New South Wales Supreme Court CITATION : Williams v Miller [2003] NSWSC 62 HEARING DATE(S) : 6th, 7th and 10 February 2003 JUDGMENT DATE : 10 February 2003 JURISDICTION: Equity Division JUDGMENT OF : Master Macready at 1 DECISION : Paragraph 52 CATCHWORDS : Family Provision. Application by adult son. Legacy increased. No matter of principle. PARTIES : John Richard Williams v Lynette June Miller - Estate of Edith June Williams FILE NUMBER(S) : SC 3705/01 COUNSEL : Mr M. Willmott for plaintiff Miss J. Needham for defendant SOLICITORS : Bolster & Co for plaintiff Gadens for defendant - 1 - THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION MASTER MACREADY MONDAY 10 FEBRUARY 2003 3705/01 - JOHN RICHARD WILLIAMS v LYNETTE JUNE MILLER - ESTATE OF EDITH JUNE WILLIAMS & ANOR Judgment 1 MASTER: This is an application under the Family Provision Act in respect of the Estate of the late Edith June Williams who died on 2 May 2000 aged seventy-one years. She was survived by her three children, one of whom is the plaintiff and the other two are the defendants. 2 The last will and testament of the deceased was dated 28 May 1997. Under that will, in paragraph 3, she gave a legacy of $50,000 to her son, the plaintiff, and she gave legacies of $25,000 each to her four grandchildren by the two defendants. They are Adam Miller, Robyn Miller, Brooke Williams and Cara Williams. 3 She gave the residue of her estate to be divided into three equal parts: one was held for the defendant, Rodney Williams; one for Lynette Miller; and the remaining one-third of her residue was held for such of the children of the plaintiff subject to them obtaining the age of twenty-five years. Those four children were John Matthew Williams, Alexander Williams, Richard Williams and Cheralyn Williams. 4 The estate of the deceased appears to amount to, in the recent executors' affidavit, $1,186,051.83. A large part, namely $749,543, or a figure near to that has been distributed. 5 In respect of the legacies in paragraph 3 of the will, the plaintiff has been paid $21,500 out of his legacy of $50,000. There has been withheld an amount said to be due for a loan by the deceased to the plaintiff said to be in the principal sum of $19,000 plus interest of $9,500. 6 In respect of the other legatees, as referred to in paragraph 3(b), the legacy of $25,000 has been paid to Adam Miller and also now to Robyn Miller. The two remaining legacies of $25,000 each to Cara and Brooke have been appropriated in a way which I will deal with shortly. 7 Finally, the executors have distributed $305,000 to Rodney Williams. There have been distributions to Lynette Miller of $270,000 in cash plus some adjustments to the distribution which could, in my view, have the effect of releasing her of the debt of $30,000 which she owed the estate and have given her as part of her share a $16,000 car. 8 Matthew Williams has been paid the sum of $45,000 on account of his share. He is entitled to more than that as his share in residue. 9 There has been a payment by way of provision of necessities of life, and also rental accommodation, for Alexander in the sum of $8043. Nothing has been distributed or put aside as part of the residue of Richard or Cheralyn. 10 The defendant, Mr Rodney Williams, obtained some advice apparently from a trustee company in Brisbane, which suggested to him that he was allowed to borrow from the estate and invest in shares, provided he paid interest at 1 per cent above bank rate. What he did was to take from the estate $150,000, which he classified as a loan to himself. He also took $50,000 to represent the legacies due to Cara and Brooke, and he invested those funds, along with $86,246 of his own moneys in shares. This has been a total investment of $286,246. On the evidence before me, that investment is now worth $231,412. 11 These matters emerged in the running of the case and were certainly not clear on the face of the affidavits that had been sworn. However, to his credit, Mr Williams undertook to the Court not to take any steps to touch those assets, and he also undertook to pay within seven days the sum of $150,000, together with interest at Supreme Court rates, together with any profit that might have been made on the share dealing. From what I have recounted it sounds unlikely there is any such profit. 12 The assets which are now in the estate are as follows: there is an amount held on the solicitor's trust account of $35,226. The estate account is $13,570; there is a debt due to the estate by Mr Williams of $150,000 as a result of his undertaking and there will be $30,000 in interest payable. That is a total sum of $228,796. 13 There are costs which have been incurred to the plaintiff of $42,000, the defendants, $85,000, of which $35,000 has been paid. Accordingly, it is now $97,000 if an order is made in the plaintiff's favour which would leave an amount in that part of the estate, which I have identified, as $131,796. 14 On any calculation of the residue in this estate, the defendants have distributed to themselves more than their share of residue, and they have not paid any of the other residuary beneficiaries either any or the full amount of their share. When I say pay, it is in respect of those who have not yet attained twenty-five years of age, and the funds have to be applied in accordance with the will and be invested for the benefit of the beneficiaries. 15 Matthew has received the sum of $45,000 and, in practical terms, that may be as a result of the fact there has been an estrangement between him and his father. He seems to be aligned with the defendants. 16 It is necessary to deal with a little of the chronology of the matter. The deceased was born on 28 July 1928. The plaintiff was born on 23 March 1947. The defendant Lynette was born on 15 February 1954 and the defendant Rodney on 13 October 1956. 17 The plaintiff completed his schooling till fourteen years of age and eventually left home in 1964. He married for the first time in 1970. He then had five children; Rachel was the first child, born on 28 July 1971, but she died in 1983. John, the plaintiff's second child, was born on 8 August 1972, Alexander on 1 August 1985, and Richard on 1 February 1987. Cheralyn, the plaintiff's youngest child, was born on 8 August 1988. In 1991, in October, the plaintiff and his wife divorced. The plaintiff in due course met Lenore Modini and commenced to live with her in March 1992. 18 The deceased's husband died in 1994 and in 1995 the plaintiff married Lenore. The last will of the deceased was made in 1997, as I have recounted, and in 1999 the deceased gave power of attorney in favour of both the plaintiff and Mr Rodney Williams. The deceased died on 2 May 2000 and probate was granted in due course and the Summons was filed within time. 19 In an application under the Beneficiary Act in the High Court in Singer v Berghouse (1994) 181 CLR 201, the Court set out the approach to be followed: "The first question is, was the provision (if any) made for the applicant 'inadequate for (his or her) proper maintenance, education and advancement in life'? The difference between 'adequate' and 'proper' and the interrelationship which exists between 'adequate provision' and 'proper maintenance' etc were explained in Bosch v Perpetual Trustee Co Limited. The determination of the first stage in the two-stage process calls for an assessment of whether the provision (if any) made was inadequate or what, in all the circumstances, was the proper level of maintenance et 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. The determination of the second stage, should it arise, involves similar considerations. Indeed, in the first stage of the process, the court may need to arrive at an assessment of what is the proper level of maintenance and what is adequate provision, in which event, if it becomes necessary to embark upon the second stage of the process, that assessment will largely determine the order which should be made in favour of the applicant. In saying that, we are mindful that there may be some circumstances in which a court could refuse to make an order notwithstanding that the applicant is found to have been left without adequate provision for proper maintenance. Take, for example, a case like Ellis v Leeder where there were no assets from which an order could reasonably be made and making an order could disturb the testator's arrangements to pay creditors." 20 I turn now to the plaintiff's position. The plaintiff is fifty-five years of age, married with four children, only one of whom is dependent upon him and living at home. He himself has Type 2 diabetes, but it appears to be controlled. He runs an earthmoving business. His income in his affidavit is indicated to be in terms of both himself and his wife, who also assists in their business, $1082.60 per week. A perusal of the drawings would tend to indicate it would be closer to $1580 per week. 21 He has a number of assets, which are as follows: he has a home at Mitchellton worth $300,000 to $310,000; industrial land, $149,000; a boat, $25,000; bank accounts and superannuation, $36,385; interest in his business of $25,729; cash of $2,800; a loan to his company of $47,756. Household contents of about $50,000. His wife's car is quoted at $6,000. His own truck is not valued, goodwill of his business of $20,466, and earthmoving equipment which he estimates at $368,000. He has cash with his solicitor for costs of $26,000. There are total assets of $1,067,136. 22 Against this, he has a home loan of $68,000, a business loan of $91,776, rates of $380, guarantees on earthmoving equipment of $358,230 plus a debt due to the taxation office of $27,523. They total $545,909, leaving a surplus of $521,227. 23 The value of his earthmoving equipment is the subject of some debate. He has insurance on it of some $215,000 but the renewal notice indicates there are some miscellaneous items that have a value of $260,000. There is no proper valuation, but I would regard his estimate of his earthmoving equipment as somewhat conservative. 24 There was a question of an advance which was made to the plaintiff in 1994 of $20,000. The evidence is he paid $1,000 back to his mother and it was so he could buy some equipment. There is a dispute as to the nature of the loan and the terms of it. The suggestion is that it was simply a non binding family arrangement. I would have thought this was not the case because it was for his business and also the plaintiff has acknowledged it by paying back at least $1,000 of the loan. 25 There are reports of statements by the deceased shortly before she died that she had not been repaid the amount and she had been paid no interest of 10% that she said was due to her on the loan. 26 The plaintiff's evidence on the matter was fairly general in terms of his future liability in respect of the loan. Having regard to that, and also the terms of the conversations recorded from the deceased, I am not satisfied that there has been any forgiveness of the balance and I accept that there was an agreement to pay interest. There is thus $19,000 owing plus interest. 27 Of course, the loan is not yet statute barred as at the date of death as six years has not expired. It would seem to me the plaintiff was obliged to bring into account the $19,000 that he owes. He is not obliged to bring into account the interest. See the discussion in the Fourth Edition of "Equity Doctrines & Remedies" Meagher Gummow & Lehane at paragraphs 37 to 180. 28 The relationship between the deceased and the plaintiff was the subject of some evidence in the affidavits, but mainly concerned how the children of the deceased were treated by the plaintiff's second wife. That evidence certainly showed concern by the deceased for the future of the plaintiff's children. However, the relationship between the plaintiff and the deceased seems to have continued and there were visits by the plaintiff to the deceased when she would stay for a few weeks to a month. In the circumstances, there was nothing in this which detracts from the plaintiff's claim on the estate, although it does have an impact on the situation of his children. 29 It is necessary to see how the plaintiff says he has been left without adequate and proper provision for his maintenance. The case put forward by the plaintiff is he has difficulty meeting his repayments on the business loan which amounts to some $1,300 per month. That loan was to purchase the land upon which he stores his equipment for the purposes of the business. I accept there may be some difficulty with mortgage payments, but the evidence tends to indicate there is not a substantial difficulty. 30 For instance, at times he has been able to have his house loan paid up to more than $31,000 in advance of where it should be, although he has recently re-used that advantage. No doubt in carrying on a business there are times when contractors do not pay and things can be difficult and there is some need to have something behind one when conducting a business. However, the claim the plaintiff makes is that he asks for enough to discharge his business and house loans and also something for contingency. 31 Before addressing this it is important to consider the situation of others who have a claim on the deceased's bounty. I first deal with the situation of Rodney Allan Williams who is forty-five years of age, married with two children, who are dependent. He has medical problems in that he has Bell's Palsy which affects the nerves in his left side of his face. He has a need which requires surgery and a doctor's certificate shows he has type 2 diabetes and angina, and he has a cholesterol problem. He runs a food distribution business. His income from that is modest, an income of about $23,000 per annum, and his wife also works, and from her separate employment receives about $26,000 per annum. 32 So far as assets are concerned, there is very little that he has in his own name. The shares which are referred to in his affidavit of 6 February 2003 are in fact the shares which are the subject of the comments I made earlier and which are set out in exhibit D. There is little property which is held by his wife. There are two houses in Brisbane, one of which was occupied for awhile. His vehicle is worth $30,000. He has a bank account. The assets of his business appear to be in the order of $165,000. 33 He does, however, have liabilities, trade debts of $130,000. He has bankcard debts of $37,500, an amount due to Dolphin Seafood of $35,000 and an amount due to Lancet. His wife has some modest loans on their jointly owned property and there is, of course, a sum of $150,000 plus interest of $30,000 which Mr Williams owes the estate. He has not made any contributions to the estate, nor has he appeared to receive benefits from the deceased in her lifetime. There is nothing to suggest his relationship with his mother was other than satisfactory. 34 I turn to consider the situation of Lynette. She is forty-eight years of age, has two children, one of whom is dependent. She only has casual employment and receives about $12,000 per annum. Her husband works with the RTA and earns about $53,000 a year. The assets of Lynette appear to be as follows: she has shares of $114,621, superannuation of $152,710, a life policy of $20,399, cash in the bank of $3,500 and two cars worth $18,000. 35 Her house at Camden is owned jointly by her husband and her and is valued at $400,000. Her liabilities are $25,074, leaving net assets of $684,156. She has some prospective medical problems in that she needs surgery to remove a lump but the details of that are not spelled out in the affidavit. 36 It is necessary also to consider the situation of the other residuary beneficiaries. Matthew is single, thirty years of age and unemployed. He has a modest income of $230 per week from unemployment benefits, and his rent is $100 per week. His assets presently amount to a little cash in the bank and some other personal items. He seems to be part way through his studies, but does not seem to have settled down well into any long term employment, or to have decided to complete his studies. He talks of going back to do them perhaps next year. 37 As I have mentioned, there has been an estrangement between himself and his father, and so he is very much now on his own. 38 As far as Alexander is concerned, he is seventeen, single and has lived at home for quite some years. When he went to Brisbane recently he was helped by the defendant who made available his wife's home to him at a reduced rental, and also provided him with some necessities. He does not seem to have employment and his prospects at the moment seem to be very doubtful. 39 With Cheralyn, there is a little more information. She is sixteen and single. Presently her father is her guardian. She is in the care of the Queensland Government Family Services. She lives in accommodation which is provided, I think, in a joint way with others and she is able to stay in them, but not all the time. Frequently her carers, people from the department, have to have time out because she is difficult to manage. It is apparent from about the time she was ten years of age she had personality problems which have caused her lots of trouble. 40 It apparently makes her difficult to live with and to control. The father and stepmother in the long term are not prepared to take her back, although they do from time to time assist when things are too difficult for the department. 41 It sounds to me like she has severe disabilities and perhaps personality disorders and she will need obviously some care in the future. Because of these personality problems it is difficult for her father to provide for her and the situation exacerbates her situation in life. 42 Richard is fifteen; he is still at school and lives at home and presumably is totally reliant on his parents. 43 When one comes to consider the application, the plaintiff does not suggest the four legacies of $25,000 each should be disturbed. A consideration of the situation of the plaintiff's children is that they are very much in need of assistance for the future. In part, Matthew is now an adult, he is on his own, and he cannot look to his father. Alexander is in a situation where he is living by himself, is of a young age, without much behind him. Obviously this is precisely the time in his life when he needs help. 44 Similarly, the other two children, to whom I have already referred, plainly, there is a need to help Cheralyn, particularly as she is likely, because of her troubles, to be isolated from her family and those who would normally look after her. Richard has had some help from his father. His education is not complete and it could be he will need assistance in the future. 45 In those circumstances I am somewhat reluctant to intrude on the shares of the children in the residuary estate. 46 I do not think this is a case where the situation of the plaintiff calls for great adjustment. Lynette is in a modest situation. She fortunately has no mortgage on the joint home and has some shares. Rodney's situation I would have described in a personal sense as not very good at all. Fortunately, he has been married for quite some time and his wife has a family home and she has some funds behind her. 47 It seems to me that it is only some modest increase in the legacy of the plaintiff that is called for. What I propose to do is increase the plaintiff's legacy to $100,000, together with a forgiveness of any interest on the loan of $20,000 from the deceased. This effectively means he gets $81,000, because the $19,000 has to be brought into account. He has already been paid $21,500 of this amount. 48 S 24 of the Act allows property to be designated as the notional estate where there has been distribution if the Court is satisfied that an order for the provision is to be made. I am so satisfied. 49 S 27 is in the following terms: "(1) On an application in relation to a deceased person, the Court shall not make an order designating property as notional estate of the deceased person unless it has considered: (a) the importance of not interfering with reasonable expectations in relation to property; (b) the substantial justice and merits involved in making or refusing to make the order; and (c) any other matter which it considers relevant in the circumstances. (2) In determining what property should be designated as notional estate of a deceased person, the Court shall have regard to: (a) the value and nature of property the subject of any relevant prescribed transaction or distribution from the estate of the deceased person; (b) where, in relation to any such prescribed transaction, consideration was given, the value and nature of the consideration; (c) any changes over the time which has elapsed since any such prescribed transaction was entered into, any such distribution was made or any such consideration was given in the value of property of the same nature as the property the subject of the prescribed transaction, the distribution or the consideration, as the case may be; (d) whether property of the same nature as the property the subject of any such prescribed transaction, any such distribution or any such consideration could, during the time which has elapsed since the prescribed transaction was entered into, the distribution was made or the consideration was given, as the case may be, have been applied so as to produce income; and (e) any other matter which it considers relevant in the circumstances." 50 The defendants well knew of the entitlements of various beneficiaries. They gave no notice of distribution. Although the cheques were signed by Rodney, Lynette knew of them and knew what was happening. In those circumstances there does not appear to me to be any reasonable expectation that would require consideration on the part of those whose property might be designated as notional estate. The substantial justice and merits also in this case require there to be designation of notional estate. 51 So far as notional estate is concerned the only property that Rodney has is his interest in the shares. That is said to be held in a family discretionary trust of which he tells me he is the only beneficiary. In respect of Lynette, she has her interest in her home. 52 Accordingly, the orders which I make are as follows: 1. I order that the legacy of the plaintiff be increased to $100,000 plus a forgiveness of any interest due to the estate on the sum of $20,000 borrowed by the plaintiff from the deceased. 2. I order that: (a) the interest of Rodney Allan Williams in the Rodney Allan Williams Family Account with ABM-AMRO Morgans; (b) the interest of Lynette Miller in 14 West Place, Camden Downs, New South Wales, be designated as notional estate. 3. Interest to run at the rates provided for under the Wills Probate Administration Act from one month from today. 4. The plaintiff's costs on a party and party basis and the defendants on an indemnity basis should be retained or paid out of the estate or notional estate. 53 I will not make any further order but no doubt the defendants will receive advice from their solicitors as to what they should do as executors and trustees. They have a responsibility to get in the balance of the shares in residue and to hold them for the benefit of those beneficiaries. That means they have to be applied in accordance with the will and the law to the benefit of those children. (Mr Willmott called for the production of a letter from his instructing solicitors to Gadens dated 20 January 2003. Not produced. Copy tendered. Counsel addressed on the question of costs.) EXHIBIT #P - LETTER DATED 20 JANUARY 2003 TENDERED, ADMITTED WITHOUT OBJECTION 54 There has been tendered an offer made on 20 January 2003 by the plaintiff to resolve the matter on the basis of: I. Payment of the balance of the legacy to which he is entitled pursuant to the will. II. Payment of interest on the legacy that is unpaid, dating from the date one year from the deceased's death at the rate prescribed pursuant to the Supreme Court Act. III. Payment of the plaintiff's costs and disbursements. 55 The offer was open for acceptance until 23 January 2003. It seems to me that the plaintiff has done better than that. Accordingly, I vary the order by providing that the costs should be paid on a solicitor and client basis on and from 24 January 2003. ********** Last Modified: 02/21/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.