Ernst v Ryf [2001] NSWSC 1167

New South Wales Supreme Court

CITATION : Ernst v Ryf [2001] NSWSC 1167 FILE NUMBER(S) : SC 2137/00 HEARING DATE(S) : 9,10, 29 October 2001 JUDGMENT DATE : 14 December 2001

PARTIES : Olivier Nikolaus Ernst (Plaintiff) Georgeanne Dawn Ryf (Defendant) JUDGMENT OF : Master McLaughlin

COUNSEL : C. Harris (for Plaintiff) B.A. Coles QC, D.A. Allen (for Defendant) SOLICITORS : Schweizer & Co, Solicitors (Plaintiff) Church & Grace, Solicitors (Defendant) CATCHWORDS : Family Provision - Claim by adult son - Applicant must place before the Court as fully and as frankly as possible details of his financial and material circumstances - Whether applicant has been left without adequate provision for his proper maintenance - Applicant must establish his own case on its own merits - Competing claim of widow LEGISLATION CITED : Family Provision Act 1982 Bosch v Perpetual Trustee Company Limited [1938] AC 463 CASES CITED : Goodman v Windeyer (1980) 144 CLR 490 Hunter v Hunter (1987) 8 NSWLR 573 Singer v Berghouse (1994) 181 CLR 201 DECISION : See paragraph 94

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION Master McLaughlin Friday, 14 December 2001 2137/00 OLIVIER NIKOLAUS ERNST -V- GEORGEANNE DAWN RYF JUDGMENT 1 MASTER: These are proceedings under the Family Provision Act 1982. 2 By summons filed on 14 April 2000 the Plaintiff, Olivier Nikolaus Ernst, claims that provision be made for him out of the estate and/or notional estate of his late father Nikolaus Wilhelm Ryf (to whom I shall refer as "the Deceased"). 3 The Deceased died on 15 December 1998, aged 58. He left a will dated 30 March 1988, probate whereof was on 6 July 1999 granted to his widow, Georgeanne Dawn Ryf, the executor named in such will (who is the defendant to the present proceedings). By that will the Deceased left the entirety of his estate to the Defendant. 4 The Deceased had been born on 28 September 1940 in Wiedlisbach in Switzerland, although for at least the last twenty-two years of life he had essentially been resident in Australia. He first came to Australia in or about December 1961, and remained here for about eight years. He returned to Switzerland in or about 1972. In the latter part of his life he (together with the Defendant) had been engaged in selling and promoting wine for a German company, which activity involved him and the Defendant travelling to Switzerland three or four times each year. 5 The Deceased married three times. However, the Plaintiff, who was born of the second marriage of the Deceased, was the only child of the Deceased. 6 The first of the Deceased's three marriages was to Denise Hélène Pochon on 21 October 1960. That marriage ended in divorce on 7 May 1969. The Deceased married his second wife, Suzanne Emma Ernst, on 1 September 1972 in Switzerland. The Plaintiff was born of that marriage on 14 July 1973. 7 The Deceased and the Plaintiff's mother separated when the Plaintiff was only an infant. They were divorced on 17 December 1974, and the appropriate court in Switzerland, being the Zurich District Court, at the time of granting that divorce made orders concerning division of property and maintenance for the Plaintiff. From the time of her separation from the Deceased the Plaintiff's mother opposed the Plaintiff having any contact with his father. Not only was the Plaintiff the only child of the Deceased, but also he is the only child of his mother, who has not subsequently remarried. The Plaintiff did not, in fact, meet the Deceased until he was aged almost 18. Thereafter the Plaintiff maintained regular contact with the Deceased both in Australia and in Switzerland. The nature and extent of that contact was a matter in dispute between the parties in the present proceedings. 8 In the meantime, however, in 1976 the Deceased had met the Defendant. They commenced to live together in 1977 and married on 17 December 1983. 9 It will be appreciated that at the time when the Plaintiff (then aged almost 18) first met the Deceased in 1991, the Deceased had already made his last will, that of 30 March 1988. The Deceased did not after meeting and commencing a relationship with his son choose to alter that will. 10 At the time of his death the assets of the Deceased consisted of the proceeds of sale of a home unit in Ben Boyd Road, Neutral Bay (which had been owned by the Deceased since 1974 and had been the residence of the Deceased and the Defendant since 1989) ($825,000); the proceeds of a bank account ($15,000) and shares ($22,000); the interest of the Plaintiff as a joint tenant in a strata title unit in The Observatory, Kent Street, Sydney (which unit had been purchased conjointly by the Deceased and the Defendant in April 1998 for $1.4million); together with certain overseas assets, consisting of land in Switzerland (which land has now been sold and the net proceeds of sale whereof amount to about $70,000), and a one-half share in real property (consisting of four apartments) in France (the value of that one-half share being $290,000). 11 It will be appreciated that the interest of the Deceased as joint-tenant in the strata unit in The Observatory has passed by survivorship to the Defendant. The purchase of that strata unit was funded by way of bridging finance. The proceeds of sale of the Neutral Bay unit have since the death of the Deceased been used by the Defendant to reduce the amount of the mortgage outstanding on The Observatory apartment. 12 The entirety of the assets of the Deceased are now held by the Defendant. In consequence, any order for provision which might be made in favour of the Plaintiff can, of necessity, be made only out of the notional estate of the Deceased, rather than out of his actual estate. 13 It should also be appreciated, regarding the assets available to meet any order for provision which might ultimately be made in favour of the Plaintiff, that the costs of the Defendant of the proceedings must be provided for and, in the event that he be successful, the costs of the Plaintiff also. Evidence concerning the amounts of those costs has been filed on behalf of each party. It is estimated that the costs of the Plaintiff will total almost $66,000, whilst those of the Defendant will total about $58,000. (It should be noted, however, that those estimations were calculated on the basis that the hearing would conclude within two days, whereas, in the event, the hearing continued into a third day.) 14 The Plaintiff, who was born on 14 July 1973 in Zurich in Switzerland, is now 28 years of age. He presently resides in Zurich. The Plaintiff remained at school until he was aged 20. Thereafter he pursued a two year course at the Lausanne Business School in Switzerland, completing the degree of Bachelor of Business Administration. He then pursued a part-time one year course (apparently attending classes only on a Saturday) for the degree of Master of Business Administration at the Lausanne Business School. The Plaintiff was in part-time employment (including employment at the Lausanne Business School itself) whilst pursuing his bachelor's degree. He was also in employment throughout most of the period whilst he was pursuing the course (part-time) for his master's degree. 15 Evidence was given concerning financial assistance which the Deceased provided to the Plaintiff, by way of a payment to him of 55,000 francs (at that time worth about $53,500 in Australian currency), in order to assist in the cost of his education. Details were given concerning the Plaintiff's university fees and also concerning the reduction in those fees which the Plaintiff received in consequence of his obtaining a scholarship during his bachelor's course and during his master's course and in consequence of his being employed by the Lausanne Business School itself during his master's course. The scholarship which he received during his bachelor's course resulted in the Plaintiff's tuition fees for the totality of the two years being reduced by 15,000 francs. The scholarship which he received during his master's course, together with the earnings which he received from his employment by the Lausanne Business School itself, resulted in him not being required to "pay much" in respect to tuition fees for that latter course. 16 The first contact between the Plaintiff and the Deceased occurred in Bern in Switzerland, the meeting between the two being arranged by the Plaintiff's uncle Bernhard Ryf. Subsequently the Plaintiff remained in contact with his father, and saw him on every occasion that the Deceased visited Switzerland. The Plaintiff also maintained contact with the Deceased either by telephone or by way of facsimile transmission about once a month during the periods when the Deceased was not in Switzerland. 17 The Plaintiff travelled to Australia in June 1995, paying his own fares. During his period of residence in Australia the Plantiff resided with the Deceased and the Defendant at their Neutral Bay residence for several weeks. The Deceased gave the Plaintiff as a birthday gift an air ticket to Cairns, where he spent most of the balance of his Australian holiday. 18 The Plaintiff visited Australia again in October 1998 (again paying his own fares), shortly before the death of the Deceased. During the week while he was in Sydney the Plaintiff stayed at the residence of the Deceased and the Defendant (the Deceased being allowed to return home from hospital during the course of that visit by the Plaintiff). 19 Despite attempts on the part of the Defendant to suggest that the relationship between the Plaintiff and the Deceased was not a good one and was not a particularly close or affectionate one, and was motivated by mercenary interests on the part of the Plaintiff, the cards and letters from the Deceased (and the Defendant) to the Plaintiff, and the various photographs of the Deceased and the Plaintiff which were placed in evidence clearly indicate that there was an affectionate and loving relationship between father and son. The Plaintiff even deferred receiving his bachelor's degree, to enable the Deceased to attend that graduation ceremony in 1997. 20 The Plaintiff, although not married, has been in a de facto relationship with a lady named Cerly Bicerra. The evidence did not disclose with precision when that de facto relationship commenced, although it would appear from the Plaintiff's evidence that it had commenced not long before the Plaintiff came to Australia in October 1998. One child, a son Alexander (who is now aged 2), was born of that relationship in December 1999. In addition, Cerly has a son Ivan (who is now aged 10) born of her former marriage. Since November 2000 Cerly has been residing with her two children in Hombrechtikon, a town located some 60 kilometres from Zurich. 21 It was asserted by the Plaintiff that he was still living in a de facto relationship with Cerly, although the Plaintiff resides in Zurich, whilst Cerly and the children reside in Hombrechtikon. 22 During the period whilst the Plaintiff and Cerly have been residing separately, Cerly has been receiving from the appropriate government entity in Switzerland payment of maintenance in respect of the Plaintiff's son Alexander. The Plaintiff has signed an appropriate legal document acknowledging his liability to reimburse the government authorities for the payment of that maintenance. Under that agreement the Plaintiff is liable to pay to Cerly maintenance for Alexander in the amount of 1,200 francs (about $1,560 a month). As I understand it, that is the amount which Cerly receives from the appropriate government entity in Switzerland. Under that maintenance agreement the liability of the Plaintiff to reimburse that government entity commenced in December 2000, and under that agreement the Plaintiff's liability, which has not in any way been met, but which continues to accrue, had by October 2001 reached $13,200 francs (about $17,140). However, for reasons which did not at the hearing emerge with any clarity, the Plaintiff has not made those payments to the appropriate government entity in Switzerland. 23 The entire arrangement which since the latter part of 2000 has obtained between the Plaintiff and his asserted de facto spouse presents a deeply dubious character. It may well be that the purpose of that arrangement has been to ensure that, without any present cost to the Plaintiff, his de facto spouse receives maintenance for his child. It may also be that the Plaintiff and Cerly are (despite the Plaintiff's assertion in this regard) no longer in a de facto relationship. No evidence was offered by Cerly in the present proceedings. The Plaintiff under cross-examination said that he had not requested her to provide an affidavit. 24 The Plaintiff asserted that for a not inconsiderable period between the conclusion of his university studies and early 2001 he had been unemployed. Throughout that period he received unemployment benefits from the Swiss Government. However, at the hearing it emerged that throughout that period the Plaintiff had been in receipt of a very significant income as a result of share trading on the internet. One of his investments in that period (in July 1999) had resulted in a profit to him in excess of 200,000 francs. 25 The Plaintiff was extensively cross-examined concerning various transactions appearing in his bank statements relating to that period whilst he was receiving unemployment benefits. There was no satisfactory explanation for the origin of deposits of significant amounts during that period. 26 Also during that period the Plaintiff was involved in a public company, Advanced Orbital Services (referred to as AOS). I considered the information which emerged under cross-examination of the Plaintiff concerning that company and his involvement therein to be quite unsatisfactory. According to the Plaintiff's evidence he had made an investment of 50,000 francs in that company, of which he was the president and one of the founders, and in which, according to his evidence, he was closely involved and to which he devoted a very considerable amount of his time and effort. Nevertheless, it was the Plaintiff's evidence that he received no remuneration from that company, but that he had a present claim against the company for an amount of 120,000 francs, a claim which he appears not to have pursued. 27 It is difficult to accept that the Plaintiff would have devoted to the affairs of that company the very large amounts of money, time and energy which he asserted, without receiving, or indeed expecting to receive, any remuneration. The Plaintiff could offer no satisfactory explanation as to why he was not paid the expected remuneration, especially since he as president of the company was in a position to effect that payment to himself. 28 It is not for this Court to express any views concerning the policy of the Swiss Government regarding the payment to its citizens of unemployment benefits. Nevertheless, the Plaintiff grounds his present application upon an asserted need. In circumstances where, as here, the Plaintiff, although unemployed for a period and in receipt of unemployment benefits, was generating for himself a very significant income, it is appropriate that the Court should scrutinise with care the evidence proferred to support the existence of such a present need. 29 The Plaintiff presently resides in rented accommodation in central Zurich, for which he pays 1300 francs (being the equivalent of about $1,700) a month. His asserted de facto spouse Cerly is also residing in rented accommodation, in Hombrechtikon, for which she pays about 1200 francs a month. 30 Since the institution of the present proceedings the Plaintiff has obtained employment. Since January 2001 he has been in permanent employment as a product controller employed by Credit Suisse First Boston Bank at its head office in Zurich, and receives a salary of 90,000 francs, (being in the equivalent of $117,000 a year). In addition, he receives from his employer family allowances totalling 400 francs ($519) a month. (That employer was described in the evidence as being one of the largest merchant banks in the world.) 31 Such evidence as was offered to the Court discloses that during the last few years the Plaintiff has expended a very considerable quantity of money on maintaining what appears to be an affluent and generous lifestyle. His credit card statements disclose very considerable expenditures at hotels, restaurants, boutique clothing shops and the like. He drives a BMW motor car, which he holds under a leasing arrangement, in respect of which he pays 1000 francs (about $1300) a month. 32 The information which the Plaintiff provided to the Court concerning his present income and his present outgoings revealed that he has a monthly surplus in excess of 4,000 francs. Nevertheless, the Plaintiff in his affidavit of 5 October 2001 asserted that he had not been able to save any of his income since he commenced his present employment in January 2001. 33 The Plaintiff did not offer any satisfactory explanation as to why he and Cerly and her children did not move into one single residence, which would appear to be a much more reasonable arrangement (so far as rental is concerned) than the present arrangement where rent is paid on two separate apartments. Until Cerly and the children removed to Hombrechtikon thirteen months ago, they and the Plaintiff had resided together in a rented apartment in Kuesnacht, a suburb of Zurich. That location was described in the evidence as one of the most expensive and prestigeful parts of Zurich, the Defendant asserting that Kuesnacht was a residential district comparable to Vaucluse or Point Piper in Sydney. 34 According to the Plaintiff's affidavit evidence, he underwent a knee operation in 1991, in consequence whereof he still experiences difficulties, which limit his ability to play sports. Otherwise his health is good. 35 I have had the benefit of receiving a summary of written submissions from Counsel for the respective parties. Those written submissions will be retained in the Court file. 36 The Plaintiff, as a child of the Deceased, is an eligible person within paragraph (b) of the definition of that phrase contained in section 6(1) of the Family Provision Act. The Defendant, who was the third wife of the Deceased, is also, as the widow of the Deceased, an eligible person, within paragraph (a) of that definition. The only other eligible persons in relation to the Deceased are his two former wives, each of whom is an eligible person within paragraph (c) of that definition. Neither of those former wives (each of whom has been served with a notice of claim) has made any claim for an order for provision out of the estate of the Deceased. 37 It cannot be emphasised too strongly that in claims for provision under the Family Provision Act it is the responsibility of the applicant to set forth as fully and as frankly as possible all details of his financial and material circumstances, including details of his assets and liabilities, of his income and outgoings (and, where the applicant has a spouse, be that spouse legal or de facto, those of the spouse). 38 In the instant case this the Plaintiff has significantly failed to do. He has been far from frank, or forthcoming, especially concerning the details of his assets. He would have had the Court believe that for a significant period he was unemployed and was subsisting on unemployment benefits. It emerged only during the course of cross-examination that during the period whilst the Plaintiff was nominally unemployed, he was in fact conducting a significant business of share trading on the internet, from which he received extremely handsome profits. Further, there were numerous unexplained deposits in significant amounts made into the Plaintiff's bank account during that period. The Plaintiff's involvement with Advanced Orbital Services was enshrouded in a total lack of precision. It seemed to me hardly likely that anyone, let alone someone with the qualifications of the Plaintiff, would have devoted his money, time and energy to that company, without any remuneration, or indeed expectation of remuneration. 39 Further, it emerged that the Plaintiff has, in relatively recent times, during the period whist he asserted that he was unemployed and impecunious, made quite generous monetary loans to friends, of which he has not chosen to seek repayment. 40 Further, the Plaintiff has not placed before the Court any information concerning the financial and material circumstances of his asserted de facto spouse Cerly. There has been no affidavit evidence of Cerly herself filed in the present proceedings. 41 I was not favourably impressed by the attempted explanation offered by the Plaintiff as to the reason why Cerly (with whom he asserts that he is still living in a de facto relationship) and the children are residing in one location, whilst the Plaintiff is residing in another location 60 kilometres away. 42 The entire arrangement which has obtained between the Plaintiff and Cerly since the latter part of last year is of a most dubious nature. It may well be that the purpose of this arrangement has been to ensure that, without any present cost to the Plaintiff, his de facto spouse receives maintenance for his child. It may also be that (despite the Plaintiff's assertion in this regard) the Plaintiff and Cerly are no longer in a de facto relationship. 43 The details of deposits and withdrawals of cash amounts from the Plaintiff's UBS bank account were not, in my view, satisfactorily explained. The Plaintiff could not satisfactorily explain certain payments made by him in cash, as a result of cash withdrawals from his bank account. Eventually, however, in re-examination, he offered the explanation that he had used those withdrawals for various loans to friends. One of those loans was in an amount of 30,000 francs, of which he asserted that 15,000 francs had been repaid. He had no documentation or other evidence to substantiate that alleged loan. 44 One might be excused for considering that, if the Plaintiff's financial and material circumstances were such as to entitle him to bring the present proceedings and obtain an order for provision, it is somewhat inconsistent that he was at the same time making unsecured and undocumented loans in quite substantial amounts to various friends. 45 I regarded much of the evidence given by the Plaintiff as quite unsatisfactory, especially concerning the arrangements (both financial and residentiary) with Cerly, the reasons why they occupied separate residences in different locations, the circumstances under which the Plaintiff entered into the agreement to reimburse the Swiss Government for maintenance in respect to his son, the various deposits and (especially) withdrawals in cash from his bank account, the circumstances in which he had been in receipt of unemployment benefits during a period whilst he had been generating a very significant income through share trading, and his involvement in Advanced Orbital Services. I have a strong suspicion that both in respect to the Plaintiff's receipt of unemployment benefits and in respect to the receipt by Cerly of maintenance from the appropriate government authority, the Plaintiff (and, in the latter case, also Cerly) have been availing themselves of social security benefits to which they might not be strictly entitled. 46 Much of the evidence adduced on behalf of the Plaintiff (especially that elicited in cross-examination of the Defendant) was directed to establishing that the Defendant is in comfortable, if not affluent, financial circumstances. It must be appreciated, however, that an applicant for an order for provision must establish his own case upon its own merits. 47 The present financial and material circumstances of the Defendant, as the chosen object of the testamentary beneficence of the Deceased, may have the effect of reducing, or even extinguishing, any order for provision an entitlement to which the Plaintiff might otherwise have established. Those circumstances, however, can in no way establish, or enhance, the claim of the Plaintiff. 48 In performing the first step in the two stage process identified by the High Court of Australia in Singer v Berghouse (1994) 181 CLR 201 at 208, in order to determine whether the Plaintiff has been left without adequate provision for his maintenance, education or advancement in life, the Court must assess whether the provision (or, as in the instant case, the absence of provision) was inadequate for what, in all the circumstances, was the proper level of maintenance appropriate for the Plaintiff, having regard, amongst other things, to the Plaintiff's financial position, the size and nature of the estate of the Deceased, the totality of the relationship between the Plaintiff and the Deceased, and the relationship between the Deceased and other persons who have a legitimate claim upon his bounty. 49 The High Court, at 210, said that that question, although it involves the exercise of value judgments, is strictly one of fact (see White v Barron (1980) 144 CLR 431 at 441-443; Goodman v Windeyer (1980) 144 CLR 490 at 501-502, 509; Hunter v Hunter (1987) 8 NSWLR 573 at 576). 50 The Plaintiff is a young man with good academic qualifications, who presently holds a permanent position with an international financial institution, and is in receipt of a relatively high salary. 51 Even on his own, somewhat unreliable, evidence, concerning his present income and present outgoings, he has a monthly surplus in excess of 4,000 francs.