Supreme Court New South Wales

• Medium Neutral Citation: Gillett v Nelson (No. 3) [2014] NSWSC 1415
• Hearing dates: 4 September 2014
• Decision date: 15 October 2014
• Jurisdiction: Equity Division
• Before: Darke J

Decision

Orders made substantially in accordance with Short Minutes propounded by the defendants.

• Catchwords: SUCCESSION - family provision - family provision order and notional estate orders proposed to be made - whether appropriate to make orders substituting property for property affected by the proposed orders - Succession Act 2006 (NSW) ss 92(1), 92(2)
• Legislation Cited: Probate and Administration Act 1898 (NSW) s 84A(3); Succession Act 2006 (NSW) ss 92(1), 92(2), 92(3)
• Cases Cited: Annette Carol Gillett v Virginia Nelson (No. 2) [2014] NSWSC 580
• Category: Consequential orders
• Parties: Annette Carol Gillett (first plaintiff); Virginia Nelson (first defendant); Peter Andrew Stiles (second defendant); Bryan Guersant Mellon (third defendant); Naringtan Pty Ltd (fourth defendant)
• Representation: Counsel: Mr J S Drummond, Mr D Barlin (plaintiff); Mr J B Simpkins SC, Mr P Knowles (defendants); Solicitors: Hartmann & Associates (plaintiff); Watson Mangioni Lawyers (defendants)
• File Number(s): 2011/191188
• Publication restriction: Nil.

Judgment

1 Judgment was given in this matter on 19 May 2014 (see Annette Carol Gillett v Virginia Nelson (No. 2) [2014] NSWSC 580) ("the principal judgment"). The Court concluded that a family provision order should be made in favour of the plaintiff out of the estate or notional estate of her late father, Arthur Vincent Nelson.

2 At [180] of the principal judgment, I stated that to the extent that distributions of property have been made out of the estate, notional estate orders should be made designating property held by the recipients as notional estate, so that property with a net value of about $1.2 million remains available to be the subject of a family provision order. I concluded (at [182] of the principal judgment) that the plaintiff should receive, after payment of the defendants' costs of the claims which have been made against the estate, a lump sum legacy of $175,000 and that, in addition, the plaintiff's costs should be paid out of any remaining balance of the estate or notional estate. The parties were directed to bring in Short Minutes to give effect to the reasons for judgment.

3 After a considerable delay, the parties provided competing versions of the orders they contended should be made, followed by written submissions on the topic. I heard brief oral argument when the matter was before the Court for mention on 4 September 2014. The parties also filed further affidavits concerning the value of the assets of the estate, including in relation to certain shares in the fourth defendant, Naringtan Pty Ltd. The defendants provided further submissions on 9 October 2014.

4 It became apparent that the parties were essentially in dispute as to whether certain substitution orders should be made, as proposed by the defendants, under ss 92(1)(b) and 92(2)(b) of the Succession Act 2006 (NSW) ("the Act"). Section 92 of the Act is relevantly in the following terms:

"92(1) If the Court has made, or proposes to make, a family provision order affecting certain property in the estate of a deceased person or a deceased transferee, the Court may, on application by a person who offers other property in substitution (the replacement property):

[...]

(b) make a family provision order in respect of the replacement property instead of the property proposed to be affected by such an order,

as appropriate.

(2) If the Court has made, or proposes to make, a notional estate order designating certain property as notional estate, the Court may, on application by a person who offers other property in substitution (the replacement property):

[...]

(b) make a notional estate order designating the replacement property as notional estate instead of the property proposed to be designated as notional estate by such an order,

as appropriate.

(3) The Court may vary or make an order under this section only if it is satisfied that the replacement property can properly be substituted for the property affected or proposed to be affected by the family provision order, or the property designated or proposed to be designated as notional estate, as appropriate."

5 It is clear from the evidence given by the third defendant, Mr Mellon, that the following property has been distributed from the estate:

(1) $400,000 that is now held on trust pursuant to clause 4(ii) of the will dated 25 May 2009;

(2) $250,000 paid to Emelia Nelson pursuant to clause 4(i) of the will dated 25 May 2009; and

(3) various items of property that have been distributed to the first defendant, Mrs Nelson, as described in paragraphs 117(c), (d), (e), (f) and (h) of the affidavit sworn by Mr Mellon on 25 March 2013.

6 It is also clear from the evidence given by Mr Mellon that the property that remains in the estate consists of various shares in private companies, namely, Naringtan Pty Ltd, A.V.N. Nominees Pty Ltd, A.V.N. Holdings Pty Limited and Acran Pty Ltd.

7 The orders sought by the defendant are (with minor changes) in the following terms:

The Court:

(1) Orders that, pursuant to s 79 of the Succession Act 2006 (NSW) ("the Act") the following property is designated notional estate of the late Arthur Vincent Nelson ("the Deceased"):

(a) the $400,000 transferred from National Australia Bank Limited with BSB 082 057 and account number 02 711 9976 to an interest bearing account and held on trust pursuant to clause 4(ii) of the Deceased's will dated 25 May 2009 ("the Will"); and

(b) the $250,000 transferred from National Australia Bank Limited with BSB 082 057 and account number 02 711 9976 to Emelia Nelson pursuant to clause 4(i) of the Will.

(2) Orders that, pursuant to s 92(2)(b) of the Act, the sum of $250,509.76 proffered by the first defendant is designated notional estate of the Deceased in substitution for the property listed in paragraph 117(c), (d), (e), (f) and (h) to the affidavit of the third defendant sworn on 25 March 2013, being property transferred to the first defendant as residuary beneficiary under the Will.

(3) Orders that, pursuant to s 92(1)(b) of the Act, the sum of $321,362.81 proffered by the first defendant be substituted as property of the Estate of the Deceased in place of:

(a) the 10 ordinary shares in the fourth defendant;

(b) the 10 'A' class redeemable preference shares in A.V.N. Nominees Pty Ltd;

(c) the 9 ordinary shares in A.V.N. Nominees Pty Ltd;

(d) the 9 'A' class shares in Acran Pty Ltd; and

(e) the 9 ordinary shares in A.V.N. Holdings Pty Limited;

held by the Estate, and such shares be transferred to the first defendant pursuant to the terms of the Will.

(4) Orders that, pursuant to s 59(2) of the Act, a family provision order is made for the plaintiff by way of a lump sum payment of $175,000 to the plaintiff from cash on deposit of the Estate of the Deceased.

(5) Orders that, pursuant to s 99 of the Act, the defendants' costs of these proceedings, on a trustee basis, are to be paid out of the Estate of the Deceased.

(6) Orders that, pursuant to s 99 of the Act, to the extent there remains any property in the Estate of the Deceased (including the notional estate and the property substituted by orders 2 and 3 but excluding the shares to be transferred pursuant to order 3) after payment of the family provision order in order 4 above and payment of all costs and expenses of the defendants as executors on a trustee basis, the plaintiff's costs as agreed or assessed are to be paid out of the Estate of the Deceased.

(7) Notes that the costs and expenses of the defendants as executors payable from the Estate of the Deceased include, but are not limited to, the costs incurred, on a trustee basis, in:

(a) proceeding number 2011/191579, being the family provision claim commenced by Cheryl Deanne Karoll; and

(b) proceeding number 2011/289346, being the family provision claim commenced by Paul Stephen Nelson.

8 The plaintiff opposes proposed orders 2 and 3. In relation to order 2, the plaintiff submitted that the amount of money proffered by Mrs Nelson in relation to the property that had been distributed to her was not equivalent to the value of such property, such that the making of the order would have the effect of significantly depleting the net distributable estate. The plaintiff made a similar complaint in relation to order 3, and in addition advanced various reasons why order 3 was not appropriate, including that it would have the effect of giving Mrs Nelson effective control of Naringtan Pty Ltd, and this was said to be not in the interests of the beneficiaries of the Arthur Vincent Nelson Family Trust.

9 I do not think there is any substance to the complaints that the proposed replacement property in respect of orders 2 and 3 is of a lesser value than the property it would replace. I see no reason not to accept the evidence of Mr Mellon concerning the value of the various assets. I do not think that any of the matters raised by Mr Selinger (an accountant who swore an affidavit filed by the plaintiff) call into question any of the conclusions reached by Mr Mellon as to valuation. I note further that no challenge was made to Mr Mellon's evidence at the hearing in relation to the value of assets. The hearing was apparently conducted on the basis that the estate had a net value of about $1.2 million as deposed to by Mr Mellon. The effect of the proposed orders would be the establishment of a fund money of at least that size. It is the intention of the executors to place the money on deposit with a bank.

10 The defendants submit that proposed orders 2 and 3 are appropriate because substituting cash for the non-liquid assets of the estate or notional estate will facilitate the most efficient implementation of the orders foreshadowed by the principal judgment, and the executors will be relieved of any need to undertake a process of liquidation of assets.

11 I accept those submissions. It is clear that liquidation of all available assets will be required in order to give effect to the orders foreshadowed in the principal judgment. The available assets, which are worth in the vicinity of $1.2 million, have to first bear the defendants' costs of the claims against the estate (which are in the order of $900,000), and then the payment of the legacy of $175,000 to the plaintiff and the payment of some proportion of the plaintiff's costs of the proceedings.

12 In circumstances where the shares in the private companies are together worth about $321,000, the proposed family provision order is one that affects such property for the purposes of s 92(1) of the Act, such that a substitution order may be made under s 92(1) of the Act if considered appropriate. The plaintiff did not submit to the contrary. There is no doubt that a substitution order may be made under s 92(2) of the Act in relation to any property proposed to be designated as notional estate pursuant to a notional estate order, if considered appropriate.

13 I think that the substitution orders proposed by the defendants are appropriate in the circumstances of this case, and should be made. In accordance with s 92(3) of the Act, I am satisfied that the replacement property can properly be substituted for the relevant property proposed to be affected by the family provision order, and can properly be substituted for the relevant property proposed to be designated as notional estate. I do not think that the various matters raised by the plaintiff specifically in opposition to order 3 provide any good reason not to make the order. Insofar as those matters include complaints concerning the administration of the Arthur Vincent Nelson Family Trust, it seems to me that they would be more appropriately raised in other proceedings. In any event, I do not think that those complaints undermine the evident desirability of liquidating all of the available assets so that the foreshadowed orders of the Court (which provide a benefit to the plaintiff) can be implemented efficiently and expeditiously.

14 The Court will therefore make orders 1 to 7 as set out in [7] above. The Court will further order that no interest is to be paid on the lump sum the subject of order 4 if it is paid within 28 days (by 12 November 2014), but if it is not so paid, interest will run from 12 November 2014 at the relevant rate prescribed by s 84A(3) of the Probate and Administration Act 1898 (NSW).

**********

Decision last updated: 15 October 2014