Latest developments in NSW Notional estate claims
Published 06 Apr 2016
Author: Garbis Kolokossian
GMP Contesting a Will Lawyers often represents clients in applications where estate assets have been distributed or are no longer in the possession of the deceased at the time of death. Whilst Gerard Malouf and Partners were not involved in this case, we have reviewed it and provided a summary of the result for your information.
This is a case where the application for an order out of the estate failed, on the basis that the assets that had been distributed were not classified as falling within the category of notional estate. The key is that assets can only be classified as notional estate if they were transferred within a closed period of time.
We have successfully prosecuted a large number of cases involving assets that have been classified as notional estate. If you find yourself in this situation, we can help.
GMP are experts in family provision claims, we can provide you with advice on an obligation free basis on whether or not you have a potential claim for provision out of an estate and what the likely outcome would be if a claim was made that assets ought to be classified as notional estate by a court.
Manning v Matsen  NSWSC 1801 (11 December 2015)
Sharon Manning (‘the plaintiff) and her brother Wayne Matsen (‘the defendant’) were born in the early 1950s and grew up in the town of Kingscliff in northern New South Wales with their parents, William and Joan Matsen. William died in May 2009. Joan died in April 2013. (the deceased).
The deceased had a healthy relationship with the plaintiff, however this deteriorated when the plaintiff became pregnant at the age of 16 before she was married, to which the plaintiff gave evidence of being “ostracized” by the deceased. The plaintiff had left Australia in 1971 and returned in 1975 although her relationship with the deceased never improved significantly until the final remaining years of the deceased.
In the 1980s, the deceased and her husband purchased the property at Carey Bay, Lake Macquarie and built a granny flat on the land for the defendant. In 2009, the deceased undertook a series of transactions to transfer the residence at Carey Bay to the defendant for the purposes of requiring the defendant to contribute to the maintenance and improvement of the property, when she decided to relocate into a nursing home.
A deed in July 2009 effectively transferred all but a life interest of the deceased in the property at Carey Bay at Lake Macquarie to the defendant and to his wife as joint tenants. Upon the date of the deceased’s death, the life interest in the residence in Carey Bay had ceased, leaving merely a small amount of cash in the estate.
The defendant’s estate comprised money on deposit of $42,000, a motor vehicle valued at $20,000, household furniture and effects of $1,000, and a toy car collection worth $1,000, together totalling $64,769.14. The motor vehicle was distributed to the defendant.
Without the Carey Bay property in the estate, was to be virtually no money remaining in the estate for the plaintiff if she was ultimately successful in her claim for an order for a family provision order.
The notional estate claim
The plaintiff brought a claim under Succession Act 2006 (NSW) (the Act), Part 3.2 for an order for family provision out of the deceased’s estate by way of restoring the Carey Bay property, now held in the defendant and his wife’s names, as a notional estate.
For present purposes, a notional estate is a concept applicable in New South Wales (NSW) which allows the adding back to the actual estate; assets or values previously gifted or distributed by the deceased. By adding back the Carey Bay property, the estate in question would have sufficient funds to meet the needs of the plaintiff’s claim.
In deciding whether there was a notional estate claim, the Court firstly had to consider whether the transfer of the Carey Bay property was a “relevant transaction” under section 75 of the Act.
Section 75 of the Act states that a person could enter into a relevant transaction if the person does any act that results in property being:
(a) held by another person (whether or not as trustee)
The Defendant had argued that the transfer of the Carey Bay property took effect on 24 July 2009 and as the deceased died more than three years later, on 12 March 2013, any “relevant property transaction” for making a notional estate order took place outside the three year limitation period, pursuant to section 80(2)(a) of the Act. Any relevant transaction could only pre-date three years from the date of death.
In the alternative, the plaintiff argued there was a “relevant property transaction” within the three years pre-dating the date of the deceased’s death. It was argued that this other relevant property transaction occurred at the date of the deceased’s death, this being April 2013 when her life interest in the Carey Bay property ceased and fell into the Defendant’s possession.
Regarding this issue, the Court held that the ending of the life interest could not qualify as “another relevant property transaction” because it was doubtful whether to die, or not to live, could sensibly be seen as an ‘act’ for the purposes of s 75
Rather, the Court held that the 24 July 2009 transaction effected by deed, involved a contract for valuable consideration as classed under section 77(4).
As such, the Court rejected the notional estate claim. The Court was not satisfied that the deceased had entered into a relevant property transaction within the three years prior to the date of the deceased’s death.