FORD v BIRT [1999] NSWSC 919

New South Wales Supreme Court CITATION : FORD v BIRT [1999] NSWSC 919 CURRENT JURISDICTION : Equity FILE NUMBER(S) : 3597/97 and 1682/99 HEARING DATE(S) : 21-23/6; 29/7/99 JUDGMENT DATE : 14 September 1999

PARTIES : Margaret Caroline Ford v. Daniel Arthur Birt - Estate of the late Joan Caroline Birt JUDGMENT OF : Bryson J at 1

COUNSEL : T. H. Barrett with C.A. Webster for Plaintiff A. Relf (solicitor) with T. Clarke (solicitor) for Defendant SOLICITORS : Walker Gibbs & King for Plaintiff John Clarke & Associates for Defendant CATCHWORDS : FAMILY PROVISION - Adult daughter - testatrix made no provision for daughter aged 36 out of estate and notional estate worth $300,000 - all assets passed to son who already owned joint interest worth $120,000 in grazing property - review of family history and parties' conduct - provision of $80,000 ordered. DECISION : See para.67. Provision $80,000 out of estate and notional estate.

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

BRYSON J.

TUESDAY 14 SEPTEMBER 1999

ESTATE OF THE LATE JOAN CAROLINE BIRT 3597 of 1997 & 1682 of 1999 - Margaret Caroline Ford v Daniel Arthur Birt

JUDGMENT 1 HIS HONOUR: Two proceedings between the same parties and relating to the same estate were heard together. Mrs Joan Carolyn Birt late of Nimmitabel, New South Wales, retired school principal died on 12 March 1997 aged 55 years. At the time of her death she was divorced; she and Mr Arthur Frederick Birt were married in 1961 and divorced on 2 June 1986 and she is survived by her only two children, Mrs Margaret Carolyn Ford the plaintiff who was born on 20 September 1962 and Mr Daniel Arthur Birt the defendant who was born on 24 August 1970. The plaintiff is often known by the nickname Marnie. On 20 November 1998 Daniel Birt obtained probate of Joan Birt's last will dated 21 November 1996. Under the provisions which took effect Daniel Birt was appointed sole executor and was given the whole of Joan Birt's estate. There were provisions in the will which might have conferred benefits on Margaret Ford if Daniel Birt had not survived Joan Birt and taken an interest under the will; in that case Margaret Ford would have received the net income of the estate for life, with provision for her children. 2 In the 1997 proceedings Margaret Ford claims provision for her maintenance and advancement in life under s.7 of the Family Provision Act 1982 out of the estate and notional estate of Joan Birt. She seeks an order designating several items of property as notional estate. The items include Joan Birt's interest as tenant-in-common in the rural property called "Hurlstone", and money in a bank account which was transferred to Daniel Birt shortly before her death. 3 In the 1999 proceedings Margaret Ford claimed that she has an equitable interest as owner of a house built in 1996 and surrounding 40 hectares of Hurlstone and alternatively a charge to secure an equitable interest. She also claims ancillary remedies. Her two claims are not cumulative on each other. The two proceedings were heard together. 4 Hurlstone is a rural property about 9 kilometres east of Nimmitabel and about 47 kilometres south-east of Cooma, with frontage to the Kybeyan Road which is tar sealed. Mr Valuer Trethewey says:- "The land is described as a mix of undulating to hilly country, steep in parts with granite base soils. Some 35 hectares joining the Kybeyan Road is gently undulating mostly cleared country, however, the land falls steeply into a gully that runs north-south through the property some 500 metres east of the road boundary. The gully obstructs access to the remainder of the land which is a mix of hilly and steep country, mostly heavily timbered with isolated pockets of clearings." Mr Trethewey also says "The land is currently used for residential purposes and light grazing which is considered to be the highest and best use." The evidence speaks of a number of rural activities which have been carried out there but Daniel Birt's principal activity there now is running about 350 sheep. The area is spoken of in evidence as 640 acres but this is not exactly correct according to dimensions stated on deposited plans. There are two freehold holdings, Lot 2 Deposited Plan 732581 which has a frontage to Kybeyan Road to the west, and by plan has 126.8 hectares excluding the road, and Lot 55 DP 7505662 to its east, containing by plan 126.8 hectares or 320 acres. There is also a small area formerly a school site referred to variously as Crown leasehold and permissive occupancy; this cannot be of significant value. Mr Trethewey's evidence including his revaluation, which I accept, establishes the value of the property at $240,000 as of 7 June 1999. It also establishes that the value of the cottage on a notional 5 ha lot would be $85,000, being $30,000 for the land and $55,000 for improvements. There has been no subdivision, and while approval would not be impossible, there would be uncertainty and difficulty in getting approval. 5 Joan Birt purchased Hurlstone in 1990 and caused the property to be transferred by the vendors Mr and Mrs Cratchley to Daniel Birt and herself as joint tenants. The consideration stated in the transfer was $209,425. The purchase money was raised by borrowing $110,000 or thereabouts from State Bank of New South Wales and the balance was contributed by Joan Birt. Daniel Birt, who was then 19 years of age and had no significant resources of his own, made no contribution to the purchase, except that he joined in the mortgage. After several years the mortgage to the State Bank was discharged with money obtained from Commonwealth Bank of Australia under a mortgage dated 30 April 1993. 6 The Commonwealth Bank mortgage in turn was discharged by Discharge dated 26 August 1996 and later registered, on payment on 19 April 1996 of $106,177.01 from the superannuation entitlement received by Joan Birt on resigning her employment. At the time of her death she was still proprietor of Hurlstone jointly with Daniel Birt; legal ownership then passed to him on her death by survivorship. However on 7 March 1995 five days before her death Joan Birt signed a series of documents prepared for her by Mr John Clarke solicitor of Cooma. Although the instructions for these documents were conveyed to Mr Clarke by Daniel Birt, Joan Birt's conduct when Mr Clarke brought the papers to her at Hurlstone for execution shows that they were fully understood by her and intended to have effect. The documents were contract for the sale by her to Daniel Birt of her interest described as "The Vendor's one-half share in the land, the improvements, all fixtures and inclusions …" for $120,000, a Memorandum of Transfer dated 7 March 1997 acknowledging receipt of consideration of $120,000 and transferring her interest to Daniel Birt, and two acknowledgments or letters of the same date, one from Joan Birt to Mr Clarke's firm saying "I advise that all moneys payable with respect to this transfer have been received" and the other from Joan Birt to Daniel Birt saying "I hereby forgive any moneys that may be owed by you to me". The substance of these events was that on 7 March 1997 Joan Birt made a donation of her equitable interest in the property to Daniel Birt; the donation was effective in equity because he was in a position to have the transfer registered, and Mr Clarke proceeded in his interest to register it, although registration took place after Joan Birt had died. 7 At the time of her death Joan Birt owned an interest in the partnership business which conducted rural operations on Hurlstone, and in the plant, stock and equipment thereof. Joan Birt was entitled to 75% of the income of the partnership and Daniel Birt to 25%; presumably interests in the partnership assets were in the same proportion. However the partnership accounts in evidence show that she had an entitlement as against the partnership to capital worth far more than the assets of the partnership actually were worth, so that on winding-up partnership affairs at the time of her death all assets would have gone to her. All assets of hers including her interest in the partnership passed to Daniel Birt under her will. His own nominal interest in partnership assets was of no value. 8 Joan Birt and her then husband Arthur Birt lived in Cabramatta in Margaret Ford's early childhood. Joan Birt set up and conducted a pre-school, then obtained formal qualifications as a teacher and did relief teaching work. They made several moves; they lived in Menai, then in 1979 to 1981 in Nowra where they conducted a boat-hire business, then in Woronora. About 1985 Joan Birt moved to Goulburn where she had a teaching position. About this time she bought a house property with about 30 acres near Goulburn; it seems likely that she used some proceeds of the home at Woronora which she received under a matrimonial property settlement for this purchase. About 1989 Joan Birt moved to Cooma and taught at Monaro High School; she sold the Goulburn the property at about this time. Later she became principal of Delegate Primary School, and while working there she returned to Hurlstone at week-ends. She resigned from the Department of School Education on 1 April 1996 and received $20,667.57 for long service and recreation leave. She also received $260,941.49 for superannuation entitlements. She may later have done some casual teaching. 9 On 12 April 1996 the Superannuation payment of $260,941.49 was deposited into a partnership bank account no. 720160570-82; kept by Joan Birt and Daniel Birt at the State Bank the previous balance was $13,707. Evidence does not show how the long service and leave payment of $20,667.57 was applied or whether it contributed to that previous balance. A few days later the partnership bank account was drawn against for $106,177.10 to pay out the mortgage to the Commonwealth Bank. This operated as a benefaction to the defendant as he was a party to the mortgage and a joint owner of the land. 10 In 1996 Joan Birt also received distributions in the estate of her late mother, and these were also deposited into the same partnership bank account: $57,500 on 21 June 1996; $66,000 on 9 October 1996; $1,264.45 on 4 December 1996. 11 After deducting the amount repaid on the mortgage the moneys which came to hand for Joan Birt in these ways from 12 April 1996 to the end of the year amounted to $300,196.50. 12 The disposition of the amounts received by the testatrix is explained, in part but not fully, by a table of payments in Exhibit G, which was prepared on behalf of the defendant while these proceedings were pending. These show many payments which are readily acceptable as connected with the operation of Hurlstone and rural enterprises there, payments for vehicles and equipment and payments for building materials and services relating to constructing the cottage. (The payments identified as relating to construction total $32,610.39). Several large payments relate to attempts to establish ostrich farming on Hurlstone, which has been a business failure. Expenses directly related to ostrich farming are: June 4, 1996 Bank transfer $40,000 June 13, 1996 Cheque to Australian Ostrich Association $ 5,000 January 31, 1997 Purchase of 19 ostriches $13,537.50 13 The $40,000 was transferred to a bank account of the testatrix at Colonial State Bank, Account No. 720107534-00 described as "Hurlstone Ostrich Facility Account". Further dealings with moneys in that account are not explained and the amount held in the account at the testatrix' death was $1,175.79. I accept that the amounts referred to were in fact expended in connection with the ostrich venture and are not now represented by any asset of significant value. A cash withdrawal of $20,000 on 8 August 1996 from the partnership bank account is unexplained. No basis exists for a finding of how the testatrix disposed of this sum, and there is no basis for finding that either the plaintiff or the defendant got the benefit of it. 14 In the inventory of property filed with the probate application Daniel Birt showed property at the following values.