Steiner v Strang

This is an application by the plaintiff, John Steiner (“John”), for interim provision or for a further interim distribution of $500,000 from the estate of his late mother, Dorothy Steiner (“Dorothy”). Without disrespect, I shall refer to the members of the Steiner family by their given names.

Dorothy left John a specific bequest of $2,000,000 in her will. He has already received interim distributions totalling $788,872.50. Notwithstanding the difficult circumstances in which John now finds himself, the Court is not satisfied that an order of either kind should be made.

John moves on his notice of motion filed 10 March 2016 which includes this prayer for relief:

In addition to s 62(1) of the Succession Act 2006 (NSW) (the “Act”), John also relies on s 84 of the Probate and Administration Act 1898 (NSW) (the “PAA”) in accordance with the principles set out by Barrett J (as his Honour then was) in Romano v Romano; Estate of Giacomo Romano [2004] NSWSC 775 (“Romano”).

The defendant executors opposed the application. John’s sister, Robyn, consented to it.

Given the interlocutory nature of this application, the parties did not suggest that there was any dispute about the facts relevant to its determination.

On 18 December 2007, John acknowledged in writing a “loan” to him by Dorothy in the sum of $881,000 (the “Alleged Loan”).

John received gifts totalling $1,210,000 from Dorothy between 15 September 2008 and 26 July 2011.

Dorothy made a will on 7 June 2011 (the “Will”).

Dorothy died on 12 October 2011. She was survived by three adult children — John, Lesley and Robyn — along with grandchildren and other family members.

On 14 December 2011 probate of the Will was granted to the defendant executors, being Mr Strang (a solicitor) and Mr Tang (an accountant) (the “Executors”). Neither of them is a beneficiary.

The Will, after making a number of particular gifts of shares and other assets, included the following provisions relevant to John:

John has received $788,872.50 in interim distributions of his entitlement under the Will. Robyn has similarly received interim distributions of $1,335,000.

On 24 April 2012, Robyn commenced proceedings for a family provision order (“Robyn’s proceedings”).

On 13 June 2012, John commenced these proceedings for a family provision order (“John’s proceedings”).

On 14 August 2012 in Steiner v Strang; Estate of Steiner [2012] NSWSC 919, White J approved an interim distribution to John of $300,000 (which amount is included in the figures referred to in paragraph [13] above). In doing so, his Honour said:

On 30 November 2012 the Executors filed a cross-summons seeking orders and declarations as to whether John was indebted to Dorothy’s estate for the Alleged Loan.

On 12 September 2014 in Steiner v Strang & Anor [2014] NSWSC 1250, Sackar J, dealing with the cross-summons only, determined that John was indebted to Dorothy’s estate for the Alleged Loan in the sum of $881,000 and that the Executors were entitled to offset that amount and interest at the prevailing rate against his entitlement both as a residuary beneficiary and as a specific legatee under the Will.

John made a further application for interim provision under s 84 of the PAA and under s 62(1) of the Act. However, reliance on s 62(1) of the Act was not pressed when the application was heard by Ball J. On 3 February 2015 in Steiner v Strang [2015] NSWSC 14, his Honour dismissed John’s application under s 84 of the PAA, concluding:

On 16 July 2015 in Steiner v Strang [2015] NSWCA 203, the Court of Appeal set aside Sackar J’s orders, concluding (citations omitted):

Insofar as the conduct of the various proceedings is concerned, when I heard John’s application which is the subject of these reasons I ordered that all of the proceedings (Robyn’s proceedings, John’s proceedings and the remitted cross-summons in relation to the Alleged Loan) should be heard together. While this judgment has been reserved, all of those proceedings have now been listed for hearing before me commencing on 22 May 2017 with an estimate of five days.

On 12 April 2016 in Steiner v Strang [2016] NSWSC 395, after a seven day hearing, Slattery J ruled against John in relation to proceedings he had brought about several matters relevant to his mother’s affairs. The Executors had been unwilling to pursue the claims on behalf of the estate. John was ordered to pay the defendants’ costs of the proceedings. A costs assessment application and itemised bill have been served on John by the defendants claiming approximately $639,000.

John’s financial and personal circumstances are parlous. John (who is 65) lives in Townsville in a unit (the “Strand unit”). John suffers from ill health and cannot work. He and his wife (who is 71) own the Strand unit and another investment property in Townsville. Their 49 year-old son lives with them. He is also in ill health and unemployed. John has significant debts to the Bank of Queensland (“BOQ”) secured over both of those properties (approximately $950,000 plus other costs) and credit card debts of approximately $385,000. John’s liabilities exceed his assets by approximately $687,000. He and his wife live from government pensions, but their monthly expenses exceed the income provided by those pensions. It appears that any shortfall has been made up by relying on credit cards. John’s wife is schizophrenic and he is her full-time carer. He is concerned that if they had to move from the Strand unit her condition would be exacerbated.

There was evidence that BOQ’s Valuer had valued the Strand unit at $520,000 or $460,000–$500,000 on a forced sale basis. John has been unable to sell or rent the investment unit. He has been unsuccessful in his attempts to sell the Strand unit. There was unchallenged evidence from a Townsville real estate agent that the Townsville property market has been in a “relentless [downward] spiral”. There is an oversupply in properties for sale and for rent “with many properties taking more than one to two year [sic] to sell/rent and some even longer”.

The present application has been motivated by foreclosure proceedings commenced by BOQ in relation to John’s two properties. On 28 November 2016, BOQ accepted a proposal which included John paying the bank $500,000 on or before 10 March 2017, in return for which BOQ would release its mortgage over the Strand unit. John seeks the further interim provision from Dorothy’s estate of $500,000 in order to be able to satisfy that part of the settlement that he has reached with BOQ.

There was no dispute between the parties about some of the current financial circumstances of Dorothy’s estate:

Section 62 of the Act provides:

In Roberts v Moses [2015] NSWSC 1504, I considered the operation of s 62 of the Act:

Mr M Condon of Senior Counsel appeared for John. His submissions may be summarised as:

The Executors were represented by Mr L Ellison of Senior Counsel. Mr Ellison’s submissions may be summarised as:

For the four reasons which follow, and not without some hesitation, I have concluded that I am unable to reach a state of actual satisfaction on the balance of probabilities that a family provision order will be made in favour of John at the final hearing of his application for such an order. Alternatively, even if I could be satisfied of that to the requisite standard, I am similarly not satisfied, and hence am unable to form the opinion required by s 62, that provision of no less than $500,000 would be made in John’s favour at any final hearing. Finally, even if I were satisfied of the two preceding matters, I would decline to make the order in the exercise of the Court’s discretion. The same considerations inform all three conclusions.

Mr Condon SC submitted in his written outline that John had “an arguable case” that a family provision order would be made. I readily accept that submission as correct. However, for the reasons which I gave in Roberts v Moses set out in paragraph [28] above, the jurisdiction to make an order under s 62 of the Act is not enlivened if all that is demonstrated is an arguable case for provision. The Court must be satisfied on the balance of probabilities that an order for provision will be made.

There can be no doubt that John’s financial and other circumstances are very serious. However, such adverse circumstances are, in and of themselves, insufficient to warrant the making of a family provision order. John is undoubtedly an eligible person for the purposes of the Act. The fundamental question is whether the Court is satisfied on the balance of probabilities that, at the time of a hypothetical future hearing, the Court will conclude that adequate provision for the proper maintenance, education or advancement in life of John has not been made by the Will in all of the circumstances, including taking into account the matters set out in s 60 of the Act, and then order further provision.

In reaching my conclusions, I have carefully considered the evidence that has been adduced about John’s circumstances. Notwithstanding that, the primary reason for the conclusion I have reached is that because of the $1,200,000 received by John from Dorothy during her life by way of gifts and the provision for him in the Will of $2,000,000, I am not satisfied, on the balance of probabilities, that at any final hearing the Court will find that adequate provision has not been made for John under the Will. I hasten to add that the conclusion I have reached is based only on the submissions and material which the parties have chosen to rely on for the purposes of the present application. Any final hearing will involve more detailed evidence and the cross-examination of witnesses, in addition to further detailed submissions about the ultimate issues. All of this may present quite a different picture at final hearing, but the Court must decide the present application on the evidence before it.

The second reason for my conclusions is the uncertainty created by the status of the Alleged Loan. Whether or not it has to be repaid by John is obviously a very important matter in determining both the adequacy of the provision made for John under the Will and the amount of any further provision. If repayment is required, John’s financial circumstances mean it can only be done by reducing his pecuniary legacy.

It was not suggested on behalf of John — and nor could it have been — that the decision of the Court of Appeal overturning Sackar J made the outcome of the Executors’ cross-summons a foregone conclusion one way or the other. For example, the Court of Appeal did not conclusively determine some question of law which had the effect, in any circumstances, that John did not have to repay the estate. The Court of Appeal’s decision turned on findings that Sackar J had incorrectly rejected some of John’s evidence and had failed to make other factual findings which the Court considered would have been appropriate for his Honour to make.

The fact that the cross-summons has been remitted for further trial demonstrates that the outcome remains open, turning at least on questions of Mr Steiner’s evidence and his credit. So much is apparent from the Court of Appeal’s reasons for remitting the cross-summons:

Neither party addressed me on the question of the likely outcome of the retrial of the cross-summons. That is sufficient for it to be inappropriate for me to express any view on the question. That position is only fortified by the fact that I am now the trial judge. It is sufficient for present purposes to note that the question of whether or not John has to repay the Alleged Loan to the estate is completely open. The uncertainty over the outcome compounds the lack of certainty about whether any order for further provision would be made and the amount of such an order.

The third reason for my conclusions recasts my second reason in an additional, slightly different juridical light. Even if the Court were able to form the requisite opinion for the purposes of s 62, the making of an order remains discretionary. In my opinion, the fact that, for the purposes of any final provision order, John’s circumstances are subject to the substantial variable of the fate of the Alleged Loan in and of itself provides an overarching discretionary reason for the Court not to make the interim order. So understood, that uncertainty is an additional reason why I decline to exercise the discretion to make an interim family provision order in favour of John.

Another important discretionary consideration — particularly where the Court might otherwise have reservations about whether or not an interim provision order should be made — is the capacity of the applicant for interim provision to secure repayment if, for example, the interim order is ultimately revoked pursuant to s 62(2) after a final hearing. The evidence starkly demonstrates that John would only be able to repay the provision by securing the Strand unit in favour of the estate and then, if necessary, selling it. The fourth reason for my conclusions is that I am not satisfied that the Strand unit would give adequate security for an interim provision of $500,000. Even on John’s own evidence a forced sale could yield less than that sum. The difficulties which John has had in trying to sell the Strand unit and the evidence about the state of the Townsville property market (see paragraph [24] above) demonstrate that even the forced sale valuation may be optimistic. On any view of the evidence, there is a real risk that if the interim provision did have to be repaid, the estate would be faced with a lengthy sale process and a strong likelihood that it would be left out of pocket, even before the expenses of a sale are taken into account.

I should finally record that, in reaching my conclusions, I have not overlooked two other matters urged upon me by Mr Condon SC on behalf of John. The first was that this was a “large estate”. Although Mr Condon SC did not specifically articulate the significance of that fact for the present exercise, I understood the implication to be that it made more likely both a finding that adequate provision had not been made for John and a more generous order for further provision.

The second matter was to bring to the Court’s attention part of Hallen J’s summary concerning family provision claims by adult children in Camernik v Reholc [2012] NSWSC 1537, where his Honour observed at [159]:

Neither of those considerations, taken singularly or together, has been sufficient to displace the reasons which I have set out in the preceding paragraphs and enable me to be satisfied that John’s application under s 62 of the Act should be granted.

Barrett J (as his Honour then was) said in Romano:

The current equivalent of the Supreme Court Rules referred to by his Honour are r 54.3(3)(d) or r 54.3(4)(b) of the Uniform Civil Procedure Rules.

John relied again on the size of the estate and the exigency of his financial and personal circumstances as warranting an order for a further interim distribution.

In addition to repeating the reasons he had advanced for the Executors in opposition to an order being made under s 62 of the Act, Mr Ellison SC submitted that it would be unsafe to exercise the Court’s undoubted jurisdiction to make an interim distribution because, adopting a conservative approach, the interim distributions to John had reached a level where there could not safely be any more such distributions without the risk of John receiving in excess of his entitlement from the estate. He made good that proposition by positing the following calculation, the integers of which were agreed between the parties (see paragraph [26] above):

On the basis of this analysis, the proposed further interim distribution of $500,000 would be considerably in excess of the amount John would be finally entitled to receive from the estate. Adopting the language of Romano, the further interim distribution should not be ordered because there was no clear entitlement to an additional legacy as large as $500,000. Neither were funds available to allow for the safe payment of it without diminishing the pool available for the satisfaction of other legacies.

The only particular issue Mr Condon SC took with this calculation was that he said it did not allow for the Alleged Loan to be added back in, assuming that John was found liable to pay it back to the estate. I do not accept that criticism because, as is apparent from sub-paragraph [47(4)] above, Mr Ellison’s calculation did give John the benefit of repayment of the Alleged Loan.

There are two reasons why the Court has concluded that no further interim distribution should be ordered.

First, the Court accepts that, again quoting from Romano, “acting with the greatest degree of conservation and prudence called for by the circumstances of the case”, the Court cannot be satisfied that the Executors could safely part with $500,000. The calculation propounded by Mr Ellison SC represents an appropriately conservative analysis. In particular, that analysis requires the “worst case” scenario (provided it is not patently unrealistic, which in this case it is not) to be considered that John has to pay back the Alleged Loan. Mr Ellison SC, correctly, did not present the calculation as being scientific. However, both parties accepted that it involved approximations and estimates that seemed reasonable and appropriate, working from the financial facts as they currently appear. The Court agrees with that characterisation of the elements of the calculation. Accordingly, a further interim distribution of $500,000 is well in excess of what could, on this scenario, be John’s remaining entitlement from the estate (ignoring any possibility of an order for further provision under the Act).

The second reason reinforces the first. Even if there was a plausible basis upon which the Court could conclude that the Executors, being conservative and prudent, could safely advance $500,000 to John, his inability to provide what the Court considers would be adequate security militates against the order being made. The analysis set out in paragraph [40] above applies equally here to defeat John’s application.

John’s application fails on both of the bases upon which it was argued. It follows that his motion filed on 10 March 2016 should be dismissed. The Court will hear the parties as to costs and any consequential orders that need to be made, including in relation to preparing the various proceedings for hearing in May 2017.