Gill v Permanent Trustee Company Limited [1999] NSWSC 394

New South Wales Supreme Court CITATION : Gill v Permanent Trustee Company Limited [1999] NSWSC 394 CURRENT JURISDICTION : Equity Division FILE NUMBER(S) : 1769/98 HEARING DATE(S) : 1, 2 March 1999 JUDGMENT DATE : 30 April 1999

PARTIES : Susan Louise Gill (P) Permanent Trustee Company Limited (D) JUDGMENT OF : Master McLaughlin

COUNSEL : Dr. Christopher Birch (P) Mr. Christopher Harris (D) SOLICITORS : John McDonald & Partners (P) Conway MacCallum (D) CATCHWORDS : Family Provision; Claim by adult daughter; Discretionary trust created by will of testator; Benefit to plaintiff under discretionary trust can be regarded as fairly illusory; Present needs of plaintiff; Competing claims of other beneficiaries under discretionary trust; Uncertainty as to whether a significant asset can be recovered by executor. ACTS CITED : Family Provision Act 1982 CASES CITED : Gregory v Hudson (Young J, 18 September 1997, unreported) DECISION : See Paragraph 45

SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

MASTER McLAUGHLIN

Friday, 30 April 1999

1769 of 1998 SUSAN LOUISE GILL -v- PERMANENT TRUSTEE COMPANY LIMITED

1 MASTER: These are proceedings under the Family Provision Act 1982. 2 By summons filed on 20 March 1998, the plaintiff Susan Louise Gill claims an order for provision for her maintenance, education and advancement in life out of the estate of her mother Winifred Betty Barker (to whom I shall refer as "the deceased"). 3 The deceased died on 22 October 1996, aged 75. She left a will dated 9 August 1996, probate whereof was on 10 March 1997 granted to Carol Lilian Grey, the defendant named in such will. Subsequently, that named executor appointed Permanent Trustee Company Limited as executor of the will of the deceased, that company consenting to such appointment. In consequence, on 12 October 1998 an order in the present proceedings was made by consent, substituting Permanent Trustee Company Limited as defendant in the place of Carol Grey, who had been named as defendant to the summons. 4 The plaintiff was born on 8 September 1954, and is presently aged 44. She was the only child of the deceased. The plaintiff's parents separated in 1972, when the plaintiff was aged about 18. She subsequently attended the University of New England and then Macquarie University, obtaining degrees in Science and Arts respectively. The plaintiff is qualified as a professional psychologist, and has practised as such. 5 In 1976 the plaintiff married her first husband. Of that marriage was born one child, Rahm Adamedes, on 9 January 1979. Subsequently the plaintiff separated from her first husband in 1984, and moved to Lismore. In 1986 the plaintiff married her second husband, Steven Edward Gill. Of that marriage was born one child, Sehran Kalun Ralph Gill, born on 13 January 1986. 6 Shortly after the death of the deceased the plaintiff's father died, on 19 December 1996. 7 The will of the deceased (which occupies some 55 pages) constitutes what has been described as a discretionary trust, of which the named executor (and subsequently Permanent Trustee Company Limited) is the trustee. Various persons, being the plaintiff, her former husband Steven Edward Gill, her two children Rahm Adamedes and Sehran Kalun Ralph Gill, her aunt Joan Freia Gray (sister of the deceased) are named as "Specified Beneficiaries" in the will. Provision is also made in the will for a further category of persons described as "General Beneficiaries". The general effect of the will is to give to the executor in its capacity as trustee an unfettered discretion to effect distributions of corpus and of income not only to one or more of the Specified Beneficiaries but also to one or more of the General Beneficiaries. 8 Pursuant to the discretion given by the will, the named executor has effected certain distributions to the plaintiff and to each of her sons. Those distributions included payments of amounts totalling $27,500 to the plaintiff, amounts totalling $11,860 to the Plaintiff and her former husband Steven Gill conjointly, an amount of $6,000 (for the purchase of a motor vehicle) to her son Rahm and an amount of $2,882 (for the purchase of a motor bike) to her son Sehran. 9 I have already referred to the fact that the plaintiff is a psychologist by profession. For some time she practised as a psychologist at Lismore, and also conducted a counselling clinic there. On account of problems with her own health, both physical and mental, the plaintiff is no longer able to work full-time. She has, however, in relatively recent times been able to work one day a week. Medical evidence tendered on her behalf suggests that it could be another two years before the plaintiff is able to resume full-time work in her chosen field. 10 The plaintiff and her two children reside in a rural property situate at and known as Lot 39, Bonnydoon Drive, Uki (near Murwillumbah in northern New South Wales). That property consists of 73 hectares. The homestead is located some two kilometres from the nearest public road and access to that house is by way of an unsealed driveway (which, according to the plaintiff, is impassable in wet weather). According to Francis Peter Smith, a registered valuer, the present value of that property is $155,000. 11 In consequence of consent orders made in proceedings between the plaintiff and her former husband Steven Gill in the Family Court of Australia, that house property (which is subject to a mortgage of about $63,000 to the Commonwealth Bank) is to be sold, and the net proceeds of sale are to be divided equally between the plaintiff and her former husband. It is estimated by the plaintiff that after the discharge of the mortgage and the payments of costs, expenses and commission associated with the sale, the net proceeds of that sale will be about $84,000, and that each of the plaintiff and her former husband will thus receive about $42,000. 12 The assets of the estate of the deceased at the time of her death consisted of a house property situate at known as 406 Percy Street, Albury, a motor vehicle, various chattels, and investments held in bank accounts and on deposit, as well as shares. The value of those assets as disclosed in the inventory of property annexed to the probate is $604,592. The house property has since been sold, for a little over $140,000 (from which was deducted agent's commission and legal costs and expenses). At the present time the assets of the estate consist of the following: Debenture with AGC (due 25 November 2000) - $47,500. Listed shares, present total value - $211,404. Chattels (stamps and coins) - $1,487. UPA Loan (Murray Vale complex) - $67,000 Tietyens investments - $177,000 Total - $504,391 13 However, it is appropriate here to refer to the significant asset described as the Tietyens investments of $177,000. It would appear that the deceased during her lifetime deposited with Tietyens, a firm of solicitors in Albury (where the deceased had resided for many years), moneys totalling $197,000. It was expected by her that those moneys would be lent to clients of that firm of solicitors, and that such loans would be secured by first mortgages. Whether or not that happened is open to very considerable doubt. 14 It would appear that the mortgage business conducted by that firm of solicitors collapsed, and that deposits totalling $24 million were thereby put at risk. I gather that the partners in the firm of solicitors either already are or soon are to become bankrupt. The present defendant notified a claim to Lawcover (the professional indemnity insurer of Tietyens) and to the Law Society of New South Wales (in respect to a claim upon the Fidelity Fund). At the present time there is considerable uncertainty as to whether all or any part of the investments of the deceased with Tietyens will be recovered by the estate. 15 The purpose of the loan to UPA (United Protestant Association) was to enable Mrs Joan Gray, aunt of the plaintiff and sister of the deceased, to acquire a retirement unit at the UPA Village, Murray Vale, Lavington. Both the plaintiff and her mother had a very good relationship with Mrs Gray, who resided with the plaintiff and her parents while the plaintiff was growing up. The named executor, Mrs Carol Grey (who is no relation to Mrs Joan Gray: their surnames are differently spelt) not merely advanced the loan necessary for Mrs Joan Gray to acquire the retirement unit, but also agreed that the estate would pay the necessary outgoings on that unit for the remainder of Mrs Gray's life. She is presently 81 years of age (having been born on 17 August 1917). Mrs Gray supports the present claim of the plaintiff, although she is desirous that the outgoings upon her accommodation should continue to be paid from the estate. The plaintiff is agreeable to that arrangement continuing. 16 The plaintiff's elder son Rahm also supports the claim of his mother. Although aware of his entitlement to do so, and although advised to do so by the legal representatives of his mother, Rahm has chosen not to seek independent legal advice. However, he filed an affidavit in the proceedings, and also gave oral evidence. His attitude at the present time is that he wishes to make no claim against the estate, and that he fully supports the claim of his mother. He did, however, say that, in the event that the estate were able to recover anything from the Tietyens investments, he might wish then to make a claim against the estate. 17 The plaintiff as a daughter of the deceased is an eligible person within paragraph (b) of the definition of the definition of that phrase contained in section 6(1) of the Family Provision Act. As such she has the standing to bring the present proceedings. 18 It is unclear whether or not either or both of the two children of the plaintiff is an eligible person in relation to the deceased. Each of those children is, of course, a grandchild of the deceased. But, in order to be such an eligible person, within paragraph (d) of the definition of that phrase, it is necessary that each of those grandchildren also have been totally or partly dependent upon the deceased. In the absence of evidence concerning any such dependency, I am not satisfied that either of those children is an eligible person. 19 At the present time the plaintiff's income consists essentially of a Supporting Parent's Benefit of $250 a week. In addition, the plaintiff receives, irregularly, amounts of $25 a week from her former husband, for the maintenance of her younger son Sehran. She also receives an average of $20 a week by way of royalties from a publication of which she is the author. 20 The plaintiff gave evidence (in her affidavit of 26 June 1998) of her expenses, which she stated to total about $650 a week. She said that she could not afford to pay for insurance on her residence or on her motor car. Neither has she been able to meet the totality of the costs thus far charged to her either in respect to her proceedings in the Family Court or in respect to the present proceedings. 21 Apart from her interest in the former matrimonial home, the assets of the plaintiff consists of an amount of about $10,000 held in a Streamline account with the Commonwealth Bank of Australia at Murwillumbah (which, essentially, represents what remains from the interim distribution which she has received from her father's estate, the balance of that amount having been expended on Mastercard debts, legal costs of the present proceedings, renovations and repairs to the house property, motor vehicle repairs, living expenses, and a short holiday to the Gold Coast), and a Hyundai Sonata motor car (formerly belonging to the deceased and included as an asset in the estate), having a current market value of $6,000. 22 The present liabilities of the plaintiff, apart from the costs of the present proceedings, consists of: Unpaid legal fees (Family Court proceedings) - $7,000 CBA Mastercard - $3,500 Half share of unpaid municipal rates - $750 23 It has already been recorded that the plaintiff's father died some two months after the death of the deceased. Under the terms of the will of George Ralph Barker, father of the plaintiff, the plaintiff is entitled to one-half of the assets of his estate. Those assets are shown in the inventory of property as totalling $303,401. However, since some of the assets are located in Hong Kong, the administration of that estate has been protracted. Further, it would appear that the plaintiff's father did not lodge tax returns for a number of years, and that, in consequence, the value of his estate will be reduced because of unpaid tax. The evidence does not disclose the amount of that unpaid tax, nor does it disclose whether any penalties will also be imposed. There has already been an interim distribution from that estate to the plaintiff in an amount of $52,379. Of that amount she actually received only about $42,000 (or, according to her, somewhat less), the difference having been deducted by her former solicitors, on account of costs' claimed by them. There appears to be considerable uncertainty as to how much the plaintiff will ultimately receive from her father's estate. 24 I have already recorded that the plaintiff's two children reside with her. There was, however, a conflict of evidence between the plaintiff and her former husband Steven Gill, as to the periods during which their son Sehran (now aged 13) was in the physical custody of each of the plaintiff and of her former husband. Sehran (who, according to his mother, does not enjoy good health) attends Murwillumbah High School. The plaintiff's elder son Rahm (who is now aged 20) is currently unemployed and is in receipt of unemployment benefits. Rahm, although residing with his mother, does not make any contribution towards his board. 25 Although the plaintiff is named as a Specified Beneficiary in the will of the deceased, the trustee is not obliged to appoint any income or capital in favour of the plaintiff. It was submitted on her behalf that her benefits under the will are indeterminate and possibly illusory. In this regard I was referred to the decision of Young J in Gregory v Hudson (18 September 1997, unreported). His Honour in that case was dealing with a testamentary provision in the nature of a discretionary trust, although in that case the testator had provided a number of documents setting forth his wishes and desires concerning the benefits to be given by his trustee to various beneficiaries. His Honour quoted with approval the following passage from Dickey on Family Provision After Death (LBC, Sydney, 1992), 121, There is some authority for the proposition that where a person is in need of provision but the quantum of provision made for him or her from a deceased's estate is wholly dependent upon the discretion of trustees, this provision is not adequate. In all probability, however, this is not an inflexible rule. In all probability the question of whether provision of this kind is adequate depends upon the particular facts and circumstances of the case. 26 His Honour continued, I consider, with respect, that Professor Dickey's comment is close to the mark. Ordinarily a benefit provided under a discretionary trust is a fairly illusory benefit because it can be terminated without reason and there is little likelihood of the discretionary beneficiary being able to force the trustee to pay her a benefit. [His Honour then proceeded to consider the effect of the various expressions of wishes provided by the testator to the trustee] 27 In the instant case the position of the plaintiff is different from that considered by Young J, where there was a memorandum of wishes executed by the testator and the trustees indicated that it was their intention to seek to carry out faithfully those wishes, which included a wish that the widow of the deceased receive substantial provision from the trust. In the instant case the defendant trustee does not give any indication of what course it might take concerning the future distributions from the trust. Indeed, it might well not be proper for it to do so in the present proceedings, since any such statement at this time might be regarded as fettering its discretion in the future. 28 Although some attempt was made on the part of the defendant to suggest that the relationship between the plaintiff and the deceased was not a close daughter/mother relationship, I am quite satisfied that, having regard to the fact that for most of her adult life the plaintiff was living in northern New South Wales, whilst the deceased was residing at Albury, in the far south of the State, the contact between the plaintiff and her mother was of a nature and of a degree concerning which the deceased expressed no dissatisfaction. It appears that the deceased herself suffered from various emotional problems, and that the plaintiff provided her with support and counselling to assist her with those problems. 29 The statements of the deceased to Mrs Carol Grey (set forth in her affidavit of 9 February 1999, in particular, paragraph 16 thereof), clearly reveal that the deceased wished to make substantial provision for the plaintiff. However, the means which she chose, by way of a discretionary trust, have not necessarily had that result. 30 It is obvious that at the present time the plaintiff has undoubted financial and material need. Her pressing and essential need is for security of accommodation, since, in consequence of the orders made in the Family Court, she must shortly vacate her present residence. 31 Evidence was placed before the Court concerning the cost of various residences in that part of northern New South Wales in which the plaintiff presently resides. Evidence of Robyn Cole (filed on behalf of the plaintiff) showed that houses in the Byron Bay area cost between $300,000 and $355,000. The evidence of valuation provided on behalf of the defendant from D. V. Cochrane & Co suggested a price range of between $150,000 and $250,000, although Mr Cochrane's prices related to residences at Mullumbimby, rather than at Byron Bay. 32 It is appropriate that the plaintiff should receive from the estate an amount which will enable her to acquire alternative accommodation. Assuming that she receives a net amount of about $40,000 from the sale of her present residence, and that that amount goes towards the acquisition of another residence for herself and her two sons, she should receive at least a further $250,000 towards the acquisition of such a further residence. In addition, the plaintiff should receive a further amount which will enable her to discharge her present liabilities, and to provide a fund to meet contingencies. An additional amount of $100,000 would, in my view, be appropriate for that purpose. That is, I consider that the plaintiff has established an entitlement to receive out of the estate a legacy in the sum $350,000. 33 The entitlement to such a legacy must, however, be viewed in the light of competing claims of any other eligible persons and of any other beneficiaries in the estate. It is possible that Mrs Joan Gray is an eligible person, although the evidence is not entirely clear in that regard. Although I am not satisfied that either of Rahm and Sehran is an eligible person, nevertheless each is also a potential object of the testamentary beneficence of the deceased, since each is a Specified Beneficiary named in the will. Mrs Gray is also a Specified Beneficiary, as also is Steven Gill, the former husband of the plaintiff. It will be appreciated, however, that Mr Gill was designated as such at a time when he was still married to the plaintiff. 34 I have already recorded that Mrs Joan Gray supports the claim of the plaintiff, although she is desirous that the outgoings of her retirement unit should continue to be paid from the trust. Rahm also supports the claim of his mother. Sehran is largely, almost entirely, dependent upon his mother. 35 A number of affidavits by Steven Gill have been filed on behalf of the defendant. Those affidavits set forth information concerning the financial and material circumstances of Mr Gill, and concerning his health. Mr Gill has made a claim upon the estate for repayment of amounts totalling $14,698 (together with charges and interest upon those amounts), in respect to travel expenses charged to various bank and credit card accounts by Mr Gill and the plaintiff for overseas travel which, according to him, the original executor had agreed would be met by the estate. As I understand it, that claim, which is disputed by the plaintiff, has not yet been admitted by the defendant. 36 The attitude of Mr Gill to the plaintiff's claim appears to be that, since he is a Specified Beneficiary named in the will of the deceased, he should remain a potential object of the discretionary distributions from the estate. Any reduction in the assets of the estate available to meet such distributions would, of course, affect the amount available to be distributed among the Specified Beneficiaries. 37 But it should here be recognised that Steven Gill was designated a Specified Beneficiary at a time when he was married to the plaintiff and that upon the termination of that marriage the financial arrangements of Steven Gill in relation to the plaintiff have been determined by way of consent orders made by the Family Court of Australia. It is inappropriate that the practical effect of those orders should now be altered, so as to preserve a possibility of Steven Gill receiving a benefit from the estate of his former mother-in-law, whilst thereby limiting, or reducing, the right of the plaintiff to obtain an order for provision an entitlement to which she has otherwise established in the present proceedings. To permit any order for provision in the plaintiff's favour to be reduced, on account of the potential entitlement of her former husband, undermines the resolution of their differences in the Family Court settlement. 38 In those circumstances, I do not consider that the entitlement of the plaintiff to a legacy in the sum of $350,000 should, on account of any competing claims on the part of Mrs Joan Gray, Rahm, Sehran, or Steven Gill, be reduced, let alone extinguished. 39 I have to this point proceeded upon the basis that the assets of the estate total $504,391. From those assets must be met the costs of each party of the present proceedings as well as the costs and administration expenses and commission of the defendant. However, the defendant has estimated that to the value of the assets of $504,391 there should now be added cash in respect to capital of $80,492, and in respect of income of $9,037, making a gross total of the value of the estate in the sum of $593,921. There are outgoings estimated to the end of May 1999 in a total sum of $34,376 to which must be added the estimated costs of the proceedings of each party (those of the plaintiff estimated to total between $25,000 and $32,000, and those of the defendant estimated to total about $16,000) 40 It would be likely, therefore, that the value of the net distributable estate would be of the order of the about $520,000. However, it must be appreciated that a component of that amount is the deposit with Tietyens of $177,000, the recovery of which is uncertain. Even if part or all of that amount were able to be recovered, allowance must be made for the costs which the estate would incur in effecting that recovery. 41 For practical purposes, therefore, it seems to me that the Tietyens deposit should be disregarded, and that the Court should proceed upon the basis that the value of the net distributable estate is no more than about $350,000. 42 Further, of that amount of about $350,000 part is represented by a debenture of $47,500 which does not become due until the latter part of next year, and part by an amount of $67,000 which will not become payable until the death of Mrs Joan Gray. Thus there will only be about $235,000 presently available to meet any sum awarded to the plaintiff. 43 It seems to me, nevertheless, that the Court should order that the plaintiff receive out of the estate of the deceased a legacy in the sum of $350,000, but that of that legacy, an amount of $47,500 should not be payable before 25 November 2000, and a further amount of $67,000 should not be payable during the lifetime of Mrs Joan Gray. Further, the amount of $47,500 should not bear interest until it becomes payable, and the amount of $67,000 should not bear interest during the lifetime of Mrs Joan Gray, whilst the balance of the legacy should bear interest if not paid by a specified date. 44 I consider that the proposed legacy in favour of the plaintiff should be in addition of the benefits given to her under the will of the deceased. She has already received some of those benefits, by way of distributions from the trust. If the proposed legacy were to be ordered to be in lieu of the benefits given to her by the will, it might be possible for it to be suggested (since the legacy will have effect as if it were given in a codicil to the will (section 14 (1) of the Family Provision Act), and, in consequence, will have effect from the date of the death of the deceased), that the benefits already received by the plaintiff from the estate of the deceased should be repaid by her to the estate. Further, it seems to me that, to the extent that there might remain any assets in the estate --- in particular the possibility that part or all of the Tietyens deposit might be recovered --- the discretion of the trustee to make distributions in accordance with the terms of the will, including distributions to the plaintiff herself, should remain unaffected. 45 Accordingly, I make the following orders: 1. I order that, in addition to the benefits given to her by the will of the late Winifred Betty Barker ("the deceased"), the plaintiff receive a legacy in the sum of $350,000, (the sum of $47,500, being part of such legacy, not to be payable before 25 November 2000, and the sum of $67,000, being part of such legacy, not to be payable during the lifetime of Joan Freia Gray), the sum of $67,000, being part of such legacy, not to bear interest during the lifetime of Joan Freia Gray, and the balance of the said legacy not to bear interest if $235,500 is paid on or before 30 May 1999 and $47,500 is paid on or before 26 November 2000. 2. I order that the costs of the plaintiff on the party and party basis and the costs of the defendant on the indemnity basis be paid out of the estate of the deceased. 3. The exhibits may be returned. I certify that this and the preceding pages are a true copy of the reasons for judgment of Master McLaughlin