Wolnizer v Public Trustee

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

TUESDAY, 31 JULY 2001 1340/00 - Duncan Frederick WOLNIZER v PUBLIC TRUSTEE JUDGMENT 1 ACTING MASTER: These proceedings are brought pursuant to s 7 of the Family Provision Act, 1982 ("the Act"). The plaintiff is the sole surviving child of the deceased. The deceased died on 4 September 1998. These proceedings were commenced on 11 February 2000. The application, therefore, is brought within time. 2 Under the terms of her will, the deceased made provision for her son to the extent that he was to receive one-third of her estate, her grandson, Matt, was to receive one-sixth of her estate, her granddaughter, Kate, was to receive another one-sixth of her estate, the Bobby Goldsmith Foundation was to receive three-twelfths and the NSW WIRES was to receive one-twelfth of the estate. 3 The reason why the deceased made provision as she did is apparent from a number of sources in the material before me today. It is true, as counsel for the defendant, Mr Flaherty, has said, that this estate comes directly from the estate of her other son, Charles Marcus ("Marcus"), who died in 1988. Both Matt and Kate are the niece and nephew of Marcus and, of course, the grandchildren of the deceased. It would appear that, within the family, there was always an intention that Matt and Kate should receive a benefit. 4 Matt is about 17 years of age and is still at school. Kate is now about 23 years of age and has recently moved away from home. The Bobby Goldsmith Foundation, as I understand it, is an organisation to assist people who suffer from AIDS and, during the latter stages of Marcus's life, that Foundation provided assistance and comfort to him. WIRES is a voluntary organisation, as I understand it, which looks after animals. The evidence is that the deceased loved animals and, in fact, had a cat, and one can assume that is the reason for the provision in the will for WIRES. 5 The evidence on behalf of the plaintiff is that he had a good, loving and caring relationship with the deceased. A letter addressed to Miss Brown of the Public Trustee from the plaintiff was tendered and marked Exhibit 1. In that letter, the plaintiff sought to be recompensed for certain services that he provided to his mother. 6 Although the defendant made submissions on the contents of that letter, in my view, the letter should not be construed in a way which is detrimental to the plaintiff's application. In re-examination, the plaintiff's evidence was that the letter was sent to the Public Trustee, without legal assistance or advice, with a view to trying to reach a settlement. I, therefore, take it as implicit in that response that it was not done on the basis of some sort of mercenary act by a son in respect of his late mother. 7 As Mr Flaherty concedes, the conduct or the quality of the relationship between the deceased and the plaintiff is not in issue. There is no need, therefore, for me to go over the evidence that deals with that relationship. The plaintiff is 53 years old, he is divorced and he has two children, Matt and Kate, who are also beneficiaries of the deceased's estate. The plaintiff, until recent times, was an undischarged bankrupt. His evidence reveals that he has net assets of around $19,000 and no liabilities. He lives in rented accommodation and has, since the dissolution of his marriage, lived in rented accommodation. 8 Currently, the creditors of his bankrupt estate are owed an amount slightly in excess of $118,000. There is in evidence a letter, dated 21 March 2001, from the Insolvency and Trustee Service Australia ("ITSA") which makes it clear what its position is in relation to the plaintiff's assets. The letter indicates that any monies out of the estate, to the extent that it would discharge or go partially towards the discharge of his debts, are to be paid to the ITSA. 9 The estate has a value of approximately $325,000. The defendant's costs are estimated at $22,000, leaving a net figure of about $303,000. 10 The beneficiaries include a minor. Matt is still at school doing Year 12 this year. For both Matt and Kate, the will makes provision that they each receive one-sixth of the estate; however, they do not receive that sum until they reach the age of 30. 11 The evidence today is that the income of the plaintiff between 1995 and 2000 showed a fluctuating income at a high of about $87,000 and a low of about $13,000. The debt under the bankruptcy notice has increased from $102,000 to about $118,000. It would appear on the evidence that there has been no reduction in the debt that is the subject of the bankruptcy proceedings. 12 The plaintiff brings a claim on the basis that he is one of two eligible persons, the other being his father, the former spouse of the deceased and that, as such, the plaintiff has a stronger claim than each of his own children and the two charities. That is, it seems, undeniable. 13 As Mr Chegwidden said in his submissions, neither the charities nor the grandchildren fall into the category of eligible persons. 14 If that were the only matter to consider, then it would be clear that perhaps a substantial adjustment should be made in favour of the plaintiff. However, that is not the only matter to take into account in determining whether there ought to be further provision made out of the estate for the plaintiff. All that submission establishes is that the plaintiff is an eligible person, and, true it is, in one of the two strongest categories of eligible persons. However, in determining whether and, if so, what provision ought be made for the plaintiff in addition to the provision that he already has, there are a number of matters that need to be considered, namely:- (a) whether or not adequate provision was made by the deceased for the plaintiff; (b) what are the plaintiff's needs; (c) whether the provision that has been made by the deceased would enable those needs to be met; and (d) any competing needs of the other beneficiaries. Of course, with the charities, I suppose they would say there is always a need. 15 For the purposes of these proceedings, consideration must be given to the position of the two grandchildren. They are both young. The provision, as it stands at the moment for them, is an amount of slightly in excess of $50,000 each. They may receive part of their legacy by way of maintenance or education between now and when they turn 30, or receive the capital and the interest once they reach the age of 30. In any event, there is money which will assist them to establish themselves in life. Certainly so far as Matt is concerned, there should be no interference with his entitlement under the deceased's will. 16 In determining whether or not additional provision should be made for the plaintiff, it is important to consider some of the authorities that deal with this question. The leading authority of how the Court is to approach such an application, dealing with the requirements of s 9 of the Act, is Singer v Berghouse (1994) 181 CLR 201 at 208-210, where the High Court makes reference to the two stages that are to be approached in determining such an application. The two stages are, firstly, was the provision inadequate and, secondly, what provision ought to be made for the plaintiff. 17 In determining whether or not provision ought to be made their Honours said, at pp 209-210:- "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." 18 The second stage, it is said, involves similar considerations. In this case, of course, there is only one surviving child and that is the plaintiff. However, consideration needs to be given to the testamentary intention expressed by the testatrix in her will. I have already referred to the reasons why provision was made for her grandchildren and also for the charities. 19 At the time that the will of the deceased was made, the plaintiff had his own business. A provision of one-third of the estate, in all probability, was what the testatrix thought was appropriate at the time, the plaintiff having his own business and earning a reasonable income. Other matters that it seems she took into consideration are the matters that I referred to earlier, that is, the assistance and support that the Bobby Goldsmith Foundation gave to her other son, her desire for something to be left to animal welfare, and her desire that some provision be made for her grandchildren. 20 As well as those considerations, the Court is required, in relation to the provisions of the Act and in particular ss 7 and 9, to give weight to the testamentary intentions of the testatrix. There are a number of cases in which the Court makes that abundantly clear. By way of illustration, Young J, in Gillard v Baker (26 May 1994, unreported), said:- "The law up until the predecessor of the current legislation was that a person could leave their property to whomsoever they wished. The Family Provision Act makes inroads into this right by conferring on the court power to vary a person's will, if that person has failed in a duty to an eligible person, and if there has been that failure then the court may make such provision out of the deceased's estate as the deceased ought to have made, for the maintenance, education or advancement in life, to the eligible person. The Act does not permit the court to re-write the will whenever the court thinks it is fair, or it thinks that the deceased has preferred a favourite child to another child. A person's right to make a will as they feel best is a fundamental right in our society and the court is only to interfere if it can see that, because of a failure of a moral duty a person who ought to have been provided for, for maintenance, education or advancement, has not been so provided for." 21 At the time when the will was executed, the plaintiff appeared to be in a reasonable position. The deceased had provided for him from what she thought was a legacy which was appropriate for him. Of course, things subsequently changed and the plaintiff became a bankrupt. There is the problem with the bankruptcy. As I have already indicated, there is a letter from ITSA which has indicated that any provision out of the estate is a provision which falls within the bankruptcy period and the Public Trustee is requested to forward any money that has been provided to the plaintiff, to the extent of the debt, to the ITSA office. 22 This then raises the questions of whether or to what extent any provision is made in addition to the existing provision for the plaintiff and, if so, what that benefit will be to the plaintiff, and what will be the detriment to the other beneficiaries. In Caska v Caska [1999] NSWSC 289, Bryson J addressed such a question. In questioning the utility of making provision for a bankrupt, his Honour said, at [15]:- "The likelihood is that any provision ordered to be made would go to the benefit of creditors, while any benefit ultimately to … [the plaintiff] would be long postponed and its nature and the time of its enjoyment is not possible to predict." 23 There is a distinction, however, between that case and this case, and the distinction goes to the quantum of the debt and the possibility of its discharge by the effluxion of time. The plaintiff has been discharged from his bankruptcy. However, he still has that liability. The amount that is currently owed is just over $118,000. 24 The next matter to consider is what are the needs of the plaintiff. The plaintiff has given evidence of his income between 1995 and 2000. There is also attached to one of his affidavits a number of tax returns and those tax returns are consistent with the oral evidence that he has given. However, I have some difficulty with what is seen as the needs of the plaintiff. In Singer v Berghouse (NSWCA, 23 July 1992, unreported), Sheller JA, with Cripps JA agreeing and Kirby P dissenting, made the following observations, with which the High Court agreed:- "I must say that I find it extraordinary that the appellant presented scant or no evidence as to her present income and outgoings or as to her intentions or needs for the future or as to what lump sum provision applying appropriate discount tables would be required to meet these claims or needs, if they existed. In my opinion, in the circumstances of this case, for the Court, in the absence of any such evidence, to make an order for the payment to the appellant of a lump sum is to do no more than act on speculation and, contrary to the prohibition contained in s 9(2) of the Act, to alter the deceased's disposition of his property in the absence of proof that he has inadequately provided for the appellant." 25 In these proceedings, there is no evidence of what the current needs of the plaintiff are. There is no evidence of what his weekly expenditure is, other than the amount of rent that he is paying. There is evidence of his employment prospects in the film industry. On his own evidence, the prospects are not strong. He has been out of the industry for a number of years and it appears, like many industries, it is one where they prefer younger people. Therefore, it is harder for people of the plaintiff's age to gain employment in his field of experience. 26 The other work that he has been doing is that of a process worker. The work is variable. They ring him when they need him and, in the tax year ended 30 June 2000, his income was about $50,000. It is difficult to see what his needs could possibly be above and beyond the discharge of his bankruptcy. In the absence of any evidence which would establish a need, there could be no provision made for him above looking at the debts of the bankruptcy. 27 Counsel for the plaintiff has submitted that the plaintiff would require, and should receive, a legacy sufficient to discharge the total indebtedness of his bankruptcy and a fund of cash to use as he thinks appropriate. It is submitted that, if the plaintiff is left with a significant legacy, he could either remain living in rented accommodation and have a cash fund available to resort to when necessary, or he could have funds to pay a deposit on modest accommodation in the Sydney metropolitan area. 28 There is nothing to support those submissions, other than in respect of the bankruptcy. In the absence of any such evidence, in my view, little adjustment should be made to the provision for the plaintiff. 29 However, one difficulty I find is that, when the costs of the plaintiff are taken into account, the estate is reduced to $272,000. That amount would probably need to be varied, because I assume, in the absence of an express statement, that those costs have been calculated on a solicitor/client basis, whereas, of course, out of this estate, if any provisions were to be made for the plaintiff, his costs would be paid on a party/party basis. It would seem, however, that perhaps the net amount in the estate would probably be in the vicinity of $277,000. That would leave the plaintiff with an amount of approximately $92,000. 30 In my view, if the plaintiff's debts under the bankruptcy proceedings were wholly discharged, the needs that he has, to the extent of proper evidence before me, would also be discharged. Once those debts have been extinguished, the plaintiff would be in a position to continue his life, without the threat of these debts remaining over his head until payment of the legacy is made. However, the other side of the coin is, of course, that any income that he earns in the future or any assets that he acquires, will not be subject to the bankruptcy. 31 If an amount were provided to the plaintiff to discharge the bankruptcy debts, then the interest on those debts would not continue to accrue. In any event, as I understand it, any moneys earned after the discharge of the debts would be his and his alone, and the balance of the bankruptcy would be written off. Nevertheless, there is still the stigma that attaches to a bankruptcy. In my view, I do not think it is appropriate to make provision for the plaintiff to the extent of any future needs. 32 Any additional provision that should be made for him should be in relation to his existing needs and the needs which have been supported by evidence today. To that extent, I am prepared to make an additional provision to the plaintiff out of the estate of the deceased to the extent of one-twelfth of the estate. That one-twelfth would result in the following adjustment:- (a) the provisions that had been made to both Matt and Kate are to remain untouched; (b) the provision to WIRES is to remain untouched; and (c) the adjustment is to be made to the Bobby Goldsmith Foundation. On my figures, that still leaves the Foundation with a sum of somewhere between $45,000 and $50,000. Therefore, the plaintiff is to receive an additional legacy of one-twelfth of the estate, such additional legacy to be provided from the legacy to the Bobby Goldsmith Foundation. 33 In all the circumstances, I consider this adjustment honours the testamentary intention of the deceased, but it also gives additional provision to the plaintiff which, in the circumstances, ought to be made in his favour. 34 So far as the costs are concerned, the plaintiff's costs are to be paid out of the estate on a party/party basis. The defendant's costs are to be paid out of the estate on the indemnity basis. They are the orders I make. **********

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