Supreme Court New South Wales Medium Neutral Citation: Martyn v Martyn [2013] NSWSC 134 Hearing dates: 21 and 22 February 2013 Decision date: 25 February 2013 Jurisdiction: Equity Division Before: Associate Justice Macready Decision: 1. Joshua Martyn and Trent Martyn are to receive a legacy of $80,000 each out of the notional estate of the deceased. 2. Interest is to run on the legacy at the rate provided for in the Probate and Administration Act 1898 three months from today's date. 3. The plaintiffs' costs on the ordinary basis and the defendant's costs to be paid or retained out of the notional estate. 4. I designate the property of the defendant at 35 Powderworks Road, Narrabeen, as notional estate for the purposes of and to the extent necessary to meet the order for the legacy and the costs referred to above. 5. I give liberty to apply. 6. The exhibits can be returned subject to the solicitors undertaking to retain them for the appeal period. 7. The payment under this judgment to be secured by a charge over the defendant's property at Powderworks Road, Narrabeen. 8. The plaintiffs' costs on the ordinary basis up to and including 24 January 2013 be paid on the ordinary basis out of the estate of the deceased and thereafter the defendant should pay the plaintiffs' costs of the proceedings on the indemnity basis. 9. The defendant's costs are to be paid or retained out of the notional estate. Catchwords: SUCCESSION - application for provision for children from former marriage of deceased - estate administered in bankruptcy - provision from notional estate Legislation Cited: Family Provision Act 1982 Succession Act 2006 Cases Cited: Cameron v Hills (NSWSC, Needham J, 26 October 1989, unreported) Cetojevic & Anor v Cetojevic [2007] NSWCA 33 Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201 Wade v Harding (1987) 11 NSWLR 551 Category: Principal judgment Parties: Joshua Takeshi Martyn and Trent Yota Martyn by their tutor Miho Kawasaki (Plaintiffs) Preedika Martyn (Defendant) Representation: Counsel: Mr CF Hodgson (Plaintiffs) Mr RK Weaver (Defendant) Solicitors: Ramensky Lawyers (Plaintiffs) Argus Lawyers (Defendant) File Number(s): 2011/405791 Judgment 1HIS HONOUR: This is an application under the Succession Act 2006 in respect of the estate of the late Craig Andrew Martyn who died on 22 December 2010 aged 47 years. 2The deceased was survived by his widow, their child, Talia, his former wife and the two children, Joshua and Trent of his first marriage. These children by their mother who is their tutor, are the plaintiffs in the proceedings. The widow is the defendant. 3The last will of the deceased was made 18 November 2004 and appointed the defendant as the executor. He left his estate as one half to his widow the defendant and one sixth of his estate to each of his three children. Assets of the Estate 4There are no assets in the estate as it was administered in bankruptcy. There is possible notional estate consisting of: (a) The matrimonial house at Powderworks Road, Narrabeen which was held by the deceased and the defendant as joint tenants. (b) A death benefit under an AMP life policy of $746,512.00. (c) A death benefit of the deceased under another Commonwealth superannuation policy which was paid as to the defendant in the sum of $70,378.65 and to Miho the mother of the plaintiffs as trustee for Joshua and Trent in the sum of $70,123.22. Apparently $510 was paid to someone named as a recipient. (d) The proceeds of the deceased's AMP superannuation policy which was paid to the defendant in the sum of $25,696. 5Costs have been incurred in the matter. Fortunately they have been kept within moderate limits; the defendant's costs of $42,149 of which $23,769 has been paid and the plaintiffs' costs of $41,651 of which $27,367 has been paid. Family History 6The deceased was born in March 1963 and his first wife, Miho, was born in February 1964. The second wife, Preedika - I will refer to these people by their Christian names as the parties referred to them - was born in August 1972. 7The deceased married Miho on 6 November 1994 and in February 1997 their son, Joshua, was born and in October 1998 their son, Trent, was born. 8In March 1999, Preedika met the deceased and his brother in Hong Kong and started a relationship with him. The deceased separated in April 2000 and was divorced on 14 April 2002. In 2003, Preedika moved to Australia. In February of that year, there was a property settlement between the deceased and Miho which finalised their property matters and resulted in the sale of their former matrimonial home. On 6 September 2003, the deceased and Preedika married and in August the following year they purchased a property at 35 Powderworks Road, North Narrabeen as joint tenants. 9At some stage in May 2004 there was a nomination of Preedika as a beneficiary of the deceased's life policy. 10The deceased and Preedika had their child, Talia, who was born in July 2004. It was shortly after that in November of that year that the deceased made his will to which I have referred. He died, as I have mentioned, on 22 December 2010. That was the end of the monthly payments of $1,450 which he had been making for the support of Joshua and Trent since the separation from their mother. 11In March 2011 Preedika received the payment of $25,696 from the AMP. Unfortunately the deceased's business which was operated with his brother could not survive his death and in March 2011 Preedika's monthly maintenance payment ceased and Moneytech Finance Pty Limited brought proceedings in the District Court against Preedika, the estate of the deceased and a number of others seeking damages of about $500,000. 12There was a grant to the defendant of the will on 23 June 2011. Shortly thereafter in July she received the substantial payment of $746,512 from AMP under his life policy. She used the money to pay off the mortgage and to pay off the settlement. 13On 7 December 2011 on the defendant's application, there was an order of the Federal Court that the estate of the deceased be administered in bankruptcy. The summons in this matter was filed on 16 December 2011. In January 2012 Preedika received the death benefit payment of $70,378.65 from the CBA. 14In February a similar sum was received by Miho as trustee for Joshua and Trent. The District Court proceedings were settled on 29 May 2012. That involved the payment by Preedika of $50,000 to the plaintiff and costs. The costs amounted to $71,168.92, so the total amount was $121.168.92. 15On 10 October last year there was a mediation which unfortunately was unsuccessful. On 12 October 2012 out of the proceeds of the death benefit payment, which had been held in trust on deposit until that stage, $520,000 was paid to discharge the mortgage over the Powderworks Road, Narrabeen property. That payment was made in circumstances where the first defendant had received advice from the bank manager that it would be in her financial interests to pay out the mortgage and it would be more efficient for her if she did that. What other advice she had at that time was not the subject of evidence. The plaintiff knew that these proceedings were well underway and what she did was at her own risk. Eligibility 16The plaintiffs are eligible persons. In an application under the Family Provision Act 1982, the High Court in Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201 set out a two-stage approach that the Court must take. These comments are equally applicable under the Succession Act. "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' et cetera were explained in Bosch v Perpetual Trustee Co Ltd. 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 maintenance, et cetera, 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." The Situation of Joshua 17Joshua is 16 years of age and lives with his mother, Miho. He is in Year 11 at Killarney High School. He is a keen surfer and wants to study Computer Science or Electrical Engineering when he leaves school. He is completely dependent upon his mother and has the $35,000 held in trust for him by his mother. The Situation of Trent 18Trent is 14 years of age and lives with his mother, Miho. He is in Year 9 and is doing well at Killarney High School. He surfs and has other activities. When he leaves school, he might go to university although precisely what he will do is not decided. He may even go to TAFE and do a motor mechanics course. He is also completely dependent on his mother and has the $35,000 held in trust for him. The Situation of Miho Kawasaki 19Miho is 49 years of age and single. She supports her two sons. She has a home worth $730,000 which is subject to a mortgage of $229,552. She also has a 1998 car worth $3,000, furniture of $4,000 and superannuation of $56,644. She also has cash which recently was $14,271. 20Miho has secure employment and her current rate of pay is $57,876 per annum. There is the possibility for bonuses but they are not always paid. All of Miho's income is used to maintain the children whose expenses comprise of a large part of the weekly payments. 21It is necessary to consider the situation in life of others having a claim on the bounty of the deceased, which in this case is his widow and daughter, Talia. The Situation of Talia and her mother, Preedika 22Talia is eight years old and lives with her mother who is now 40 years of age. Preedika owns her home at Narrabeen which is worth between $760,000 and $780,000. It is unencumbered. She has furniture, a Mazda 3 worth $16,000 and savings adding up to $36,000. She has a tax debt of $4,800. Talia needs some $6,000 spent for dental work. Preedika does some part-time work earning $65 per week and receives $210 a fortnight as a family benefit. She studies two days a week doing a beautician course at TAFE and will reach level 5 in June this year when she will be able, if she obtains employment, to earn $740 per week. 23She has difficulty reading English and her spoken English is hesitant. This will be something of a disadvantage for her in obtaining employment. It may mean she will take some time to obtain employment. 24Failing this, she is considering setting up her own business at home for which she will need a separate room for her beauty parlour. However, such prospect is only in the initial stages of thought and she would have difficulty perhaps with her English in doing that. 25It is necessary to see how the plaintiffs have been left without adequate and proper provision for their maintenance, education and advancement in life. 26Miho, the mother of the plaintiffs, pays the contributions to living expenses of about $37,763 for the two boys each year. This includes their school fees. There are future education needs once they have left school. For Trent they may be as high as $100,000 for four years of study at university. For Joshua, if he goes to university, $60,000 or $3,500 if he does a motor mechanics course. They also suggest that they need funds for a car and trips overseas to see their grandparents. In the context of this case, that is not possible. 27In recognition of the limitation which the factual circumstances of this case indicate, they have asked for $100,000 for each plaintiff. 28The only source of funds to meet any claim is now represented by Preedika's unencumbered home. It will be some time before she can earn a living and she plainly cannot borrow at the moment. That means that the home will have to be sold and she will need to downsize her accommodation. 29It must be realised that it was a short marriage of seven years duration and she contributed nothing in a financial sense towards the house. They did have a child, Talia, who they both supported. She has taken the risk of paying off this mortgage rather than keeping back some funds to pay out any claim. If the house is sold for $764,00 she will receive $736,280 after expenses. If sold for $780,000 she will receive $755,840 after expenses. There are in evidence the asking prices for houses and units in the Narrabeen area which is her local area. I accept she should remain close to where she presently lives in that area for the children's sake. 30The alternative houses range from two-bedroom houses for $250,000 to $400,000 and with two-bedroom units in the low $400,000. 31The problem is that we have costs of about $90,000 of which $50,000 still remains unpaid and these must also come from any available fund. There will also be the purchase cost of any new property for Preedika. 32I also note that the two plaintiffs already have $35,000 each held in trust for them. I think that a sum of $80,000 for each plaintiff is appropriate and will leave enough for Preedika to find reasonable accommodation for herself and Talia. It would be good to provide more for the boys but it must be remembered that there is another young child, Talia, who needs to be provided for, for many years. The only property available is the former joint home. Joint Tenancy Provision 33The relevant prescribed transaction which is alleged under s 75 & 76(2)(b) of the Succession Act is the failure of the deceased to sever the joint tenancy. 34In Wade v Harding (1987) 11 NSWLR 551 Mr Justice Young, when dealing with similar provisions in the Family Provision Act, concluded on the facts of that case, "what was foregone in not severing the joint tenancy was received by continuing to be a joint tenant". This conclusion appears to be because he formed the view that immediately before death the deceased had an equal chance with the joint tenant of benefiting by the jus accrescendi. 35In Cameron v Hills (NSWSC, 26 October 1989, unreported) Needham J described that approach in these terms: "With great respect to his Honour, I find it difficult to see how a joint tenant, about to die immediately, can be said to have an equal chance of surviving the other joint tenant. The Court must look at the position the moment before death. Whatever may have been the facts in that case justifying the conclusion, there are no such facts in this case. Immediately before the death of this deceased there was no rational prospect of his surviving the defendant. Accordingly, in my opinion, no valuable consideration in money or money's worth was given for the omission of the deceased to sever the joint tenancy." 36Needham J's approach has now been followed in the Court of Appeal. See Cetojevic & Anor v Cetojevic [2007] NSWCA 33. 37Provided that a deceased has suffered some injury, had a medical problem or set in train some sequence of events as a result of which death ensues then, like his Honour Justice Needham, I would normally conclude that there was no rational prospect of the deceased surviving his co-tenant. In the present case the deceased died by accidental drowning. In these circumstances I would conclude that no valuable consideration was given and thus there is a prescribed transaction. 38Section 87 of the Succession Act provides as follows: "The Court must not make a notional estate order unless it has considered the following: (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, (c) any other matter it considers relevant in the circumstances." 39The only relevant reasonable expectations could be those of the defendant, Preedika. It is true that she was the only nominated beneficiary under the insurance policy and it was clear that the deceased wanted to provide for her. His will also provided for his children. 40What I propose to do is in my view appropriate, notwithstanding that Preedika believes that his intention was to provide her with full benefit of the insurance policy. 41In my view the substantial justice and merits of the application make it appropriate to declare the property as notional estate. Orders 42Accordingly, the orders that I make are as follows: 1. Joshua Martyn and Trent Martyn are to receive a legacy of $80,000 each out of the notional estate of the deceased. 2. Interest is to run on the legacy at the rate provided for in the Probate and Administration Act 1898 three months from today's date. 3. The plaintiffs' costs on the ordinary basis and the defendant's costs to be paid or retained out of the notional estate. 4. I designate the property of the defendant at 35 Powderworks Road, Narrabeen, as notional estate for the purposes of and to the extent necessary to meet the order for the legacy and the costs referred to above. 5. I give liberty to apply. 6. The exhibits can be returned subject to the solicitors undertaking to retain them for the appeal period. Discussion 43I will make an additional order that the payment under this judgment be secured by a charge over the defendant's property at Powderworks Road, Narrabeen. 44I note that there has been an offer of compromise served on 23 January 2013 in which the plaintiff offered to accept $65,000 for each of the plaintiffs. Accordingly, I vary the order to provide that the plaintiffs' costs on the ordinary basis up to and including 24 January be paid on the ordinary basis out of the estate of the deceased and thereafter the defendant should pay the plaintiffs' costs of the proceedings on the indemnity basis. The defendant's costs are to be paid or retained out of the notional estate. ********** 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. Decision last updated: 27 February 2013