Campbell v Chabert-McKay [2010] NSWSC 859 (5 August 2010)

Last Updated: 31 October 2011

NEW SOUTH WALES SUPREME COURT

CITATION:
Campbell v Chabert-McKay [2010] NSWSC 859
This decision has been amended. Please see the end of the judgment for a list of the amendments.

JURISDICTION:
Equity

FILE NUMBER(S):
2008/279610

HEARING DATE(S):
2, 3 and 4 December 2009

JUDGMENT DATE:
5 August 2010

PARTIES:
Plaintiff: Holly Rhys Campbell
Defendant: Annie Chabert-McKay

JUDGMENT OF:
White J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
Plaintiff: J Drummond
Defendant: M S Willmott SC

SOLICITORS:
Plaintiff: Hartmann & Associates
Defendant: Gordon A Salier, Solicitor


CATCHWORDS:
SUCCESSION – family provision – claim by daughter of deceased – estate fully distributed to defendant – application under Family Provision Act, s 16 for extension of time to apply for provision out of estate – ascertaining whether there is sufficient cause for application being made out of time – whether defendant will suffer any relevant prejudice by the plaintiff’s delay
SUCCESSION – family provision – whether order should be made designating property of defendant as notional estate – consideration of matters in Family Provision Act, ss 27 and 27 – meaning of “other special circumstances” justifying order – determination of amount of provision to be ordered

LEGISLATION CITED:
Family Provision Act 1982 (NSW)

CATEGORY:
Principal judgment

CASES CITED:
Alexander v Jansson [2010] NSWCA 176
Lewis v Lewis [2001] NSWSC 321
Massie v Laundy (Supreme Court of New South Wales, Young J, 7 February 1986 unreported, BC8601246)
De Winter v Johnstone (Court of Appeal, 23 August 1995, unreported, BC9505226)
Warren v McKnight [1996] NSWSC 419; (1996) 40 NSWLR 390
Dare v Furness (1998) 44 NSWLR 493
Ebert v Ebert [2008] NSWSC 1206
Re Guskett (deceased) [1947] VicLawRp 28; [1947] VLR 212
Re Lauer (deceased) [1984] VicRp 14; [1984] VR 180
Bearnes v Bearnes-Hayes (Supreme Court of New South Wales, Young J, 7 May 1997, unreported)
Cetojevic v Cetojevic [2006] NSWSC 431
Baker v R [2004] HCA 45; (2004) 223 CLR 513
Lloyd-Williams v Mayfield [2005] NSWCA 189; (2005) 63 NSWLR 1
Singer v Berghouse (No. 2) [1994] HCA 40; (1994) 181 CLR 201
Wentworth v Wentworth (1995) 37 NSWLR 703

TEXTS CITED:


DECISION:
1. Order that the time for the plaintiff to apply for an order under s 7 of the Family Provision Act 1982 in relation to the estate of the late David McKay be extended up to and including 14 July 2008.
2. Order that provision be made out of the notional estate of the late David McKay in favour of the plaintiff in the sum of $1,230,000.
3. Stand over the proceedings to a date to be fixed to determine which assets of the defendant should be designated as notional estate out of which such provision is to be made.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION


WHITE J

Thursday, 5 August 2010


2008/279610 Holly Rhys Campbell v Annie Chabert-McKay

JUDGMENT

1. HIS HONOUR: This is an application under the Family Provision Act 1982 (NSW) for an order for provision out of the notional estate of David McKay who died on 26 December 2004. The plaintiff is the deceased’s daughter of his first marriage. The defendant is the deceased’s widow by his third marriage. She is the executrix and the sole beneficiary of the estate.

2. The estate was sworn for probate purposes in the amount of $4,094,020. The principal assets disclosed in the inventory of property filed with the application for probate consisted of real estate known as “Collingwood” and “Collingwood Farm” in Exeter in New South Wales to which was attributed a combined value of $3,050,000 and 53 shares in Scuderia Veloce Pty Ltd to which was then attributed a value of $1,033,778. In addition, on 19 November 2004 the deceased had entered into a contract for sale of approximately 40 hectares of the farm known as Collingwood. The sale was settled on 23 December 2004, three days before the deceased’s death. On the deceased’s direction the purchase price of $950,000 was paid to the defendant. From that sum the defendant, in accordance with the wishes of the deceased, paid $200,000 to the plaintiff in February 2005.

3. Although the deceased died on 26 December 2004, the plaintiff did not commence proceedings for an order under the Family Provision Act until 14 July 2008. This was more than two years outside the prescribed period of 18 months after the deceased’s death for the making of an application. (Family Provision Act, s 16(1)(b)). By the time proceedings were commenced, the estate had been fully distributed to the defendant. Title to the real property was transmitted into the defendant’s name as beneficiary under the will by a transmission application dated 17 June 2005 which was registered on 21 June 2005. The shares in Scuderia Veloce Pty Ltd were transmitted into the defendant’s name on 17 June 2005. The remaining assets in the estate consisted of listed shares (to a value of about $13,000). These were sold in April 2007 and the proceeds deposited into the defendant’s bank account.

4. The deceased did not have a close relationship with the plaintiff. He deserted his first wife and the plaintiff when the plaintiff was ten years old. The plaintiff was naturally and justifiably resentful. They had intermittent contact over the years prior to the deceased’s death.

5. The plaintiff deposed that she had net assets of between $230,000 to $330,000 not including superannuation of about $90,000. She has significant financial needs. Senior Counsel for the defendant admitted that the provision made in favour of the plaintiff by the deceased during his lifetime was inadequate for her proper maintenance, education, and advancement in life (Family Provision Act, s 9(2)(a)). He made no provision for the plaintiff in his will. The concession was correctly made.

6. The first issue is whether an order should be made pursuant to subs 16(2) of the Act extending the period for the plaintiff to make her application under the Act. To obtain such an extension the plaintiff must demonstrate “sufficient cause ... for the application not having been made within [the prescribed] period” (s 16(3)(b)) and must show that discretionary considerations warrant the extension of time.

7. The second question is whether an order should be made under s 23 or s 24 of the Act designating property of the defendant as notional estate. Section 23 is engaged because by directing the payment of the purchase price of the land sold shortly before his death to the defendant, the deceased entered into a prescribed transaction within the meaning of s 22(1) of the Act. The plaintiff contends that when that transaction was entered into, the deceased had a moral obligation to make adequate provision for her proper maintenance and advancement in life that was substantially greater than any moral obligation of the deceased to enter into the transaction (s 23(b)(ii)). Section 24 is engaged because the estate has been distributed to the defendant. In deciding whether to designate property as notional estate, the court is required to consider the matters in ss 27 and 28. These include that there be other “special circumstances” that justify the making of the order (s 28(5)).

8. If time is extended, and if an order should be made designating property of the defendant as notional estate, the third question is what amount of provision should be ordered in favour of the plaintiff.

Background

9. The deceased was born on 14 May 1921. He was 83 when he died. His occupations were as racing car driver, journalist and motorcar dealer. On 21 October 1952 the deceased married Elizabeth Antill. There was one child of the marriage, namely the plaintiff. She was born on 3 May 1958. She was named Josephine Fiona McKay.

10. The deceased was often away in Europe or otherwise absent while he pursued his career of racing car driver. In June 1968 the deceased left his wife and child and commenced living with a Robyn Mitchell. From late 1968 (when the plaintiff was ten) to December 1971 (when she was 13) the plaintiff was a boarder at SCEGGS Moss Vale in the Southern Highlands. The deceased’s parents owned the Collingwood Farm at Exeter, also in the Southern Highlands. The deceased visited the plaintiff on only a couple of occasions during this time. The deceased did not arrange for her to visit her grandparents at Collingwood.

11. The deceased and the plaintiff’s mother were divorced in 1971. From 1972 to 1975 the plaintiff attended Roseville Ladies’ College as a day student and lived with her mother in Turramurra. She has no recollection of seeing her father at this time. She has no recollection of receiving any gifts from him for either Christmas or birthdays. It was her perception that the deceased failed to provide adequate financial support for her mother and her.

12. In 1972 both of the deceased’s parents died within six months of each other (exhibit 2, page 249). The deceased and his brother inherited the Collingwood Farm. The deceased later acquired his brother’s interest in the farm.

13. In the 1970s the deceased married Robyn Mitchell. They divorced in 1986.

14. The plaintiff finished school in 1975 and worked as a secretary before travelling overseas in 1979. By this time she used her present name of Holly Rhys Campbell, being names from her mother’s side of the family. She formally changed her name in 1990. Whilst overseas between 1979 and 1981 the plaintiff met the deceased at a hotel at Monaco. She had called him in March 1979 to ask him to pay for her mother’s airfare so that her mother could join her in London for her 21^st birthday. He declined that request. He proposed that she join him at Monaco for the Grand Prix of that year. The deceased did not acknowledge her 21^st birthday. The plaintiff subsequently travelled to Monaco and stayed at the hotel for a week. He paid for the hotel accommodation. The experience was not a happy one. The deceased and his then wife left the hotel without saying goodbye.

15. The plaintiff returned to Australia in 1981. She sent Christmas and birthday cards to the deceased, but he did not reciprocate. She attended his 60^th birthday in May 1981.

16. In 1982 the plaintiff was hospitalised for a month and was visited by the deceased once. Again, the experience was not a happy one. She was distressed at what she perceived to be the deceased’s lack of concern for her.

17. Between 1983 and 1986 the plaintiff studied a drama course. Following the completion of the course she invited the deceased to attend her graduation play. The play was somewhat avant garde. The deceased walked out complaining loudly and later accused the plaintiff of being a disgrace to the family.

18. On 16 August 1985 the deceased met the defendant in Beaulieu-sur-Mer near Cap Ferrat. The defendant’s appeal to the deceased and their subsequent courtship are described in a book published by the deceased in 2001 (“David McKay’s Scuderia Veloce”). The defendant was a resident of Geneva where she was employed as a school teacher. The deceased took up residence in the defendant’s apartment in Geneva. They married on 29 May 1990. In 1993 the deceased and the defendant moved from Switzerland. The defendant took early retirement and received what she called a “golden handshake” of a little under 100,000 Swiss francs. She also received a lump sum superannuation entitlement of CHF 379,193.

19. Before moving to Australia permanently in 1993 the deceased and the defendant visited Australia from time to time. In late 1991 or early 1992 the deceased invited the plaintiff to the Collingwood Farm. They drove to the farm together. The deceased told the plaintiff that she and her mother could go to the farm if they wished when he and the defendant were in Europe and asked her to mow the lawns and keep an eye on the cottage. From late 1991 until about 1996 the plaintiff and her mother frequently travelled to Collingwood and stayed at the property at which time the plaintiff would mow the lawns if required and inspect the house. The farm had been leased to a family by the name of Christie for a number of generations. The Christie family resided in two of the three cottages located on Collingwood and ran the farm.

20. The deceased formerly owned all of the shares in Scuderia Veloce Pty Ltd. Scuderia Veloce was originally the name of a motorcar racing team organised by the deceased in the 1950s and 1960s. Under the same name the deceased later acquired motorcar dealerships in Sydney which he sold in the mid 1980s. At the deceased’s death the assets of Scuderia Veloce Pty Ltd consisted principally of cash, listed shares, and an investment called National Income Securities issued by the National Australia Bank. There were 100 issued shares in Scuderia Veloce Pty Ltd. During his lifetime the deceased transferred 47 shares to the defendant for no consideration. In 1999 the deceased transferred to the defendant National Income Securities to the value of $500,000.

21. On 29 January 2002 the plaintiff’s mother died.

22. From 2002 until mid-2004 the plaintiff lived with a Mr Peter Prentice. Their relationship ended in 2004.

23. In 1991 the plaintiff established a business known as Holcam Creative. It provided marketing services such as preparation of brochures or flyers, in-house magazines, advertisements, designs for exhibitions and presentation of websites. The business was conducted by a company, Holly Campbell Advertising Pty Ltd. It acted as trustee for a trust of which the sole beneficiary is Holly Campbell Services Pty Ltd. The plaintiff has at all times been the sole director and shareholder of both companies. It was a small business employing up to six permanent staff and some temporary staff. Because of adverse trading conditions and the loss of a major account the plaintiff effectively closed the business at the end of 2009.

Deceased’s representation to give plaintiff a remainder interest in Collingwood

24. In 2004 the deceased was diagnosed with terminal cancer. On 30 September 2004 both the deceased and the defendant made new wills. The deceased’s will provided that if the defendant survived him by 30 days, then he gave the whole of his estate to her and appointed her his sole executor. If the defendant did not survive the deceased by 30 days, he left his estate in equal shares to the plaintiff and to Ms Nathalie Barcellini, the defendant’s daughter. The defendant’s will made on the same day was to like effect. She left her estate to her husband if he survived her by 30 days. If not, she left her estate equally between her daughter and the plaintiff. At the time these wills were made, the deceased was known to be terminally ill. The strong likelihood was that he would predecease the defendant.

25. In October 2004 the plaintiff was telephoned by Mr Prentice who told her that he had received a telephone call from her father to say that he was dying of cancer and wished to see the plaintiff before he died.

26. The deceased was concerned that the plaintiff might make a claim on his estate. He raised the issue with his accountant, Mr Shepherd, and with his solicitor, Mr Fleming. On 25 October 2004 Mr Fleming made a file note of a telephone conversation with the deceased in which that concern was expressed. The deceased told Mr Fleming that he did not know anything about his daughter’s financial circumstances. He said that he had paid for her schooling and as far as he was aware, she was self-sufficient, but he had not seen or heard from her in many years and did not know where she was. He contemplated making a contract with the defendant for mutual wills. Mr Fleming advised him that even if he made a mutual will contract, it would not stop his daughter from challenging the will and would not stop the defendant from spending all of the money in the estate.

27. A file note of Mr Fleming’s conversation the following day records that the deceased had instructed Mr Fleming that he was prepared to rely on the defendant to do the right thing. On 26 October, in further discussion with his solicitor, the deceased said that he expected that the plaintiff would have inherited all of his first wife’s assets and he would make some inquiries to see whether he could learn something about his daughter. It was at that time that the deceased gave instructions for the proceeds of sale of Lot 4 of the Collingwood Farm to be directed to the defendant.

28. On 28 October 2004 the deceased told Mr Fleming that he had spoken with his daughter’s partner whom he said was a mining engineer who owned a property in Darling Point and a fine wool stud property. He reported that his daughter was apparently “highly sought after as a marketing person” and they were proposing to be married. The deceased’s evident understanding that his daughter would be well provided for by her partner was wrong. The plaintiff and Mr Prentice did not marry. Nor did Mr Prentice own a property in Darling Point or a fine wool stud property. He was then an undischarged bankrupt. Mr Fleming advised the deceased of difficulties in connection with the making of mutual wills.

29. On 31 October 2004 the plaintiff travelled to Collingwood and met the deceased and the defendant. Upon the plaintiff’s arrival the deceased took her aside and told her that the defendant would be inheriting his estate and that he did not want the plaintiff to upset her by contesting the will. He told the plaintiff that he wanted the defendant to be well looked after and safe after he was gone and that she had been a wonderful wife. The plaintiff was distressed. She said:

“Fine. I have had nothing from you my entire life. That’s not the reason I came down. I just thought that you wanted to see me.”

The deceased replied:

“Well I wanted to make sure you don’t upset Annie and cause trouble for her.”

30. Later the deceased learned from the plaintiff that the plaintiff had lent $200,000 to Mr Prentice. He told her that he was selling off 100 acres of the farm and when the sale went through he would give her $200,000. The plaintiff thanked him.

31. After lunch when the plaintiff was preparing to leave, the deceased took her aside and gave her a family signet ring and a book about his ancestors. The plaintiff deposed that a conversation to the following effect took place:

“Deceased: ‘Do you like the farm?’

Holly: ‘Yes, why?’

Deceased: ‘Well, you know land is very important Josephine. It is the best asset you can have. As I have told you, Annie is getting the farm after I die and I want her to have it for the rest of her life. But it would be nice to keep it in the family, would you like it after she dies?’

Holly: ‘Yes that would be great. You know mum loved the land so it is in me but I was not expecting anything from what you said earlier this afternoon.’

Deceased: ‘Well, land is important and always a sound investment. You will have the place after Annie dies. I will make sure of that.’

Holly: ‘Thank you very much. I have always loved the farm. That is wonderful and very unexpected.’”

32. The following day the deceased advised his solicitor that his meeting with his daughter went very well, that she was self-sufficient, made money, and did not want anything from him. Mr Fleming’s file note continues:

“We then talked about whether Annie should only get her life estate in respect of the house and four acres and get the rest of the estate outright and have Josephine receive the house on Annie’s death. David, after further discussion, decided that Annie should get the whole estate outright – there should be no binding agreement on her to maintain the will in its present form and David will sign a piece of paper to that effect.”

33. On 9 November 2004 the deceased signed a letter addressed to his solicitor stating that although he and his wife had executed wills in similar terms on the same day, the wills were not to be taken to be mutual wills, there was no contract between him and the defendant to bind the defendant not to change the terms of her will, and the defendant was to receive the whole of the deceased’s property absolutely.

34. On 5 November 2004 the plaintiff wrote to the defendant and the deceased in part to thank them for their hospitality on the previous Sunday. In the course of her letter the plaintiff wrote:

“... I feel you are concerned that I [may] contest your will as that seemed to be one of the main points of discussion on Sunday. In no way do I wish to cause Annie hardship or further pain or any uneasiness for her future. Your wishes for Annie remain just that. Further to that, you mentioned yesterday you both wished to send me some money. Again, I am not asking for anything, and though perhaps not entirely successfully, I have always stood on my own two feet. I have enclosed my details as you asked for, but do not feel obligated. I will be OK. ...”

35. The conversation the plaintiff said she had with the deceased in which he told her that she would inherit the farm after the defendant’s death is significant in two respects. It is a relevant circumstance to her claim for provision (Alexander v Jansson [2010] NSWCA 176 at [18]). More importantly, it is significant to the plaintiff’s claim for an extension of time in which to commence the proceedings.

36. The plaintiff deposed that she did not receive a copy of the deceased’s will until 1 April 2008 when she received a copy from her then solicitor, Mr Stephen Wawn. She said that until then she assumed that she would inherit the Collingwood Farm after the defendant’s death because that is what the deceased had told her.

37. Mr Willmott SC for the defendant submitted that I should not accept the plaintiff’s evidence of what she was told by the deceased. Such evidence is to be treated cautiously given that the deceased cannot contradict the plaintiff’s evidence.

38. Notwithstanding that caution, I accept the plaintiff’s evidence that the deceased did say to her words to the effect to which she deposed. The plaintiff emerged from cross-examination with credit. Her answers were responsive. Where she was challenged on matters of detail concerning the operation of her companies, she was able to provide evidence corroborating her affidavits. Her affidavit evidence was appropriately frank. Thus in her first affidavit, she deposed to having sent a letter to the deceased by facsimile upon her return to Sydney after the meeting on 31 October 2004 informing the deceased that, as he had requested, she would not contest the will. At the time she swore the affidavit she did not have the facsimile or a copy of it. She did not wait to see whether the defendant would be able to produce the letter. Nothing less from a witness is expected. But expectations that a witness will tell the whole truth in an affidavit are often disappointed. In this case those expectations were met.

39. Moreover, there is indirect corroboration of the plaintiff’s evidence in the deceased’s communications with his solicitor. It is clear that the deceased had in mind that either by the mechanism of mutual wills, or by altering his will to give the defendant only a life estate, the plaintiff might inherit Collingwood, or the house and four acres, after the defendant’s death. After the deceased decided that the plaintiff considered herself to be self-sufficient and had expressed the view that she did not want anything from him, he decided that the defendant should inherit the house and farm absolutely. Prior to that time, he was contemplating that the plaintiff should inherit at least the house after the defendant’s death. It is thus quite plausible that he should have represented to the plaintiff that she would inherit the property after the defendant’s death.

40. The plaintiff was cross-examined on the fact that in her letter addressed to the defendant and the deceased of 5 November 2004 she made no reference to the promise she said the deceased had made to her. Her explanation carried conviction. She said that the fact that her father had discussed her inheriting the property after the defendant’s death in a private discussion on the terrace outside the house indicated to her that he did not want it known to the defendant. The plaintiff was aware that as the deceased was spending most of his time in bed, the facsimile would probably be collected by the defendant. She assumed that the deceased would not want the defendant to see reference to what he had told the plaintiff. I accept that evidence. Nor is it realistic to say that the plaintiff should be expected to have confirmed the promise made by the deceased by a private letter written to him. I consider the plaintiff’s evidence to be honest and reliable. I accept her evidence that the deceased did say to her words to the effect to which she deposed in her affidavit set out at para [31] above.

41. In early December 2004 the deceased asked the plaintiff to join him for a last Christmas at Collingwood. She arrived on Christmas eve. However, the deceased had been admitted to Bowral Hospital shortly before her arrival. He was in a coma. He died on 26 December 2004.

42. On 27 February 2005 the defendant paid the plaintiff $200,000 from the proceeds she had received on 23 December 2004 from the sale of Lot 4.

Extension of time

43. Probate of the deceased’s will was given to the defendant on 3 June 2005. At no time prior to 2008 did the plaintiff make any inquiry as to the terms of the deceased’s will. She was not told that she inherited nothing under the will.

44. On 15 June 2005 the defendant gave notice of intended distribution of the deceased’s estate by placing a notice in the Southern Highland News. The plaintiff did not see the notice, but it would have made no difference to her position had she done so. She did not expect to inherit anything until the defendant died.

45. The prescribed period for bringing an application for provision under the Act is 18 months after the deceased’s death (Family Provision Act, s 16(1)(b)). That time expired on 26 June 2006. Subsections 16(2) and (3) provide:

“16 Time for application for provision

...

(2) An order [for provision] under section 7 shall not be made unless the application for the order is made within the prescribed period in respect of that application or within such further period as the Court may, having regard to all the circumstances of the case but subject to subsection (3), by order, allow.

(3) The Court may not make an order under subsection (2) allowing an application in relation to a deceased person to be made after the end of the prescribed period unless:

(a) the parties to the proceedings concerned have consented to the application being made after the end of that period, or

(b) sufficient cause is shown for the application not having been made within that period.”

46. It is clear from the structure of subsections (2) and (3) that the applicant for an extension of time must show “sufficient cause” for the application not having been made within the prescribed period. If such sufficient cause is shown then the court may, having regard to all the circumstances of the case, extend the time for making an application. As Hodgson J (as his Honour then was) said in Lewis v Lewis [2001] NSWSC 321 at [83] the use of the expression “sufficient cause” is curious because, by definition, there must have been sufficient cause for the application not having been made within the prescribed period. The expression “sufficient cause” must be taken to mean “sufficient explanation” or “sufficient justification or excuse”.

47. If there is sufficient explanation for the delay in making the claim, then other factors relevant to the exercise of the discretion under subs (2) include any prejudice to the beneficiaries, whether the plaintiff has been guilty of any unconscionable conduct, and the strength of the plaintiff’s case (Massie v Laundy (Supreme Court of New South Wales, Young J, 7 February 1986 unreported, BC8601246); De Winter v Johnstone (Court of Appeal, 23 August 1995, unreported, BC9505226); Warren v McKnight [1996] NSWSC 419; (1996) 40 NSWLR 390 at 394; Dare v Furness (1998) 44 NSWLR 493 at 500; Ebert v Ebert [2008] NSWSC 1206 at [38]- [45]).

48. As noted earlier in these reasons, the plaintiff was told by the deceased that she would inherit Collingwood (the deceased did not distinguish between Lot 1 and Lot 3) after the defendant’s death. Prior to April 2008 the plaintiff made no inquiry to ascertain whether the deceased had kept his promise. She was neither invited to, nor did she attend, any meeting at which the will was read. She did not see the notice of intended distribution of the estate, but I do not think it would have made any difference to her course of action had she seen the notice. She must have expected that the estate would be distributed.

49. The plaintiff became amicable with the defendant. The defendant stayed with the plaintiff in Sydney and the plaintiff visited the defendant at Collingwood from time to time. The plaintiff was first prompted to inquire about the will in February 2008 when the defendant told her that the Christie family would be leaving Collingwood in May of that year. She asked the defendant whether she would be getting anyone to replace the Christies to run the farm. The defendant said she didn’t want anybody to run the farm, only to lease the cottages and the land. The plaintiff expressed her concern that the farm would become run down and would quickly lose its value if it were not operated as a dairy. The defendant replied that she did not know yet what she would do with the farm, but would try her best to keep it in good order and that the plaintiff should not concern herself.

50. The plaintiff was concerned that the defendant might sell the farm. It was only at this time that she asked the defendant for a copy of the deceased’s will. On 6 March 2008, she wrote to the defendant saying that she had to update her will and her solicitor had asked for copies of both her parents’ wills. She said that she had never seen the deceased’s will and asked the defendant to send a copy to her solicitor, Mr Wawn. The defendant replied saying that she would phone her solicitor who would send it to Mr Wawn.

51. On 1 April 2008, the plaintiff received the copy of the will from Mr Wawn. She met with Mr Wawn on 8 April 2008. His note of the conference reads:

“Conf. With Holly Campbell to discuss possible FPA claim re her late father David McKay who died either late 2004 or early 2005 and left her zero in his last will. She only got a copy of will March 2008 from his widow (3^rd wife) because he had told her that he had left her his house in Exeter and some land which would go to her on the death of his wife Annie Chabert-McKay. He made her promise that she would not contest his will if he left her this house and land. When Annie indicated recently that she did not propose to spend any money on maintaining the property Holly thought she should get a copy of her father’s will to confirm her interest in his estate as she had never been given a copy before. She was then advised by me that she did not receive any interest in his estate and so she now has sought my advice on whether she has any right to challenge her father’s will. She said she thought she had seven years from the date of his death to do this. I said the time limit was in fact 18 months but this time could be extended by the Supreme Court if a good explanation existed for the delay. I said she should get senior counsel’s advice ...”

52. Thereafter she moved promptly to obtain a copy of the application for probate to ascertain the size of the estate. She retained new solicitors and prepared a detailed affidavit filed on the commencement of the proceedings on 14 July 2008.

53. The plaintiff did not give evidence in her affidavits as to whether she had any understanding as to the time limit for making an application under the Act. In cross-examination she said that she did not know before April 2008 that it was possible for the daughter of a testator to seek provision out of the testator’s will by applying to the court. She said she had not heard of and did not know about the Family Provision Act and had never known anyone who had instituted proceedings under the Act. She said that given the seriousness of the deceased’s condition and the seriousness of her conversation with him, she believed him when he told her that she would get the farm after the defendant died and assumed that he had done what he had said. She assumed that when the defendant died she would then be notified that she would receive the farm. She gave the following evidence:

“Q. But the fact that you believed that he had made this testamentary disposition to that effect, did it not occur to you that you might want to see the Will to confirm that?

1. No, I didn't, because I didn't think that that was a very polite thing to do to Annie.”

54. Whether the position was as the plaintiff said in cross-examination that she did not know that it was possible to apply to the court for provision out of the estate, or whether the position was as recorded in Mr Wawn’s file note that the plaintiff thought that she had seven years after her father’s death in which to challenge his will, the plaintiff did not know before 8 April 2008 that the prescribed period for making an application under the Act was 18 months. This is not a case in which the plaintiff knew of her rights and knew of the time within which those rights should be exercised. She received no advice prior to April 2008 that she might be entitled to make a claim under the Act. Whilst she may well have had in mind that she could bring a claim to challenge the will if she had not been left the interest in Collingwood the deceased had promised, I accept her evidence, that she did not know of a daughter’s right to seek provision out of the estate if the testator’s will did not make adequate provision for her proper maintenance and advancement in life. Her sensitivity in not asking for a copy of the will prior to 2008, because it would be impolite, is understandable.

55. In this case the plaintiff is not guilty of any unconscionable conduct in her delay in making her claim. Nor was the defendant prejudiced in her dealings with the assets of the estate by reason of the delay. There is no suggestion that the defendant would have acted differently had the claim been made promptly.

56. Mr Willmott SC for the defendant submitted that the defendant was prejudiced by the delay because of the deterioration in the plaintiff’s health and her financial circumstances after 2006 or 2007. He submitted that had the claim been made within the prescribed period and been determined in, say, 2007, the plaintiff’s claim for provision would have been weaker.

57. I do not accept that that is a relevant prejudice to the defendant. Whenever a claim for provision is made under the Act, the court has to make an assessment of a claimant’s future needs. There is always an element of uncertainty in that prognostication. Often a separate component of the provision ordered is specified as a sum to cover future contingencies. Had the plaintiff’s claim been determined in 2007, the judge hearing the claim would have to have taken into account the possibility that the plaintiff’s financial and physical circumstances might deteriorate. The fact that the plaintiff can demonstrate that such a deterioration has occurred means that the court is placed in a better position now than it would have been in 2007 to make that assessment. I accept that this might result in provision being made for the plaintiff in a greater sum than would have been the case had her claim been heard and decided in 2007. But that is not of itself a relevant prejudice. It is simply a reflection of the court’s having more information than would have then been available on which to base its decision. Moreover, had the plaintiff obtained an order for provision in 2007 and there was a subsequent substantial detrimental change in her circumstances, it would be open to her to apply for additional provision pursuant to s 8 of the Act.

58. In support of this submission, Mr Willmott SC relied on Re Guskett (deceased) [1947] VicLawRp 28; [1947] VLR 212, Re Lauer (deceased) [1984] VicRp 14; [1984] VR 180 and Bearnes v Bearnes-Hayes (Supreme Court of New South Wales, Young J, 7 May 1997, unreported). He submitted that the significance of Re Guskett and Re Lauer was that in each case the financial circumstances of the applicants were more secure at the time when the limitation period was running than when the applications were commenced. In neither case was an extension of time given.

59. In both cases the applicants for extension of time knew of their rights. In Re Guskett the plaintiff applied within the prescribed period but did not proceed with the claim. Herring CJ said that the plaintiff’s advisors must have known of the time limitation. He did not accept that they had not communicated that information to the applicant. He found that she chose to sleep on her rights for three years. Herring CJ said that the case might have been very different had the plaintiff only recently become aware of her rights under the Act.

60. In Re Lauer the applicant for extension of time was aware in a general way that people could challenge the provision of a will, but she did not consult any legal advisor at the time and did not consider the possibility of applying for provision out of the estate. The applicant delayed many years in applying for provision. The delay was attributed partly to a drastic reversal of her financial position and partly to the fact that the major asset in the estate was land, the value of which dramatically increased in the years after the testator’s death. Young CJ thought it unlikely that had an application for provision been made within the prescribed period of six months after the grant of probate the applicant would have had a substantial chance of success (at 184). However the reasons for refusing the extension of time were that his Honour considered that a deterioration in the applicant’s financial position and the inflation of the value of the testator’s estate beyond what might have been expected at the date of death were not sufficient grounds for extending the time for making an application. Another relevant factor was that under the legislation in question it was necessary for an applicant to show that provision made under the will was not adequate when considered at the time of the testator’s death. Under the Family Provision Act 1982 that is not the relevant time for considering whether less than adequate provision was made for the proper maintenance, education or advancement in life of the eligible person (s 7).

61. In Bearnes v Bearnes-Hayes, Young J applied these decisions in refusing an application for extension of time under s 16 of the Family Provision Act. There the applicant was 16 months out of time. The plaintiff knew of the contents of the will. She did not obtain legal advice as to whether she could make any claim against the estate. She was content with her own financial circumstances at the time and it was only after the prescribed period expired that relations between the plaintiff and the executrix (the deceased’s daughter) soured. Young J held that such change in circumstances were not usually considered enough to warrant an extension of time and refused the application.

62. I do not think that any of these cases lays down any principle applicable to the present case. Each involved a discretionary judgment based on its particular facts. None of the cases establishes a principle which could be applied to the Family Provision Act that it is a ground for refusing an extension of time that events have occurred after the prescribed period elapsed which strengthen a plaintiff’s claim for provision, as this creates a relevant prejudice to the defendant.

63. No other specific prejudice was identified. Mr Willmott submitted that a beneficiary who has received her entitlement and has enjoyed it in the expectation that after the prescribed period has elapsed, the enjoyment will not be disturbed, suffers prejudice if an application is thereafter commenced, even if the beneficiary has not materially been affected. The disturbance of that expectation involves prejudice to the defendant. Mr Willmott submitted that that prejudice was increased in the circumstances of the present case where the plaintiff had promised her father and the defendant that she would not contest the will.

64. I will assume that the defendant did have the expectation referred to in counsel’s submissions, although she did not give direct evidence of it. Such a disappointed expectation is an insubstantial basis for refusing to entertain the plaintiff’s application where the deceased admittedly failed to make adequate provision for her proper maintenance and advancement in life. I will make an order pursuant to subs 16(2) extending the period for the plaintiff to make her application for an order under s 7 to 14 July 2008, being the date of the filing of the summons.

Designation of property as notional estate

65. There is no issue that by directing that the proceeds of sale of Lot 4 be paid to the defendant, the deceased entered into a prescribed transaction (s 22(1)). The defendant gave no consideration for the payment. Section 23 provides:

“23 Notional estate—prescribed transactions

On an application in relation to a deceased person made by or on behalf of an eligible person, if the Court is satisfied:

(a) that an order for provision ought to be made on the application, and

(b) that, at any time before death, the deceased person entered into a prescribed transaction:

...

(ii) which took effect within the period of 1 year before death, and was entered into at a time when the deceased person had a moral obligation to make adequate provision, by will or otherwise, for the proper maintenance, education and advancement in life of that or any other eligible person which was substantially greater than any moral obligation of the deceased person to enter into the prescribed transaction, ...

...

the Court may, subject to sections 26, 27 and 28, make an order designating as notional estate of the deceased person such property as it may specify, being property which is held by, or on trust for the disponee or, where there is more than one disponee, any of the disponees, whether or not that property was the subject of the prescribed transaction.”

66. Subject to deciding that some property held by the defendant should be designated as notional estate so that there are assets from which an order for provision could be satisfied, it is clear that s 23(a) is satisfied. I also consider that s 23(b)(ii) is satisfied. The deceased had a substantial moral obligation to make adequate provision for the plaintiff’s proper maintenance and advancement in life. He recognised this from time to time by contemplating that he and the defendant should make mutual wills so that the plaintiff and the defendant’s daughter would both inherit the defendant’s property (including the property she would inherit from the deceased) after the defendant’s death. There were substantial practical objections to that course which the deceased’s solicitor pointed out to the deceased, which persuaded the deceased from that course of action. Nonetheless by that conduct the deceased acknowledged an obligation to provide for the plaintiff. In the end he decided that he should rely upon the defendant to do what was right.

67. Pursuant to the deceased’s request to the defendant, the plaintiff received the sum of $200,000 out of the proceeds of sale of Lot 4. Given the size of the estate and the plaintiff’s financial needs in 2004, that was then an inadequate provision.

68. In the financial year ended 30 June 2004 Holly Campbell Advertising Pty Limited as trustee of the Holly Campbell Advertising Trust derived a net profit of $134,429 which was distributed to Holly Campbell Services Pty Limited. The plaintiff had a taxable income in that financial year of $155,836 including a franked dividend of $11,000 from Holly Campbell Services Pty Limited. As at 30 June 2004 Holly Campbell Services Pty Limited had retained profits of $382,352.

69. In the following financial year ended 30 June 2005 the trust suffered a net loss of $184,179, largely due to bad debts. The provision for bad debts was $327,955. There was no distribution to Holly Campbell Services Pty Limited. That company recorded a loss for the financial year ended 30 June 2005 of $44,159 after income tax. It paid a dividend of $2,000 to the plaintiff and at 30 June 2005 had retained profits of $336,192. However, the trust had a loss to carry forward of $184,179. In the year ended 30 June 2005 the plaintiff received a salary from the trust of $149,999 and had taxable income of $154,809.

70. Thus at the time of the prescribed transaction the plaintiff was receiving a good income from the business. But the business was subject to the vagaries of commerce including the risk of bad debts which materialised in the same financial year.

71. The plaintiff had formerly owned a unit in Darling Point. She had sold that unit in November 2001 and received approximately $280,500 from the net proceeds of sale. From this she advanced $25,000 to Holly Campbell Advertising Pty Limited to provide funds for a fit-out of its new premises. In December 2004 the plaintiff owned no real property. She was living with Mr Prentice in rented accommodation. She proposed separating from him. Whilst she was deriving a good income, the continuation of that income was dependent upon the continued success of the business of Holcom Creative. She did not have substantial assets. She did not purchase her unit in Bellevue Hill until 2006. The plaintiff said, and I accept, that the principal bad debt suffered in the financial year ended 30 June 2005 arose in October or November 2004 when Holly Campbell Advertising Pty Limited was unable to recover a sum of $236,104.58 from a client. Thus the risks of commerce had started to come home at the time of the prescribed transaction.

72. When the matter is considered at the time of the transaction, I am satisfied that adequate provision for the plaintiff’s proper maintenance and advancement in life required considerably greater provision than the sum of $200,000. At that time the deceased’s property (prior to the payment to the defendant of $950,000) exceeded $5 million.

73. The deceased perceived that there was a need for the defendant to be provided with a ready source of cash. Mr Fielding’s note of 26 October 2004 records the deceased as having referred to the payment as resolving an immediate financial problem. However, the defendant did not have any such immediate financial problem, and she had not told the deceased that she had any such problem. The reason for the deceased’s concern is not apparent, given that the defendant received all of the deceased’s shares in Scuderia Veloce Pty Ltd, and thus became a 100 per cent shareholder of that company. Its assets were all liquid. She was also in receipt of her Swiss pension and would become entitled to a pension from the Department of Veteran Affairs. She would also become entitled to the remaining acreage of Collingwood, part of which was let.

74. The evidence of the defendant’s own financial position in 2004, apart from the assets she inherited or received from the deceased, is unclear. There is no evidence that she had any pressing need for the payment. This fact is evidenced from the way in which the receipt of $950,000 was dealt with. She banked the amount of $950,000 to the credit of her account with the National Australia Bank. In February 2005 she paid $200,000 to the plaintiff. She also placed $800,000 on term deposit, from which I infer that her account was already in credit to an amount of at least $50,000. When the term deposit matured she paid two sums totalling $587,481 to her superannuation fund. She paid $224,960.43 to Scuderia Veloce Pty Ltd to create a credit loan account.

75. There is no doubt that the deceased had a moral obligation to provide for the defendant. There is no evidence that that extended to having a moral obligation to direct the payment of the purchase price to the defendant, let alone that any moral obligation the deceased might have had to effect such a transaction for the defendant’s benefit matched or approached the deceased’s obligation to make adequate provision for the plaintiff’s proper maintenance and advancement in life.

76. I therefore conclude that subject to ss 26, 27 and 28 of the Family Provision Act, it is open to make an order designating as notional estate of the deceased property held by the defendant. It is not necessary that the property which might be so designated be capable of being traced to the moneys received by the defendant from the sale of Lot 4. In determining what property, if any, should be designated as notional estate by reason of the prescribed transaction, regard is to be had to the amount received by the defendant pursuant to that transaction (s 27(2)(a)).

77. Section 26 is not an obstacle to designating property of the defendant as notional estate because the prescribed transaction directly disadvantaged the estate (s 26(a)).

78. The estate has been fully distributed to the defendant. Pursuant to s 24, but subject to ss 27 and 28, an order may be made designating as notional estate of the deceased such property of the defendant as may be specified. Again, it is not necessary to be able to trace the property distributed to assets held by the defendant, but in this case there will be no difficulty in tracing the principal assets the defendant inherited, namely Lots 1 and 3, and 53 of the shares in Scuderia Veloce Pty Ltd.

79. Section 27 provides:

“27 Designation of property as notional estate—matters to be considered

(1) On an application in relation to a deceased person, the Court shall not make an order designating property as notional estate of the deceased person unless it has considered:

(a) the importance of not interfering with reasonable expectations in relation to property,

(b) the substantial justice and merits involved in making or refusing to make the order, and

(c) any other matter which it considers relevant in the circumstances.

(2) In determining what property should be designated as notional estate of a deceased person, the Court shall have regard to:

(a) the value and nature of property the subject of any relevant prescribed transaction or distribution from the estate of the deceased person,

(b) where, in relation to any such prescribed transaction, consideration was given, the value and nature of the consideration,

(c) any changes over the time which has elapsed since any such prescribed transaction was entered into, any such distribution was made or any such consideration was given in the value of property of the same nature as the property the subject of the prescribed transaction, the distribution or the consideration, as the case may be,

(d) whether property of the same nature as the property the subject of any such prescribed transaction, any such distribution or any such consideration could, during the time which has elapsed since the prescribed transaction was entered into, the distribution was made or the consideration was given, as the case may be, have been applied so as to produce income, and

(e) any other matter which it considers relevant in the circumstances.”

80. So far as s 27(1)(a) is concerned, the defendant did not give evidence that she expected that the plaintiff would not make any claim on the estate, although it would have been reasonable for the defendant to have assumed after the prescribed period for making a claim expired that no such claim would be made. There is no evidence that she did turn her mind to that question. Even if she had assumed that no claim on the estate would be made, the defendant did not alter her position in any way as a result of such an assumption. If the defendant had such an expectation, the substantial justice in making an order for provision for the plaintiff would warrant the interference with that expectation. The defendant’s needs, and her wishes in relation to the property which might be designated as notional estate, will be taken into account as relevant circumstances in determining what provision is adequate for the plaintiff’s proper maintenance and advancement in life (s 9(3)(c) and (d)). Such expectations as the defendant may have had do not mean that none of her property should be designated as notional estate.

81. Questions arising under s 27(2) can be addressed in the context of deciding what property should be designated as notional estate after I have concluded what order for provision should be made.

82. Section 28 provides:

“28 Designation of property as notional estate—powers and restrictions

(1) On an application in relation to a deceased person for an order for provision in favour of an eligible person, the Court shall not make an order designating property as notional estate of the deceased person unless the deceased person left no estate or unless it is satisfied:

(a) that the estate of the deceased person is insufficient to allow the making of provision that, in its opinion, should be made, or

(b) that, by reason of the existence of other eligible persons or the existence of special circumstances, provision should not be made wholly out of the estate.

(2) On an application in relation to a deceased person, the Court shall not make an order designating as notional estate of a deceased person property in excess of that necessary to allow the making of provision that, in its opinion, should be made.

...

(5) On an application in relation to a deceased person, being an application:

(a) made pursuant to an order under section 16 allowing the application to be made, or

(b) for an order under section 8 for additional provision,

the Court shall not make an order designating property as notional estate of the deceased person by reason of a prescribed transaction or a distribution unless it is satisfied:

(c) that:

(i) the property was the subject of the prescribed transaction or distribution,

(ii) the person by whom it is held holds the property as a result of the prescribed transaction or distribution as trustee only, and

(iii) the property is not vested in interest in any beneficiary under the trust, or

(d) that there are other special circumstances (including, in the case of an application made as referred to in paragraph (a), the incapacity, during any relevant period, of the person by or on whose behalf the application is made) which justify the making of an order so designating the property.”

83. There is no dispute that the deceased did not make adequate provision for the plaintiff’s proper maintenance and advancement in life. It is clear that some provision should be made for the plaintiff. As the estate has been distributed, s 28(1)(a) is satisfied as the estate is insufficient to allow the making of any provision. Alternatively, for reasons below I consider that special circumstances exist which would warrant the making of an order designating property as notional estate within the meaning of s 28(1)(b).

84. The question of special circumstances was also raised by the defendant in connection with s 28(5). As the application is to be made by virtue of the order to be made under s 16, and as the property distributed to the defendant pursuant to the prescribed transaction and the distribution of the estate is not held on a trust for which no beneficiary has a vested interest, the plaintiff must establish pursuant to s 28(5)(d) that there are “other special circumstances ... which justify the making of an order so designating the property”. Mr Willmott submitted that the “other” special circumstances that must be demonstrated are circumstances other than those which justified the making of the order extending time under s 16 for the making of the application.

85. In Cetojevic v Cetojevic [2006] NSWSC 431 Campbell J (as his Honour then was) assumed without deciding (at [79]) that more is required to establish “other special circumstances” under s 28(5)(d) than is required to obtain an extension of time under s 16.

86. I accept that more is required to establish “other special circumstances” under s 28(5)(d) than would be required to obtain an extension of time. But I do not agree that to establish such other special circumstances the court is to exclude circumstances considered under s 16. Mr Willmott stressed that the plaintiff needed to establish not just special circumstances, but other special circumstances to justify the making of an order designating property as notional estate.

87. In my view “other special circumstances” are not special circumstances other than those considered under s 16 or s 8. Section 16 requires the court to have regard to all the circumstances of the case in deciding whether to extend time. This must include any special circumstances. Similarly, if an application is made for additional provision under s 8, the court is required by s 9(3)(d) to consider any circumstance it considers relevant.

88. The scheme of s 28(5) is that the circumstance described in s 28(5)(c) is to be regarded as a special circumstance. When s 28(5)(d) refers to “other special circumstances” it is referring to special circumstances other than that referred to in s 28(5)(c). Thus, in s 28(5)(d), the incapacity of an applicant is described as a special circumstance. But incapacity would have to be relevant to the exercise of discretion under s 16 whether to grant an extension of time.

89. For these reasons, I do not accept that matters relevant to the decision to extend time under s 16 are excluded from consideration under s 28(5)(d).

90. What then are “special circumstances” within the meaning of s 28(5)(d)? This question was considered by Campbell J in Cetojevic v Cetojevic. His Honour cited relevant authorities including Baker v R [2004] HCA 45; (2004) 223 CLR 513, where Gleeson CJ said (at [13]):

“[13] There is nothing unusual about legislation that requires courts to find ‘special reasons’ or ‘special circumstances’ as a condition of the exercise of a power. This is a verbal formula that is commonly used where it is intended that judicial discretion should not be confined by precise definition, or where the circumstances of potential relevance are so various as to defy precise definition. That which makes reasons or circumstances special in a particular case might flow from their weight as well as their quality, and from a combination of factors.” (footnotes omitted)

In other words, a circumstance may be special by reason of degree as well as of kind.

91. Circumstances need not be unique to be special, but they will be unusual (see cases cited in Cetojevic v Cetojevic at [77]).

92. I consider the deceased’s abandonment of the plaintiff when she was a child, his neglect of her during his lifetime, the size of the distributed estate and of the property the subject of the prescribed transaction, and the fact that there has been no relevant dealing by the defendant with such property save for the completion of the subdivision of Lot 3, constitute special circumstances which justify the making of an order designating property held by the defendant as notional estate. It is not hard to identify from the many published decisions under the Family Provision Act similar combinations of circumstances (e.g. Lloyd-Williams v Mayfield [2005] NSWCA 189; (2005) 63 NSWLR 1). Nonetheless, such a combination of circumstances is not usual. I consider that the circumstances are special within the meaning of s 28(5)(d). Accordingly I consider that property held by the defendant may be designated as notional estate.

93. Pursuant to s 28(2) no more property should be designated as notional estate than is necessary to allow the making of appropriate provision.

Plaintiff’s financial position

94. At the time of hearing, the plaintiff deposed that she had caused Holly Campbell Advertising Pty Limited (the company which carried on business under the name Holcam Creative) to wind down its business. She had terminated the employment of the employees of the business. The last permanent staff designer, a Ms Agnieska Rozycka, had given notice of resignation of her employment on 24 September 2009 effective on 23 October 2009. In cross-examination it was put to the plaintiff that she had closed down the business of the company in order to maximise her claim on the estate. The plaintiff denied that this was so and I accept her denial. I accept that the plaintiff decided to close the business of the company for good business reasons. It had lost work from a major client and had been unsuccessful in winning a tender from that client. Its regular flow of work from real estate agents in the eastern suburbs had diminished and the plaintiff did not expect that the work available from that source would be sufficient to meet overheads. Between 6 and 13 November 2009 the plaintiff advised clients and suppliers of Holcom Creative that it would not be taking further work.

95. In the financial years ended 30 June 2008 and 30 June 2009 the Holly Campbell Advertising Trust made profits of $83,534 and $119,263 respectively. These profits were distributed to the sole beneficiary of the trust, Holly Campbell Services Pty Limited. No distribution was physically paid. Instead, the trustee of the trust acknowledged a liability to Holly Campbell Services Pty Limited of $218,552. The plaintiff is the sole shareholder of both Holly Campbell Advertising Pty Limited and Holly Campbell Services Pty Limited. The former shares have no value as Holly Campbell Advertising Pty Limited only carries on business as trustee. The value of the plaintiff’s shares in Holly Campbell Services Pty Limited depends upon its ability to recover the debt owed to it by Holly Campbell Advertising Pty Limited. The balance sheet of the trust as at 30 June 2009 showed that Holly Campbell Advertising Pty Limited had total liabilities of $518,552. Apart from the liability to Holly Campbell Services Pty Limited it owed $300,000 to St. George Bank. That debt is guaranteed by the plaintiff. The balance sheet disclosed that it had total assets of $518,553 as at 30 June 2009. This consisted of cash of $130,984, receivables of $305,094, and property, plant and equipment of $79,427. Preliminary expenses were also brought to account as a non-current asset of $3,048 but they are not realisable. Of the receivables of $305,094, the principal debt owed to Holly Campbell Advertising Pty Limited is a debt of $200,192 owed to it by the plaintiff. In other words, as at 30 June 2009 the debt owed by the trustee to Holly Campbell Services Pty Limited was only about $18,000 more than the debt owed by the plaintiff to Holly Campbell Advertising Pty Limited.

96. In the financial year ended 30 June 2009 Holly Campbell Advertising Pty Limited paid a wage to the plaintiff of $90,783. That was her only income for the year.

97. The plaintiff produced draft profit and loss statements per Holcam Creative prepared on a cash rather than an accruals basis for the period from 1 July 2009 to 16 November 2009. This showed a net profit for that period of $26,138.57. There were profits (calculated on a cash basis) for the months of July and August 2009, but losses from September to November.

98. As at mid-November 2009 two bank accounts held in the name of Holcom Creative with the St. George Bank had credit balances totalling $93,938.83. This was a reduction of $37,045 from the cash held at bank as at 30 June 2009.

99. Holly Campbell Advertising Pty Ltd held a lease of its office in Stanley Street, Darlinghurst at a rent of $44,000 per annum. The lease expires on 16 February 2011. It was also the lessee of a Canon printer for which the yearly lease fee was $17,437.20 plus GST. The plaintiff personally guaranteed the performance of Holly Campbell Advertising Pty Ltd under both leases. At the time of the hearing it was not known whether the plaintiff would be able to arrange for an assignment of the lease of the office premises. The plaintiff expected that the printer would not realise any significant amount on resale.

100. Although the final position on the winding-up of the affairs of Holly Campbell Advertising Pty Limited is not known, it is unlikely that the company would have sufficient funds without calling up the debt owed to it by the plaintiff, to discharge its liability to St. George Bank and meet its other liabilities to non-related creditors. Given that the plaintiff has personally guaranteed the significant liabilities of the company to non-related creditors, her financial position can be reasonably assessed by excluding from consideration her liability to Holly Campbell Advertising Pty Limited and the value of her shares in Holly Campbell Services Pty Limited and Holly Campbell Advertising Pty Limited. It is likely that the cash resources of Holly Campbell Advertising Pty Limited will be consumed in meeting its liability to the landlord of its office premises and meeting its liability under the lease of the printer and reducing the debt payable to St. George Bank. So far as these matters can be assessed, I think it probable that at the end of the day, after the assets of Holly Campbell Advertising Pty Limited are exhausted, the plaintiff will face a liability of at least $200,000, and possibly up to $300,000, under her personal guarantees.

101. The plaintiff owns a unit in Fairfax Road, Bellevue Hill valued between $1.1 million and $1.2 million. It is subject to a mortgage to St. George Bank which secures two debts, namely the debt of $300,000 owed by Holly Campbell Advertising Pty Limited and guaranteed by the plaintiff, and a further debt, which, as at 31 October 2009, amounted to about $511,000.

102. The plaintiff held minimal amounts of cash and shares of no material value. She estimated that the value of her household effects was $20,000. She has two superannuation accounts. One account, as at 30 June 2008, had a balance of approximately $82,000. The second account was a self-managed superannuation fund. In the financial year ended 30 June 2008 the plaintiff transferred $30,000 from her first superannuation fund to her personal superannuation fund. The balance of the first fund of $82,189.24 was the balance after that payment. In the following financial year the plaintiff transferred a further $38,000 from her first superannuation fund to her self-managed fund. Her personal superannuation fund purchased artworks for a total sum of $64,810. It otherwise had approximately $6,500 in cash investments. The payment of $38,000 would have diminished her first superannuation fund by that amount. I infer that the total value of the plaintiff’s superannuation is approximately $120,000 of which approximately $65,000 is invested in artworks.

103. In addition the plaintiff owns antique furniture and artwork having a value of between approximately $104,000 and $139,000.

104. Despite her youth the plaintiff is in need of surgery to both hips. The estimated costs associated with the replacement of her right hip is approximately $52,000. The estimated cost of the operation to the left hip is approximately $27,000. Her hearing is also deteriorating. She has hearing aids and is paying off a debt of $6,595 for the hearing aids by instalments of $250 per week. She also has other medications, the cost of which she estimates to be about $50 per week.

The plaintiff’s claim for provision

105. In her affidavit of 12 July 2008 filed on the commencement of the proceedings the plaintiff said that she sought a provision which she would apply to reduce the mortgage secured over her Bellevue Hill unit, to undertake renovations to the unit, to set aside a fund to meet contingencies, and to provide a fund should she close the business of Holcom Creative. She has since taken steps to close the business of Holcom Creative. She said that when Holcom Creative ceases to trade and if she were unable to obtain alternative employment, she would no longer need to reside in the eastern suburbs and would prefer to reside in the northern beaches. She referred to advertisements for houses in the northern beaches which had level access (desirable because of her hip problems) and which ranged in price from approximately $900,000 to $2 million. She sought a provision which would provide her with an income. She calculated her weekly expenses to be $1,556. Her accountant’s report calculated that a capital sum required to meet such ongoing expenses if the capital were invested to achieve an interest rate of 4.605 per cent per annum for a period of 34 years would be $1,637,853. The plaintiff’s counsel submitted that provision of a further $500,000 would be an appropriate sum for future contingencies. Counsel for the plaintiff submitted that a provision of at least 50 per cent of the deceased’s net distributable estate would be no more than what was adequate to provide for the plaintiff’s proper maintenance and advancement in life.

Defendant’s financial position

106. The principal assets the defendant inherited from the deceased were the properties known as Collingwood and Collingwood Farm and 53 shares in Scuderia Veloce Pty Ltd. The defendant lives in the cottage on the property known as Collingwood (being Lot 1 in DP 1054556). The agreed value of that property at the time of hearing was $710,000. The property known as Collingwood Farm (being Lot 3 in DP 1077545) was valued in April 2009 by a registered valuer, Mr Oliver, at $1.8 million. Approval has been given to the subdivision of that lot into two separate lots. Another valuer, Mr Ryan, valued Lot 3 at $1.7 million, but said that on subdivision of Lot 3 into two separate lots, the separate lots would have values of $720,000 and $1.2 million. Mr Oliver agreed with these assessments and said that if anything, $720,000 was conservative. The subdivision of Lot 3 has been completed. It is reasonable to value the two lots formerly comprising Lot 3 at $720,000 and $1.2 million. The real estate has a value of about $2,630,000.

107. The defendant owns all 100 of the issued shares in Scuderia Veloce Pty Ltd. She owned 47 shares before the deceased’s death. He had given them to her. The defendant inherited the remaining 53 shares. The assets of the company include a non-interest bearing loan owed by the estate of the deceased of $609,822.73. That can be excluded for present purposes, because if the loan were repaid by the estate of which the defendant is the sole beneficiary, it would increase the value of assets available for distribution to the defendant as shareholder. The company’s balance sheet of 30 June 2009 disclosed that it also held cash (including interest-bearing deposits) of $492,669. Apart from some property, plant and equipment of negligible value, its other assets included shares in public companies and investments in National Income Securities. These were shown at cost of $732,124.48. At the time of hearing the value of those shares and investments was $1,692,242. Apart from a provision for income tax of $18,872, the only liability of the company was a debt payable to the defendant of $379,450. The defendant’s shares in Scuderia Veloce Pty Ltd and the debt owed to her by the company are worth about $2,164,000.

108. In 2007 the defendant sold the shares she inherited in Telstra and IAG. Apart from Collingwood, Collingwood Farm, the debt owed by Scuderia Veloce to her, and her shares in Scuderia Veloce, the defendant has superannuation which, as at 30 June 2009, had a value of $957,667. This was in the form of a term deposit of $548,322, investments in National Income Securities of $371,200, and cash of $38,145. At the time of the hearing the value of the National Income Securities was $404,224. Thus the defendant has approximately $990,000 in superannuation.

109. In addition the defendant owns in her own right antique furniture insured for replacement value of approximately $340,000, a motor vehicle purchased in 2008 for $26,000 and two bank accounts with the National Australia Bank, one called the “Collingwood Account” and the other the “NAB Retirement Account”, having a combined credit balance of a little under $141,000. Her total assets exceed $6.25 million.

110. The defendant is in receipt of a non-taxable pension paid fortnightly from the Department of Veteran Affairs of about $1,490 per month. She also receives a taxable pension from Switzerland. In the financial year ended 30 June 2009 she received $29,622 from Switzerland. She derived rent from letting the Collingwood Farm, but the rent received was less than the expenses. She made a marginal income from primary production. It appeared from her cross-examination that many ordinary living expenses are paid through Scuderia Veloce.

Extent of the provision to be made

111. Sections 7 and 9 provide for a two-stage process. The court may not make any order for provision in favour of an eligible applicant unless it is satisfied that the provision, if any, made in favour of the applicant by the deceased either during his lifetime or out of his estate is, at the time the court is determining whether or not to make such an order, inadequate for the proper maintenance, education and advancement in life of the applicant. There is no dispute that the first stage of the two-stage process is satisfied. That is, there is no issue that the court has jurisdiction to make an order for provision under s 7. In deciding what provision out of the notional estate of the deceased ought to be made for the maintenance, education or advancement in life of the plaintiff, I must address all of the circumstances relevant to determining what provision would constitute “proper” maintenance and advancement in life of the plaintiff (Singer v Berghouse (No. 2) [1994] HCA 40; (1994) 181 CLR 201 at 209-210; Wentworth v Wentworth (1995) 37 NSWLR 703 at 737-738). Subsection 9(3) provides:

“9 Provisions affecting Court’s powers under secs 7 and 8

...

(3) In determining what provision (if any) ought to be made in favour of an eligible person out of the estate or notional estate of a deceased person, the Court may take into consideration:

(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,

(c) circumstances existing before and after the death of the deceased person, and

(d) any other matter which it considers relevant in the circumstances.”

112. The matters in s 9(3)(a) are not relevant in the present case. The plaintiff did not make any contribution to the acquisition, conservation or improvement of property of the deceased.

113. So far as s 9(3)(b) is concerned, there is nothing in the character or conduct of the plaintiff before or after the deceased’s death adverse to her claim. Mr Willmott SC submitted that after the plaintiff left school, she had made no real effort to make contact with the deceased, and when she did contact him it was only to ask for financial assistance. The plaintiff finished school in 1975. So far as she recalls the first time she attempted to contact the deceased was in 1978 when she was about 20 and had decided to travel overseas for a working holiday. She telephoned her father and told him that she was going overseas for a working holiday and asked if he could give her some guidance as to how to go about writing columns or making contacts in journalism. He invited her to his house at Edgecliff. The plaintiff said that the meeting was not warm, encouraging or helpful. In the course of the meeting, the deceased said to the plaintiff:

“Josephine, what do you intend to do with your life? You can’t expect any handouts from me. You will have to make it on your own - you have to stand on your own two feet.”

114. He did not give the plaintiff any names of overseas contacts or acquaintances. After the plaintiff had gone overseas and was working in Switzerland she telephoned her father in 1979. She asked him to pay for her mother’s airfare to travel to London for her 21^st birthday as she did not have enough to pay her mother’s fare. He refused.

115. It was put to the plaintiff that the deceased’s response was not unreasonable. The plaintiff did not agree. Nor do I. I take into account that I have only the plaintiff’s version of her dealings with her father but I accept her as a witness of credit. Moreover, the deceased’s attitude of indifference to his daughter is corroborated by his book in which she barely rates a mention, and that in the context that her birth coincided with a period in which the deceased was away in Europe and “exposed to the dangerous liaisons of long-distance travel”.

116. The plaintiff did not invite the deceased to her 21^st birthday because she understood that he would not be able to attend. He expressed no interest in attending and did not send a card or present.

117. The next contact was later in that year when the plaintiff stayed at the hotel in Monaco with the deceased and his second wife. The plaintiff gave evidence of asking the deceased for a loan because she had bought only casual clothes, whereas the deceased’s circle of friends and their children in the deceased’s group were smartly dressed. She also did not have enough money to pay her way for lunches and the like. The deceased refused any financial assistance saying she would have to learn to make it on her own. Again, it was put to the plaintiff that this being the third time she had any contact with her father, was also the third time she had asked for assistance and his response was not unreasonable. The plaintiff did not agree. Nor do I.

118. In final submissions Mr Willmott SC contended that the plaintiff had not shown gratitude to the deceased, but had rejected her father. Every time she made contact with him it was to ask for something and the deceased’s reaction was perfectly normal. Indeed, Mr Willmott submitted that the plaintiff had shown a lack of gratitude to her father.

119. The plaintiff had nothing to be grateful for. She had been abandoned by her father aged 10. Apart from paying her school fees and providing maintenance to her mother pursuant to orders made in the Family Law proceedings, and providing her with accommodation in Monaco for a week (during which the plaintiff became distressed at the lack of contact with her father) he did nothing for the plaintiff. The deceased’s abnegation of his parental responsibility increased rather than diminished his moral obligation to make adequate provision for her in his will. I reject the defendant’s submission that anything in the character or conduct of the plaintiff diminishes the strength of her claim.

120. Subsections 9(3)(c) and (d) are perfectly general. Apart from the plaintiff’s financial needs, the size of the distributed estate and the property the subject of the prescribed transaction, the significant matter still to be considered is the deceased’s moral obligation to the defendant. They were married for over 14 years. They lived together in the defendant’s apartment in Geneva for about five years before their marriage. They shared their expenses. The defendant gave up her employment when she and the deceased moved to Australia.

121. The defendant gave evidence of financial contributions that she made for the deceased’s benefit. In her first affidavit she deposed that in late 1993 or early 1994, she and the deceased arranged to build an annexe next to their cottage and to replace the second cottage at the farm. She said that she provided $50,000 from her own funds for those purposes. That amount was repaid with interest.

122. In her fourth affidavit served shortly before the hearing, the defendant deposed that she also provided $150,000 from her own funds towards the cost of the annexe. She said that that amount was never repaid. The defendant produced no documents to corroborate that evidence. She said that she no longer had the documents. The defendant said that when she swore her first affidavit in which she deposed to having paid $50,000 for the purposes of building the annexe and replacing the second cottage on the farm, she had forgotten that she had provided $150,000 which, unlike the payment of $50,000, was not repaid.

123. In the absence of corroborative evidence, and having regard to the defendant’s omission of this evidence in her earlier affidavits, I am not satisfied that she made the payment of $150,000.

124. However this question is not important. Whilst the defendant may have made some financial contributions to the deceased, they were dwarfed by the financial contributions the deceased made to the defendant during his lifetime. In addition to the transfer of 47 shares in Scuderia Veloce Pty Ltd for no consideration, in 1999 the deceased paid $510,000 for the defendant to acquire 5,120 NAB National Income Securities to that value.

125. Of far greater significance to the deceased’s moral obligation to provide for the defendant than any financial assistance the defendant may have given the deceased was the love, companionship and emotional support she gave him, and all of the intangible elements of their union. The deceased recognised his moral obligation to the defendant. His book contains many references acknowledging the contribution she made to his happiness and welfare.

126. However, the defendant is very well provided for. As set out earlier in these reasons she has net assets exceeding $6.25 million. She has a tax-free pension from the Department of Veteran Affairs which in March 2009 was between $605 and $771 per fortnight, a Swiss pension of approximately $2,000 per month, interest from moneys on deposit, dividends from Scuderia Veloce Pty Ltd, and income from primary production. The defendant can draw on her superannuation. In April 2009 she was receiving non-taxable income of $5,000 per month from her superannuation fund.

127. In her affidavit of 17 April 2009 the defendant said that she had monthly expenses to the order of $10,425. However, this included council rates, insurance and maintenance repairs for the farm which would be deductible expenses taken into account in calculating her net income from letting the two cottages on Collingwood Farm. She deposed that the rental received from the two cottages on Collingwood Farm was less than the expenses she incurred in respect of it and produced a schedule of such expenses. However, the defendant’s tax returns for the year ended 30 June 2008 showed that the farm business (still operated under the estate of the deceased) returned a marginal profit. Independently of that business, the defendant reported income for the year ended 30 June 2008 from interest and dividends of approximately $120,000, her Swiss pension of $24,355, and income derived from providing tutoring services in French of $82,199, in addition to the tax-free pension from the Department of Veteran Affairs.

128. The defendant tendered a further exhibit said to contain details of income and expenses for Scuderia Veloce Pty Ltd for the year ended 30 June 2009. The exhibit purported to show that there were expenses for that year of $103,214.48 compared with income of $95,277.58. The expenses claimed as expenses of Scuderia Veloce Pty Ltd included various private expenses of the defendant such as for motor vehicles. It also included cash drawings which the defendant made from her loan account which were not company expenses at all. I do not consider that any weight can be given to the statement of expenses of Scuderia Veloce Pty Ltd tendered by the defendant.

129. The defendant deposed that she suffered from various medical conditions which required treatment that came at an expense. She also needed to support her daughter who occupies one of the cottages on Collingwood Farm. She has a grandson aged 17 or 18 who lives with his father. The defendant proposes to pay approximately $14,000 per year for her grandson’s support, including a pension to his father of $3,000, pocket money of $150 per month, $4,000 to visit the defendant in Australia, and otherwise to provide for her grandson’s welfare. The defendant deposed that she also contributed to the care of her sister in France. She estimates that she paid about $1,200 per year to contribute to the care of her sister. The defendant also said that it might be necessary both for her daughter and her to acquire new motor vehicles at a cost in the order of $50,000. This was notwithstanding that the defendant had bought a new motor vehicle on 16 January 2009.

130. The defendant also said that “eventually” it may be necessary for her to take up residence in a nursing home. She produced various brochures of appropriate nursing home accommodation in the Bowral area. She said that she would be interested in accommodation something like a particular property advertised as being available for $699,000. This was the equal highest price of any of the houses shown as being available in the particular retirement estate in which the defendant expressed an interest.

131. I consider that the defendant exaggerated her financial needs. However, it is unnecessary to explore that question in any detail. I am satisfied that after adequate provision is made for the plaintiff‘s proper maintenance and advancement in life, the defendant will have more than adequate assets and income to meet generously her expenses and allow her to make generous provision for her daughter, grandson and sister.

132. The plaintiff’s need is for provision which would allow her to discharge her debts, and a generous provision for contingencies to pay her medical expenses and to allow for the vicissitudes of life including moneys to tide her over until she obtains new employment, or is able to establish a new business in the same field. I do not accept that adequate provision for her proper maintenance includes a lifetime pension, let alone a pension to provide an income of $1,556 per week. (That figure included amounts totalling $514 per week for mortgage payments which would be unnecessary upon discharge of the debt. It also included a figure of $148 per week which would be unnecessary when the plaintiff, as she intends to do, sells her existing unit and moves to a house in the northern beaches.)

133. Adequate provision for the plaintiff’s proper maintenance does not require the provision of a capital sum which would meet her ongoing expenses for the rest of her life. The plaintiff has a substantial earning capacity, even though she has decided for good reason to close her existing business. She impressed as an intelligent businesswoman. Her financial need is for a provision which will clear her debts, pay for her immediate required medical expenses, and provide a capital sum to provide for the vicissitudes of life. Some or all of such a sum for contingencies might prudently be invested in superannuation, but I do not consider it appropriate to address a separate amount as a contribution to her superannuation. The size of the notional estate justifies a generous assessment of a sum for contingencies. I take into account that the plaintiff has received a provision of $200,000 in 2005.

134. I assess the appropriate provision to be $1,230,000, being $750,000 to substantially clear debts, $80,000 for medical expenses and $400,000 as a provision for contingencies including tiding the plaintiff over until she finds new work.

135. I will not yet designate particular assets of the defendant as notional estate from which such provision should be made. It may be that the appropriate property to designate as notional estate is the lot described in Mr Childs’ valuation as Lot 2 of the subdivision of Lot 3, being the area of 43.7 hectares including ancillary improvements which was valued by him at $1,200,000. On the other hand, it may be that the defendant would propose satisfying the order for provision out of other assets, for example by having recourse to the assets of Scuderia Veloce Pty Ltd. If the property to be designated is the more valuable lot of the subdivided lot 3 in DP 1077545, the title details of that lot will need to be provided.

136. For these reasons I make the following orders:

1. Order that the time for the plaintiff to apply for an order under s 7 of the Family Provision Act 1982 in relation to the estate of the late David McKay be extended up to and including 14 July 2008.

2. Order that provision be made out of the notional estate of the late David McKay in favour of the plaintiff in the sum of $1,230,000.

3. Stand over the proceedings to a date to be fixed to determine which assets of the defendant should be designated as notional estate out of which such provision is to be made.

137. On the adjourned date I will hear the parties on costs.

AMENDMENTS:


19/08/2011 - Correction to hearing dates: "2009" substituted for "2010" - Paragraph(s) 0


LAST UPDATED:
19 August 2011