Large v Higham & Ors [2010] NSWSC 104 (23 February 2010)

NEW SOUTH WALES SUPREME COURT

CITATION:
Large v Higham & Ors [2010] NSWSC 104
This decision has been amended. Please see the end of the judgment for a list of the amendments.

JURISDICTION:
Equity

FILE NUMBER(S):
4997/07

HEARING DATE(S):
6 & 24-27 August 2009, 17 December 2009

JUDGMENT DATE:
23 February 2010

PARTIES:
Plaintiff: John Stewart Large
First Defendant: Christopher Higham as Executor for the Estate of the Late John Michael Large
Second Defendant: Maria Bernadette Large
Third Defendant: Lausanne P/L (as Trustee for the JML Superannuation Fund)

JUDGMENT OF:
Slattery J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable

COUNSEL:
Plaintiff: Ms E Cohen
First & Third Defendant: Mr D Liebhold
Second Defendant: Mr N A Confos

SOLICITORS:
Plaintiff: Dakin Law
First & Third Defendant: HWL Ebsworth Lawyers (Sydney agent for Zilkens & Co)
Second Defendant: Bray Jackson & Co

CATCHWORDS:
SUCCESSION
wills, probate and administration
construction and effect of testamentary dispositions

uncontested that inadequate provision was made for the plaintiff out of the testator's estate
what is the proper provision that should be made for the plaintiff’s maintenance, education and advancement in life
little chance of plaintiff finding employment
plaintiff given legacy to further his advancement in life

LEGISLATION CITED:
Family Law Act 1975 (Cth)
Family Provision Act 1982 (NSW)

CATEGORY:
Principal judgment

CASES CITED:
Foley v Ellis [2008] NSWCA 288

TEXTS CITED:

DECISION:
ORDERS:
(1) Pursuant to UCPR r28.2 order that the following questions be decided separately:

(a) Whether the provision made for the plaintiff by the deceased was adequate for the plaintiff’s proper maintenance, education and advancement in life: Family Provision Act, s 9(2);

(b) In the event that the question in (a) be answered in the affirmative, what further provision ought to be ordered for the plaintiff.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

SLATTERY J

TUESDAY 23 FEBRUARY 2010

1 HIS HONOUR: John Michael Large (“the testator”) died in Sydney on Anzac Day 2006. He left a will dated 16 March 2006. The testator had been a successful pharmacist, a business entrepreneur and an important actor in the Australian motor racing industry. He married three times.

2 His first wife was Jocelyn Fisher. They married in 1961 and had two children. The elder child was John Stewart MacKenzie Large (“the plaintiff”), who is the plaintiff in these proceedings. The plaintiff was born in November 1961 and was forty-eight at the time of trial. The younger boy Andrew, committed suicide at the age of 21 in May 1985. The testator and Jocelyn lived together in Tasmania. They separated in 1964. The testator left Tasmania in 1965 and moved to Perth, Western Australia.

3 In 1972, the testator met and married Maria, the second defendant in these proceedings. Apart from a short time apart during the period 1982-1984 they lived together until 1991 when they again separated. They had no children together. The testator and Maria divorced in 1998. The testator then moved to Brisbane to live with his sister, Carole so they could jointly care for their mother.

4 In 2000 the testator married for the third time. His marriage to Rhonda Matthews lasted until 2004. The testator again returned to Brisbane to live with his sister Carole.

5 In late 2004 the testator by chance met Maria again on a social occasion associated with their mutual interest in motor sport. They soon reconciled. Throughout 2005 the testator and Maria kept in very close contact. Late in 2005 Maria moved to Sydney and they commenced to live together. They planned to marry. However the testator’s health deteriorated rapidly in March and April 2006. He died on Anzac Day that year.

6 On 1 June 2006 probate of the testator’s will was granted to Mr Christopher Higham, the first defendant in these proceedings. The will creates four testamentary trusts. Mr Higham is the trustee of each trust.

7 After making some small bequests the will gives Maria Large 50% of the estate, Carole 25% and Rhonda 12.5%. As trustee Mr Higham holds the remaining 12.5% of the estate on trust for the plaintiff for life. The income on the plaintiff’s 12.5% share is distributable to him at the discretion of the trustee. After the plaintiff’s death, one of his sons Oliver Scott is entitled to this 12.5% share. The plaintiff has another son. Oliver’s mother had adopted Oliver out at birth, with the plaintiff’s concurrence.

8 The plaintiff now challenges the provision made for him under the will in these proceedings he brings under the Family Provision Act 1982. The plaintiff’s personal circumstances raised specific issues in the testator’s mind at the time he made his will. The evidence shows that the testator considered the terms of his will very carefully. It is difficult not to admire the care with which he structured its provisions for the plaintiff and the other beneficiaries.

9 Nevertheless both Maria Large and the trustee, Mr Higham concede in these proceedings that in the circumstances that have eventuated, under the will the plaintiff was left without proper provision for his maintenance, education and advancement in life. But the parties cannot agree on just what that provision should be. The immediate issue for the Court therefore is the proper provision that should be made out of the testator’s estate for the plaintiff’s maintenance, education and advancement in life.

10 The estate is currently without sufficient funds to make any substantial provision for the plaintiff without either a contribution from notional estate or some major consensual rearrangement of the shares of the present beneficiaries under the will. In order to simplify the administration of the estate, I am first asked to consider the question of what is the proper provision that should be made out of the testator’s estate for the plaintiff’s maintenance, education and advancement in life. Once my decision is made about this issue the parties ask the Court for an opportunity to see whether they can resolve the remaining issues in the proceedings. This seemed the efficient course. It provides a way of ensuring that the parties can still maintain the capacity to mould something of the outcome, once they understand what the Court’s findings are in relation to proper provision for the plaintiff out of the estate. The precise procedural device for this separation of issues is considered later in this judgment.

11 First though, it is necessary to consider relevant aspects of the lives of the testator, his son the plaintiff and the other beneficiaries of the testator’s estate. Then it is necessary to consider the precise issues that bear upon the making of proper provision for the plaintiff out of the estate.

The Plaintiff and The Testator

12 The testator was energetic and competitive. His first child the plaintiff was content with a much quieter life. The testator left the household of the plaintiff’s mother, Jocelyn when the plaintiff was very young. No doubt in part because of this event, the testator’s relationship with the plaintiff was likely to be difficult.

13 The plaintiff was only approximately 4 years of age when his parents separated in 1965. After the separation the testator and his brother Andrew and their mother remained in Tasmania. There was no property settlement between the testator and Jocelyn. Certainly none is identified through the evidence. It appears that Jocelyn struggled financially in raising the testator’s two sons, the plaintiff and Andrew. She remarried in 1968. She and her new husband, Alan McIntyre, were together until his death.

14 During his childhood the plaintiff did not have regular face-to-face contact with his father. The testator would telephone on occasions and otherwise sent birthday and Christmas cards. The plaintiff did have though considerable contact with his paternal grandparents who remained living in Tasmania.

15 The plaintiff visited his father on a number of occasions during his adolescent years. His first trip to see his father was when he was about 14 years old. This was probably about 1975 after the testator and Maria had been together for about 3 years.

16 The plaintiff again visited his father in the summer of 1976 and 1977. He travelled by bus across the Nullarbor Plain to Perth. He had an enjoyable holiday with his father who took the plaintiff to work in his pharmacy, visited other friends and relatives throughout the trip and went fishing and ten-pin bowling. The plaintiff wanted to join his father in Perth permanently but this did not eventuate. This was undoubtedly disappointing for him. His real desires to be with his father during adolescence were not able to be satisfied.

17 The plaintiff found that he was not a particularly good student at school and left before the Higher School Certificate. However he was passionate about music and received prizes in that field. Music is an interest he has retained ever since.

18 After leaving school at 16 the plaintiff began labouring work at a mill and general farming activities in Tasmania. Although it was just good for him to have a job, both the testator and the plaintiff’s mother expressed to him hopes that he should get a better qualification.

19 In 1979 when he was about 18 the plaintiff commenced to travel. He spent some time with his Aunt Carole in Brisbane and then settled in Cairns where he worked as a labourer and later at a boiler-making firm. It was at about this period of time that the testator and the plaintiff began writing to each other regularly.

20 The plaintiff returned to Tasmania in the early 1980s. He was visited there by his father, the testator during this period.

21 The plaintiff formed a relationship with a young woman called Christine Kaufman in about 1981. She became pregnant towards the end of this relationship and a child was born to them in 1983. The young couple decided to have the baby placed out for adoption. The plaintiff discovered some years later that the boy had been adopted by a Mr and Mrs Scott and that they had named him Oliver. So far as the plaintiff is aware Oliver never had any contact with the testator. Nor had the plaintiff had any contact with Oliver until about the time Oliver gave evidence in these proceedings.

22 The plaintiff turned 21 in 1982 when Christine was only about 2 months pregnant with Oliver. At a family gathering the testator took the plaintiff aside, gave him a gold watch for his birthday and said to him:

23 I accept that this was said. It is difficult to reconcile this with what happened later. The correct analysis is that circumstances changed the testator’s attitude to the plaintiff over time. The testator recognised his son with other acts of generosity at this early time.

24 By the mid 1990s the testator no longer recognised in conversation with his son the possibility that the plaintiff might be his principal heir. Indeed he denied the possibility. Some of the reasons for this will become clear as their joint history is explained.

25 The plaintiff had intermittent contact with his father in his early twenties, in the early 1980s. A lingering issue in the relationship was the testator’s disapproval of the fact that Oliver had been put up for adoption. The plaintiff went on holiday with his father at Surfers’ Paradise in his early twenties, when he was in a relationship with another young woman.

26 By 1989 the plaintiff was single again and living in the Lismore area. He began relationship with a young woman by the name of Jodi Edwards. Ms Edwards became pregnant but the relationship ended before the child was born. Jodi named the baby, born on 3 July 1991, "Moon" Edwards.

27 Moon now mostly lives with Jodi and her mother and stepfather in Gympie, Queensland. The plaintiff has little contact with Moon. Jodi and members of her family seem to be opposed to such contact. One of the plaintiff’s desires is that he would like to be in a position to provide for Moon and Oliver if he were able to do so.

28 About the early to mid 1990s, after the testator and Maria had separated the testator invited the plaintiff to celebrate Christmas and the New Year with him and with Rhonda. They spent time together in Sydney, went out to dinner and talked on New Year's Eve. During this trip the testator, the plaintiff and Rhonda went out on a harbour cruise with various celebrities. The plaintiff still remembers this cruise well. Although the contact between father and son was infrequent, the testator tried to make it special.

29 In Christmas 1994 there was more contact between the plaintiff and his father. But the testator had suffered a heart attack and was by then very weak. Despite the testator's poor health he took the plaintiff shopping, purchased clothes and consumer items for him and commenced looking for houses. They looked at the Sylvania Waters property together, a property that the testator ultimately purchased.

30 It could not be said that contact between the plaintiff and the testator through the 1990s was frequent. But the testator did initiate contact on a periodic basis and the plaintiff responded positively to that contact. When the contact occurred they both benefited from it.

31 By the late 1990s the testator's involvement in the Targa Race was diminishing. The race was eventually sold in 2000. The plaintiff now feels that the testator would have liked him to have been more involved in motor sport. During the 1990s the plaintiff’s relationship with Rhonda was tense from his perspective. That made social contact with his father difficult during this period. The plaintiff now has a better relationship with Rhonda. In retrospect he regrets the difficulties during this time.

32 The plaintiff’s perspective on their meetings is that despite their lack of closeness and the infrequency of contact, they got on well and never argued. They wrote letters to one another and met up for lunch and dinner from time to time. I accept the correctness of this.

33 The plaintiff has given evidence, which I accept, about the financial assistance provided by his father during the testator's lifetime. During the plaintiff’s adult years the testator assisted him with bills that the plaintiff could not pay. A typical example of this was that the testator paid the plaintiff's car registration of $1,000 in 1993 when the plaintiff did not have the means to do so. Also in the mid-1990s the testator purchased expensive clothes as a Christmas gift. The impression given by the plaintiff's evidence was that there were many other smaller gifts as well. The plaintiff's present financial circumstances are discussed below.

34 The reverse side of the testator's busy life in motor sport and in building a chain of pharmacies was that time to see his son was always limited. An important feature of this case is that there is no evidence of the testator rejecting his son. Time, geography and important lifestyle differences drove them apart.

35 The last time the plaintiff saw his father was at his paternal grandmother's 90th birthday celebration, about 18 months before the testator died. He travelled to Brisbane by bus for the occasion. The plaintiff caught up with his father, with Carole and with other family members. This was a very happy occasion. So happy indeed that the plaintiff was surprised at the testator and Rhonda's separation and divorce not long afterwards.

36 The plaintiff spoke with his father on the telephone in the weeks prior to the testator's death. The plaintiff said he offered to come and stay with his father but that his father said to him "there is no need". I accept this was said to the plaintiff. Whatever the reason for it, it meant that the plaintiff did not see the testator in his final months.

37 The plaintiff attended his father's funeral in Sydney on 4 May 2006 at St Andrews Cathedral. He was a pall bearer at the funeral.

Maria Large

38 Maria Large, the testator’s second wife received 50% of the estate. She appeared as the second defendant in these proceedings to maintain that interest. The testator’s benevolence to Maria is understandable when their time together is considered.

39 Maria was born on 10 February 1945 and is now aged 65. She first met the testator in Melbourne in May 1972. The testator was then 34 and she 27. At the time that they met he owned and operated the Hamilton Hill Pharmacy near Fremantle in Western Australia. They married in Melbourne on 25 November 1972. They jointly purchased a house in Attadale, Western Australia in March 1974. In May 1975 they jointly invested in a vacant block of land in the same suburb.

40 Maria supplied significant support to the testator in the expansion of his pharmacy businesses. In June 1977, in partnership with one Ian Barron, the testator opened up the pharmacy known as the “Civic Drive In Pharmacy” at Inglewood near Perth. Maria played an important role in expanding the testator’s pharmacy businesses. In addition to working full time at Hamilton Hill, Maria acted as the retail stock co-ordinator for the opening of the Civic Drive In Pharmacy.

41 The opening of the new pharmacy led in June 1978 to a change of residence for the testator and Maria. They sold their existing residence for more than twice the price for which they had purchased it and used the funds to buy another house in the same street in Attadale.

42 The testator and Ian Barron had made good judgments in founding a pharmacy business together. In August 1989 they opened a second pharmacy in partnership together. For this opening Maria was again responsible for retail stock co-ordination, opening promotion stock, selection of staff and ongoing training of staff, while she continued to work at Hamilton Hill. There were now three pharmacies in the growing group.

43 The group continued to expand. By 1982 there were six pharmacies. Five of them operated seven days per week. The other one operated six days a week. Stock promotion and control was a major issue for the growing group. Maria co-ordinated product promotion and retail stock levels for each store. She also managed staff selection and staff training from the Hamilton Hill pharmacy.

44 The testator and Maria separated 10 years after they met, in late 1982. Their time together had been one of intense business expansion. As their conversations upon their later reconciliation show, there was also conflict in their relationship. Despite their domestic separation, Maria continued to play a role in the testator’s pharmacy business. She continued to work within the group, troubleshooting at individual pharmacies, overseeing operating procedures, purchasing stock and training staff.

45 Maria’s organizational skills were recognised in the marketplace. Headhunted by the pharmacy chain FH Faulding (WA) Pty Limited, she took up a position as a retail services consultant. In 1984 she and the testator reconciled and lived together for a further seven years until November 1991. During these years the business expanded remarkably. By November 1991 there were 17 pharmacies in the group through a number of Australian states. Maria had some experience in each of these pharmacies.

46 Upon separation the testator and Maria went to different states. Maria remained in Attadale until their joint residential property was sold in December 1992. The testator moved to Hobart, Tasmania. At the time of their 1992 separation Maria was 46 and the testator was 53. But for a two-year separation between 1982 and 1984 they had been together for over 19 years

47 It took some time for their matrimonial issues to resolve. A property settlement was quickly achieved in March 1993 through a property settlement deed under s 86 Family Law Act 1975 (Cth). Their divorce was not formalized by decree nisi until May 1998.

48 The testator and Maria’s property settlement deed reflected her contribution to their marriage. It also reflects their rapid expansion in wealth during those 19 years. The principal features of the deed were:

49 The testator and Maria did not have any children together. It was many years after their separation before the testator remarried.

50 The issues in this case have brought to the fore Maria’s contribution to the testator’s life and wealth. There is a risk in that setting out their joint history that the important influence on the testator’s life of his other wives, Jocelyn and Rhonda will tend to be displaced. Analysis of Maria’s situation in particular is necessary because one of the direct consequences of the Court making the orders sought in these proceedings is that Maria’s share of the estate is that at the most significant risk of diminution.

51 The testator was not a man to do anything by half measures. In his chosen profession of pharmacy he become a director of Guild Insurance, Rumbles Limited and was a founding member of a national pharmacy political lobby group. Between 1976 and 1986 he held various positions in the Pharmacy Guild both in Western Australia and nationally. Maria gave the support and time that he required to achieve all of this professionally.

52 Although the testator was successful on the ground as a rally champion he also had a desire to influence and improve the world around him. He designed, developed and promoted the world-class road rally event known as “Targa Tasmania” – an annual international rally still conducted. Maria supported him socially in forming the important personal relationships with the powerbrokers and officials of international motorsport organization that enabled him to advance to a senior position within FIA. Maria’s evidence credits him with a having influence in retaining the Australian Grand Prix as part of the world Grand Prix Championships.

53 When the testator was 62 he married Rhonda Matthews in June 2000. It was a shorter marriage than the testator’s marriage to Maria. They had been together before they were formally married. The testator and Rhonda separated in August of 2004. They entered consent property orders in November 2005. Under that settlement Rhonda received furniture, cash, a motor vehicle, share in the sale proceeds of a boat, listed shares and a mortgaged property in the Hunter Valley. She also became entitled to a 12.8% interest in his estate. Rhonda also transferred all her interest in Lausanne Pty Limited to the testator in this settlement.

54 A relevant aspect of the testator’s property settlement with Rhonda was its arrangement for the sale of the Sylvania Waters property. Under the property settlement the parties acknowledged that the Sylvania Waters property was on the market for sale. Pending sale of the property and by way of interim property settlement, the parties had taken out a mortgage over the property and advanced $250,000 each to themselves. They agreed that the proceeds of sale after payment of sale expenses would be used to discharge the combined $500,000 mortgage. The proceeds of sale would then be used to pay Rhonda the sum of $1,132,138 in 3 instalments. The first instalment of just over the sum of $1 million was due immediately upon execution of the settlement. Under this property settlement the testator had the right to set the sale price for the Sylvania Waters property and to acquire title in it provided he paid out his obligations to Rhonda under this arrangement. The testator’s obligations under his property settlement with Rhonda were ultimately satisfied with assistance from Maria, who had by then returned into his life.

55 Shortly before Maria retired from work in late March 2005 she encountered the testator at a motorsport rally in Perth in November 2004. Despite their separation, they had both individually maintained interest in the sport. The testator and Rhonda had only separated in August that year and were then living apart within the property at Sylvania Waters, Sydney. The testator was planning to return to Perth. The Western Australian Government was supporting Rally Australia and motor sport in the state was active.

56 I accept Maria’s evidence that from the time of their meeting in late 2004 and early 2005 the testator and she quickly took steps to re-establish a life together. Their reunion though entirely unscheduled from Maria’s point of view, was perhaps not totally unexpected for the testator. He had asked his sister Carole to contact Maria a short while before their meeting. They exchanged reminiscences and within a few days the testator had asked her to help him, especially with his involvement in motorsport. They commenced to discuss in what State they might buy a property and live close to one another. The testator expressed to her deep regrets about the breakdown of their marriage. They commenced to focus on the things they had in common. In the course of their early reconciliation discussions, the testator said to her,

57 By the end of 2004 the testator had achieved seniority within Australian and international motor sport. He was vice president of the Federation Internationale de l’Automobile (“the FIA”) the world governing body for Formula One and other motor racing world championships. And he was Chairman of Honour of The Confederation of Australian Motorsport (“CAMS”). He travelled extensively both within Australia and overseas in both these roles throughout 2005. Maria often travelled from Perth to be with him on his journeys within Australia.

58 They planned to buy a penthouse in South Perth. They examined plans, engaged an interior decorator and designed extensions. They changed course when the Western Australian Government chose to discontinue support for Rally Australia. The testator then invited Maria to join him in Queensland, where he was staying with Carole.

59 In Queensland they planned to purchase adjoining apartments on top of the old Coronation Hotel in Coronation Drive Brisbane. Their idea was to remove the dividing wall between the 2 apartments, redesign the resulting floor plan and create a single large penthouse apartment, which would also have an office, board room and guest suite. Plans for this purpose were prepared and left with Carole.

60 Health and medical complications began to impact on their lives at several levels very soon after their reunion. The testator and Carole’s mother died in February 2005. Carole was badly affected by her mother’s death and needed medication. The testator too became seriously unwell. He was hospitalized in August 2005 in Brisbane. Carole and Maria attended upon him daily for over 12 hours per day. Even when the testator was in hospital, he and Maria made plans for a future together. At this time it seems that Maria did not appreciate how grave the testator’s condition actually was.

61 Their hospital discussions broached the question of where they were to live together. These discussions are important background to one of the issues for the Court – Maria’s interest in the Sylvania Waters property. The parties agreed that they did not wish to live in Melbourne. Their principal choices were between Brisbane and Sydney. The Sylvania Waters property had not sold. They decided to live there. It was still necessary to pay out Rhonda. The consent property orders with Rhonda were not finalized until November. The idea emerged between them that Maria could buy a half interest in the Sylvania Waters property and the testator would use the proceeds of the sale of that half interest to pay out Rhonda under his property settlement with her. Maria felt that the Sylvania Waters property needed renovation. The estimated cost of these renovations was approximately $195,000. She offered to provide total funds of $1.5 million for those joint purposes by organizing a loan through her bank in Western Australia. Maria made good on this promise, taking out the loan on 19 December 2005, so the testator would have funds to pay out Rhonda under his property settlement and have money left over for renovations.

62 The testator and Maria formalised these arrangements through heads of agreement crafted by the testator’s lawyer and their accountant, Mr Higham. The heads of agreement recite that, “the testator and Maria now wish to resume their relationship and intend to remarry”. The heads of agreement were not a prenuptial agreement compliant with Part VIIIA Family Law Act 1975 (Cth). There probably was not time for that just then. Circumstances surrounding the making of the heads of agreement indicated the parties were under time pressures. The two schedules to the heads of agreement, the schedules of Quarantined Assets show that at that as at 30 November 2005 each of the testator and Maria had net assets of approximately $4.8 million.

63 The heads of agreement provided for Maria Large to provide the testator with $1.5 million so he could buy out Rhonda from the Sylvania Waters property. The testator would allow the title to be used to assist Maria organising a loan for this. Interest would be capitalised for a period. They would make mutual wills. He was to bequeath her 50% of his estate. She would give him enough to pay out his loan obligations.

64 Both Maria and the testator took steps consequent upon their entry into the heads of agreement. There were several of these. First, the testator remade his will, giving 50% of his estate to Maria. This will is the subject of this proceeding.

65 Secondly, Maria took steps to remake her will but did not complete those steps. At the time the heads of agreement were signed she was preoccupied with administering her father’s estate. As part of that she was selling the family home in Melbourne late 2005. She was also planning a future with the testator. She says that she intended upon her return to Perth to contact a solicitor to redraft her will, in accordance with the heads of agreement. I accept that this was her genuine intention. There were pressures preventing her from amending her will, so she executed a document dated 16 December 2005, which acknowledged her obligation to leave not less than $1.6 million or a sum equal to the value of any debt secured against the title of the Sylvania Waters property on the date of her death. This document was apparently created to provide some informal evidence of her intentions should she die before being able to make another will.

66 Thirdly, she made the necessary arrangements to pay the testator $1.5 million. She raised the finance with the National Australia Bank, drawing down an advance of $1.5 million on 23 December 2005. This advance was applied as to $1,054,638 to Rhonda for her share of the Sylvania Waters property, as to $250,000 to pay out Rhonda’s bank loan for the interim property settlement, and as to $195,362 to the testator for renovations to the property.

67 Fourthly, Maria paid the necessary stamp duty and legal costs to enable conveyance of a half interest in the Sylvania Waters property into her name. The testator conveyed a half interest in the property to her, for what was expressed to be a nominal consideration of one dollar, on 18 March 2006. The parties had agreed the property was worth $3 million. The consideration for his half interest was expressed in the heads of agreement as $1.5 million.

68 Fifthly, after capitalizing the interest obligations for the first year on the loan of $1.5 million Maria then paid interest to her bank, the National Australia Bank, on the loan.

69 Once Maria had advanced the $1.5 million she was able to move into the Sylvania Waters property with the testator. She left Perth for Sydney on 29 December 2005. They only had a further four months together. These were filled with his intense and continuing commitment to motor sport, with decorating and renovating the Sylvania Waters property and with his increasingly complicated medical problems.

70 The testator’s medical problems, included muscular degeneration in the back, a foot problem interfering with walking, a continuing heart condition after major heart attack in 1994, kidney failure. By this time he had also developed insulin dependent diabetes. He ultimately died of cancer.

71 When she arrived in Sydney Maria drove the testator to his frequent medical appointments. She attended upon him during his increasingly frequent periods in hospital commencing in the second week of March 2006. He was exhausted from his international FIA related travels. Maria spent much time nursing him and caring for him at home to assist his recovery from his self-imposed but punishing travelling schedule. She helped administer his daily medication, provided meals in his bedroom when necessary, prepare his clothes to wear for the day and wheeled him around the house in his wheelchair. She says, and I accept that she was there at his “beck and call to give him everything that he needed to make his life comfortable.”

72 The testator was 67 when he died on 25 April 2006. Maria played an important role in organizing his funeral.

73 Maria also spent much time with Carole and the testator in the last few months of the testator’s life. In those last few months she helped care for Carole as well as the deceased. They formed a close relationship in this period. This seemed to be what the deceased wanted. Maria Large was a realistic witness who gave a believable account of her reconciliation with the deceased. The underlying facts of reconciliation are made out. I accept her evidence.

74 In his principal affidavit in the proceedings of 14 November 2007 the plaintiff demonstrated how few assets he has. This position was not altered in his affidavit of 14 July 2009. In November 2003 the value of his assets and personal property was estimated at $7000. His sole assets were a station wagon motor vehicle, an electric guitar, a banjo, a tape recorder and other clothes and personal effects. He has two bank accounts. In November 2007 there was only a total of four dollars in these accounts. He has no other financial assets, shares, real estate or other investments.

75 The plaintiff has been unemployed most of his adult life. He never qualified for a trade. He has generally done seasonal work such as fruit picking. In November 2007 he was unemployed and in receipt of social security benefits. He received additional social security benefits for participating in the "work for the dole" program. He then received $250 per week from Centrelink. At the time of hearing the plaintiff is receiving $560 per fortnight in Social Security benefits but he said that it costs him $600 per fortnight to live. He undoubtedly leads a very marginal existence.

76 In November 2007 the plaintiff was living out of his car and using the washing facilities and other amenities and caravan parks for daily living. He is able to pay $15 - $20 per night for these various facilities. He was living in a disused greenhouse and paying $100 per week with electricity included. He says that he is frustrated because he has "nowhere to grow things" which has made him unhappy. The evidence certainly demonstrates an agricultural theme to most of his attempts at work over the years.

77 The plaintiff's health could only be described as fair. He has an old neck injury, which occasionally causes him pain and affects his ability to pick fruit. His capacity for the rigours of seasonal work at his age is diminishing in any event.

78 Despite his work history the plaintiff says that he always wanted to own his own piece of farming land and that from such a position he would have wished to be in a position to provide financial assistance to his mother and his two sons. Interestingly, in the lead up to a hearing in these proceedings, for perhaps the first time in his adult life, he started to take steps to realise an ambition to undertake farming on his own plot of land.

79 All of the plaintiff’s recent work experience has been in Work for the Dole programs. Through one of these he became interested in the macadamia nut industry. He left his job though when he was upset about his father's death.

80 During periods of unemployment the plaintiff spends much of his time with music artists and music students. He cannot make a living from this interest but it provides great pleasure for him.

81 At the beginning of 2009 the plaintiff enrolled in a college course in agriculture certificate (Farm Management) at the Tasmanian Polytechnic at Burnie. He attended this course throughout 2009 up to the time of hearing. This appears to be the first extended tertiary education the plaintiff has undertaken since leaving school. Whilst the case against him was that this was far too late in life to show a genuine desire to build an independent farming property, the plaintiff demonstrated something more than merely doing the groundwork for litigation. His oral evidence showed that he took obvious pleasure at this course and, as will be discussed below his teacher, Mr Ranson was impressed with his progress so far.

82 In this course he learns about farming and general agriculture. He attends four days a week. He is learning skills that he would only otherwise learn on his own farm. He is taught everything from raising cattle and sheep, working the land with implements and the general maintenance of crops and pastures. The course takes five years to complete. Only in the latter years does the course teach the higher-level skills of farm management and an understanding of agricultural markets.

83 The plaintiff has a criminal record. He appropriately gave frank disclosure of the detail of this record in his case in chief. The full record (Exhibit 1) was tendered in the course of his oral evidence. The range of offences demonstrated by this record is consistent with the lifestyle that he has led. His casual attitude to legal and social regulation is demonstrated by traffic offences for bald tyres and driving unregistered and uninsured motor vehicles. Especially when younger he clearly had an explosive temper which is confirmed by charges of behaving in an offensive manner and common assault and damage to property. He has been found guilty of possession of drugs and equipment to administer prohibited drugs. His criminal record gives a picture of instability and antisocial behaviour. Looking at the whole picture though the worst of it appears to be well behind him.

The current position of the estate

84 Mr Higham the trustee gave evidence about the current position of the estate. He gave a picture of intense difficulty in winding up the affairs of the estate. A special problem for his administration was the difficulty in negotiating with the testator's former partners in his various pharmacy businesses. Extracting reasonable value for the testator’s share in these businesses or business premises was proving difficult. The value of the testator's assets at the time of his death was mainly in the JML Superannuation Fund. Lausanne Pty Limited is the trustee of the superannuation fund. Mr Higham is the sole director and shareholder of Lausanne Pty Limited.

85 For the purposes of this judgment, dealing with the limited issues that it does, it is not necessary for me to go further into the detail of the administration of the estate other than to show the relative position of the estate and the superannuation fund and the effect that Sylvania Waters would have as notional property. This is well set out in a table tendered to the Court after submissions and showing the relative position of these three groups of assets. It is set out below.

Actual Estate		Potential Notional Estate		Total
Lausanne	Estate	Sylvania Waters	Super Fund	Total
Trading Trust Beneficiary Loan
Assets Cash Lausanne Trading Trust Notional 50% Interest in Sylvania Waters Peet Windsor Syndicate	[<br>]548,884 143,923	[<br><br><br>]1,341,432	[<br>]1,201,524 175,000	[<br>]1,750,408 - 1,341,432 175,000
	692,807	1,341,432	1,376,524	3,410,763
Liabilities Estimated futures costs of administration Balance Pre Withholding Taxes Provision for Withholding Taxes Carole @ 70% of 25% of Estate at 16.5% Stewart @ 70% of 12.5% of estate entitlement 16.5% Stewart @ 70% of excess to $450,000 of estate entitlement @ 16.5% Taxation @ 15% of income	[<br>] 277,000 415,807 89,749 44,875 7,100	[<br>] - 1,341,432	[<br>] 50,000 1,376,524	[<br>] 327,000 3,083,763 - 89,749 44,875 7,100
Total Withholding Taxes	141,724			141,724
Net Estimated funds available for distribution including notional estate	274,788	1,341,432	1,376,524	2,942,744

86 Lausanne Pty Limited has commenced proceedings for judicial advice and directions in the Supreme Court of Western Australia (Exhibit A). Lausanne Pty Limited is not obliged to pay the assets in the superannuation fund to the estate. One possibility is that they may be paid to Maria. I do not need to go into whether or not this is likely or what the outcome of the proceedings in the Supreme Court of Western Australia will be. If I am asked to consider issues in relation to notional estate, these issues may come into play.

87 For present purposes the important conclusion is that the total distributable assets within the estate are a little over $400,000. 12.5% of estate assets is a little over $50,000. Income on that at 8% per year is only $4000. It is logical on the basis for there being no real contest in these proceedings that the provision made in favour of the plaintiff out of the testator's estate is inadequate for his proper education, maintenance and advancement in life.

88 The relevant statutory provisions of the Family Provision Act engaged by the plaintiff’s application are set out below. The plaintiff qualifies as an “eligible person” entitled to make a claim against the estate of the testator under s 6(c) Family Provision Act.

89 The discretionary considerations of the Family Provision Act have been invoked in this case by both sides. The relevant principles developed in the authorities that are relevant to the exercise of this discretion are set out below but the statutory provisions are relevantly the following.

(a) the provision (if any) made in favour of the eligible person by the deceased person either during the person’s lifetime or out of the person’s estate, or

(i) if no provision was made in favour of the eligible person by the deceased person, the provision made in favour of the eligible person under this Act out of the estate or notional estate, or both, of the deceased person, or

(ii) the provision made in favour of the eligible person by the deceased person either during the person’s lifetime or out of the person’s estate as well as the provision made in favour of the eligible person under this Act out of the estate or notional estate, or both, of the deceased person,

(a) any contribution made by the eligible person, whether of a financial nature or not and whether by way of providing services of any kind or in any other manner, being a contribution directly or indirectly to:

(i) the acquisition, conservation or improvement of property of the deceased person, or

(ii) the welfare of the deceased person, including a contribution as a homemaker,

(b) the character and conduct of the eligible person before and after the death of the deceased person,

90 The present case raises questions as to what kind of provision if any, should be made out of the estate of the testator. These questions are discussed below. The Family Provision Act s 11 statute gives a broad range of choices, once a finding is made that some order should be made.

Legal Principles

91 The legal principles that apply to the jurisdiction I am called on to exercise in this case are not controversial. They have been clearly summarised in a recent decision of Taylor v Farrugia [2009] NSWSC 801 where Brereton J said:

92 Towards the very end of the hearing counsel proposed that I only deal with the potential notional estate issues in these proceedings after the parties had had an opportunity to resolve them with the knowledge of my findings about what is an appropriate provision for the plaintiff out of the estate of the testator. To achieve this it was necessary to make orders for the decision of the separate question of the issues raised by ss 9(2) and 7 Family Provision Act. Although issues as to the extent of the notional estate of the testator cannot really be ignored when making s 9(2) and s 7 judgments the course suggested had the clear advantage of allowing the parties to resolve those issues themselves. Accordingly I will make the orders for separate trial of these issues set out at the conclusion of this judgment.

93 Issues in relation to notional estate in this case may conveniently be divided into two baskets. The first relates to the Superannuation Fund and the trading trust. The second relates to the Sylvania Waters property. The trustee concedes that the assets of the Superannuation Fund are capable of being notional estate. The question is whether an order should be made over it.

94 Maria Large raises two notional estate related questions about the Sylvania Waters property. The first is whether it is capable of being notional property. The second is whether there is an impediment to the making of a notional estate order in respect of this property by reason of s 27 of the Family Provision Act 1982.

95 This judgment deals with the separate question. If other issues cannot be resolved within 28 days then the parties should approach the Court for directions as to the trial of the other remaining issues.

96 The plaintiff’s principal case was that he could conduct a farm in Tasmania after he had undergone the agricultural course at the Tasmanian Polytechnic for that purpose. He sought an order for the provision of a lump sum for his benefit to allow this enterprise to be set up and pursued. His counsel in closing submissions ultimately abandoned this case. The decision to withdraw this case was rightly taken as the evidence in support of it was becoming unrealistic. It is worthwhile to examine the flaws in that case because they throw much light on what should now be appropriate provision for the plaintiff out of the estate of the testator.

97 The fundamental assumption behind the plaintiff’s principal case was that he is capable of managing the occupation of running a small farm. I doubt that the plaintiff would be capable of managing a farm in the way that he claims. I say this for several reasons. Running a farm is not a simple occupation. It is one that involves important qualities and skills, such as foresight, judgment of markets, consideration of costs, dealing with suppliers and stock and station agents.

98 First, the plaintiff is unlikely to be able to apply himself consistently with the constant effort required to run a farm on a day-to-day basis. His criminal history indicates he has an emotional short fuse. He will react aggressively when his intentions are thwarted or he is provoked.

99 Second, his farming education so far, creative and well constructed though his course is, does not give confidence that he has the ability to deal with the aspects of farm management that require the exercise of personal and commercial discipline and sound judgment. He has not done any management courses as yet. As he himself says, they are “further down the track”.

100 Third, the cause of his interest in agriculture seems inconsistent. He says that in recent times his interest was sparked by the experience of working on a macadamia nut farm in 2005 and 2006. He stopped doing this when his father died. However, he then moved to Tasmania where macadamia nuts and sugar cane, the crops with which he had familiarity, cannot be grown. This move does not bespeak a real commitment to improving his farming skills.

101 Fourth, he has a history of drug use and convictions for possession of drugs. This history shows a lifestyle that is not conducive to constant application or the dedicated habits of farming work. The plaintiff showed a lack of insight that growers of poppies for the extraction of opium for the health care industry might need to be specially licensed for that purpose. He said that he only discovered the need for licensing of opium poppy growers when giving evidence. He did not apparently suspect that his criminal record might be an impediment to being licensed to grow poppies. He seemed genuinely surprised that with a criminal record that included convictions for possession of drugs he would be unlikely to get a licence to grow opium-producing poppies in Tasmania. This demonstrated some lack of insight into his circumstances.

102 Fifth, he admitted some recent marijuana use. The usage admitted occurred as recently as the commencement of his technical college course earlier this year. That background contains the risk of his returning to using drugs and failing in any enterprise he started.

103 The picture for the plaintiff’s future employment is not entirely negative though. Mr Ranson’s evidence, taken by telephone from Tasmania gives some ground for optimism about the plaintiff’s future. Mr Ranson teaches the plaintiff at the Tasmanian Polytechnic in Burnie. He holds a Diploma of Agriculture from New Zealand. He has his own farm, which he runs on weekends. Mr Ranson thought that the plaintiff had the potential to progress through each of the Certificates in Agriculture offered by the Polytechnic.

104 Mr Ranson said that the plaintiff’s attendance at college had been excellent. He is always punctual. He is willing. He stays back to help the managers to save their time. The course ratio is presently two-thirds practical and one-third theory. The plaintiff has the capacity to complete Certificate 2 and Certificate 3 Mr Ranson thinks. The former certificate is really equivalent to a traineeship. The latter certificate can be finished on the college farm. If that happens the course will send out experts in agronomy who can assist with fertilisers. Even diploma Certificate 5 can be mentored whilst a trainee is operating a farm. Mr Ransom thought that the plaintiff was capable of passing Diploma 5 but “with difficulty”. He thought it would take another two to three years to get through.

105 But to achieve the plaintiff’s ambition to own a farm substantial capital would have been required. The purchase price of cropping land in northern Tasmania is $7,000 to $12,000 per acre. Cropping land is more valuable than grazing land. A small mixed farm in the area with mixed cropping and grazing would cost of the order of $1.5 million. This is also the price of the farm presently being sold by the Tasmanian Polytechnic at Burnie. Irrigation infrastructure needs to be put in to make these farms work viably. Contractors can supply machinery. Mr Ranson thought that a 200 acre farm would be the minimum size necessary for viability. A person could earn $40,000 to $50,000 net income from a farm of this size. Poppies are not an essential crop for viability of what Mr Ranson calls mixed farm. A cash buffer is required on the typical mixed farm. Tasmanian agriculture has a low risk of crop failure. Cash buffer levels would not be high in Tasmania.

106 The plaintiff may yet be able to pass his course and do some farming. The chances of him successfully running a mixed farm in Tasmania though are very low.

107 The plaintiff is barely employable. With his criminal record, at his age and with his particular employment history he is unlikely to be acceptable to any employer who asks him about either his employment or criminal history. He may gain undemanding labouring occupations involving little or no responsibility on his part where such questions do not matter as much. It is fair to assess him as chronically unemployed. Given his way of life up to the age of 48, I find that this is probably unlikely to change but there is a little hope.

108 Many issues were pursued as to the plaintiff’s credibility. It is not productive to examine them in any detail. Most of the plaintiff’s contact with the testator was uncontroversial. Most of the credit issues raised do not impact on my final findings. Some of them derive from my observations. The defendants raised others.

109 The plaintiff had a tendency to deny things that were not convenient to him. For example, he said that he had not read parts of his affidavit that were inconsistent with his current evidence.

110 He has selective recollections of his criminal behaviour and prior convictions. That is understandable. He does have a palpable sense of shame about his past conduct. He clearly wanted to put it all behind him. This is one positive sign for the future. But it was accompanied at times by a somewhat truculent refusal to recognise the obvious.

111 The plaintiff is however quite intelligent. His syntax and use of language shows more than average sophistication. He speaks, though slowly with a deliberateness that suggests a capacity to choose his words carefully. His answers were indeed subtle at times. His incapacity to manage a farm is more a reflection of a lack in willpower and application and the risk of the unpredictable in his own behaviour rather than any want of basic intelligence on his part.

112 Exhibit 5(2D) shows that the $10,000 inherited from the plaintiff’s grandmother was exhausted within no more than 14 months, from July 2005 to September 2006. This demonstrates for the period in question a ready willingness to dissipate funds available to him. But more than one perspective on his life is warranted. The plaintiff’s counsel says that it also shows his clear need of money and the inadequacy of his current social security benefits. In that I think she is right.

113 The plaintiff was prepared to deny that he had read Maria Large’s affidavit about his smoking habits. This was so despite his having replied to her affidavit in his own final affidavit.

114 The plaintiff had difficulty in answering questions about paragraph 53 of his recent affidavit where he said that he “would expect to look for a long time for the perfect property”. In evidence he said he did not think he would look for very long for a property. This tends to show what was being put to him, that he had not thought through very far his ideas of purchasing a property. This in turn confirms doubts that he has sufficient foresight to do this successfully. Although his mental calculations in the witness box of the minimum size of a potato farm were impressive.

115 The range of the plaintiff’s investigations created another credit issue for him. When the second affidavit was sworn the plaintiff could only find the properties in Annexure “A” available. They are properties that were “economically viable to a point”. He had not investigated the returns on land in the south of Tasmania, even though his preference is to live closer to his mother in the South of Tasmania. He may have to discontinue his College course if he moved south. He would not have the advantage of staff development. He said, “I haven’t thought deeply about it because I didn’t think it would be happening soon”. This is a fair reflection of the lack of detailed thinking out of this proposal that has been done. The plaintiff claimed that his idea “was developed” but I do not think it was.

116 The questions raised for consideration suggest the following final structure for this judgment.

117 The issue of whether there is adequate provision for the plaintiff out of the estate of the deceased is not controversial in this case. The figures are set out above showing how little is the income that would be derived on his 12.5% share in the estate, makes this clear. The issue was not seriously contested by either of the defendants.

118 Even if one were to add the notional estate potentially in the superannuation fund into the calculation, the probable invested income on 12.5% of the total of $1,757,239 ($415,807 plus $1,341,432) is 8% of $219,654 or $17,572. An annual income of this amount is only likely to reduce the plaintiff’s social security benefits, without giving him a chance to buy some small plot of property to live on. It is necessary to consider what is proper provision for the plaintiff.

119 The plaintiff was content with the present trust structure of the will. He said to the trustee at the funeral, he “didn’t mind it being a trust”. He only had a problem with the percentage. In cross-examination and questions from the Court when he said he was quite happy with the structure his father had set up in the will. He accepted the wisdom of his father’s testamentary intentions. Despite the fact that he thought he could handle money, he also thought that it would be wisest and best to have a trustee structure in place.

120 The other feature of the trustee structure of the will which the plaintiff acknowledged was wise was that his son Scott would receive the balance of the capital after the plaintiff’s death. The plaintiff has some insight into the risks that might be associated with giving the funds to him without a trustee and in such a way that Scott might be at risk of not receiving the capital as a result of the plaintiff’s dealings with the funds during his lifetime.

121 However the plaintiff’s case is that to structure any provision for the plaintiff the way that the deceased did is liable to produce an inadequate result for the plaintiff as the assets of the estate have eventuated. A small supplementary income will do no more than offset the plaintiff’s Newstart social security benefits.

122 Although the testator's life estate structure was a wise attempt to deal fairly with the plaintiff circumstances and to allow something later for Oliver it fails in adequacy for one main reason.

123 The thing which the plaintiff most needs now, is as he stated himself, is a small property on which he can grow a few things and still receive his social security benefits. That gives him the best chance of settling down to a law-abiding life, which will give him some satisfaction. He may if he passes his Polytechnic course still use the property as security to pursue his ambition of running a farm. That will be his decision to make in the future. This can really only be achieved if he is given a legacy to purchase such a property. Income will not achieve that result. This is what a wise and just testator would wish to provide for him. The only question now is the amount.

124 An incidental but important result of disturbing this part of the structure of the will is that the value of Oliver’s remainder will need to be capitalised either by agreement or his situation will need to be dealt with by the Court. I will allow the parties an opportunity to attempt to resolve this issue.

125 There are advantages for the plaintiff in having some security in the short term that will not impact on his Centrelink benefits. With that security he has the option of passing his course and then seeing whether he could run a farm. He would not then have the risk of failing at a larger business operation and ending up with nothing. A wise and just testator would not set a man of the plaintiff’s ability and history up to fail by taking on obligations beyond his means and capacities.

126 I accept the persuasive force of the plaintiff’s amended case that his advancement in life is now best served by giving him the capacity to buy a small property on a few acres in rural Tasmania. On this he would not run a major farming operation but he would be able to undertake small scale vegetable growing and hobby farming.

127 I do not accept the plaintiff's submission that he needs a capital sum to provide income in addition to a sufficiently sized legacy to purchase a property. A capital sum such as that would reduce his social security benefit and provide a large fund that he could dissipate. A residential property does not have the same effect on his social security benefits. There is also still a risk of dissipation of such a capital sum (probably of the order of $200,000 to offset his pension) due to the plaintiff’s past and recent history. There is at least some real prospect that he would invest a smaller legacy in a property, which would then be difficult to dissipate. If all goes well with the Polytechnic course he has something he can use as security to commence commercial farming but he is also free not to take that risk. Also it is to be observed that there is no right in an adult son to an income of this kind: Foley v Ellis [2008] NSWCA 288.

128 I do not think in this case that there is any point in requiring the Public Trustee to intervene in the structure of such a legacy. This will only diminish the capital available to the plaintiff. This legacy is a final opportunity that the plaintiff will have to use an asset make something of his life and not to waste it. I expect that his very entrepreneurial father would have seen some benefit in this.

129 Two properties were suggested as samples of that kind of property the plaintiff might purchase. Exhibit 6 (2D), which had an asking price of $320,000 and Exhibit 3, which had an asking price of $255,000. They are properties of the kind that the plaintiff could purchase with such a legacy.

130 The plaintiff would in my view also require a small buffer fund to allow him to pay some of the incidental expenses of purchase and start to run small-scale agriculture of the property after it was purchased. Various figures were suggested for this but in my view the appropriate allowance is $80,000 on top of the higher purchase priced property of $320,000. The buffer would also permit him to buy a more expensive property, if that is what he wanted I propose therefore to provide for a legacy to the plaintiff of $400,000 out of the estate of the deceased.

131 Noting the findings I have made about the quantum of a legacy that should be provided for the plaintiff, I direct the parties to bring in short minutes of order to give effect to this judgment.

AMENDMENTS:

31/01/2011 - typographical errors - Paragraph(s) 29, 36, 63, 67,124

LAST UPDATED:
31 January 2011

Supreme Court of New South Wales

Large v Higham & Ors [2010] NSWSC 104 (23 February 2010)