,000 that I propose to award to Robert Wilcox, or the deferred annual payments of $40,000. If it is necessary for the estate to sell any property to meet its liabilities, it will not be simply because of the payment of $107,000 to Robert Wilcox or the annual payments of $40,000 to commence in 2016. The evidence of Mr Peart satisfies me that the sale of a small portion of the land on which the pastoral business is conducted could be achieved without detracting from the core profitability of the business. Given the considerable expenses which the estate is facing, I have no doubt that the necessity of such a sale is under active consideration.

Orders & Costs 38For those reasons, I order that provision be made out of the estate of the deceased (Ian Francis Sanderson) in favour of the first plaintiff by the payment to the first plaintiff of the amount of $387,000, which sum should be paid as follows: (a)$107,000 within 90 days of this order; (b)$40,000 by seven annual instalments commencing on 21 February 2016. 39I propose that the usual order for costs be made but I will entertain written submissions as to any special costs order for which the defendant may contend. 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: 24 February 2014

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