New South Wales Supreme Court CITATION : Barna v Barna [2008] NSWSC 1402 HEARING DATE(S) : 4 December 2008 JURISDICTION : Equity Division JUDGMENT OF : Brereton J EX TEMPORE JUDGMENT DATE : 4 December 2008 DECISION : Property to be held on trust by executor as to 20/75 shares for the plaintiff and 27.5/75 shares for the first and second defendants respectively. CATCHWORDS : SUCCESSION - family provision and maintenance - failure by testator to make sufficient provision for applicant – where applicant received no benefit under deceased's will due to ademption of gift in will – where applicant on disability pension – where defendant siblings also on disability pensions – relevant considerations LEGISLATION CITED : (NSW) Family Provision Act 1982 CATEGORY : Principal judgment Kleinig v Neal (No 2) [1981] 2 NSWLR 532 Re Fulop (dec'd) (1987) 8 NSWLR 679 CASES CITED : Singer v Berghouse (No 2) (1994) 181 CLR 201 Stewart v McDougall (NSWSC, 19 November 1987, unreported, Young J) Vigolo v Bostin [2005] HCA 11; (2005) 221 CLR 191 Bela Barna (plaintiff) PARTIES : Zoltan Barna (first defendant) Katalin Hamori (second defendant) FILE NUMBER(S) : SC 4805/07 Mr D Liebhold (plaintiff) COUNSEL : Mr Z Barna (in person) Mrs K Hamori (in person) SOLICITORS : Nicholas George Lawyers (plaintiff) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BRERETON J Thursday, 4 December 2008 4805/07 Bela Barna v Zoltan Barna & Anor JUDGMENT (ex tempore) 1 HIS HONOUR: The deceased Mrs Berta Barna died on 31 January 2007, leaving a Will which she had made on 16 December 2003, by which she appointed her son, the first defendant Mr Zoltan Barna, to be her executor and trustee, and gave the whole of her estate to her trustee upon trust: as to her interest in 15 Sage Street, Mt Druitt and the sum of $300,000 for her daughter, the second defendant Mrs Katalin Hamori; as to her interest in 38 Edmonston Street, Tregear for her son, the plaintiff Mr Bela Barna; and as to the residue for, Zoltan. Zoltan, the executor named in the Will, not having applied for probate, letters of administration pursuant to (NSW) Probate and Administration Act 1898, s 41A, for the purposes only of making an application under (NSW) Family Provision Act 1982, were granted to Bela on 13 May 2008. 2 Prior to her death, in circumstances to which I shall come, the gifts of the deceased; interests in 15 Sage Street, Mt Druitt and 38 Edmonston Street, Tregear were adeemed, the deceased having otherwise alienated her interest in those properties. So far as the evidence goes, the only assets of significance in the estate are the deceased's former home at 12 Darley Street, Marrickville – of which there is in evidence an appraisal of value at between $700,000 and $800,000, and for the purpose of these proceedings I shall assume its value is about $750,000 – and some amounts standing to the credit of bank accounts in the name of the deceased, of which after payment of funeral expenses the net balance is only a couple of thousand dollars. The estate apparently has no debts. The plaintiff's affidavit of costs indicates total estimated legal costs of these proceedings up to and including the hearing today at just under $60,000. The defendants, who are unrepresented, have no such costs. On the basis of Darley Street being worth about $750,000, cash in the bank accounts of about $2,700, and costs of just under $60,000, the net distributable estate is in the order of $695,000. The effect of the Will 3 Prior to her death, the deceased and Bela sold the Tregear property and divided the net proceeds equally between them. Accordingly, the gift of the Tregear property to Bela was adeemed, and there was no benefit left for him to take under the Will. 4 On the face of the Will, Katalin was to receive the deceased's interest in the Mt Druitt property plus $300,000. Although there was at one stage a suggestion in the evidence that the legacy of $300,000 to Katalin had been paid before the death of the deceased, it transpired that each of the children had by one means or another received a property or an interest in property from the deceased. Katalin received (at least indirectly) the deceased's interest in the Mt Druitt property, but there is nothing to substantiate that she also received the $300,000. The gift of the Mt Druitt property having been adeemed, nonetheless the legacy of $300,000 remains outstanding. 5 Thus, in the absence of any order being made under the Family Provision Act, Katalin would be entitled to a legacy of $300,000, and Zoltan would be entitled to the rest and residue of the estate (amounting, in effect, to about $390,000). To give effect to that, it would be necessary for Darley Street to be sold in any event, in order to pay Katalin's legacy. What I have said to this point is intended only to serve as a summary of what would happen if the Court were not to intervene under the Family Provision Act and make an order for provision, as sought by Bela, and any consequential orders. The proceedings 6 Before I come to that, I should record that the proceedings came before the Court today in a somewhat unorthodox manner. It is unnecessary to recite the whole of their procedural history. The defendants were joined by order made by an Associate Judge on 6 June 2008. Despite directions to do so, they never filed any affidavit evidence, nor did they attend a mediation that was appointed to take place in September. Bela's solicitors repeatedly warned the defendants that the matter was set down for hearing today and that he would seek to proceed. 7 Today, the matter was listed in the Family Provision Act running list before an Associate Judge, and referred to me due to the exigencies of that list on the basis that it was thought that there might be an adjournment application by the defendants. Although, before me, Zoltan initially indicated that he sought an adjournment to obtain representation, I decided to read all the material, and then discussed with the parties the best way to proceed, in the light of the defendants' defaults, and the prospects of an adjournment making a significant difference to the outcome. Zoltan then said that he was unsure, though he would prefer an adjournment. Katalin, through her son, Mr John Hamori, indicated that she would prefer that the matter proceed and be resolved today. Bela wished the matter to proceed today. I decided to permit the defendants to give oral evidence, particularly as to their financial circumstances, notwithstanding that they had filed no affidavit evidence. In those circumstances, it seemed to me that little other than further costs would be gained by adjourning the matter, and the plaintiff had a very strong discretionary case to resist any adjournment. Accordingly, I proceeded to hear the matter. 8 Each of the parties has been offered an opportunity to say what they wished to say about the relationships between them and the deceased, and to explain their respective financial circumstances. I have admitted into evidence material in a form which might strictly be regarded as inadmissible, but in the context of this application and the desirability of resolving it now, rather than suffering an adjournment with the associated additional costs, I have adopted the expedient course – bearing in mind the strictures upon the Court to achieve a just, quick, and cheap resolution of proceedings, and the disproportionate cost of allowing an adjournment to adduce formally admissible evidence on issues of marginal ultimate significance. Family Provision Act 9 On an application under the Family Provision Act for provision out of the estate of a deceased, the approach of the Court has been described by the High Court of Australia in Singer v Berghouse (No 2) (1994) 181 CLR 201 as involving a two stage process (at 208): the first requires a determination of the jurisdictional fact whether the applicant has been left without adequate provision for his or her proper maintenance, education and advancement in life; and the second, which arises only if the first is resolved affirmatively, involves a discretionary assessment as to what provision ought to be made out of the estate for the applicant. However, as the High Court explained, similar considerations inform both stages of the process (at 209-10): The determination of the first stage in the two-stage process calls for an assessment of whether the provision (if any) made was inadequate for what, in all the circumstances, was the proper level of the maintenance etc. 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 the applicant. 10 Because the considerations relevant to both stages overlap in this way, consideration of an application under the Family Provision Act does not always divide neatly into the two questions, as Callinan and Heydon JJ pointed out in Vigolo v Bostin [2005] HCA 11; (2005) 221 CLR 191, [122]. Nonetheless, in an application under the Act, the Court must consider, first, whether the plaintiff is an eligible person; secondly, whether the plaintiff has been left with inadequate provision for his or her proper maintenance, education and advancement in life; and, thirdly, if so, what, if any, provision (or further provision) ought to be made out of the estate for those purposes. 11 The relevant principles and considerations were concisely described by McLelland J (as he then was) in Re Fulop (dec'd) (1987) 8 NSWLR 679 (at 679): In making these determinations, the following principles apply: first, the Court should not interfere with the dispositions in the will ... except to the extent necessary to make adequate provision for the plaintiff's proper maintenance, education and advancement in life, secondly, the expression 'proper' in this context connotes a standard appropriate to all the circumstances of the case, and thirdly, the Court may take into consideration any matter (whether existing or occurring before or after the death of the deceased) which it considers relevant in the circumstances, including (a) the nature and quality of the relationship between the plaintiff and the deceased (b) the character and conduct of the plaintiff (c) the nature and extent of the plaintiff's present and reasonably anticipated future needs (d) the size and nature of the estate of the deceased (e) the nature and relative strength of the claims to testamentary recognition by the deceased of those taking benefits under the will of the deceased ... and (f) any contribution, financial or otherwise, direct or indirect, by the plaintiff to the property or welfare of the deceased. Eligibility 12 Bela, being a son of the deceased, is plainly an eligible person. His application was brought within the prescribed time after the death of the deceased. I turn then to the circumstances of Bela and his claim. Bela's circumstances, contributions and claim 13 Bela is a 63-year-old pensioner, who receives a disability pension on account of his bad back. He came with his parents and siblings to Australia in 1957, having been born in Hungary in 1945. In his last years at school he laboured on the family property at Redhead near Newcastle after school and on weekends. He left school at the age of 15 in 1960 to commence working full time in a shop, and thereafter, for about the next decade, contributed almost all of his weekly income to the deceased, retaining only 10 percent or so for his own purposes. 14 In 1966, the deceased and her husband, Bela's father, purchased the Darley Street property which the family thereafter occupied as its home. Bela assisted his father in performing work on the residence, including building a granny flat and a shed, and carrying out other maintenance and improvements. 15 In 1970, there was a serious breakdown in the relationship between Bela and the deceased. This arose in circumstances where Bela travelled to Hungary, to marry the woman who became his wife. It seems that he did not have sufficient funds to return to Australia following the wedding and asked the deceased to advance those funds to him. The deceased advanced to him $1,100; it is a matter of controversy as to whether those funds were provided as a gift or a loan. Bela says it was a gift. However, not long after his return to Australia, the deceased demanded repayment which Bela refused. Although the sum in question was only $1,100, and the events took place 38 years ago in 1970, it seems clear that this dispute was never wholly resolved. Between 1970 and the mid 1990s, contact between the deceased and Bela was sporadic, and although Bela from time to time made attempts to establish contact they were usually, though not invariably, rebuffed by the deceased. From 1994 onwards, apparently following the breakdown of Bela's marriage, their relationship improved. Bela stayed at the deceased's home once a week or so, and they also spoke on the telephone more frequently. 16 That there was a significant reconciliation is most clearly demonstrated by the uncontroversial fact that, in 1996, they together purchased, as joint tenants, the Tregear property. For this purpose, Bela provided $36,000 of the purchase money (from the property settlement consequent upon his divorce), and the deceased provided about $54,000; accordingly, the contributions were in the approximate proportions 60 per cent by the deceased and 40 per cent by Bela. 17 The Tregear property was sold, on 8 April 2004, for $230,000. After selling expenses, each of Bela and the deceased received about $107,000. Thus, despite their unequal contributions to the purchase money, they shared equally in the proceeds, which represents a contribution by the deceased to Bela's estate. From that $107,000, Bela purchased a car, took a number of holidays (or as he put it in his oral evidence, "lived it up" for a while), and spent more on everyday living expenses. 18 Despite the reconciliation to which I have referred, it is also clear from Bela's demeanour, and the answers he gave when questioned by his sister Katalin, that a significant degree of resentment, if not anger, remained on the part of Bela towards the deceased. 19 Bela's current financial circumstances are that from the $107,000 proceeds of the Tregear property he retains about $20,000, and he has a motor vehicle that he says is worth about $9,000. His de facto partner, Ms Horvath, has minimal cash savings. They have no other property of significance. Bela receives a disability allowance of $238 and Ms Horvath receives $204 a week; thus their total weekly income is about $440 a week, against total weekly expenditure, modest as it is, of about $660 a week. The beneficiaries' circumstances and claims 20 While the defendants have to prove nothing in this application – it is only Bela who has to establish that he has been left with inadequate provision for his proper maintenance and advancement in life – nonetheless, the position of the other beneficiaries is relevant to judging what was proper provision for Bela, and what, if any, order ought be made in his favour. 21 I turn then to the first defendant Mr Zoltan Barna. Zoltan has been in receipt of sickness benefits for some five years – perhaps longer, perhaps shorter. He has previously had a number of employments, including as a mechanic, but none of them very longstanding. He says, and for present purposes I accept, that he suffers from schizophrenia and obsessive compulsive disorder. He receives a fortnightly sickness benefit of about $540, that is about $270 per week. He owns a property in Hollywood Drive, Lansvale, which was transferred to him by his mother in or about 1987, and which he lets for a rent of about $190 per week (although it seems likely that, if marketed commercially, it could probably generate more, but it provides enough to cover his needs at present, and he has adopted an understanding and commendably compassionate approach towards his tenants). 22 Other than periods when, due to his illness, he has been hospitalised or in boarding houses, he has lived in the Darley Street property with his mother since 1967. He described the relationship with his mother as initially very close; it deteriorated when he became ill and somewhat rebellious in the 1980s, but they became reconciled in about 2000 and enjoyed a good relationship since. He made contributions to the deceased's welfare; in particular, in and after 2005, when she had a stroke, he looked after her for a time when she was incapable and disorientated, bathing her, making her meals, taking her to medical appointments, and so on. Zoltan finds his meagre income of a total of $460 per week sufficient to cover his very modest needs. 23 I turn then to the second defendant, Mrs Katalin Hamori. Katalin did not give evidence of the nature and quality of her relationship with the deceased, though offered an opportunity to do so. So far as her financial circumstances are concerned, she lives with her husband in a property in Austral, the value of which is not known to me. Some of their six children continue to reside with them there. Her husband receives a pension, and she is not in employment. They have no investments. 24 The deceased and Katalin transferred the Mt Druitt property referred to in the Will to Katalin's son, Mr John Hamori, for a price of $240,000, on 27 July 2006. Mr John Hamori explained that he paid the full purchase price to solicitors acting for his mother and grandmother, and they then, pursuant to a family agreement, distributed the $240,000 equally between Mr John Hamori and his five brothers and sisters. Inadequate provision? 25 As Mr John Hamori explained – and I am inclined, from my short opportunity to observe this family, to think is probably correct – there were, during the history of the family, various times at which various members of it were in disagreement and not talking to each other. Most of those disagreements were resolved sooner or later, but there were ongoing frictions so far as Bela was concerned, attributable, in large part at least, to the dispute over the $1,100 in 1970. 26 The breakdown of the relationship between a parent and child does not necessarily obliterate a parent's obligation to make testamentary provision for the child. In Kleinig v Neal (No 2) [1981] 2 NSWLR 532, Holland J said (at 541): Here was a son at the instigation of his father became highly qualified and experienced in his father's own field of autmotive engineering. No-one would have known better than his father that without substantial capital the son would have little or no chance of exploiting for his maintenance and advancement in life the specialized knowledge, skill and experience which he had gained at his father's hands and by his own independent efforts except at the lowest level of an employee in a motor repair workshop or on a very low scale of business in his own account. The father must have known that the wages which the father paid when the sone was in his employ and which the son could have earned after he left his father's employ would not permit the son to save up enough capital to go very far in his trade on his own. Moreover, until they finally fell out in 1967, the son had worked long hours and to good effect in his father's business. He had helped to build the business up and to gain a good reputation for it by his participation in motor racing. The father had led the sone to believe that one day the business would be his or his and his brother's. The reasons for their falling out would have not, in my opinion, have been regarded by a wise and just parent as sufficient to relieve the father of any further concern for promotion of his son's financial welfare. Such a parent would have recognised that part of the fault was his own, have taken some blame upon himself and would not have allowed his disappointments in his sone to be an excuse for not fostering his son's welfare. A wise and just father as wealthy as the deceased, knowing his son's potential to succeed in his field and develop a successful business if he had capital to do so and knowing also that he did not have such capital and, except perhaps in the very long term, would never have such capital, would, in my opinion, have felt that he ought to leave him a substantial sum in his will. Such a father would also have taken into account that his son had a wife and young family of three children, with the possibility of more, dependent upon him and was living in a small home, inadequate for their needs, and was being forced to live at a very modest standard of living which, for of means, was liable, without some financial assistance, to continue well into the future. He would not have overlooked that his son had a spinal defect which had troubled him before and might cause him some disablement in the future. He would have recognized that such disablement would be a serious for a man earning his living doing the kind of work that the son was qualified to do. 27 The obligation to make provision for persons for whom the community would expect a testator to make provision does not import an obligation to deal with children equally. A testator is entitled to deal differently with his or her children, and the quality of the relationship that the testator has with each of the claimants on the estate is a relevant consideration. 28 It is plain that Bela has been left with inadequate provision for his proper maintenance and advancement in life. There is no evidence that the father of the present parties, the testator's husband, made any provision for any of them, and the likely circumstance is that his estate such as it was, passed to his wife, the present deceased. Having regard to the circumstances that Bela does not own and is not buying a home, but is living in rented accommodation; that his weekly expenses, modest as they are, exceed his weekly income; that his income is itself a disability pension, reflecting an apparent longstanding if not permanent disability, which will prevent him from generating work in the future; given his present age of 63 and that his accumulated assets amount to about $29,000, including a motor vehicle; and having regard to size of the estate of about $695,000, and the provision made for Zoltan and Katilin through properties transferred to them (or their families) before her death, the deceased was obliged to make some provision out of her estate for Bela. The deceased recognised as much in her Will, making at least some provision for him before the gift was adeemed. This conclusion is only fortified by the contributions which he made to the family in earlier years, and – as his counsel has pointed out – it is particularly relevant to bear in mind that he had to leave school at an early age of 15, without completing the School Certificate or similar qualification, in order to enter into employment, support the family and contribute most of his income for many years thereafter to his mother, no doubt for the purposes of support of the family. It seems to me that the testator was unreasonably influenced by the fallout of the 1970 dispute over $1,100. The circumstance that there had been a falling out over that matter, which was never wholly resolved, was not such as to excuse the testator from making provision for one for whom she would have otherwise been expected to make provision. What order should be made? 29 The much more difficult question is how much of the estate Bela should receive and what, if any, adjustment should be made in respect of the other claims on the estate. 30 As I have said, the net distributable estate appears to be about $695,000. 31 Zoltan, like Bela, has made contributions to the welfare of the deceased, although his have perhaps been made, at least so far as the evidence reveals, in later years when the deceased was ill and he cared for her. He has his own problems with disability and although, in addition to whatever he receives from the estate, he has the property at Lansvale, its rental value does not suggest that it is a particularly valuable property, although it does provide an alternative place of residence for him in the future, if, as appears inevitable, Darley Street must be sold. It is of significance that he apparently lived with his mother for most of the 40 years since 1967 although, as I have recorded, there have been periods when he was absent from the home. 32 So far as Katalin is concerned, the evidence does not permit me to make any finding as to her relationship with her mother, other than that there appears to have been nothing abnormally good nor bad about it. There is no evidence of any particular contribution made by her; on the other hand, there is no evidence of any particular breakdown or disruption in the relationship between her and her mother. It is clear that she was living away from the home for much of the period in question and has herself been married, and has another source to look to for support. 33 Bela has set out in his affidavit a number of needs which he claims he has. I do not find it a useful exercise, in the context of a case such as the present, to deal separately with each of those claims and allow, disallow or modify them. A wise and just testator, looking at the competing claims of these three, would have given very little significance to the 1970 dispute over $1,100. The testator would have been entitled to take into account, however, that at least that benefit, and also the benefit of her greater contribution to the Tregear property, had been conferred on Bela, while bearing in mind also that benefits had been conferred, in the form of the Lansvale property and the Mt Druitt property, on the defendants. Any provision that Bela has received from the $1,100 and the Tregear property is significantly less than any benefit Zoltan received from the Lansvale property, or Katalin's family received one way or another from the Mt Druitt property. 34 In Stewart v McDougall (NSWSC, 19 November 1987, unreported), Young J (as the Chief Judge in Equity then was) explained that the Court's role was limited to making adequate provision for an eligible person's proper maintenance and advancement: It is important to state what the Family Provision Act permits a court to do and what it does not permit a court to do. The Act recognizes that Australians have freedom to leave their property by their will as they wish, with one exception. The exception is that a person must fulfil any moral duty to make proper and adequate provision for those whom the community would expect such provision to be made before that can leave money as they wish. Thus in these cases one does not ask is the will fair, on does not ask why did the testatrix not divide her property equally; one does not as a judge say how would I have made a will had I been the testatrix? What must be asked is whether the testatrix by her will failed in her moral duty to those who had a claim on her? Even if the court comes to the view that that question should be answered in the affirmative, the court still does not remake the will, but only alters it to the extent that proper and adequate provision is made to the eligible person in respect of whom the testatrix failed in her moral duty. 35 Although at first sight Bela's needs appear to exceed those of Zoltan, one has to bear in mind that, if the Darley Street property must be sold, then Zoltan will either lose the income from Lansvale if he occupies it, or have to rent elsewhere, and once that is taken into account, there will not be a large difference between their positions, save that Zoltan will have the Lansvale property. Katalin still has to support some of her children who are remaining at home, but as I have said has a husband – albeit one on a disability pension – to whom she ought primarily look for support. 36 When weighing these considerations, I cannot see that a wise and just testator would have thought that Bela's claim exceeded that of either of the defendants. Each of the defendants in their own ways has and will continue to have, significant needs, and it is not to be overlooked that they had a closer relationship with the deceased than Bela had. Having regard, first, to Bela's claimed needs; secondly, to the relative position of the two defendants; and, thirdly, the benefits already received by each of the parties, it seems to me that provision for Bela in the order of $200,000, leaving the remaining $490,000 to be shared between the two defendants would be appropriate. However, to avoid the potential of variances in value impacting unfairly, I will express that entitlement as a proportion of the proceeds of sale. 37 I order that in lieu of the provisions of the Will of Berta Barna, deceased, and pursuant to Family Provision Act, ss 7 and 10, the executor hold the property at 12 Darley Street, Marrickville upon trust for the plaintiff as to twenty 75th shares, for the first defendant as to 27.5 75th shares and for the second defendant as to 27.5 75th shares. 38 I order that the costs of the plaintiff be paid out of the estate of the deceased. 39 I reserve liberty to apply in the event of any difficulty arising in the implementation of those orders. 40 I thank counsel and the parties for their assistance and co-operation in having the matter resolved today. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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