Habricko v Palijan

The plaintiff is Tom Habricko (“Tom”), the only son of Jela Habricko (“Mrs Habricko”) and her husband Ivan Habricko (“Ivan”). Mrs Habricko died on 16 July 2015 at the age of 82. Without disrespect, I shall refer to the plaintiff and several others who feature in this judgment by their given names.

On 16 February 2013, Mrs Habricko made her final will (the “Will”).

In addition to Tom (who is 61 years old), the defendant Mary Palijan (“Mary”) is Mrs Habricko’s only other eligible beneficiary. Mary (who is 57 years old) is Tom’s only sister and the only daughter of Mrs Habricko and Ivan. Mary is the appointed executrix and trustee of the Will.

Under the Will, Mrs Habricko’s estate (the “Estate”) was left entirely to Mary. At the time of trial, it comprised an immaterial amount of cash and 50% of a property at Cecil Hills (the “Cecil Hills Property”) which was jointly owned as tenants in common as to 50% by Mrs Habricko, and as to 50% by Mary and her husband, John Palijan (“John”). The value of Mrs Habricko’s 50% share at the time of hearing was approximately $775,000.

By summons filed on 24 June 2016, Tom applies for provision out of the Estate under s 59 of the Succession Act 2006 (NSW) (the “Act”). Mr R Austin of Counsel appeared for Tom and Mr G A Elliott of Counsel appeared for Mary.

Mr Austin ultimately accepted that any provision for Tom could not be more than between $50,000 and $100,000 as a buffer for contingencies or vicissitudes. Tom had received considerable financial assistance from Mrs Habricko and Ivan during their lifetimes. Mary had not. In the last three years of her life, Mrs Habricko had purchased the Cecil Hills Property with Mary pursuant to an arrangement that Mary would care for her (Mrs Habricko) and then receive the Estate. Mary had cared for Mrs Habricko until the latter’s death.

Having regard to the assistance received by Tom from his parents; the composition of the Estate; Tom and Mary’s respective claims on Mrs Habricko’s testamentary bounty; and Mrs Habricko’s clear view that Tom had been benefited during her and Ivan’s lives and that Mary should receive the Estate including in return for caring for her (Mrs Habricko), the Court is not satisfied that the Will makes inadequate provision for Tom. Alternatively, even if that were not so, for the same reasons the Court would not, in the exercise of its discretion, order additional provision for Tom.

Part 3.2 of the Act deals with family provision orders. Division 1 of that part identifies, in s 57, who are “eligible persons who may apply to the Court for a family provision order in respect of the estate of a deceased person”. Section 58(2) requires an application for a family provision order to “be made not later than 12 months after the date of the death of the deceased person, unless the Court otherwise orders on sufficient cause being shown”.

Division 2 of Part 3.2 of the Act deals with determination of applications for family provision orders. For the purposes of these proceedings, the relevant provisions are:

In West v Mann [2013] NSWSC 1852 at [9]–[11], I explained the reasons for the approach I adopt to applications under the Act. That is how I will proceed in this case.

By reference to the language of the Act, the questions and issues which the Court must take into account are:

Having identified what I consider to be the correct approach under the Act to an application of this kind, I will set out the uncontested facts before resolving the three relevant factual issues that were in dispute.

The Court finds the facts to be as follows.

Mrs Habricko was born on 29 September 1932 in what was then Yugoslavia.

Mrs Habricko married Ivan in Yugoslavia and they had two children there: Tomislav (Tom) and Marijan (Mary).

Tom was born on 19 November 1956.

Mary was born on 25 February 1960.

Tom’s future wife, Lily, was born on 11 August 1961.

In October 1970, the family of four migrated to Australia.

The family first lived in a hostel in Victoria. They then moved to another hostel in East Hills, Sydney after which they lived with Ivan’s cousin in Leichhardt. The family later rented a property in Petersham.

Soon after the family’s arrival in Sydney, Ivan commenced work for Dunlop making car batteries and Mrs Habricko found work as a cleaner at Rozelle Hospital.

In April 1972, Ivan and Mrs Habricko purchased a unit in Day Street, Leichhardt for $16,750 subject to a $12,000 mortgage.

In late 1972, at the age of 16 years, Tom left school and commenced employment working in a factory making bicycles. Six months later he commenced a job as a process worker at Smalls Chocolate Factory. Tom contends that from the time he commenced work until after his marriage he gave his pay packets to his parents and his mother would give him pocket money every week and also pay for anything he needed.

On 10 September 1976, when Tom was 19 years of age, Mrs Habricko, Ivan and Tom purchased a house in Petersham as joint tenants for $57,000 (the “Petersham Property”) subject to a $28,000 mortgage. It is Tom’s submission that he contributed to the payment of the mortgage through the pay packets given to his mother. Mary denies this.

The mortgage over the Petersham Property was discharged on 7 November 1979.

Tom says that in 1981 an extension was added to the Petersham Property at an estimated cost of between $30,000 to $40,000. Tom claims the funds for the extension were paid by both Ivan and himself.

In 1981, Mrs Habricko suffered an injury at work and made a Workers Compensation claim. Mrs Habricko did not return to paid employment after this injury.

Tom married Lily on 20 February 1982. Tom says that he continued to give his pay packet to his parents for several months after the marriage but that he spoke to his parents and said that he and Lily needed to start saving for a house of their own so Tom discontinued giving his parents his pay.

Tom and Lily remained at the Petersham Property with Tom’s parents until August 1982 when they purchased a house at Minto (the “Minto Property”) for $59,500 with a mortgage of $40,000. Mary alleges that at the time of the purchase Tom and Lily received approximately $10,000 towards the deposit of the Minto Property from Mrs Habricko after she received her worker’s compensation payout.

Mary married John on 25 September 1982. They continued to live with Mrs Habricko and Ivan for a further two years while saving to purchase their own home.

On 10 November 1983, $30,573.86 was paid into Tom and Lily’s mortgage account to reduce it to $9,400. Between February 1984 and February 1985 the balance of the mortgage over the Minto Property was paid off, including by some payments (the records are incomplete) of $1,000.

Tom and Lily’s son Danny was born on 13 December 1984.

In March 1985, the mortgage over the Minto Property was discharged.

In 1986, Tom and Lily sold the Minto Property for $69,950 and moved back into the Petersham Property where they lived for three years while they bought land and built a new home. Tom claims that during these three years he and Lily contributed 50% of food and utility bills.

In 1987, Tom and Lily purchased land in Abbotsbury for $51,000 (the “Abbotsbury Property”) on which they built a home.

Tom and Lily sold the Abbotsbury Property for $325,000 in 1992.

Tom claims that, out of the proceeds of sale of the Abbotsbury Property, he provided $26,000 to $30,000 to his parents to purchase a new car and another $70,000 for improvements to the Petersham Property.

In 1992, Tom and Lily bought land at Bossley Pak to build their current home.

In 1994, Ivan provided Tom with $90,000 to assist Tom and Lily with the building of their home on the land at Bossley Park.

Tom and Lily’s daughter Melinda was born on 3 March 1994.

Tom and Lily’s son Paul was born on 20 June 1995.

In November 2011, Mrs Habricko and Ivan saw their solicitor, Mr Walter Lyubicic, in relation to preparing new wills. They specified that the wills be in favour of each other and otherwise in favour of Mary. Mrs Habricko’s and Ivan’s wills made on 14 November 2011 had an identical clause inserted:

At the same conference with Mr Lyubicic at which they made their wills, Mrs Habricko and Ivan also executed a severance of their joint tenancy with Tom of the Petersham property. Tom ultimately accepted that he received notice of the proposed severance in a letter dated 16 November 2011 and that he was aware of what was being done. The severance was subsequently registered in early 2012 with the effect that Mrs Habricko and Ivan were joint tenants of a two-thirds interest in the Petersham Property, which interest they held as tenants in common with Tom owning the remaining third.

At the same time Ivan prepared a handwritten document outlining amounts taken out of the “House Budget” of the Petersham Property (“Ivan’s List”). A translation of this document is:

The Petersham Property was listed for sale in January 2012.

On 24 January 2012, Ivan died after a brief illness.

After Ivan died, Mary’s evidence (on which she was not challenged) was that Mrs Habricko told Mary that she (Mrs Habricko) did not want to live alone and had said “We can buy a house together. I will contribute what I get from selling my house and I will leave everything to you at the end”.

On 7 March 2012, contracts were exchanged for the sale of the Petersham Property for $1,050,000. It will be recalled that the Petersham Property had been purchased in 1976 for $57,000.

On 13 March 2012, Mrs Habricko, Tom and Mary attended the offices of their solicitor, Mr Anthony Tran. Mr Tran asked Mary to stay outside his office as she was not a party to the sale.

During the meeting it is alleged by Mr Tran that he discussed with Mrs Habricko and Tom the distribution of proceeds of the sale. Mr Tran’s recollection of the conversation is:

The text of the document drafted by Mr Tran and signed by Mrs Habricko and Tom on 13 March 2012 (the “Tran Note”) is:

Tom accepted that he had agreed with Mrs Habricko that he would receive half the sale proceeds rather than the one-third to which he was strictly entitled. However, his evidence was that the words “with no further claims on the estate after this” were not on the Tran Note when he signed them and that he had not made any agreement to that effect. Because the appearance of the Tran Note may be important, a copy is attached as Schedule One to these reasons.

Settlement of the sale of the Petersham Property occurred on 30 April 2012 and Mrs Habricko and Tom each received cheques to a value of $515,592, representing their respective 50% shares in the proceeds of sale of the Petersham Property. The cheques were banked into their respective Commonwealth Bank accounts. Giving Tom an extra one-sixth of the proceeds meant he received approximately $175,000 more than he otherwise would have.

Once the Petersham Property had been sold, Mrs Habricko moved in with Mary and John at the home they had in Minto which they had put on the market. It was sold later in 2012 for $360,000, of which Mary and John received about $260,000.

At the end of May 2012, Mary and John decided to buy the Cecil Hills Property for $875,000 subject to a mortgage for $390,000. It was ultimately purchased on 12 July 2012 with Mary and John, of the one part, and Mrs Habricko, of the other part, as tenants in common of half interests in the Cecil Hills Property. Mrs Habricko contributed $520,785 towards the purchase. The mortgage (for which each of Mary, John and Mrs Habricko was liable) was drawn down with $328,000 going to the purchase and the balance to other expenses including a car for John. Mary and John paid the balance of the purchase price from the proceeds of the sale of their house at Minto and their savings.

The Cecil Hills Property was incomplete and Mary and John say that they spent approximately $120,000 on various improvements. If the value of those contributions is taken into account then the respective contributions of Mrs Habricko and Mary (and John) to the Cecil Hills Property were approximately equal. Mary’s evidence was that additional work which will cost approximately $85,000 will be required to improve the Cecil Hills Property.

Mrs Habricko made the Will on 16 February 2013.

Mrs Habricko died on 16 July 2015, having lived with Mary and John at the Cecil Hills Property from the time it was bought three years earlier.

Probate of the Will was granted to Mary on 10 November 2015.

Tom commenced these proceedings by summons filed on 24 June 2016.

I will now consider three disputed matters of fact.

The Court finds that Tom made some contributions to paying off the mortgage over the Day Street, Leichhardt property. The Court also accepts Tom’s evidence that in relation to the Petersham Property, he did give his pay packets to his mother so that the family’s resources were pooled to acquire the Petersham Property. This finding is made for two reasons:

The Court notes that Mary denies Tom made such contributions. However, Mary has no direct knowledge whether Tom did or did not. Her denials are based on hearsay recollections of what Mary says Mrs Habricko said from time to time. Because it is hearsay I give that evidence little weight and prefer what, in my mind, accords with the inherent probabilities, especially given the speed with which the mortgage was paid off.

In reaching this conclusion I have also not overlooked Mr Tran’s evidence (see paragraph [50] above) that Mrs Habricko said that Tom did not contribute any money to the Petersham Property. While I do not doubt that Mr Tran was trying to give his evidence to the best of his recollection, the fact remains that he had no file note (other than the Tran Note) of his conference on 13 March 2012 with Mrs Habricko and Tom. Mr Tran, understandably, accepted that he had many clients and had had many conferences. In the circumstances, while acknowledging him to be an independent and disinterested witness, I have reached the conclusion (with no criticism intended) that his unassisted recollection is not a sufficiently reliable basis upon which to make any findings unless it is inherently probable or is consistent with other, contemporaneous documentary evidence.

While the Court accepts Tom’s evidence, at a general level, that he contributed his income to the family asset pool, that finding is only of limited assistance for Tom’s case. That is because no financial records have been produced that would enable the Court to form any view as to the relative financial contributions of Tom and his parents to the Petersham Property. Tom did accept in cross-examination that in getting half, rather than one-third, of the Petersham Property he received more in dollar terms than he had put in, including by reason of the increase in value of the Petersham Property.

Insofar as Tom says he contributed to an extension to the Petersham Property in 1981 (see paragraph [26] above), in the absence of documentary evidence supporting that statement, I am not satisfied that Tom has discharged the onus of proof to establish that fact on the balance of probabilities.

The Court accepts Ivan’s List as accurate. It is a note prepared by Ivan in circumstances where no reason has been shown as to why Ivan would fabricate it or its contents.

Tom accepted that he had received the money for the Hillman Station Wagon, the amplifier and guitar, and the $4,000 for another car.

The Court also finds that he did receive $40,000 from Mrs Habricko rather than only the $30,000 to which Tom admitted. There are two reasons for this finding. First, as I have said, I accept the truth of what is set out in Ivan’s List. Second, the payments to reduce Tom and Lily’s mortgage between November 1983 and February 1985 (see paragraph [31] above) are consistent with Tom receiving $40,000 rather than only $30,000.

Finally, Tom accepted that he had received $90,000 from Ivan towards the construction of Tom and Lily’s current home at Bossley Park. The remaining question is whether the Court is satisfied that Tom “repaid” it or otherwise gave to his parents approximately $100,000 from the proceeds of sale of the Abbotsbury Property. The Court is unable to make that finding for two reasons:

In summary, the Court accepts that Tom received the benefits set out in Ivan’s List. However, Tom has not established to the requisite standard of proof that he made the repayments which he said he did.

The Court accepts the Tran Note as accurately recording the arrangements between Mrs Habricko and Tom for the following reasons:

In reaching this conclusion, I have taken into account Tom’s denials that such an arrangement was ever discussed in the conference with Mr Tran. In the face of the Tran Note, I do not accept those denials. However, it could not be and was not suggested that Tom was legally bound in the sense that he had abandoned his rights under the Act in a formal way. Nevertheless, based on the Tran Note the Court finds that Tom knew and understood that Mrs Habricko was giving him an extra one-sixth over and above his entitlement in the Petersham Property on the basis and with the intention that would satisfy any claims he might have against the Estate, so that whatever was left on her death would pass to Mary.

At the time of trial the Estate comprised an immaterial amount of cash and Mrs Habricko’s 50% share as tenant in common in the Cecil Hills Property. The value of Mrs Habricko’s 50% share at the time of hearing was approximately $775,000.

The Estate had no material liabilities, subject to one qualification. Mary submitted that the Estate had a liability to reimburse her and John for one-third of the mortgage repayments they have made both before and since Mrs Habricko’s death and also for one-third of the cost of the various improvements they had made to the Cecil Hills Property (see paragraph [56] above). Because of the view the Court has taken as to the outcome of the proceedings, it is unnecessary for this issue to be resolved.

Tom’s costs on the ordinary basis up to and including the hearing were $91,600. Mary’s costs on the indemnity basis were $49,300 (but this figure was premised on a one day hearing when in fact two days were required).

Tom is the only son of Mrs Habricko and Ivan and is 61 years old.

Tom and Lily’s home at Bossley Park has a value of approximately $1,200,000, subject to a mortgage of approximately $240,000.

Bank records show that on 3 May 2012 approximately $340,000 from Tom’s share of the sale of the Petersham Property was paid in to reduce his and Lily’s mortgage down to $6,000. He also paid off credit cards, repaid a debt he owed to Mary and bought cars for two of his children. Tom and Lily do not have savings. Nor do they have any material debts other than the mortgage over their home. Tom accepted that after paying down the mortgage account in 2012, he had used that account as an overdraft account to pay for overseas trips to Croatia and other discretionary expenditures. His evidence was that he expected to repay the mortgage from his and Lily’s income and when they “downsized” one day.

Tom and Lily have three adult children, all of whom (as well as the girlfriend of one of the children) live at home. None of the children or the girlfriend have been paying board or contributing to household expenses, although Tom said they were starting to do so. Tom accepted in cross-examination that he and his family (including his three children and one of their girlfriends) were able to live within their means, not spending more than what he and Lily were earning.

Tom has no trade or tertiary qualifications. He is currently employed by Woolworths on a casual basis and earns approximately $950 to $1,050 net per week. His taxable annual income for each of 2014 and 2015 was approximately $54,000. He had superannuation of approximately $17,000 as at 30 June 2015.

Lily works as a casual cashier at Coles earning approximately $329 net per week. For the 2013 to 2015 years her taxable annual income was approximately $29,000 in each year. She has superannuation of approximately $25,000.

By reason of the Court’s findings in paragraphs [53] and [71] above, the Court also finds that during Ivan and Mrs Habricko’s lifetimes, Tom received benefits of $135,850 (Ivan’s List), $175,000, and the capital appreciation in the value of his share of the Petersham Property.

Mary is 57 and John is 59.

Mary works as a claims assessor. Her net pay as at June 2017 after tax and superannuation was $1,621.84 per fortnight (approximately $42,000 per annum).

John works for the Australian Federal Police. His net fortnightly pay varies but a payslip in evidence suggests it is about $1,500 (approximately $39,000 per annum).

Their annual expenses appear to exceed their incomes by $3,000 or $4,000, but given the various approximations in the evidence I do not regard that amount as material.

Mary and John have two adult children. Jason, aged 27, lives independently in the country. Nicole, aged 25, still lives at home and works as a hairdresser. She sometimes, but not always, contributes about $100 per week to household expenses.

John and Mary’s assets are valued at $1,748,804 comprising their interest in the Cecil Hills Property (valued at $775,000); superannuation ($826,486 comprising $462,457 (Mary) and $364,029 (John)); savings of $37,318; household effects of $10,000 and three motor vehicles with a total value of approximately $100,000. Their only debt apart from a car lease of $800 per fortnight is the mortgage over the Cecil Hills Property of $326,499. Therefore their net assets are $1,422,305.

Because Tom is Mrs Habricko’s son, he is an eligible person under s 57 of the Act. The summons was filed less than 12 months after Mrs Habricko’s death. It follows that the questions set out in sub-paragraphs (1), (2) and (4) of paragraph [11] above are all answered “yes”.

The Provision referred to in the question posed in sub-paragraph [11](5) above is nil.

It is next necessary to consider what is sometimes referred to as the jurisdictional question. This is set out in sub-paragraph [11](6) above, namely whether the Court is satisfied, at the time when the Court is considering the application, that the Provision for Tom is not adequate for his proper maintenance, education or advancement in life. If that question is answered “yes”, then the Court’s discretion to make a family provision order in favour of Tom is enlivened.

In Verzar v Verzar [2014] NSWCA 45, Meagher JA (with whom Macfarlan and Barrett JJA agreed) summarised the legal principles governing this stage of the inquiry:

In addition to the preceding passage from Verzar, I also respectfully adopt what Hallen J said in Camernik v Reholc [2012] NSWSC 1537 both as to the general approach to applications for family provision and judicial observations concerning claims by adult children.

Applying the principles just set out, the Court is not satisfied that the Provision is not adequate for Tom’s proper maintenance, education or advancement in life. The question posed in sub-paragraph [11](6) above is answered “No”. The parties’ submissions and the Court’s reasons for this conclusion are set out in the following paragraphs.

Mr Austin’s submissions on behalf of Tom as to both the inadequacy of the Provision and what would be an appropriate Proposed Provision can be summarised as:

Mr Elliott’s submissions on behalf of Mary may be summarised as:

Having regard to the principles set out in paragraphs [93] and [94] above, I am not satisfied that by failing to give anything to Tom under the Will, Mrs Habricko failed to make adequate provision for his maintenance, education or advancement in life generally for the reasons advanced by Mr Elliott. My own expression of my reasons for this conclusion are:

For the reasons given in the preceding paragraph, the question in sub–paragraph [11](6) should be answered “no”. It follows that the Court’s discretion to make a family provision order in favour of Tom is not enlivened. However, if I am wrong in that conclusion, I would still have declined to exercise the Court’s discretion to order provision for Tom out of the Estate for the reasons given in the preceding paragraph and for the following additional reasons:

If it were necessary to be answered, the Proposed Provision referred to in sub-paragraph [11](8) above would be “nil”.

Tom’s summons will be dismissed.

The Court will hear the parties on the question of costs. ANNEXURE HABRICKO v PALIJAN (392 KB, pdf)