O'LOUGHLIN v O'LOUGHLIN SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MASON P, MEAGHER and HANDLEY JJA 15 October 1997, 15 October 1997 [1997] NSWCA 237 FAMILY PROVISION — provision for adult son — provision to establish career FAMILY PROVISION — protective trust for adult son — inadequate provision The appellant and the respondent were the only sons of the deceased. The deceased left half his residuary estate to one son, his executor, absolutely and half on protective trusts for the other. The executor son had substantial assets. The other son who had no assets and had no success in his chosen vocation, architecture, applied for further provision. The value of the residuary estate was approximately $370,000. The Master awarded substantially the whole estate to the applicant. HELD: (1) The deceased was not obliged to provide funds to establish the applicant in private practice as an architect. In so holding the Master fell into error. (2) The provision in the protective trust was inadequate and the appropriate provision was half the estate absolutely. Handley JA This is an appeal by the former executor of the estate and a principal beneficiary from orders made by Master Macready under the Family Provision Act on 28 November 1996. The appellant and the respondent are the only children of the late Francis James O' Loughlin who died on 25 June 1994. The deceased was then in his late seventies or early eighties. The plaintiff, Jeffrey, is the younger of the two brothers being born in 1942, Peter being born in 1940. The deceased left a will dated 28 May 1994 under which he gave a series of legacies to his grandchildren and others. He directed that the rest of his estate be divided into two half shares. One half share went to Peter James O' Loughlin, the executor, absolutely. The other half share the deceased directed should be held by the executor on protective trusts for the benefit of Jeffrey. The protective trust extended to both capital and income and, subject to distributions made for the benefit of Jeffrey, the remainder was held in trust for the children of Peter. The son, Peter, pursued a business career, is married, has two children, and has accumulated substantial assets. The plaintiff, Jeffrey, qualified as an architect but has not hitherto practiced regularly in his chosen profession and has had a number of set backs in his health and in his chosen career. At the time of his death he was unemployed and living on Social Security in a hotel at Mittagong. For whatever reason life has not hitherto treated him particularly well. Because of Jeffrey's lack of success in his chosen profession he was not able to maintain regular contact with his father, who lived in Adelaide until moving into a retirement village at Shoal Bay in 1993, not long before he died. Because of his greater resources, and because his career involved extensive travel within Australia, Peter was able to maintain regular personal contact with his father in Adelaide. 2 UNREPORTED JUDGMENTS With the advancing years it became necessary for the deceased to move into a retirement village and Peter arranged for his father to come to New South Wales and move into a village at Shoal Bay and, from then on, Peter helped manage his father's affairs under a power of attorney. Later the deceased moved into a nursing home at which stage Peter took over the entire management of his father's affairs. At the trial Jeffrey established a clear case for further provision out of his father's estate. Because of the nature of the protective trust established by the will, and the conflict of interest which it created, it could not be seriously argued - and it was not argued by Mr Holmes QC for Peter - that the trust made proper provision for Jeffrey's undoubted needs. At the date of his father's death he was substantially penniless, had no secure accommodation, and was not able to make any effective move to re-establish himself in his chosen career. There was therefore power to make an order for the benefit of Jeffrey by way of further provision out of the estate. Unfortunately Peter and his legal advisers failed to place proper evidence before the Master to identify the assets and liabilities of the estate and their value as at the date of trial. Peter also failed to provide adequate information as to his own financial position, although there is no doubt that he was comfortably off. The Master concluded that the distributable estate amounted to $481,293.56 but from this the legacies totalling $110,000 and accrued interest had to be deducted. There was also the need to make proper allowances for the costs of the proceedings, at the very least the executor's costs, which were a testamentary expense. Counsel for Jeffrey stated on the first day of the hearing before the Master that there was no longer any challenge on Jeffrey's behalf to the legacies. This meant that the estate which the Master had to consider for the purpose of exercising the Court's powers under the Act was, on the evidence before the Master, some $370,000 less the costs of the proceedings. The Court has had further evidence on appeal relating to the value of the estate which must be considered for the purposes of the Act. It seems that the estate is in the order of that found by the Master, taking into account the notional estate created by prescribed transactions for the benefit of Jeffrey and Peter during the relevant period before their father's death. The Master referred to Jeffrey's needs, which were clear enough. He considered that Jeffrey was not subject to any criticism because his circumstances, and distance, had prevented him maintaining a close personal relationship with his father. I would respectfully agree with this finding. There is no suggestion of any disentitling conduct on the part of Jeffrey. Jeffrey's needs, which the Master considered should be addressed by an order under the Act, were for reasonably secure accommodation and a further amount needed to enable Jeffrey to re-establish himself as a professional architect in private practice on his own. I have no doubt that Jeffrey's needs for secure accommodation constituted a clear entitlement on his behalf to an order up to the extent of half the estate. However, I have not been persuaded that the deceased had any obligation to enable Jeffrey, at the age of 53, to re-establish himself in private practice as an architect. The Master thought that this represented the plaintiff's only option at this stage of his life. If that is a current assessment - and I am not sure that either the Master or this Court is really able to make more than an educated guess in that regard - his prospects, I would think, are somewhat bleak. URJ O'LOUGHLIN v O'LOUGHLIN (Handley JA) 3 Whether one looks at the matter in terms of the moral duty of the deceased, or the proper provision to be made for an adult son of 53 years of age with professional qunlifications, I am of the view that the Master fell into error in concluding that any obligation that the deceased had, or any power which the Court had, to make proper provision for Jeffrey extended to providing him with funds to enable him to set himself up in private practice as an architect in Sydney at the age of 53. In any event whether one looks at the matter in terms of the moral obligation of the deceased, or under the constraints of Singer v Berghouse, one looks at what is the proper provision to be made by the Court in all the circumstances, it does not seem to me that the Court's order in Jeffrey's favour should go beyond giving him half of the available estate. The father enjoyed a close personal relationship with Peter who was able to look after his father in his twilight years and, in the circumstances, I do not think it would be appropriate to make an order in Jeffrey's favour for the whole estate which is, effectively, what the Master did. In doing that, in my view, the Master, with respect, fell into error and I would, therefore, set aside his exercise of discretion and, on a re-exercise, I would propose that an order be made that Jeffrey receive one half of the available estate after deduction of the legacies and all proper costs and expenses. Credit must be given by both brothers for the prescribed transactions from which they benefited. These have been quantified as $14,000 in the case of Jeffrey and $36,961.30 in the case of Peter. In addition there have been distributions made in Jeffrey's favour since the death which the Court is informed total $158,151.14. I would, therefore, propose the following orders. 1. Appeal allowed. 2. Set aside the order of the Master. 3.In lieu thereof substitute an order that Jeffrey receive absolutely half of the residuary estate of the deceased bringing into hotchpot the prescribed transactions in favour of both Jeffrey and Peter and giving credit for all distributions made since the death of the deceased. Mason P IJ agree. Meagher JA I also agree. Mason P Mr Justice Handley has proposed orders dealing with issues other than costs, with which Mr Justice Meagher and I have agreed. We have heard debate on the costs issue. The letters that were tendered have been marked as exhibit #A. The transcript will show the debate, and will show Mr Gruzman's acknowledgment, albeit reluctant, that the offer of an indemnity costs order is more in his client's interests than unravelling the full consequences of the exhibit #A Calderbank letter. The orders of the Court, therefore, are those proposed by Mr Justice Handley and, as regards costs, the costs of the trial remain undisturbed. The Public Trustee is to have his costs out of the estate on a submitting basis. The first respondent is to pay the appellant's costs on an indemnity basis, including the costs of the fresh evidence affidavits. The respondent is to have a certificate under the Suitors Fund Act. Meagher JA I agree. Handley JA I agree. 4 UNREPORTED JUDGMENTS Mason P Those orders are the orders of the Court. (1) Appeal allowed. (2) Set aside the order of the Master. 5 (3) In lieu thereof substitute an order that Jeffrey receive absolutely half of the residuary estate of the deceased bringing into hotchpot the prescribed transactions in favour of both Jeffrey and Peter and giving credit for all distributions made since the death of the deceased. (4) The costs of the trial remain undisturbed. 10 (5) The Public Trustee is to have his costs out of the estate on a submitting basis. (6) The first respondent is to pay the appellant's costs on an indemnity basis including the costs of the fresh evidence affidavits. (7) The respondent is to have a certificate under the Suitors Fund Act. Counsel for the appellant: H Holmes QC Solicitors for the appellant: Stewart Cuddy & Mockler 20 Counsel for the respondent: A Gruzman Solicitors for the respondent: B M Salmon Layton & Co3040