Panagopoulos v Panagopoulos

1. [1]

   These proceedings concern the estate of Theodoros Panagopoulos who died on 22 October 2000.

2. [2]

   The plaintiff, Jim Panagopoulos, a son of the deceased, brings a family provision application under s 7 of the Family Provision Act 1982 (NSW). The defendant, George Panagopoulos, is the deceased’s other son.

3. [3]

   As was done at the hearing, and without meaning any disrespect, I will refer to the parties by their first names.

4. [4]

   The deceased executed a will on 16 December 1997 but the original will, which was left in the safekeeping of the solicitor who prepared it, was lost. The solicitor gave to the deceased an unsigned and undated copy of the will. George found this copy of the will after the deceased’s death.

5. [5]

   George was named as the deceased’s executor in the copy will. This Court granted probate of the copy of the will to George on 15 May 2002. I will simply refer to the “will”.

6. [6]

   At the date of the deceased's death, he owned a residential property in Marrickville (which I will call the Marrickville property as it is still occupied by Jim). The Marrickville property was valued at $400,000 in the deceased’s inventory of property. The deceased also left two bank accounts containing the estimated total sum of $25,000.

Deceased’s 16 December 1997 will

1. [7]

   The will contained the following material provisions:

2. [8]

   There are a number of apparent problems with the wording of the will. First, clause 3 purports to give Jim’s children the same interest that he would have received if he had not predeceased the deceased, but that interest was only a life interest. As this aspect of clause 3 assumes that Jim has died before the deceased, there will be no life interest that Jim’s children could enjoy. Alternatively, clause 3 may have been intended to give life interests to the children of Jim who survived him. The possible grant of concurrent life interests in a residential property to more than one person is at least an unusual gift.

3. [9]

   Secondly, clause 4 on its face gives the residue of the deceased’s estate equally to the deceased’s children that survive him. Both Jim and George survived the deceased. That would have the effect that Jim would first enjoy a life estate in the Marrickville property under clause 3 and then upon his death his estate would share the residue (which would include the remainder interest in the Marrickville property) equally with George.

4. [10]

   Thirdly, as clause 4 was capable of giving George a half interest in the residue if he survived the deceased, as happened, the explanation in clause 6 as to why the deceased had made no provision for George is inexplicable.

George’s application to rectify the 16 December 1997 will

1. [11]

   George made an application to this Court for an order rectifying the will. The application was made by summons filed on or about 19 December 2003. In addition to his own evidence and evidence given by the solicitor who prepared the will, George relied upon an affidavit and a consent executed by Jim on 17 or 18 December 2003. On about 8 March 2004, the Court made the rectification order sought by George. As Jim had executed a consent and supported the application, the rectification order was made by consent.

2. [12]

   The rectification order provided as follows:

3. [13]

   The new clause 3 made it clear that only natural children of Jim would inherit the Marrickville property absolutely at the end of Jim’s life estate. In the absence of Jim having natural children, the title to the Marrickville property would go to George’s children on Jim’s death. Apparently, clause 4 of the will was not rectified because, by the date the rectification order was made, the Marrickville property was the only asset in the deceased’s estate, so that there was no significant residue.

Effect of the parties’ initial pleadings

1. [14]

   Jim commenced these proceedings by statement of claim filed on 30 July 2018. That was almost 18 years after the death of the deceased.

2. [15]

   Paraphrasing the prayers for relief in the statement of claim, Jim sought the following orders:

3. [16]

   Although the prayers for relief do not include an order extending the time for the making of the family provision application, being 18 months after the death of the deceased, par 51 of the statement of claim pleaded a request that time be extended pursuant to s 16 of the Family Provision Act.

4. [17]

   George filed his defence on 4 July 2019. Relevantly for present purposes, George pleaded in par 15 that the time for the making of the family provision application should not be extended in circumstances where the deceased died in 2000 and no facts had been pleaded supporting any such extension and no facts had been pleaded to support a claim for family provision.

5. [18]

   George also filed a cross claim on 4 July 2019. In essence, George sought the following relief:

6. [19]

   Jim apparently filed his defence to the cross claim on about 8 August 2019.

7. [20]

   Jim filed an amended statement of claim on 9 December 2019. In the events that have happened, it is not necessary to consider the amendments in any detail. Jim did not plead the basis of his application for an extension of time to commence his family provision application. George’s defence to the amended statement of claim was filed on 13 January 2020.

Jim’s abandoned application to amend

1. [21]

   Shortly before the commencement of the hearing, on 17 February 2021 Jim served a draft further amended statement of claim on George, and on 22 February 2021 a revised version of that draft pleading. Jim’s application for leave to amend his statement of claim was made on the first day of the hearing. Paragraph 26A(i)-(vi), which was provisionally allowed, pleaded the basis of Jim’s claim that the rectification order was made irregularly and against good faith in that George had failed to inform Jim that the intended effect of the rectification order was to disentitle Jim to property that he may have inherited under the will.

2. [22]

   On the third day of the hearing, I noted that Jim had withdrawn his application to make this amendment. Following argument, Jim’s counsel advised the Court that Jim did not press his application for leave to amend to include par 26A(vii)-(xiii) (which alleged a claim of breach of fiduciary duty by George) and par 26B (which alleged a claim of undue influence against George). I made a note of the withdrawal of the application on the third day of the hearing. I gave leave to Jim to make other amendments that were not contested. I indicated that in due course an order would be made that Jim pay George’s costs thrown away as a result of the application.

3. [23]

   The claims in the draft further amended statement of claim that were ultimately not pressed therefore ceased to be relevant to the proceedings. However, George had already incurred costs in responding to the proposed amendments, given that the issue was raised by Jim close to the commencement of the hearing. The only remaining significance of the application is the costs order that was ultimately made against Jim.

First phase of the hearing

1. [24]

   The proceedings were set down for hearing on the five days commencing on 1 March 2021. The hearing proceeded on those days and the Court was able to continue the hearing on 8 and 11 March 2021.

2. [25]

   The focus during the first phase of the hearing was Jim’s claim for an order setting aside the rectification order and his claim that, on the proper construction of the will in its original form, the Marrickville property was intended to be given to Jim absolutely. As Jim’s outline of submissions recorded at par 91, the family provision claim only arose if Jim was unsuccessful in his primary contention that the entire interest in the Marrickville property had been given to him.

3. [26]

   Significantly, in relation to Jim’s application for an extension of time to commence his family provision claim under s 16 of the Family Provision Act, Jim said at par 95 of his opening written outline:

Jim’s bankruptcy and its effect

1. [27]

   Jim became bankrupt on 18 January 2006 as a result of his presentation of a debtor’s petition. Jim was discharged from bankruptcy on 19 January 2009. There was no issue between the parties concerning the effect of Jim's bankruptcy on the claims that he has brought in these proceedings and the effect on those claims if Jim's bankruptcy is annulled. It will therefore be sufficient if that effect is explained in the following outline.

2. [28]

   Where a debtor becomes a bankrupt, s 58 of the Bankruptcy Act 1966 (Cth) provides for the vesting of the bankrupt’s property in the Official Trustee or a registered trustee. Property that is acquired by, or devolves upon, the bankrupt before the date of the bankruptcy, being property that is divisible amongst the creditors of the bankrupt, vests in the Official Trustee or registered trustee forthwith: Bankruptcy Act, s 58(1)(a), (6). Conversely, property that is acquired by, or devolves on, the bankrupt on or after the date of the bankruptcy, being property that is divisible amongst the creditors of the bankrupt, vests in the Official Trustee or registered trustee as soon as that property is acquired by, or devolves on, the bankrupt: Bankruptcy Act, s 58(1)(b), (6).

3. [29]

   Under family provision legislation, the nature of an order for further provision has been to take effect as if it were a codicil to the testator’s will: Testator’s Family Maintenance and Guardianship of Infants Act 1916 (NSW), s 4(1); Family Provision Act, s 14(1)(a); Succession Act, s 72(1)(a). However, the provision made by a family provision order takes effect only as if it were a testamentary disposition, and the result of such an order is imposed only as from the date of the order: McLeod v Johns [1981] 1 NSWLR 347 at 349 (Kearney J). In other words, as Mason CJ, Brennan, Deane, Dawson and Gaudron JJ stated in Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306 at 316; [1990] HCA 45:

4. [30]

   Citing the decisions of this Court in Union-Fidelity Trustee Co of Australia Ltd v Montgomery [1976] 1 NSWLR 134 at 141 (Helsham J) and McLeod v Johns at 349 (Kearney J), the majority of the High Court noted at 316-7 (citations omitted): “It should be observed that the same result has been reached in relation to legislation providing that the order should take effect as if it had been made by codicil.”

5. [31]

   Given that Jim is a discharged bankrupt, the foregoing propositions reveal that any order for further provision made by this Court will not vest in the Official Trustee and the impact of any such vesting is not a concern for the Court in determining whether adequate provision has been made or whether to make an order for further provision.

6. [32]

   Jim’s life estate vested in the Official Trustee at the time Jim’s bankruptcy commenced on 18 January 2006. If as a result of the setting aside of the rectification order that may have been made in these proceedings as originally constituted, or the making of any new rectification order, or as a result of a favourable construction of the original 17 December 1997 will in Jim’s favour, it was found that Jim was entitled to a greater interest in the deceased’s estate, that greater interest would also have vested in the Official Trustee on 18 January 2006. The same is true for Jim’s right to claim the original relief in these proceedings insofar as its purpose was to establish that Jim was entitled to a greater share than the life estate.

7. [33]

   Jim filed the debtor’s petition on his own accord and without seeking legal advice concerning the full effect of his bankruptcy and the extent of his duties as a bankrupt to the Official Trustee. Jim did not disclose in his statement of affairs that he had any interest in the Marrickville property. Consequently, the Official Trustee, in ignorance of the existence of Jim’s life estate, was unable to move to realise the value of the life estate to pay any of Jim’s creditors who lodged proofs of debt in his bankruptcy. Moreover, Jim has lived in the Marrickville property with his family since shortly after the death of the deceased, without paying any rent or occupation fee to the Official Trustee since 18 January 2006.

8. [34]

   As Jim is unemployed and impecunious it may be that the Official Trustee will not sue Jim for mesne profits as compensation for Jim’s trespass on the Marrickville property, following the Official Trustee’s learning recently of the existence of Jim’s life estate. However, if the Court were to make a family provision order in Jim’s favour that gave Jim a greater interest in the Marrickville property than the life estate, then that additional interest might be the subject of execution by the Official Trustee of a successful claim for mesne profits. The Court has no information about whether the Official Trustee would make such a claim against Jim. The potential claim complicates the Court’s consideration of whether any particular family provision order will improve the provision for Jim’s maintenance, education or advancement in life.

9. [35]

   Section 153A of the Bankruptcy Act relevantly provides for the annulment of a debtor’s bankruptcy in the following terms:

10. [36]

    Where the bankrupt is able to pay all of the bankrupt’s debts in accordance with s 153A, s 154 of the Bankruptcy Act has the following relevant effect:

11. [37]

    Consequently, if, by reason of these proceedings or any step taken by the Official Trustee to realise the value of Jim’s life estate in the Marrickville property, or as a result of the sale of that property by George as executor of the deceased’s estate, Jim’s bankrupt’s debts within the meaning of s 153A of the Bankruptcy Act are paid in full, s 154 of that Act will have the effect that any of Jim’s property that remains vested in the Official Trustee and which has not been realised for the purpose of paying the bankrupt’s debts will revert to Jim. That reversion could extend to any balance in the value of the life estate that was not required to pay the bankrupt’s debts, and any other proprietary right that Jim may have had in relation to the deceased’s will. In principle, those rights would include all of the rights that formed the basis of Jim’s claims in these proceedings as originally constituted.

Discovery of Jim’s bankruptcy

1. [38]

   On 9 March 2021, George's solicitors carried out a bankruptcy search in respect of Jim and discovered that Jim had become bankrupt on 18 January 2006 as a result of his presentation of a debtor's petition, and the possibility emerged that Jim's interest in the Marrickville property and some of the claims made by Jim in the proceedings may have vested in the Official Trustee.

2. [39]

   On 11 March 2021, the proceedings were stood over to 19 March 2021 after the result of the bankruptcy search was disclosed to the Court by George on that day.

3. [40]

   It is not necessary to set out in detail the immediate history of the proceedings following the discovery of Jim's bankruptcy. The Official Trustee appeared before the Court by its solicitor on several occasions, but on 14 July 2021 it was excused from further attendance.

4. [41]

   Jim unsuccessfully pursued attempts to raise the funds necessary to obtain an annulment of his bankruptcy or to compromise the claim of the only creditor who had lodged a proof of debt in his bankruptcy.

5. [42]

   Significantly, on 18 May 2021, Jim's counsel conceded to the Court that all the claims he had made in the proceedings, except the family provision claim, had vested in the Official Trustee and Jim only had standing to bring the family provision claim.

6. [43]

   Jim filed a further amended statement of claim on 28 April 2021 and George filed his defence to that statement of claim on 18 May 2021. The amendments made by Jim did not involve the abandonment by him of all his claims that had vested in the Official Trustee. The amendments included, however, the deletion of prayers 2 and 3, which related to the order to set aside the rectification order.

7. [44]

   On 26 July 2021, George filed a notice of motion seeking the summary dismissal of the remaining claims for relief in prayers 1 to 8 of the original statement of claim on the basis that Jim did not have title to those claims or standing to make them.

8. [45]

   George's counsel provided written submissions in support of George's notice of motion on 11 August 2021, and Jim's counsel replied by written submissions dated 12 August 2021. By those submissions, Jim acknowledged that he had not been successful in raising the funds necessary to obtain an annulment of his bankruptcy, which Jim had been advised required payment of $111,511. Jim conceded that the only claim that he continued to have standing to make was his family provision claim.

9. [46]

   Jim did not formally consent to the orders sought in George's notice of motion because he wished to keep alive the possibility that he could reinstitute those claims if circumstances permitted him to regain standing to pursue them. Jim accepted that he could not resist an order that he pay the costs of George's notice of motion. Jim opposed an order that he pay George's costs of the claims that would be dismissed, based on what he claimed to be the interrelationship between the claims that had become vested in the Official Trustee and Jim's remaining family provision claim.

Procedural orders made on 17 August 2021

1. [47]

   On 17 August 2021, I made the following orders:

2. [48]

   Order 2 only referred to the dismissal of prayers 1 and 4 to 8 of the further amended statement of claim because prayers 2 and 3 had been deleted from the original statement of claim by that pleading.

Jim’s second further amended statement of claim

1. [49]

   Jim filed a second further amended statement of claim on 6 September 2021. The principal effect of that pleading was that the only claim that remained was Jim's family provision claim, which was made in the following terms:

2. [50]

   The second further amended statement of claim deleted a number of allegations of fact but retained the allegations concerning the making by George of the application for the rectification of the will and the manner in which George procured Jim's consent to the application. The second further amended statement of claim also maintained Jim's pleadings concerning the construction of the will in its original form and as rectified. Jim also maintained his pleading of his claim for reimbursement in respect of improvements made by Jim to the Marrickville property.

3. [51]

   In the second further amended statement of claim, Jim added the following allegations of fact concerning his bankruptcy and its consequences (Jim’s new claims):

4. [52]

   In par 51A of the second further amended statement of claim, Jim pleaded that the facts alleged about George's rectification application, the circumstances in which Jim's consent to the rectification order was procured, Jim's allegations concerning the proper construction of the will, the contributions made by Jim to the improvement of the Marrickville property, the circumstances alleged concerning Jim's bankruptcy, and his loss of standing to bring the claims that had been dismissed should be taken into account pursuant to s 16(3)(b) of the Family Provision Act in respect of Jim's application to extend time for the making of his family provision claim.

5. [53]

   Finally, Jim pleaded in par 53 that the same matters should be taken into account pursuant to s 9(3) of the Family Provision Act for an order for further provision out of the estate of the deceased.

George’s defence to second further amended statement of claim

1. [54]

   George filed his defence to the second further amended statement of claim on 7 September 2021. George's response to Jim's family provision claim included the following:

2. [55]

   The hearing of these proceedings concluded over the period of 14, 16 and 17 March 2022.

3. [56]

   It follows from my history of these proceedings that Jim's original claim for an order setting aside the rectification order and for the construction of the will for which Jim contended, with a family provision claim as a fallback, has been recast as a claim based upon the proper construction of the rectified 16 December 1997 will and a conventional family provision claim that cannot be maintained by Jim unless the Court extends the time for Jim to have commenced the claim.

Proper construction of rectified 16 December 1997 will

1. [57]

   As Jim’s application for an order setting aside the order of this Court rectifying the will has been dismissed, these proceedings must be decided on the basis that the will takes effect as rectified. The issue of whether the rectified will should be construed in the manner claimed by Jim must be decided before the Court deals with Jim’s family provision claim.

2. [58]

   The terms of the original will are set out above at [7] and the rectification order at [12]. That order replaced clause 3 of the original will, but left clauses 4 and 6 in their original terms. The rectified clause 3 appears reasonably clearly to give a life estate in the Marrickville property to Jim and upon his death, the remainder to any of Jim's natural children who survive him, then, failing survival by natural children, equally to the children of George.

3. [59]

   I take Jim's submissions concerning the proper construction of the rectified will from pars 82 to 87 of Jim's outline of final submissions dated 28 February 2022. Jim suggested two possible constructions of the will, the latter of which had two different alternatives.

4. [60]

   Jim's first construction was that clause 3 is a gift of the freehold of the Marrickville property to Jim, clause 4 only deals with the balance of the estate (the $25,000 as it turned out), and clause 6 explained why there was no gift to George.

5. [61]

   The second construction recognised that clause 3 only gives a life estate to Jim, but offered that clause 4, in dealing with the residue after the life estate in the Marrickville property, deals with the remainder after the end of Jim's life estate and has the effect of giving the remainder equally to Jim’s estate and to George. Jim submitted then that either: (i) clause 6 has the effect of reading down clause 4 so that the entirety of the remainder is given to Jim; or (ii) clause 6 is meaningless and of no effect, so that clause 4 gives the remainder equally to Jim and George.

6. [62]

   The difficulty with both constructions is that clause 3 deals exhaustively with the remainder interest after the end of Jim’s life estate. The remainder interest does not fall into the residue of the deceased’s estate and is not dealt with by clause 4. The remainder interest passes either to Jim’s natural children or, Jim not having natural children, to George’s children.

7. [63]

   It is in any event improbable that the rectified will was intended to have the consequence that Jim obtained the whole or half of the freehold, given that clause 3 specifically gives him a life estate and the remainder to persons other than Jim.

8. [64]

   The proper construction, and effect in the circumstances as they are, of the rectified will is that, by clause 3, Jim received a life estate in the Marrickville property and, Jim not having had natural children, George’s children are to receive the remainder interest in the Marrickville property. Clause 4 refers only to the balance of the estate, and clause 6 is superfluous.

Jim’s discovery of life interest in Marrickville property

1. [65]

   The issue of when Jim learned that he was only entitled to a life estate in the Marrickville property, rather than that he was entitled to full ownership, is crucial to the determination of a number of issues in the proceedings. The significance of Jim’s new claims is dependent on when Jim found out that he was entitled to a life estate. Jim’s explanation for his delay in commencing his family provision application is dependent on the Court’s conclusion on his claim as to when he learned that he only had a life estate in the Marrickville property. It will therefore be convenient to deal with this issue now, in advance of the other remaining issues in the proceedings.

2. [66]

   Jim’s case was that, at all times after the death of the deceased, Jim believed that he was the owner of the fee simple of the Marrickville property and that he only learned that George remained the owner and that Jim was only entitled to a life estate, which had not been placed in his name on the title to the property, in about August 2016 when Jim received in the letterbox of the Marrickville property a letter containing a Valuer General’s valuation of the property. Jim claimed that he opened the letter only to discover to his shock that George was described as the owner of the property. Jim engaged the services of a conveyancer, who carried out a title search and confirmed that George was the registered proprietor.

3. [67]

   George’s response was that he had always believed, as a result of his discussions with the deceased before his death and George’s participation in conferences with the solicitor that led to the preparation and execution of the will, that the deceased’s testamentary intention was that Jim would only receive a life estate in the Marrickville property under the deceased’s will. That was because the deceased recognised a need to provide accommodation to Jim but did not trust his prudence to be able to retain the property. George’s evidence was that he informed Jim shortly after the death of the deceased that Jim had been given a life estate in the Marrickville property, and explained the nature of that interest to Jim.

4. [68]

   I have not been able to accept Jim as a reliable witness of fact. Jim explained his failure to tell his solicitor about his bankruptcy in par 32 of his 2 September 2021 affidavit on the basis that he “had completely forgotten about it, the bankruptcy having occurred 18 years prior.” Jim said in par 33 that even if he had remembered the bankruptcy, he would not have understood that it was relevant to these proceedings as the bankruptcy finalised in January 2009. While it is true that Jim was discharged from bankruptcy on 19 January 2009, that did not reverse the vesting of Jim’s property in the Official Trustee that has been discussed above.

5. [69]

   It may be that Jim genuinely did not understand the proprietary effect of his bankruptcy, but his explanation is still not compelling given that the preparation of an application for further family provision necessarily requires a detailed examination of the applicant’s financial history. A witness whose memory does not extend to remembering his bankruptcy is unlikely to be a reliable witness when it comes to the recollection of much less significant events.

6. [70]

   George’s written submissions dated 9 March 2022 detail a significant number of instances when Jim reversed his earlier evidence or appeared to mould his evidence to the requirements of his case. It is not necessary to set out all those instances, but I record that, in the aggregate, they caused me to lose faith in the reliability of the evidence that Jim gave. I did not gain the impression that Jim consciously falsified his evidence, but it appeared to me that Jim often did not sufficiently understand the underlying concepts that were the subject of his evidence, so that he was prone to giving inconsistent evidence or changing the effect of his evidence, without fully appreciating that that was what he was doing.

7. [71]

   Jim’s cross-examination included a number of positive instances that establish that Jim must have known historically that he had received a life estate in the Marrickville property under the deceased’s will.

8. [72]

   The following cross-examination took place concerning Jim's knowledge of the gift made to him by the deceased in his will [T 54.25-55.20]:

9. [73]

   Jim’s acceptance that he was told by George that he had a life estate in the Marrickville property, followed immediately by a retraction of that evidence, did not instil confidence that Jim’s evidence was reliable.

10. [74]

    The cross-examination continued as follows [T 57.13-57.32]:

11. [75]

    Again, Jim admitted that George informed him that he had a life estate, before claiming that he was not informed what was in the will.

12. [76]

    Jim was cross-examined concerning his knowledge that the title to the Marrickville property was not in his name, but George nonetheless required Jim to pay the rates [73.1-73.48]:

13. [77]

    Further [T 81.34-82.50]:

14. [78]

    George’s wife Vicki gave affidavit evidence that, in around June 2012, Jim said to her on numerous occasions: “You know Dad left me only a life tenancy. This way George can kick Alexandra and James out of the house straight away something happens to me”, and that an equivalent conversation took place in around 2015. Vicki’s evidence was not challenged in cross-examination.

15. [79]

    Nick Karahalios is an architectural draughtsman who assisted Jim in mid-2002 to prepare plans for a development application for repairs and improvements to the Marrickville property that Jim wanted to carry out. Mr Karahalios gave evidence of a conversation with Jim during one of their first meetings in which Jim made the following reply to a question as to who owned the property: “My brother George is the Executor of my father’s estate but I have the right to live there for my life.” This evidence was not challenged in cross-examination.

16. [80]

    Jim’s ‘Customer Declaration Form – Newstart Allowance’ dated 13 April 2016 states against “Home ownership”: “Bequeathed Life Interest”. The form was completed before the time when Jim claimed to have learned that George was the sole owner of the Marrickville property when Jim received the valuation from the Valuer General. Jim was cross-examined on this document [T 118.1-119.49]:

17. [81]

    I do not consider that the evidence Jim gave in response to the record in the Centrelink form that Jim was entitled to a life estate in the Marrickville property is at all credible. There is no reason to think that any Centrelink officer would insert the response in the form unless Jim had provided a description of his interest in the property that was consistent with him having a life estate.

18. [82]

    While the Court cannot be sure precisely when Jim learned that he had a life estate in the Marrickville property, I am satisfied that he became aware of the fact relatively shortly after the death of the deceased. On the balance of probabilities, I find on the basis of Mr Karahalios’ evidence that Jim became aware of the fact by at least mid-2002.

Reserved costs and Jim's new claims

1. [83]

   It is necessary for the Court to determine what orders should be made in relation to the costs reserved by order 7 made on 17 August 2021. They are the costs incurred by the parties in relation to the claims made by Jim that were dismissed on that date. They are the claims to set aside the order rectifying the will, a claim for a declaration as to the proper construction of the will in its original form, Jim's claim that the will should be further rectified, an order that George holds the Marrickville property on a constructive trust for Jim, and Jim's claim for restitution in respect of Jim's improvements to the Marrickville property. It is appropriate to deal with the reserved costs now, as it is possible that Jim's application for further family provision will be influenced by any costs liability that is imposed upon him.

2. [84]

   Ordinarily, the determination of the reserved costs would be straightforward, and Jim would be ordered to pay George's costs of the claims that have been dismissed on the basis that the costs should follow the event: Uniform Civil Procedure Rules 2005 (NSW), r 42.1. However, Jim has resisted that outcome on the basis that substantially all of the costs of the claims that have been dismissed would have been incurred by the parties in any event, because the evidence relevant to those claims is also relevant to the issues that remain to be decided in respect of Jim's family provision application: see pars 51A and 53 of the second further amended statement of claim as explained above.

3. [85]

   Jim elaborated upon the basis of the alleged evidentiary correspondence between the dismissed claims and his family provision application by reference to the manner in which Jim's new claims were articulated in pars 35B to 35P of the second further amended statement of claim that are set out above. The allegations in pars 35B to 35F provide a factual basis for Jim's claim in par 35G that George's conduct caused Jim's insolvency and the consequences of his bankruptcy. The allegations in pars 35I to 35O support Jim's claim in par 35P that George's conduct caused Jim to lose his entitlement to pursue the claims that were dismissed on 17 August 2021, because those claims became vested in the Official Trustee as a consequence of Jim's bankruptcy.

4. [86]

   Jim has not sought any separate relief based upon the alleged wrongful conduct of George. Jim has raised the allegations defensively to deflect George's case that Jim should not be given leave to commence his family provision application out of time. Jim has also made his new claims to support his claim that his present circumstances justify the making of an order for further family provision in his favour. Jim also appears to claim that, if the other beneficiaries have been prejudiced by the consequences of Jim's bankruptcy during the period of his delay in commencing his family provision application, that prejudice was caused by George and not by Jim.

5. [87]

   The effect of Jim's new claims is that the Court cannot determine the costs reserved by order 7 until these allegations have been dealt with. It is necessary to set out the logic behind Jim's new claims in order to deal with them. That logic is:

Significance of George’s failure to transfer a legal interest to Jim

1. [88]

   I will deal first with Jim's new claim based upon the failure of George to transfer a legal interest in the Marrickville property to Jim. The implication in the second further amended statement of claim is that, if George had transferred a legal life interest or the fee simple in the Marrickville property into Jim's name, that fact would have averted his bankruptcy.

2. [89]

   I find that this argument by Jim is fatally flawed as a matter of logic, and that it cannot succeed, whatever the correct finding is as to when Jim learned that he had only been given a life estate in the Marrickville property.

3. [90]

   As I have recorded above, it was Jim's case that he believed at all times from the date of the deceased's death until about August 2016 that he had become the legal owner of the fee simple under the deceased's will. If Jim had believed that, when he got into financial difficulty, he would have sought to raise funds to repay his debts, either by mortgage or sale of the Marrickville property. Had Jim sought to mortgage or sell that property, he would quickly have learned that he did not have legal title to any interest in the property. That would naturally have caused Jim to confront George, so that George could cause all outstanding steps to be taken to enable Jim to deal with the property in a way that would enable him to pay his debts.

4. [91]

   Jim did not provide any evidence that he took any step to raise money using the rights of the owner of the fee simple of the Marrickville property. There was in fact no evidence that Jim advised George that he had become insolvent or that Jim proposed to file a debtor's petition. I accept George's evidence that he was not aware of these matters, and that he did not learn of Jim's bankruptcy until George's solicitors carried out the bankruptcy search on 9 March 2021.

5. [92]

   Jim's failure to act as if he understood that he was the legal owner of the freehold of the Marrickville property is incidentally powerful evidence that Jim did not have that belief at any time before he filed his debtor's petition.

6. [93]

   Alternatively, if I am correct in my finding that Jim learned relatively soon after the death of the deceased that he had been given a life estate in the Marrickville property, on the evidence Jim did not make any attempt to raise money to pay his debts on the security of his life estate in the Marrickville property. As Jim did not do so, he cannot claim that George's failure to cause Jim's life estate to be registered on the title to the property was a cause of Jim's bankruptcy and the consequences of that bankruptcy.

7. [94]

   Not only did Jim not provide evidence that he tried to raise money to pay his debts on the security of the life estate that I have found he believed he had in the Marrickville property, Jim did not lead any evidence that would support a finding that some lender would have lent Jim the money he needed on the security of a life estate in the Marrickville property.

8. [95]

   Further, the evidence established that George took steps necessary to cause Jim's life estate to be registered on the title to the Marrickville property, but the Registrar General rejected the transfer lodged by George on the ground that the transfer required the names of the remaindermen to be stated in the transfer, and the relevant part of the transfer prepared by George's solicitor was blank. The reason why the names of the remaindermen were not inserted was that they could not be identified at the time the transfer was prepared. As a matter of legal theory, it remained possible for Jim to have natural children who might survive him, but if there were no such survivors the Marrickville property would pass to George's children.

9. [96]

   The evidence did not establish that there was some way that accorded with the Registrar General's practice that George could have caused Jim's life estate in the Marrickville property to be registered on its title. As Jim has at all times since shortly after the death of the deceased enjoyed possession of the Marrickville property in fact, as if he had a legal life estate in it, and as Jim did not inform George that Jim would suffer some prejudice if his legal life estate was not registered, George cannot be blamed for not taking some effective step to have Jim's life estate registered.

10. [97]

    I therefore find that Jim has failed to establish that George's failure to cause a legal interest to be registered in Jim's name on the title to the Marrickville property caused or contributed to Jim's insolvency or his bankruptcy and the consequences of the bankruptcy.

Significance of Jim’s ignorance of probate issues

1. [98]

   It remains necessary to consider Jim's new claim based upon the allegations in par 35F(i)-(vi) of the second further amended statement of claim. Jim has not articulated in the second further amended statement of claim, or in his submissions, why any of the actions that Jim alleged George took or failed to take in respect of dealing with the deceased's will could have caused or contributed to Jim's insolvency or his bankruptcy and the effects of the bankruptcy.

2. [99]

   Whether Jim understood that he had been given a life estate in the Marrickville property as I have found, or whether he believed that he was entitled to the fee simple, Jim's interest in the property was only relevant to the consequences of his insolvency and bankruptcy to the extent that he may have attempted to use his interest in the property to raise funds to repay his debts. As I have explained, Jim did not do so.

3. [100]

   Jim's state of knowledge concerning the will, the grant of probate, and the making of the rectification order could only have been material to Jim's ability to take proceedings relevant to the effect of the will. Those proceedings may have been for a declaration as to the proper construction of the original will, or a resistance to the rectification application. Even if it be assumed that additional knowledge on these issues may have caused Jim to take some course in relation to the meaning or effect of the will, the only outcome could have been that his entitlement to a life interest in the Marrickville property would have been confirmed, or he would have acquired some additional interest in that property.

4. [101]

   Those outcomes would not have made any relevant difference because, as I have explained above, at all material times Jim correctly believed that he did have an interest in the Marrickville property (whatever that interest may have been), and Jim made no attempt to raise funds on the basis of his interest in order to repay his debts and to avoid bankruptcy.

Determination of the dismissed claims not now possible

1. [102]

   Finally, the outcome of Jim's family provision claim cannot be affected by Jim's claim that a consequence of George being responsible for Jim's bankruptcy was that Jim has been deprived of his right to pursue the claims that were dismissed on 17 August 2021. The reason is that, even if, contrary to the conclusions that I have reached above, George was responsible for Jim's bankruptcy and Jim’s loss of the capacity to pursue the dismissed claims, the Court has no basis for making any finding as to what the value of the dismissed claims would have been to Jim. Following upon the dismissal of the claims, the parties naturally ceased to contest them, and the Court has not received any submissions from the parties concerning how the dismissed claims ought to have been determined. Consequently, the Court cannot make any findings concerning the probable outcome of those claims had they not been dismissed.

Determination of costs reserved by order 7

1. [103]

   Now that I have dealt with Jim's attempt to establish an evidentiary overlap between the dismissed claims and Jim's new claims, it is necessary that I deal with Jim's more general claim that he should not be ordered to pay the reserved costs, because the evidence that has been led in the first phase of the hearing is substantially relevant in any event to the issues that have arisen in respect of Jim's family provision claim.

2. [104]

   This is a difficult argument to deal with in a simple and efficient manner, because its determination requires an understanding in some detail of all of the evidence led in respect of the dismissed claims, and the evidence that is relevant to Jim's family provision claim, so that a sound judgment can be made as to the extent to which the evidence on the dismissed claims was material in a sufficient way to the family provision claim.

3. [105]

   As it happened, in the time between the end of the first phase of the hearing on 11 March 2021 and the hearing on 19 March 2021, when I was advised of the results of the bankruptcy search carried out on 9 March 2021, I had substantially prepared a draft judgment setting out and examining the significance of the evidence led by the parties on the claims that were ultimately dismissed on 17 August 2021. It would not be appropriate for the Court to include those draft reasons in this judgment for the purpose of demonstrating whether or not there was a substantial evidentiary overlap between the dismissed claims and the family provision claim, as the level of detail would tend to obscure the point, and it would not be appropriate for me to publish my preliminary views concerning the evidence that was led on the claims that have now been dismissed.

4. [106]

   I am satisfied, however, upon a detailed consideration of the evidence led on the dismissed claims, and the evidence relevant to Jim's family provision claim, that Jim has not established that there is a real or substantial overlap, at least one that is sufficient to justify treating the costs of the dismissed claims as being costs incurred in respect of the family provision application.

5. [107]

   I consider that it will be sufficient, in the circumstances, to set out the following distillation of the issues traversed by the evidence relevant to the dismissed claims, which I have produced using my now superseded draft judgment:

6. [108]

   Apart from the first subject matter summarised above, being the evidence of the statements made by the deceased as to his testamentary intentions and the reasons for his actions, I consider that the evidence and the forensic contest relevant to the dismissed claims only had peripheral relevance to the issues that arise on Jim's family provision application.

7. [109]

   Consequently, I am satisfied that the ordinary costs order should be made in respect of the costs reserved by order 7 made on 17 August 2021, with the result that Jim should be ordered to pay George's costs thrown away by the dismissal of the dismissed claims on the ordinary basis. It will follow that Jim will be required to bear his own costs of the dismissed claims.

Preliminary observations about Jim’s family provision claim

1. [110]

   The parties have agreed that because the deceased died before 1 March 2009, the effect of clause 11(2) of Schedule 1 of the Succession Act 2006 (NSW) is that the Family Provision Act applies to Jim's family provision claim.

2. [111]

   George accepted that, as Jim is a child of the deceased, he is an eligible person to make a family provision claim against the deceased's estate within par (b) of the definition of "eligible person" in s 6 of the Family Provision Act.

3. [112]

   Although prayer 9 of the second further amended statement of claim sought an order that the Marrickville property be declared as part of the notional estate of the deceased, it is not necessary to consider that claim, as the Marrickville property was clearly part of the estate of the deceased at the time of his death, as he was the unencumbered registered proprietor of the property. The parties properly made no submissions on the notional estate issue.

4. [113]

   The circumstances of Jim's family provision claim are quite unusual. Insofar as Jim's current financial needs are relevant to the outcome of his application, Jim is now living on a pension with no real prospects of being able to earn any significant income in the future from employment. His wife is also ill and unemployed. Jim's stepson suffers from some disability that means he needs assistance.

5. [114]

   For the moment, Jim and his family have a home in the Marrickville property, but Jim's life estate in that property vested in the Official Trustee on 18 January 2006. The life estate remains so vested even though Jim was discharged from bankruptcy on 19 January 2009. The life estate, or the balance of its value after funds are realised to repay the creditors in the bankruptcy, will only revest in Jim if and when the bankruptcy is annulled.

6. [115]

   Although Jim's initial inquiries led to Jim being advised that a payment of $111,511 would be required for the bankruptcy to be annulled, an email from the Official Trustee's solicitors dated 17 March 2022 explained that the estimated total required to annul Jim's bankruptcy was then $79,757.86, subject to certain contingencies that could increase the payout figure. That figure could increase to $86,870.12 if a certain creditor found the information necessary to lodge a proof of debt in Jim's bankruptcy. Jim does not have the funds to achieve an annulment of his bankruptcy by paying the lesser amount now required.

7. [116]

   Jim and his family do not have a continuing right to reside in the Marrickville property. As adverted to above, in principle, Jim is liable to pay mesne profits to the Official Trustee for his unauthorised occupation of the Marrickville property since 18 January 2006. There is no evidence concerning the Official Trustee's intentions as to whether Jim and his family will be ejected from the Marrickville property, or whether a claim will be made against Jim for an occupation fee. Circumstances do not permit the Court to forecast what might happen, as it is not clear that the Official Trustee will see value in ejecting Jim because of the contingent nature of the life estate, and, as matters stand, the Official Trustee may well take the view that Jim is impecunious and unable to meet any judgment against him for an occupation fee.

8. [117]

   Jim may now be even worse off than these dolorous circumstances may suggest, because it is possible that the Official Trustee will decide to make a claim against the proceeds of any order that may be made in favour of Jim in these proceedings for further family provision. There is no evidence that permits the Court to judge the likelihood of that occurring, in part because the Official Trustee has only recently been advised of Jim's life estate in the Marrickville property and has not indicated its intentions.

9. [118]

   Further uncertainty arises because, as a result of costs orders being made in favour of George in these proceedings, or the Official Trustee's learning of Jim's life estate in the Marrickville property, that property may be sold by choice or necessity. If that happens, the Official Trustee may receive a sufficient share of the proceeds of sale to fund an annulment of Jim's bankruptcy. That may lead to some valuable asset revesting in Jim, but there is no basis for the Court to make any reliable findings concerning this possibility.

10. [119]

    Compared to Jim's present circumstances, he was very considerably better off in the period immediately following the death of the deceased, and before Jim incurred debts that he found himself unable to pay. Jim was entitled to a life estate in the Marrickville property that would provide a home for him and his family, at least during the balance of Jim's lifetime. Furthermore, during that period, both Jim and his wife were substantially healthier than they now are and their capacity to earn income from employment was also significantly greater.

11. [120]

    As I have explained above, although Jim became insolvent and decided to relieve himself of the consequences of his inability to pay his debts by lodging a debtor's petition, he did not make any attempt to raise money on the basis of whatever interest he had in the Marrickville property. Jim did not raise the issue with George, and so the nature of Jim's issue in the property remained unresolved, and George was prevented from taking any step that may have averted the bankruptcy. Jim apparently did not understand the full consequences of his bankruptcy and appears to have understood that it would cease to have any effect upon his discharge. Either because of his lack of understanding or forgetfulness, he instructed his solicitors to commence the now-dismissed claims on his behalf without informing them that he had been made bankrupt. As a result, Jim has now been ordered to pay George the substantial costs thrown away as a result of the dismissal of the dismissed claims. Jim has also incurred the obligation to pay George's costs under orders 4 and 6 made on 17 August 2021.

12. [121]

    The joint expert valuation evidence placed a current value on the freehold of the Marrickville property of $1,650,000, which was divided between the life estate at $535,000 and the remainder at $1,115,000. I accept the evidence of the valuation witnesses that the market value of the freehold is in the order of $1,650,000, as that valuation was undertaken in a conventional and well-understood manner. The reliability of the valuations of the component interests in the freehold is less certain, as there is not a ready market for life estates or remainders in residential properties. The reason is obvious, in that the right to enjoy possession of the property is contingent on the continuation of the life of the life tenant. While the valuation witnesses gave rational explanations as to how they divided the freehold value between the life estate and the remainder, there must be a real possibility that, if the two interests were sold separately, the sum of the prices fetched would be less than the market price of the freehold if sold at the same time. The reason is that potential purchasers would have to factor in risks that do not arise upon the sale of a freehold.

13. [122]

    The Official Trustee already has a reason to try to sell the life estate in the Marrickville property in order to realise funds to pay the creditors in the bankruptcy and the Official Trustee’s costs. The only way that George will be able to recover the costs that he has incurred, for which he is entitled as the executor and trustee to be indemnified out of the remainder of the estate, is if the remainder in the Marrickville property is sold. The only property available to meet orders for costs made against Jim in favour of George is the balance of the value of the life estate after Jim’s bankruptcy has been annulled. The result is that it may be in the interests of both George and the Official Trustee to join in selling the freehold of the Marrickville property for its full market value. I will make some further observations about the possible significance of the Marrickville property being sold when I consider the outcome of Jim’s family provision application later in these reasons.

14. [123]

    The costs incurred by the parties are of overwhelming significance in the present case. My understanding of the evidence is that Jim’s estimated costs are $648,800 (inclusive of GST) and George’s costs are $558,898.85 (inclusive of GST). The total is $1,207,698.85. Consequently, the costs incurred by the parties exceeds the value of the property remaining in the deceased’s estate, although Jim’s legal representatives’ entitlement to their fees depends upon the contingency that Jim’s claim succeeds.

Application for leave to make claim out of time

1. [124]

   Section 16 of the Family Provision Act relevantly provided:

2. [125]

   In Haertsch v Whiteway (2020) 102 NSWLR 386; [2020] NSWCA 133 at [53], Meagher JA (with whom Macfarlan and Leeming JJA agreed at [1] and [78] respectively) explained that there are two steps to obtaining an extension of time to apply for provision under the Family Provision Act: first, showing sufficient cause for the application not having been made within the prescribed period and, secondly, the Court exercising its discretion in favour of granting the extension of time:

3. [126]

   In Stojanovski v Stojanovski [2019] NSWSC 1713 at [459], I accepted that the following observations by Hallen J in Stojanovski v Stojovski [2016] NSWSC 976 concerning the granting of an extension of time to commence proceedings under s 58(2) of the Succession Act apply equally to its predecessor, s 16 of the Family Provision Act:

4. [127]

   As Parker J noted in Choras v Farmakidis [2020] NSWSC 367, there are differences in the wording of s 16 of the Family Provision Act and s 58 of the Succession Act, the latter of which applied in the case before his Honour. Parker J relevantly said:

5. [128]

   I consider that the difference in wording between the two statutory provisions will not usually make any difference to the Court's decision as to whether or not an application for further family provision should be permitted to be made out of time.

6. [129]

   In summary, the issue of whether the Court should allow Jim to prosecute his family provision claim out of time depends upon the following considerations:

Has Jim shown sufficient cause for his delay?

1. [130]

   The first question that must be determined therefore is whether Jim has shown sufficient cause for his application not having been made within the period of 18 months from the date of the death of the deceased. As noted above, the deceased died on 22 October 2000, so the 18-month period elapsed on 22 April 2002.

2. [131]

   A special feature of this case is that the deceased's original will was lost. At this remove in time, the evidence has not established with any precision when George discovered the copy will that was ultimately admitted to probate. The grant of probate of the copy will was made on 15 May 2002. Although the Court has accepted above that, at some early stage, Jim was informed by George that he had been given a life estate in the Marrickville property, the Court cannot now determine precisely when that information was provided to Jim. There is some evidence that Jim was aware at least that George understood Jim had received a life estate in about mid-2002. Until Jim learned of that fact, he was not in a position to consider and take advice as to whether he should commence a family provision application.

3. [132]

   Jim's explanation for why he did not commence his family provision application until 30 July 2018 had two components. Jim sought to explain the elapse of time between the end of the prescribed period and about August 2016 by claiming that up until that time he had always believed that the deceased had left him full ownership, and that he was the proprietor of the fee simple in the Marrickville property.

4. [133]

   Jim then sought to justify the further delay of about two years up to 30 July 2018 by relying on the emotional turmoil that he suffered as a result of discovering that he suffered from prostate cancer and the loss of his wife's employment for medical reasons. He also relied upon the difficulty that he experienced in obtaining legal representation because of his impecunious circumstances.

5. [134]

   I am prepared to accept that Jim's explanation for the later period provides a sufficient cause, if considered separately from the first period. My acceptance of this aspect of Jim's explanation is supported by my view that no additional prejudice to the other beneficiaries has been shown to have arisen after August 2016.

6. [135]

   The vice from which Jim's attempt to show sufficient cause for his delay in making his application suffers arises in relation to the initial 16-year period to August 2016, as the Court has rejected Jim's claim that he was unaware during this period that he had only been given a life estate, and that he thought that he had been given the freehold, so that he had in fact received the lion’s share of the deceased's estate. The rejection of Jim's claim means that he has not demonstrated a sufficient cause for his application not having been made in time.

7. [136]

   In the circumstances, any attempt by the Court to determine the real causes of Jim's delay in making his application for further family provision would involve unwarranted speculation. However, it may be said, without undue unfairness to Jim, that the evidence has not painted him as a particularly organised person. At all times, Jim has enjoyed the benefit to occupy the Marrickville property in accordance with his life estate. I have noted above that the Marrickville property was valued in the inventory of the deceased's property made in conjunction with the application by George for probate of the will at $400,000. If Jim had made his family provision application within the 18-month period, or with a short delay justified by the consequences of the loss of the will, Jim's right to occupy the Marrickville property would have been jeopardised by the probable need to sell the property to pay the parties' costs of the proceedings. The balance of the estate may not have been sufficient to permit the Court to make any family provision order that was more valuable to Jim than the life estate that he had.

8. [137]

   Furthermore, when proceedings were ultimately commenced by Jim, the primary objective was to receive the freehold title to the Marrickville property, by means of the order for rectification of the will being set aside and an argument that, on the proper construction of the original will, Jim was entitled to receive either the freehold or a life estate followed by an equal share of the remainder.

9. [138]

   Whatever may have been the real reasons why Jim did not commence his family provision application until 30 July 2018, I cannot accept that the explanation given by Jim has been candid or correct. In these circumstances, I must conclude that Jim has not satisfied the mandatory requirement in s 16(3)(b) that sufficient cause be shown for the application not having been made within the prescribed period, with the result that an order permitting Jim to prosecute his family provision application out of time cannot be made.

Would prosecution of Jim’s claim prejudice the other defendants?

1. [139]

   I will now explain why I have come to the conclusion that, even if Jim had shown sufficient cause for his application not having been made within the prescribed period, I would in the exercise of my discretion not have made the orders sought by Jim, because I am satisfied that the delay has caused prejudice to the other beneficiaries that is so substantial that it would be unjust for the Court now to make any family provision order in favour of Jim.

2. [140]

   In principle, to assess the prejudice of the delayed commencement of proceedings, it is necessary for the Court to estimate when the family provision application would have been heard if it had been commenced before 24 April 2002, or on some later date that could have been justified under s 16(3)(b) of the Family Provision Act in order to compare the relative positions of the parties at that time and at the present.

3. [141]

   As I have explained above, it is not now possible for the Court to determine precisely when George found the copy of the original will, and when Jim was informed that he had only been given a life estate in the Marrickville property. However, the copy will must have been found before probate was granted on 15 May 2002, and I have found that Jim was informed that he had been given a life estate in the Marrickville property no later than at or about that date.

4. [142]

   The Court is not in a position to estimate with any precision when a family provision application made by Jim some reasonably short time after mid-2002 was likely to be dealt with by the Court.

5. [143]

   I consider that 18 January 2006 is a date that is significant to this issue, because that is the time when Jim became bankrupt, as the result of his presentation of a debtor's petition. Because the fact that Jim had only inherited a life estate in the Marrickville property may not have been able to be confirmed as a result of the discovery of the copy of the will until sometime in early 2002, it is likely that the Court would have accepted that Jim had shown sufficient cause for his family provision application not having been made within the 18-month period after the death of the deceased, if Jim had commenced his application within a reasonably short period after the date when the copy will was found. Three- and one-half years elapsed between the 15 May 2002 grant of probate of the will to George and Jim's lodgement of his debtor's petition. It is in my view more probable than not that the Court could have determined Jim's family provision claim before 18 January 2006, if Jim had made his claim within a reasonable period after the grant of probate of the will to George. Even if the Court had not finally determined Jim's claim before 18 January 2006, I consider that it is improbable that Jim would have taken the unilateral course of lodging his debtor's petition if his family provision claim had been in the course of prosecution. At that time, it is probable that payment of Jim's debts could have been deferred by one means or another, pending the determination of that claim, or alternatively some means for raising the money to pay the debts could have been arranged.

6. [144]

   As I have explained above, before Jim became bankrupt, he was entitled to a life estate in the Marrickville property and both he and his wife were, in relative terms, in a better state of health and had much better earning capacities than they now have. Jim is now a pensioner, and his state of health has deteriorated markedly. The life estate in the Marrickville property is now vested in the Official Trustee, and in principle, Jim has a liability to the Official Trustee for an occupation fee for the Marrickville property since 18 January 2006. Given the evidence concerning the deceased's reason for only leaving a life estate to Jim in his will, and the difficulty that the Court may have faced in formulating a family provision order that was more favourable to Jim than his entitlement to a life estate, as it would probably have been necessary for the Marrickville property to be sold to meet the costs of the application, I consider that Jim's prospects of success, had he commenced his application within time or within a time in respect of which sufficient cause for delay could have been shown, may have been limited. In my view, the other beneficiaries will be seriously prejudiced if Jim is permitted to commence his family provision application almost 18 years after the death of the deceased, because his present circumstances have deteriorated as a result of his delay in making his claim.

7. [145]

   Additionally, it is relevant to the determination of whether the other beneficiaries would be unfairly prejudiced by Jim's delay in commencing his application for further family provision that George has incurred the costs of defending the dismissed claims, as well as the other costs orders made against Jim. A consequence of Jim's life estate vesting in the Official Trustee as a result of Jim's bankruptcy will be that the remainder of the deceased's estate in George's hands will be depleted by the entire amount of George's costs. If the Court were to make an order permitting Jim to commence his claim out of time, and then to make an order for further family provision in favour of Jim, the portion of Jim's costs that are attributable to his family provision claim would also have to be paid out of the remaining part of the deceased's estate. As I will demonstrate when I deal with Jim's family provision claim, the consequences of Jim's bankruptcy have included that the remainder of the estate that would be available to share between Jim and the other beneficiaries has been so greatly depleted by wasted legal costs that the consequences of those costs being incurred would also provide a basis of unfair prejudice, if Jim were given leave to commence his application out of time.

Determination of family provision application

1. [146]

   Although I have found that the Court should not make an order under s 16(2) of the Family Provision Act that Jim be permitted to commence his application for further family provision after the expiration of the period of 18 months from the deceased's death, I will deal with the merits of the application on the basis that my refusal to extend the time for the commencement of the proceedings may be found to be in error.

2. [147]

   Given that my consideration of the merits of Jim's family provision application is only for the purpose of explaining what would have been the outcome of the application if I had permitted it to proceed, it is not necessary for me to set out a detailed analysis of the legal principles that are accepted as governing family provision claims.

3. [148]

   In essence, if the Court had made an order giving Jim leave to commence his application out of time, s 9(2) of the Family Provision Act would first have required Jim to satisfy the Court that the provision made in his favour out of the deceased’s estate is, at the present time, inadequate for Jim’s proper maintenance, education and advancement in life. If Jim satisfied the Court of that requirement, s 7 would empower the Court to make an order for the provision out of the estate that the Court is of the opinion ought, having regard to the circumstances at the time the order is made, to be made for Jim’s maintenance, education or advancement in life. Section 9(3) contains a non-exhaustive list of the factors that may be taken into consideration by the Court. The Court may take into account any matter which it considers relevant in the circumstances, but it is of particular relevance in the present case that s 9(3)(b) specifically authorises the Court to take into account Jim’s conduct after the death of the deceased.

4. [149]

   As I have recently done in Last v Lewis [2022] NSWSC 791 at [125], I will take the core principles governing the Court's family provision jurisdiction, both generally and in the context of an application by an adult child, as being as recently stated by the Court of Appeal in Bassett v Bassett [2021] NSWCA 320. Although the Court of Appeal was concerned with an application made under the Succession Act, it noted at [84] that the provisions of that Act are "broadly equivalent" to the corresponding provisions under the Family Provision Act. I will, with respect, confine my references to the parts of the Court’s reasons that are of particular relevance in the present case:

5. [150]

   The Court of Appeal emphasised, at [80] and [81], that s 59(2) of the Succession Act required that the Court make any order that is made, "having regard to the facts known to the Court at the time the order is made". The Court of the Appeal noted, at [90], that if the evidence established that the applicant for family provision relief had an intention as to the applicant's future conduct as at the time the order for further family provision is made, the existence of that intention may be a fact known to the Court at the time. However, where the execution of the intention is contingent upon future events, that execution will not be a fact known to the Court.

6. [151]

   There is a difference in wording between s 59(2) of the Succession Act, which requires that the Court have regard "to the facts known to the Court at the time the order is made", and s 7 of the Family Provision Act, which requires that regard be had to "the circumstances at the time the order is made". I doubt that the expressions "facts known to the Court" and "circumstances" have any relevant difference in meaning.

7. [152]

   I have raised this issue because the circumstances of Jim's application give rise to a number of possibilities the outcome of which is not predictable by the Court on the balance of probabilities. In the reasons that follow, I will consider those possibilities, although I have concluded that the need for the Court to focus on the circumstances that have actually been established by the evidence has the effect in this case of constraining the capacity of the Court to make a meaningful order for further family provision in favour of Jim. I will now address what I consider to be the most material circumstances. In doing so, I will gather together many of the relevant findings that I have made above. In determining the monetary amounts relevant to this exercise, I will calculate the amounts based upon the evidence, although I acknowledge that that will lead to a false appearance of precision.

8. [153]

   Clause 3 of the rectified will gave Jim a life estate in the Marrickville property that would have provided Jim and his family with adequate accommodation for his life but, by reason of Jim's decision to lodge a debtor's petition, the life estate is now vested in the Official Trustee.

9. [154]

   Jim is technically liable to pay an occupation fee to the Official Trustee for the period since 18 January 2006, but it is not known whether the Official Trustee will sue Jim to recover the occupation fee. The Official Trustee has not yet acted to do so, but that may be because the Official Trustee has only recently learned of the existence of the life estate.

10. [155]

    Equally, the Official Trustee has a right to eject Jim and his family from the Marrickville property, but there is no evidence as to whether or not it will do so. The likelihood that the Official Trustee will move for ejection may depend upon the Official Trustee's view as to whether it is able to sell the life estate for a sufficient price to be able to pay the creditors in the bankruptcy and the Official Trustee's costs in a worthwhile amount. Alternatively, it is possible that the Official Trustee may lease the Marrickville property to Jim.

11. [156]

    The evidence is that Jim requires, as matters stand, $79,757.86 to achieve the annulment of his bankruptcy. If the bankruptcy is annulled, either the life estate or any share in the value of the life estate that remains in the hands of the Official Trustee after payment of creditors and costs will vest in Jim. Jim does not have the $79,757.86 within his resources that is necessary to achieve an annulment of his bankruptcy.

12. [157]

    As the joint valuation report placed a nominal value of $535,000 on Jim's life estate in the Marrickville property, if either the life estate or the freehold in the Marrickville property is sold in the future, in any circumstances the probability is that Jim's bankruptcy will be annulled, and Jim will become entitled to some presently unknown amount of money.

13. [158]

    Moving to the costs incurred by the parties in the proceedings, George's costs on the indemnity basis are estimated to be $558,898.85. George is entitled as the executor and trustee of the deceased's estate to have his costs paid out of the remainder of the estate in his hands. The evidence suggested that George's children, as the remaindermen, have funded George's costs. Jim will be obliged to pay to George the costs ordered to be paid by orders 4 and 6 and the costs reserved by order 7 made on 17 August 2021. As Jim has no assets so long as the life estate in the Marrickville property is vested in the Official Trustee, Jim will be unable to pay these costs to George.

14. [159]

    George's solicitor's affidavit made on 8 March 2022 gave separate estimates of the costs incurred by Jim. On the indemnity basis, the orders 4 and 6 costs were $87,096.42, the order 7 costs were $234,647.57, and the family provision application costs were $236,554.86.

15. [160]

    As George's solicitor deducted 25% in order to estimate the costs payable on the ordinary basis, but Jim's solicitor deducted 40%, for the purposes of consistency in these reasons I have assumed that the proper deduction is 30%. On that basis, Jim will become liable to pay George $225,220.79 for the orders 4, 6 and 7 costs. As Jim cannot pay those costs, they will have to be borne by the estate.

16. [161]

    The Court is generally resistant to making family provision orders that have the effect of compensating applicants for further family provision who have incurred costs liabilities to the executor as a result of the manner in which the proceedings have been conducted. The Court will generally be unwilling to make a family provision order that protects the applicant from his or her liability to pay such costs. In Bassett v Bassett, Bell P (as the Chief Justice then was), Leeming and Payne JJA said:

17. [162]

    In a similar vein, Hallen J said in Page v Hull-Moody [2020] NSWSC 411:

18. [163]

    I had earlier said myself in Stojanovski v Stojanovski [2019] NSWSC 1713:

19. [164]

    Consequently, if the circumstances known to the Court otherwise justified the Court in making an order for further family provision in favour of Jim, that would be done on the basis that Jim would have to satisfy his liability to pay $225,220.79 in costs to George. In practical terms, that would mean that any lump sum payable to Jim out of the part of the deceased's estate remaining in George's hands would be reduced by that amount.

20. [165]

    Jim's solicitor only gave evidence that Jim's total costs would be $648,800 and did not break that estimate down into the different categories of costs, as did George's solicitor. For the sake of argument, I will assume that half of Jim's total costs were incurred in relation to his family provision claim. On my calculation, the equivalent percentage of George's costs was about 42%. On that basis, if a family provision order was made in Jim's favour, as well as the usual order that his costs on the ordinary basis be paid out of the estate, then, on the assumption that a 30% deduction is appropriate, Jim would be entitled to payment of $227,080 out of the estate as his costs of his family provision claim.

21. [166]

    On that basis, the amount of costs payable out of the part of the estate that remains in George's hands would be $558,898.85 plus $227,080, giving $785,978.85. As mentioned, Jim would be required to bear the orders 4, 6 and 7 costs of $225,220.79 that he is unable to pay to George.

22. [167]

    The evidence is that if he succeeds in these proceedings, Jim will be liable to pay his lawyers $648,800. The $227,080 payable by George to Jim will be reduced by the $225,220.79 that Jim owes to George. These two obligations will thus effectively cancel out. Jim will remain liable to his lawyers for the full amount of the costs that he has incurred.

23. [168]

    As noted above, the joint valuation report placed a value on the freehold in the Marrickville property of $1,650,000. I have accepted that the freehold of the property will probably sell for that price on the open market. The expert valuers jointly valued the remainder in the Marrickville property at $1,115,000. That is really a notional value, as the Court knows that there is no ready market for remainders in residential properties subject to life estates. The value was determined by the expert valuers on the assumption that it was legitimate to assume that Jim’s life expectancy was the median of Jim’s age cohort. The absence of a ready market does not mean that the remainder has no value. However, the price that the sale of the remainder might fetch is likely to depend upon idiosyncratic considerations, including Jim's current age and the prognosis for his cancer diagnosis.

24. [169]

    If the remainder in the Marrickville property could be sold for $1,115,000, then the amount remaining in the deceased's estate in George's hands available to be the subject of a family provision order would be $556,101.15, on the basis that only George's costs of $558,898.85 would have to be paid out of the price received.

25. [170]

    As all that is left in the deceased's estate is the remainder in the Marrickville property, and the Court cannot be sure whether a buyer can be found for that asset, or what price will actually be received, the circumstances known to the Court include that the estate of the deceased has a value that is presently unknown but is subject to meet an indemnity in favour of George of $558,898.85.

26. [171]

    Not only can the Court not be sure that the amount in fact available for distribution between the beneficiaries is $556,101.15, but if the Court makes any order that requires the sale of the remainder in the Marrickville property, that may unfairly prejudice the other beneficiaries by some presently unpredictable amount. Under the terms of the rectified will, the other beneficiaries only have to wait until the end of Jim's life estate to become entitled to enjoy the freehold in the Marrickville property. That presently has a value of $1,650,000. If the Court makes an order that forces a sale, depending upon the circumstances, the amount actually available for distribution between all of the beneficiaries may be driven below $556,101.15. If whatever amount is realised by George is that amount, or any significantly lesser amount, an order that requires a substantial lump sum to be paid as further family provision to Jim will plainly significantly reduce the inheritance of the other beneficiaries, when compared to the testamentary intention of the deceased, as stated in the rectified will.

27. [172]

    There is actually no evidence that George will, with the consent of the other beneficiaries who have borne his costs of the proceedings, choose to sell the remainder in the Marrickville property, even if that is the only way that the costs can be recovered at this time. They could take the view that the preferable course is to wait until the other beneficiaries are entitled to the freehold and then to recover the costs expended out of the higher value of the freehold. That way they would not subject themselves to the risk that an attempt to sell the remainder would generate an artificially low price. Consequently, the Court could only be sure that the remainder will be sold if it were to make an order to that effect.

28. [173]

    As noted above, there is no evidence that the Official Trustee proposes to sell Jim's life estate. As Jim has been diagnosed with cancer, the sale value of the life estate is unpredictable. The Official Trustee may be satisfied if a price of $79,757.86 can be obtained from the sale, but this demonstrates that the amount to which Jim would be entitled cannot be estimated.

29. [174]

    Neither George nor the Official Trustee has a right to force the other to join in selling the freehold in the Marrickville property. That is because those owners own separate estates in the one property, and they are not co-owners for the purposes of s 66G of the Conveyancing Act 1919 (NSW).

30. [175]

    George and the Official Trustee could nonetheless agree to join in selling the freehold in the Marrickville property. There would be commercial common sense in taking that course on the part of each, as it would permit George to recover his costs of the proceedings and to realise the remainder for the highest price possible. It would also permit the Official Trustee to pay the creditors in the bankruptcy and the Official Trustee's costs, and to fulfil any obligation owed to the bankrupt to recover a proper price for the bankrupt's property. However, there is no evidence that George and the Official Trustee will agree to sell the freehold, and the Court has no power to require them to do so.

31. [176]

    Although the outcome of a joint sale of the freehold in the Marrickville property would require a presently unknown agreement between George and the Official Trustee as to how the sale price, after payment of costs, would be divided, it is possible that, if the Official Trustee acted to protect Jim's interests, the division would approximate the ratio 1,115,000 to George and 535,000 to the Official Trustee. There is therefore a possibility that Jim would become entitled to $535,000 less $79,757.86, being $455,242.14, less an allowance for transaction costs.

32. [177]

    The circumstances that are presently known to the Court therefore give rise to a number of future possibilities the occurrence of which cannot on the evidence be predicted on the balance of probabilities. Those possibilities are that: (1) no sale occurs of any interests in the Marrickville property; or (2) one or both of the life estate and the remainder in that property are sold; or (3) the freehold in the property is sold, and the proceeds of sale divided.

33. [178]

    If there is no sale of any interest in the Marrickville property, then there would be no fund available to make a lump sum order for further family provision in favour of Jim. George would have to bear his costs of the proceedings until the other beneficiaries become entitled to the freehold. In the meantime, Jim would be liable to be ejected from the Marrickville property by the Official Trustee, and will be notionally liable to pay an occupation fee that he will not have the funds to pay.

34. [179]

    If interests in the Marrickville property are sold independently, then additional funds will become available in amounts that cannot be determined on the present evidence. Up to about $556,101.15 could be received by George and up to $455,242.14 could be received by Jim.

35. [180]

    If George and the Official Trustee agreed to join in selling the freehold, then there would be a greater chance that these additional amounts could become available to the parties.

36. [181]

    The only one of these outcomes that the Court can force is the sale of the remainder in the Marrickville property, which entails the high level of uncertainty of outcome and risk of unfair prejudice to the other beneficiaries that has been considered above. If the sale of the remainder led to George receiving a price large enough to fund an order for family provision in favour of Jim that was more than $79,757.86, Jim could use that money to obtain an annulment of his bankruptcy. The life estate in the Marrickville property would then revest in Jim. However, Jim would be liable to pay his legal costs to his lawyers. It seems to be inevitable that it would be necessary for the life estate to be sold. If this result occurred, then the consequence of the Court taking the only course within its power would be to require the remainder and the life estate to be sold separately, which would have an uncertain outcome and subject the deceased’s estate to the risk of an unpredictable reduction in value for the reasons discussed above.

37. [182]

    The consequence of all of these considerations is that the effect of Jim's conduct in lodging the debtor's petition to cause his own bankruptcy, and then prosecuting proceedings that were ultimately required to be dismissed, is that the Court has been placed in the exceptional position that the circumstances known to it are so uncertain as to make it inherently impossible for the Court to make any useful order for further family provision in favour of Jim which is fair to the other beneficiaries, and predictable in its outcome.

38. [183]

    In this case, the Court has evidence of the reasons why the deceased decided to leave only a life estate in the Marrickville property to Jim. On the evidence, the deceased duly considered the claims on his estate. He decided that it was warranted that Jim receive an inheritance which assured that he would have a home for life. The deceased decided that it would be unsafe to leave Jim any interest in the Marrickville property that he could sell or encumber. Events have shown that the deceased's testamentary planning was far-sighted and correct. Unfortunately, the deceased could not predict that Jim would lose his entitlement to the life estate in the Marrickville property by causing his own bankruptcy.

39. [184]

    The deceased expressed, by means of the rectified will, his testamentary intention to benefit his grandchildren, either the natural children of Jim or George's children. On the evidence, the deceased did not owe any testamentary duty to Jim's wife or stepson, in accordance with community standards or moral duty.

40. [185]

    The depletion of the deceased's estate is entirely attributable to Jim's conduct after the death of the deceased. Given the deceased’s effort to provide a home for Jim for his lifetime in a way that was thought to be secure, neither moral duty nor community standards would require the deceased, if he were now alive to do so, to make a substantial lump sum bequest to Jim out of the part of the deceased’s estate that remains after Jim’s bankruptcy and the prosecution of the dismissed claims, given that the payment of any substantial lump sum to Jim would deprive the other beneficiaries of substantially all of the inheritance that the deceased intended that they should receive.

41. [186]

    In the circumstances, it cannot be said that Jim has satisfied the requirement in s 9(2) of the Family Provision Act that, at the present time, the provision made in his favour in the rectified will is inadequate for his proper maintenance, education and advancement in life.

42. [187]

    If that conclusion were found to be in error, the foregoing discussion of the status of the deceased’s estate would nonetheless precipitate the outcome that the Court decide not to exercise its discretion under s 7 to make an order for further provision for Jim.

Orders

1. [188]

   Order (2) will be made by the agreement of the parties.

2. [189]

   The orders of the Court are:

   1. (1)

      Order that the plaintiff's claims in his second further amended statement of claim be dismissed.

   2. (2)

      Declare on the cross claimant's cross claim that the cross claimant is entitled to be paid $13,824 out of the estate of the deceased, and that the cross claimant has a charge over the estate to secure that payment.

   3. (3)

      Order the plaintiff to pay the defendant/cross claimant's costs of the proceedings on the ordinary basis.

   4. (4)

      Order that, to the extent that the defendant does not recover from the plaintiff his costs of the proceedings, those costs be paid out of the estate of the deceased on the indemnity basis.