Baulch v State Trustees Ltd
[2008] VSC 22
•13 February 2008
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 5596 of 2006
IN THE MATTER OF Part IV of the Administration and Probate Act 1958
and
IN THE MATTER OF the estate of VERA ECKHARDT deceased
| WANDA BAULCH | Plaintiff |
| v | |
| STATE TRUSTEES LIMITED ACN 064 593 148 (sued as Executor of the will of Vera Eckhardt deceased) | Defendant |
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JUDGE: | PAGONE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 28, 29 January 2008 | |
DATE OF JUDGMENT: | 13 February 2008 | |
CASE MAY BE CITED AS: | Baulch v State Trustees Limited | |
MEDIUM NEUTRAL CITATION: | [2008] VSC 22 | Revised 25 February 2008 |
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ADMINISTRATION AND PROBATE – Responsibility of testatrix to make provision for the proper maintenance and support of only child – Financial hardship – Quantum – s 91 Administration and Probate Act 1958
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R. Phillips | S. Tomyn & Co |
| For the Defendant | Mr R. Boaden | State Trustees Legal Branch |
HIS HONOUR:
The only issue in this case is the quantum that the Court should order under s 91 of the Administration and Probate Act 1958 (“the Act”) be paid to Wanda Baulch, the plaintiff, out of the estate of her late mother, Vera Eckhardt, (“the deceased”). The plaintiff’s claim for provision out of her late mother’s estate was made pursuant to Part IV of the Act and the defendant concedes that some provision should be made: the only question is how much?
Section 91 of the Act empowers the Court to order that financial provision be made out of the estate of the deceased person for the “proper maintenance and support” of a person “for whom he or she had responsibility to make provision”. In Brinkkotter v Pelling[1] Hansen J said that s 91 of the Act directs attention to three stages or issues which the Court must address: first, whether at the date of the deceased’s death, the deceased had a responsibility to make provision for the proper maintenance and support of the plaintiff; secondly, whether the distribution of the estate by the will does not make adequate provision for the proper maintenance and support of the plaintiff; and thirdly, the amount of the provision (if any) which the Court may order.[2] Sub‑section 91(4) directs attention to the matters which a court must have regard to in determining whether the deceased had responsibility to make provision for a person and whether or not the distribution of the estate of the deceased person, as effected by the deceased’s will, made adequate provision for the proper maintenance and support of the person applying to the Court under s 91.
[1][2006] VSC 101 (Unreported, Hansen J, 24 March 2006).
[2]Ibid [154].
The deceased died on 18 July 2005 having made a will on 18 March 1996 in which she appointed State Trustees Limited, the defendant, as executor. The plaintiff was the deceased’s only child but no provision was made for her in the will. The deceased left some specified jewellery to her niece, Ludmila Menchinska Leonidova, who lives in the Ukraine, her remaining items of personal adornment and clothing to the Red Cross Society of Victoria, and her residuary estate to be divided equally between her niece Ludmila Menchinska Leonidova and the niece’s son, Yuriy Ihmatovich Menschinski (who is the deceased’s great‑nephew). No provision was made in the will for, and indeed no mention was made in it of, her daughter (the plaintiff). The will was prepared for the deceased by the defendant but the defendant was not able to inform the Court whether she had been advised of any responsibility arising under s 91 of the Act or otherwise. A casual observer might think it unfortunate that the defendant in these proceedings, having prepared the will for the deceased, is now agreeing that the terms of a will it prepared should not be followed in its terms.
The deceased’s estate as at the time of the proceeding was valued at about $473,000. As at 18 January 2008, the deceased’s assets consisted of $452,500 (from the proceeds of the sale of the deceased’s property in Albert Park), $33,784.04 (being the proceeds of bank accounts and the sale of foreign coins), $76,498.47 (from other receipts) and $552.97 (from other income). A variety of expenses have been paid and $2,059.55 has been reserved for income tax expenses. Liabilities for tax to the date of final distribution and the legal cost of these proceedings had not been paid but as at 18 January 2008 there appeared to be some $473,053.08 available in the deceased’s estate.
The relationship between the plaintiff and her mother seems always to have been deeply troubled. The deceased was born on 7 January 1925 in the Ukraine and her daughter, the plaintiff, was born in Germany on 23 August 1945. Until about the age of 18, the plaintiff believed that her father was a Joseph Fedorowicz who had married her mother in 1947, but since the age of about 18 has had some occasion to doubt that. On 20 October 1949, the family arrived in Australia and were sent to live at the Bonagilla Migrant Camp until the family found a home to live in Healesville whilst Mr Fedorowicz looked for work. Eventually he found work at General Motors Holden at Fishermens Bend in the early 1950s and a house was purchased in City Road, South Melbourne. In 1954 the deceased and her husband were separated and were divorced in 1961. The plaintiff was nine years of age at the time of the separation but gave evidence of recalling the marriage as being unhappy and of her parents always fighting. She did not have her own room although there was a separate room where she could have slept and, where she did sometimes sleep with her mother in a single bed when things between the parents were particularly bad. Her father would sometimes come home drunk and she would sleep in the same bed between them. The deceased subsequently formed a de facto relationship with an Austrian man referred to as Joe. It appears that they purchased a house together in about 1957 but that relationship did not last long.
I need not set out all of the evidence about the relationship between the deceased and the plaintiff other than to say that the uncontroverted evidence is one of a profoundly troubled relationship with a deep trauma affecting them both. The plaintiff’s description of her mother was of a violent woman frequently screaming and constantly critical. An independent psychological report produced for the purpose of the proceeding concluded that the plaintiff appeared to have developed clinically significant symptoms of post traumatic stress disorder in response to persistent physical abuse in childhood and ongoing mental abuse from her mother throughout her life. The independent psychological report recorded that the plaintiff has suffered from pre‑occupation with memories of the abuse and anticipatory fear of further abuse which she tries to overcome by focussing on the positive. The plaintiff was said to avoid her mother due to fear of outbursts and threats of God’s punishment and has had to keep herself busy to avoid thoughts of the trauma and that at one stage she had become suicidal. The report also recorded that the plaintiff had developed an alcohol abuse disorder and engaged in both binge drinking and excessive daily drinking. The plaintiff’s evidence does not suggest any cause she might reasonably have given to her mother for the abuse and anger shown to the plaintiff as a child and adolescent. The plaintiff seems to have been a good student, won a scholarship to MacRobertson Girls High School, was female dux of the school in Grade 6 and was second in her class in Years 7 and 8. There is no evidence before me of the plaintiff having been a difficult child or having caused her mother problems that might give some clue to the emotional and physical treatment. I cannot, and should not, speculate on what may have produced the state of their troubled relationship but the one clear conclusion from all the evidence is that the relationship was profoundly troubled and that each of them (both the plaintiff and the deceased) were profoundly scarred.
The stressful relationship between the plaintiff and her mother came to a head in 1963 when the plaintiff was halfway through Year 12 at school over what, by itself, would appear to be an insignificant incident. The plaintiff’s evidence was that her mother started screaming at her because she was not putting the saucepans in the right place and that, having had enough, the plaintiff left the house and went to live with friends she had made through school. Some 18 months previously the deceased had found herself pregnant with, and in 1961 gave birth to, a child of another man with whom she had been living. The father of that child was told to leave the home after a row with the deceased but before the child’s birth, and the child was given up for adoption immediately at birth.
In early 1964 the deceased married a Detlef Eckhardt who later deserted her. The plaintiff gave evidence that in 1966 she made an unsuccessful attempt at reconciliation with the deceased. In 1968 the plaintiff met, and subsequently married, her husband, Graham Baulch, with whom she has had four children. Mr Baulch succeeded in developing some relationship between the deceased and her four grandchildren, although it seems that the first attempt had been unsatisfactory and that, in any event, it did not extend to any contact between the deceased and the plaintiff. Nonetheless, the deceased occasionally went for drives with the plaintiff’s husband and the grandchildren. On one occasion the deceased gave Mr Baulch $1,000 for each of the grandchildren who collectively managed to maintain some sort of relationship until her death. Indeed, it was one of the grandchildren, Eugenie Baulch, who caused the South Melbourne Police to break into the deceased’s house and found her body in the bedroom after she had made a number of attempts to get in contact with her grandmother but got no response.
The uncontested evidence of Eugenie Baulch about her grandmother’s character and feelings towards the plaintiff was consistent with the evidence of the plaintiff. It was that the deceased was lonely, bitter and negative about her daughter. Ms Eugenie Baulch gave evidence that when they went for a drive together, most of her grandmother’s conversation was about the plaintiff but to the effect that she was stupid and a bad person. The deceased’s account to that granddaughter of the occasion causing the plaintiff’s departure from the deceased’s home was that there had been a fight and that the plaintiff had “raised her hand and was going to hit” the deceased. Nonetheless, Eugenie Baulch’s evidence is that affection between she and her grandmother grew over the years and that the deceased and each of the other grandchildren managed to maintain some sort of relationship even though the plaintiff could not.
The people to whom the deceased left her estate are, as I have indicated, her niece and her grandnephew living in the Ukraine. Each prepared forms of affidavits which were accepted in evidence in the proceeding. The uncontested evidence of the niece was that her mother, Domikia, born in 1918, was the deceased’s sister. The niece gave evidence that in 1942 the deceased was taken to a forced labour camp by the invading German Army in the Soviet Union. Between then and 1983 the family had no information about the deceased and believed that she had died.
In 1983 the deceased found her surviving family in the Ukraine through the Red Cross and began to correspond with them. In 1985 the deceased met her sister at Kyiv Airport for the first time after a 43 year separation. She stayed with her Ukraine family for a couple of months and became fond of her niece’s youngest son, Yuriy, who was then about eight. They would sit for hours together and talk about school and Australia.
The evidence given both by the niece and by her son was of a fondness and bond having been developed between them and the deceased. The niece referred to the deceased as “like a second mother” for her and of having kind memories of her stay. Correspondence began in 1983 between them and was maintained regularly until 2005. The grandnephew referred to the deceased as “a real grandmother” for him. She showed interest in his life, gave him advice, and prayed for him. Occasionally she would send money to them although it may not all have reached its intended destination after going through bureaucratic channels.
It is not my task to adjudicate upon the troubled relationship between the plaintiff and the deceased, especially since the deceased is not able to give evidence in her own cause. There is no doubt that their relationship was deeply troubled, antagonistic and strikingly different to the relationships which the deceased had with her grandchildren and with her Ukranian relatives, and different from the relationship which the plaintiff had with her husband and children. The defendant concedes that the deceased had an obligation to provide for the plaintiff and that the plaintiff is entitled to receive something in the exercise of the jurisdiction under s 91 of the Act in contrast to the nothing provided for by the deceased in her will.[3] For me the task is, therefore, to determine the extent of the responsibility upon the deceased to have made provision for the plaintiff.[4] In considering that question I am bound to consider the matters mentioned in sub‑ss 91(4)(e) to (o) and, pursuant to s 94(1)(p), to consider any other matter which is relevant.[5] A consideration of those matters, and of the helpful submissions which both counsel have provided, does not produce an easy or obvious answer. On behalf of the defendant it was contended that I should award about a third of the estate to the plaintiff reasoning, in summary, that there were three people who could look to the deceased for support, that the relationship between the plaintiff and the defendant had been separate and independent for over 40 years, and that the plaintiff has not insignificant funds whilst the circumstances of the niece and grandnephew in the Ukraine are significantly worse. The plaintiff, in contrast, contended that she should receive the whole of the residue of the estate or, alternatively, at least a legacy of $375,000 (about 80% of the estate).
[3]Walker v Walker 395 NSW 34 (Unreported, NSW, Young J, 17 May 1996) 30-31; Kleinig v Neal (No. 2) [1981] 2 NSWLR 532, 540 (Holland J).
[4]Collicoat v McMillan [1999] 3 VR 803, 818 (Ormiston J).
[5]Blair v Blair [2004] VSCA 149 (Unreported, Chernov and Nettle JJA and Hansen AJA, 27 August 2004) [41] (Nettle JA).
Contrary to the submission for the plaintiff, I do not think it either appropriate or possible to adjudicate on the fault of the state of the relationship between the plaintiff and the deceased.[6] In any event, even if I were to adjudicate on the fault of the unsatisfactory relationship between the plaintiff and the deceased, it would not assist in enabling me to determine the quantum of any order I should make in favour of the plaintiff. I have no basis to ignore the fact that there are two other relatives in the Ukraine with some claim and for whom the deceased appears to have had genuine affection and concern. On the other hand I do not accept the defendant’s submission that the claims of each of the plaintiff, the niece and the grandnephew are equal as between the three of them. The plaintiff was the deceased’s daughter and that fact carries with it a well‑recognised obligation[7] not readily attributable to nieces and grandnephews. Indeed, the defendant acknowledges in its submissions that the deceased ought to have made some provision for the plaintiff “because she was her daughter”. It may for present purposes be accepted that the provision must reflect the nature and quality of the actual relationship between a mother and daughter but it is significant that it is a relationship of mother and daughter that I must take into account and weigh that kind of relationship against the more distant relationship with the others for whom provision has been made in the will. It may also be true that the relationship between the two might be described, as the defendant did, as “distant” during the plaintiff’s adult life but I do not think it accurate to say that it was “non‑existent, other than for the tie of blood”. The evidence is striking that there was a deep, albeit profoundly troubled, relationship that existed between the plaintiff and the defendant even though they did not see each other for some 40 years. The relationship between the two was in part lived through the deceased’s grandchildren and, on one view, was ever present in each of them, albeit that it lived in them as something negative.
[6]Walker v Walker 395 NSW 34 (Unreported, NSW, Young J, 17 May 1996) 30-31.
[7]Kleinig v Neal [1981] 2 NSWLR 532, 540 (Holland J); Anderson v Teboneras [1990] VR 527; Grey v Harrison [1997] 2 VR 359; Barnaby v Berry [2001] NSWCA 454; Allan v Allan [2001] VSC 242 (Unreported, McDonald J, 25 July 2001); Penn v Richards [2002] VSC 378 (Unreported, Ashley J, 6 September 2002); De Angelis v De Angelis [2003] VSC 432 (Unreported, Dodds-Streeton J, 10 November 2003); Herszlikowicz v Czarny [2005] VSC 354 (Unreported, Hargrave J, 8 September 2005); Brinkkotter v Pelling [2006] VSC 101 (Unreported, Hansen J, 24 March 2006).
The financial circumstances of the niece and grandnephew, if relevant, are not clear enough in the evidence to form a secure understanding of their financial position. They are plainly not wealthy individuals and would doubtlessly receive comfort from some part of the deceased’s estate, but what impact the amounts would have on their lives is not clear on the evidence which has been filed. The niece is 62 years of age, lives alone, receives a pension of approximately UAH 547 (said to be approximately $US109) per month and, it seems, also has a salary from her teaching Ukrainian language and literature at school. She lives in an old wooden house which needs constant repairs and she has difficulty purchasing the firewood needed to heat the house. Her assets appear to be a bank balance of UAH6,000 which (on the exchange rates implicit in the evidence) appears to around $US1,200. Her health is deteriorating and her two sons do not seem well placed to support her fully. Her younger son, Yuriy, is 29 years of age and lives with his wife and their nine month old daughter at his wife’s parents’ three bedroom apartment. Both husband and wife are engineers by profession although the wife is presently on maternity leave and not working. His salary for a six month period was approximately UAH3,000 before taxes which he calculated at approximately UAH430 (or USD$85) per month after taxes.
The plaintiff’s financial position, and her need for adequate provision, in its turn is not entirely clear. She resides at a property on Burwood Highway in Burwood which is owned jointly with her son. It is estimated to be worth about $550,000 but has a mortgage debt of $233,169. She is also the joint proprietor of a unit in Surry Hills with a man with whom she had a relationship in the past. That property is estimated to be worth between $400,000 and $480,000 but has a current mortgage debt of $137,435. She currently earns some $53,173.60 per annum working 80% of a fulltime teaching load. The current value of her superannuation contributions, if she were permanently to retire now, is $81,602 and has no significant cash savings.
The plaintiff may have given a complete picture of her financial position but it is difficult to determine from the evidence what amount from the deceased’s estate would be adequate provision in keeping with the deceased’s responsibility. There was, for example, no evidence of what superannuation benefits she could secure or expect with her existing assets, future savings and alternative amounts which might be awarded under s 91 of the Act. The parties, nonetheless, urge me to determine a quantum to be awarded to the plaintiff of between the third conceded by the defendant and the 80% to 100% contended for by the plaintiff.
I have decided to award 50% of the estate to the plaintiff. The defendant’s equal division between three potential beneficiaries is not appropriate because it places the same weight on the claim by a daughter as on the claims by the more distant relationships of niece and grandnephew: in my view a daughter’s claim has greater call upon a testator’s responsibility to make adequate provision. On the other hand, the testator’s will and wishes should not be ignored: the court’s jurisdiction under s 91 of the Act is limited to the extent of giving effect to the responsibility which the deceased had; it is not an opportunity for me to substitute my views or values for those of the testator after hearing the evidence. I have therefore sought to limit my interference with the deceased’s will to the extent that the evidence safely established the responsibility. It is not a large estate and the deceased had made gifts to the niece and grandnephew during her lifetime. The gifts during her lifetime are consistent with the testator’s desire to provide for her niece and grandnephew in the Ukraine. An amount of 50% of the residue of the estate to the plaintiff should give her an amount in excess of $200,000 and would discharge the deceased’s responsibility by provision of about half of what she had to give. The deceased’s responsibility is to be judged by reference to what she had to give, it is not an obligation to ensure that those to whom she had a responsibility were provided for beyond her means to do so. It is also a responsibility which she had to discharge consistently with her genuine concerns for others who she might wish to support. In the, perhaps tragic, circumstances of this troubled relationship an amount of 50% of the sum in question in favour of an only daughter may be justified in light of the evidence of her circumstances, the size of the estate, the defendant’s concessions and the deceased’s will and desire to benefit a niece and grandnephew.
I make the following orders subject to any matter which counsel may wish to make about costs or the form of the orders:
1.That provision be made out of the estate of the late Vera Eckhardt for the payment to the plaintiff of 50% of the residue of her estate as if so provided for in clause 3 of her will dated 18 March 1996.
2.That the costs of and incidental to this proceeding be paid by the defendant on a solicitor and client basis from the estate.
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CERTIFICATE
I certify that this and the 9 preceding pages are a true copy of the reasons for Judgment of Pagone J of the Supreme Court of Victoria delivered on 13 February 2008.
DATED this thirteenth day of February 2008.
Associate
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