Peters v Salmon [2013] NSW SC 953

The complexity of succession issues for farming families was recently demonstrated in the New South Wales Supreme Court decision of Peters v Salmon [2013] NSW SC 953. The case was a claim for further provision from an estate pursuant to the Succession Act 2006 (NSW). The factual background was extensive and complex.

Facts

Maurice Salmon (deceased) died in 2011 aged 87 years of age. He was survived by his wife and seven children. His principal asset was a farm spread over five titles near Wagga Wagga. The properties were utilised to run cattle and produce hay and crops to predominantly feed those cattle. The properties were estimated to be worth approximately $1.6 million and other assets totalled approximately $70,000.

In his Will dated 29 September 2009 the deceased appointed his wife, son Michael and daughters Jan and Sue as his executors. He bequeathed:

  • The Swansea and Ganmurra properties to Mrs Salmon.
  • The Flanagans and Olivers properties to Michael.
  • The property known as Mundowy to his son Luke.
  • A legacy of $10,000 to his daughters Donna and Jan.
  • Forgave a debt of $14,000 to his daughter Kerryn but evidence submitted at trial supported that the debt had been forgiven during the deceased’s lifetime, and
  • The residue to Mrs Salmon.

The Will also declared that:

  • It showed a preference for Michael in consideration of him continuing to assist the deceased in his farming operations, often for very little reward and allowing the deceased to accumulate the assets which he did during his lifetime; and
  • Assistance had been given by the deceased and Mrs Salmon to their other children and they had benefitted as close to equal as possible in monetary value the assets owned by him during his lifetime.

Claims

Claims for further provision were pursued by Donna and Kerryn, they claimed that Mrs Salmon should be granted a life interest in the Ganmurra property and Michael a licence to use the land until her death following which the Ganmurra and Olivers properties should be transferred to Donna and Kerryn. In turn, they would provide an undertaking not to make an application against Mrs Salmon’s estate on her death.

Donna

Donna was 53 years of age at the time of the trial. She had lived on the family farm until she was 19 years of age. She alleged that in a telephone discussion with the deceased, he stated that "I bought you a house down the road from Aunty Ivy" to be in close proximity to provide care to the deceased’s sister. He paid approximately $42,000 for the home and Donna further alleged telling the deceased that "If I could afford to pay back some of it, I will." The deceased responded, that if money was tight "It doesn’t matter if you can’t pay me back." From 1979 until 1987 Donna lived in that house and paid rent to the deceased. Until the deceased sold the home in 1993 rent was received by the deceased from subsequent tenants. Donna asserted that the deceased had sought her consent to sell the home to help keep the farm running during a time of drought. It was sold for $85,000 and she expected that the deceased would account for that in his Will.

The Court did not accept Donna’s assertion that the deceased had purchased the home for her as no documentary evidence of the deceased’s intention to ever gift it to her existed. That was in contrast to documented loans the deceased had made during his lifetime to Michael to purchase the Flamingo property.

Donna maintained contact with her parents after leaving Wagga Wagga and became financially independent. She was taking a break from her usual employment as a real estate agent but both she and her husband had had the benefit of reasonable incomes over the years and owned net assets worth approximately $644,000.

Kerryn

Like Donna, Kerryn grew up on the farm. After leaving school she contemplated staying on the farm but that was discouraged by the deceased so she sought paid employment and eventually she left. She enjoyed a close relationship with the deceased and visited the farm a few times a year to help him. The deceased lent Kerryn $15,000 in 1994 of which $1,000 was repaid in 1999.

Kerryn’s personal circumstances differed from Donna’s. At the time of trial she was 56 years of age and had recently separated from her husband of 28 years. Their financial property settlement was yet to be finalised but it was likely that she would be left with a mortgage of about $225,000. She worked six days a week but did receive a reasonable income from her hard work.

Michael

Michael worked on the farm since 1979 and continued to do so at trial. He was not paid a wage but received room and board, fuel on the farm account and occasional allocations of stock or grain in his name in addition to income he earned from odd jobs off the farm.

During the lifetime of the deceased he had been given the Flamingo property and renovated a portable home on the block for himself and his family to reside in. He performed most of the farming work after the deceased retired in 1990. Over the years Michael earned off-farm income, particularly during drought and undertook a trenching business which ceased operating in 2011 when his commitments to the farm became more time consuming.

It was accepted by the Court that Michael had devoted much of his life to the farm and to the deceased and often for very little reward. His assistance during that time to both the deceased and Mrs Salmon had enabled them to continue to live in the lifestyle they wanted on the farm. Michael’s future would also depend on the success and income generated by the farm.

Decision

The financial position and contribution to the farm and the deceased by each of the parties was disputed by all sides. After the deceased had died, Mrs Salmon had sold cattle and transferred property to Michael that she had inherited under the Will. It was asserted by Donna and Kerryn that the disposal of those assets demonstrated that Mrs Salmon didn’t therefore have a need for provision under the Will from the deceased.

The Court rejected that submission and accepted that while Donna and Kerryn were both eligible applicants, both Mrs Salmon and Michael had strong competing claims that supported the provision the deceased had made for them in his Will.

In considering the factual circumstances, the Court was not satisfied that Donna had been left without adequate provision for her maintenance and advancement in life despite her good relationship with the deceased. She was also in a stable financial position and could comfortably retire in the future. While the Court accepted that the legacy of $10,000 to Donna was small, the question for consideration was not whether that amount was fair but whether it was adequate in the overall circumstances.

Kerryn’s claim was considered differently to that of Donna’s. In view of the provision made for her (merely the forgiveness of a debt of $14,000) the Court considered that it was not adequate. Taking into account the amount Kerryn required to reduce her mortgage to a level that she could repay before her retirement and give her a modest amount of superannuation to rely on, she was awarded the amount of $200,000 from Michael’s share of the estate.

In fashioning this resolution the Court acknowledged that the award of $200,000 to Kerryn may require Michael to sell one of the properties but also formed the view that there was no evidence that Michael could not raise the funds personally to preserve the farm, or if he was required to sell one of the properties, that the farm would not be viable.