Chester v Cowin (No 2)

1. [1]

   These are my reasons for making orders to give effect to the conclusions I reached in Chester v Cowin [2024] NSWSC 1554, to which I will refer as the principal decision. I will use the same naming conventions as in those reasons. I will also deal with the question of costs.

2. [2]

   In the principal decision, I said at [53] and [55]:

3. [3]

   I directed the parties to bring in agreed short minutes of order to give effect to these conclusions or, failing agreement, to make brief submissions as to the orders for which they contend. I also directed the parties to make submissions about costs.

Orders to give effect to my conclusions

1. [4]

   The parties say that I should make orders for the Reindeer Place property to be transferred to the first plaintiff and the defendant as tenants in common in equal shares but have otherwise been unable to agree short minutes to give effect to my conclusions.

2. [5]

   As matters stand, no-one has taken any steps to comply with any of the formalities associated with obtaining a grant of administration of the estate, which needs to occur irrespective of the orders made in relation to the plaintiffs’ claims. As I mentioned at [12]-[13] of the principal decision, the estate owns shares and potentially other assets that cannot be dealt with until that occurs. Those shares will probably need to be sold in order for the estate to realise cash for the purpose of meeting at least some of the costs associated with these proceedings.

3. [6]

   The conclusion I reached was that Geraldine and her two younger children should have a temporary right of occupation, subject to payment of a modest rent and subject to meeting costs associated with the upkeep of the property in the meantime. As I said at [59], I could not see why the administration of the estate should not proceed subject to the right of occupation. But whether and on what terms the title to the property should be dealt with subject to the plaintiffs’ rights is a matter that, in the ordinary course, would be resolved by those responsible for the administration of the estate.

4. [7]

   In all of these circumstances, it is appropriate for one of the parties to be appointed as administrator of the estate generally, so as to allow for all of the assets of the estate, apart from the Reindeer Place property, to be realised and distributed in accordance with the laws of intestacy, the property being subject to the further provision I propose to order.

5. [8]

   That however does not quite deal with all of the issues that are likely to arise. The parties contemplate that the property will need to be sold once the right of occupation comes to an end. I agree. I have given some thought to making an order creating what would, in effect, be a testamentary trust for sale. On this approach, the property would be transferred into the name of Penelope as trustee for herself and Geraldine in equal shares, subject to the right of occupation, with the obligation to sell the property at the conclusion of the right of occupation. The difficulty with this approach is that Penelope would then be on title and would need to deal with third parties in relation to all of the matters for which Geraldine will be liable during the right of occupation, such as rates and utilities.

6. [9]

   The approach adopted by the parties involves orders that the property be transferred into the names of Geraldine and Penelope and that, at the conclusion of the right of occupancy, the property be sold. I am content to approach this matter in this way, given the general agreement of the parties that this should occur. The parties will hold the property subject to the right of occupation and subject to the obligation to sell the property when that right comes to an end. Should either Penelope or Geraldine die in the meantime, the other will continue to hold the property subject to the obligation to sell it at the conclusion of the right of occupancy.

7. [10]

   It will also be appropriate to make orders for Penelope to be appointed as administrator of the estate. I will dispense with the formal requirements for the appointment of administrators, including for the payment of a bond, under the Probate and Administration Act 1898 (NSW). I will also make orders for the Reindeer Place property to be transferred into the names of Penelope and Geraldine and for it to be sold at the conclusion of the right of occupation.

8. [11]

   The issues now dividing the parties are as follows. First, Penelope says that Geraldine’s obligation to pay an occupation fee should be “backdated” to the date of their father’s death in 2022. Secondly, Penelope seeks a variety of orders in relation to the maintenance, upkeep and inspection of the property during the period of Geraldine’s right of occupation, including what occurs on default. Thirdly, the parties are in dispute as to how to arrive at an appropriate rate for the occupation fee.

9. [12]

   For completeness, Penelope submits that I should make these orders:

10. [13]

    The plaintiffs submit that I should make these orders:

11. [14]

    Geraldine says that it would be illogical to require her to pay for the occupation of the property between May 2022 and the date of judgment. I disagree that such an outcome would be illogical. There is no reason why an order on those terms could not be made.

12. [15]

    However, there is a good reason why such orders should not be made here: the parties have to date taken no steps whatsoever to have the estate administered. As such, the parties have been acquiescing in Geraldine’s continuing occupation of the property without dealing with the question of rent on behalf of the estate. Because I do not know precisely how or why this situation has come about and why it has persisted for so long, I do not propose to disturb it.

13. [16]

    The effect of my principal judgment is that Geraldine should now be entitled to continue in occupation, as of right, but subject to the conditions I identified. I propose to make orders that will require Geraldine to pay for the occupation only from the date of the orders.

14. [17]

    There is a clear need for Geraldine’s right of occupation to be identified with some care. Her interests, and that of the two younger children, will not be served by orders that leave the parties in a state of uncertainty as to the extent of their obligations and the consequences of non-compliance.

15. [18]

    I therefore consider it appropriate for many of the orders sought by Penelope to be made. This includes orders that Geraldine be required to bring the property up to a standard of repair and requiring her to give reasonable access to Penelope in order to inspect the property. Although those are matters that tend to treat Penelope as a lessor of the property (which she is not), they seem to me to be essential to ensure that the property is maintained in a state appropriate for Geraldine and the children to continue in occupation and to preserve the value of the property pending its ultimate sale.

16. [19]

    So far as the consequences of non-compliance are concerned, Penelope’s draft orders propose that (among other defaults) Geraldine’s failure to maintain the property, to meet ongoing expenses such as rates, or to pay the fee associated with her continued occupation will result in an immediate loss of her right to occupy the property. In my view, breach of any of the conditions should not result in an immediate loss of the right to occupy. The orders should provide that only defaults lasting in excess of three continuous months should, absent agreement between Geraldine and Penelope, result in the loss of the right of occupation.

17. [20]

    The parties are broadly agreed as to the process by which the fee is determined but the plaintiffs submit that I should specify the amount in the final orders. The difficulty with that approach is that it will be necessary for the amount to be determined and adjusted from time to time, which would be difficult if the amount were otherwise enshrined in an order. I will therefore make orders as proposed by Penelope, adjusted in the light of my conclusion in respect of backdating payments.

Costs

1. [21]

   On 23 January 2024, Penelope’s solicitor wrote to the solicitor for the plaintiffs ahead of a mediation scheduled to occur on 4 March 2024. The letter contained a thorough explanation of the issues in dispute and the matters that were likely to be – and which were in fact – relevant to resolving the rights of the parties. The letter contained an offer of compromise, the gist of which was as follows:

   1. (1)

      Geraldine be granted a right to reside in the property until her youngest child turns 18;

   2. (2)

      Geraldine pays half the market rent during that time; and

   3. (3)

      Geraldine and Penelope jointly have the rights and responsibilities of the “landlord”, and that Geraldine also has the rights and responsibilities of the “tenant”, under the standard form residential tenancy agreement published by the NSW Government.

2. [22]

   The offer, which was expressed to be open for a period of 14 days and which referred to Calderbank v Calderbank [1976] Fam 93, was not accepted.

3. [23]

   Penelope argues that Geraldine has not done better than the offer and that her rejection of it was unreasonable. Her proposed costs orders are set out above at [12].

4. [24]

   Penelope’s argument is quite persuasive. The offer was reasonable. As she pointed out in written submissions filed in support of her proposed costs orders:

5. [25]

   Nonetheless, and although this issue is quite finely balanced, I am not able to conclude that it was unreasonable of the plaintiffs to reject the offer such as to attract the principles in Calderbank v Calderbank. Even though it is true to say that the offer sought to reach a very similar result to that which I have found to be appropriate, the fact that it did so in a slightly different way makes it difficult for me to be confident that the plaintiffs would have been better off accepting the offer. I do not know what the costs associated with the upkeep of the property will be, nor do I know what the market rent for the property would be. It may also be that some of the maintenance work can be done by Geraldine’s two older sons, who are apprentice tradespeople.

6. [26]

   It is regrettable that the estate will bear the costs of this litigation. If the plaintiffs had accepted the offer, they would have been able to continue in occupation and there would also have been a generous distribution to both sisters from the residue of the estate. That will no longer be the case.

7. [27]

   There is much force in Penelope’s submission that the offer was an appropriate way to preserve the approximate $140,000 in cash and shares making up the residuary. Nonetheless, given my inability to determine with sufficient accuracy whether (apart from costs) the offer represented a better result than what I have found, I decline to make the costs orders sought by Penelope. Instead, I will order that both parties pay their own costs.

ORDERS

1. [28]

   The orders of the Court are as follows:

   1. (1)

      Order that the defendant be appointed as administrator of the estate of the late Mr Malcolm Chester (Estate).

   2. (2)

      Direct that the formal requirements under the Probate and Administration Act 1898 (NSW) pertaining to the defendant’s appointment as administrator of the Estate, including the requirement for a bond to be executed under s 64, be dispensed with.

   3. (3)

      Order that provision be made from the Estate for the first plaintiff, fourth plaintiff and fifth plaintiff (the Relevant Plaintiffs) in terms set out herein.

   4. (4)

      Order that the whole of the Estate, but for the property at 10 Reindeer Place, Werrington NSW (the Property), be distributed to the first plaintiff and defendant in equal shares.

   5. (5)

      Order that the Property be transferred into the names of the first plaintiff and the defendant as tenants-in-common in equal shares.

   6. (6)

      Order that the Relevant Plaintiffs be granted a right of occupation of the Property from the date of these orders until three months after the fourth and fifth plaintiffs have completed secondary school or, alternatively, until the Relevant Plaintiffs vacate the Property at some earlier date either voluntarily or by termination (the Occupation Period).

   7. (7)

      Order that the Property be sold at the end of the Occupation Period and that the net proceeds of sale be distributed to the first plaintiff and defendant in equal shares.

   8. (8)

      Order that the first plaintiff be subject to the following terms during the Occupation Period:

   9. (9)

      Order that the Occupation Fee payable by the first plaintiff to the defendant be calculated and paid in the following way:

   10. (10)

       Order that each party bears their own costs.