Bowyer v Wood
[2006] SASC 96
•6 April 2006
SUPREME COURT OF SOUTH AUSTRALIA
(Testamentary Causes Jurisdiction)
In the Estate of ANN WILLOUGHBY WOOD
BOWYER v WOOD & ORS
Judgment of The Honourable Justice Duggan
6 April 2006
SUCCESSION - FAMILY PROVISION AND MAINTENANCE - FAILURE BY TESTATOR TO MAKE SUFFICIENT PROVISION FOR APPLICANT - WHETHER APPLICANT LEFT WITH INSUFFICIENT PROVISION - CLAIMS BY CHILDREN
Application by adult daughter for provision out of estate of testatrix under Inheritance (Family Provision) Act 1972 s 7 - estate valued at $1.2m - legacies totalling approximately $251,000 to charity and $502,000 to unmarried sister, married brother and sister of testatrix, their spouses and children - gift of $77,464 to each of the four children of the testatrix, including plaintiff - plaintiff received substantial financial assistance from testatrix during the latter's lifetime - plaintiff and husband joint owners of farming property and self-supporting.
Held: plaintiff not left without adequate provision for her maintenance, education and advancement in life - application dismissed.
Inheritance (Family Provision) Act 1972 s 7, referred to.
Singer v Berghouse (1994) 181 CLR 201; Goodman v Windeyer (1980) 144 CLR 490; In the Estate of Guthrie (1983) 32 SASR 86; McCosker v McCosker (1957) 97 CLR 266, applied.
Hunter v Hunter (1987) 8 NSWLR 573; Coates v National Trustees Executors and Agency Co Ltd (1956) 95 CLR 494, considered.
In the Estate of ANN WILLOUGHBY WOOD
BOWYER v WOOD & ORS
[2006] SASC 96Civil
Duggan J. The plaintiff, Mary Ann Bowyer, has applied for an order under s 7 of the Inheritance (Family Provision) Act 1972 (“the Act”) which would make further provision out of the estate of her mother Ann Willoughby Wood (the testatrix) for the plaintiff’s “maintenance, education or advancement”. The executors and certain beneficiaries of the will of the testatrix have been joined as defendants.
The plaintiff is one of four children of the testatrix. The other children are Michael Hall, Kathleen Smart and Elinor Appletree.
The testatrix died on 19 December 2003 aged 71 years, leaving a will dated 21 January 1998. She left an estate valued at $1.2m.
In her will, the testatrix gave directions for the distribution of her personal assets. After making gifts of specified items of jewellery, she directed that the remainder of her personal property be distributed amongst several beneficiaries, including the plaintiff.
Next, the will provided that Michael Hall was to receive one-fifth of the remaining estate amounting to approximately $251,000, but with a request, without imposing any trust or binding obligation on him, to distribute such money to one or more of a number of named charities.
When Michael Hall gave evidence he was asked about his intention with respect to the precatory directions in the will concerning gifts to charities. He said he proposed to donate the full amount left to him in this part of the will to the named charities. He said he would do so over a period of two financial years so as to maximise the taxation deductions in respect of his personal income. He added that he would then distribute the money equivalent of the taxation benefits to the four children of the testatrix. He estimated that the total taxation benefit would be approximately $60,000.
The will then directed that a series of gifts of money were to be paid to certain charity workers and persons who had been of assistance to the testatrix during her lifetime, including her accountant, cleaner and gardener. The total value of these gifts is not to exceed $25,000.
The effect of two further clauses in the will is that each of the six grandchildren of the testatrix will receive $20,928 and each of the four children of the second husband of the testatrix, Alastair Wood by a previous marriage, will receive $10,464.
The will then provided for gifts to the married brother and sister of the testatrix, their spouses and children and gifts to the unmarried sister of the testatrix. These nine beneficiaries would each receive $55,809.
Finally, the residue of the estate is to be divided equally amongst the children of the testatrix, including the plaintiff. Each would receive $77,464.
According to the plaintiff’s case, inadequate provision has been made for her maintenance, education and advancement in life. She seeks an order that further provision be made for her by the court. According to the submissions made by the plaintiff’s counsel, this provision should be made out of the bequest to Michael Hall which was made with the request that it be distributed to the named charities and the bequest to the siblings of the testatrix, their spouses and children.
The plaintiff and her husband gave evidence in support of the application. The defendants called Ms Philipa Fletcher, the unmarried sister of the testatrix. All were witnesses of truth.
The testatrix married twice. She and her first husband, Steele Hall, separated in late 1975 and the marriage was dissolved in 1978. There were four children of that marriage. Her daughter, Kathleen Smart, and her husband have three children. Her son, Michael Hall, has one child by a previous marriage. Elinor Appletree is a single mother with one child. Alastair Wood, the second husband of the testatrix, has four children by a previous marriage.
The plaintiff was born on 20 May 1957. Her sister Kathleen was born in 1959, her brother Michael in 1961 and her sister Elinor in 1964. She lived with her parents until they separated. The testatrix then moved into a house at Mitcham. The plaintiff continued to live with her father at Henley Beach.
When the plaintiff left school she was employed in various occupations. She married her husband, Peter Bowyer, on 21 July 1984. Their son Alex was born in 1994.
Prior to their marriage, the plaintiff’s husband was a partner with his father and younger brother in the faming of a family property at Owen. They grew crops, ran sheep and operated a piggery.
In 1988, the plaintiff and her husband leased the piggery and operated it as partners. The piggery was leased from Bowco Pty Ltd which owned 450 acres of the property operated by the Bowyer family. Peter Bowyer had shares in that company and, in 1993, he and the plaintiff purchased the shares in Bowco Pty Ltd which belonged to the other members of the Bowyer family. The evidence as to the purchase price is unclear.
Bowco Pty Ltd was voluntarily liquidated in July 1996 and the 450 acres of land previously owned by it were transferred to the plaintiff and her husband. In late 1999 they sold 30 acres of that land which included the piggery. The sale price for the piggery and stock was $467,000. After selling the piggery, they concentrated on cropping.
Prior to the liquidation of Bowco Pty Ltd, the plaintiff and her husband purchased a parcel of land in the area which was owned by the testatrix. It comprises approximately 150 acres and is known as “9 Mile Paddock”. The purchase price was $75,000 and the proceeds were distributed amongst the testatrix and her four children including the plaintiff. The plaintiff’s share was deducted from the purchase price.
From 1997 until 1999, the plaintiff and her husband also sharefarmed a property at Owen which was owned by the plaintiff’s father. In early 2000, the plaintiff and her husband purchased that property for $400,000. It comprises 470 acres of arable land. Under the terms of sale, $200,000 was to be paid in four payments of $50,000 over four years. The payment of $200,000 by way of instalments has now been made. The remaining $200,000 was lent to the plaintiff and her husband by the testatrix at five per cent interest.
In April 2002, the plaintiff and her husband purchased a further 277 acres of land near Hamley Bridge for $357,000. This property is 15 kilometres south-east of Owen. The money to purchase the property was borrowed from Elders Rural Bank.
The present position is that the plaintiff and her husband own and farm in partnership 1317 acres of land at the three locations referred to above.
At the trial, the plaintiff produced the following schedule (Exhibit P 36) of the assets and liabilities of her husband and herself as at 22 January 2006.
CURRENT ASSETS
DR
CR
Land
2,635,000
Agricultural Plant & Equipment
226,170
Motor Home (estimated)
12,500
Boom Sprayer
71,000
Shares
· See “Annexure A” attached
38,343
Trading Options (R.J. O’Brien)
117,763
Elders Seasonal Account
2,115
Australian Central – MA Bowyer
· My Account (61310812) - $2,100.60
· Smart Cast Account (61310813) - $51,70
· E Savings Account (63077333) - $516.90
· Christmas Account (63118880) - $1.03
2,670
Commonwealth Bank Streamline Account
754
ATO – GST
2,775
TOTAL:
3,109,090
CURRENT LIABILITES
DR
CR
Elders Rural Bank term Loan
442,878
Commonwealth Bank Matercard Statement
P N Bowyer
415
Westpac Bankcard P N Bowyer
514
Westpac Altitude Credit Card M A Bowyer
5,924
Crieff Pty Ltd Loan (formerly A W Wood)
140,000
John Deere Commercial Loan
57,289
Boom Sprayer Deposit
10,710
Lyndoch Motors Account
4,477
TOTAL:
662,207
Mr Roder, for the defendants, challenged some of the entries in this schedule. I accept his submission that $7,710 is the amount of the outstanding liability in relation to the boom sprayer and not $10,710. I also agree with Mr Roder’s submission that the credit in the Elders Seasonal Account as at 22 January 2006 was $45,697 and not $2,115.
I accept the accuracy of the remainder of the information in the statement of assets and liabilities. After making adjustments for the errors, I find that the value of the assets of the partnership as at 22 January 2006 was $3,152,672.00. The liabilities as at that date were $662,207.
A schedule of taxable income or loss of the plaintiff and her husband was tendered (P 18). The table is based on the financial years ending 30 June 1993 to 30 June 2005 (estimated). The plaintiff’s average income for those years was $26,010 and that for the plaintiff’s husband was $22,210.
It is important to bear in mind, however, that in the years up to and including 1999, the major part of the business of the partnership was the piggery and Mr Bowyer gave reasons as to why this venture was ailing. If the average income is calculated on the financial years ending 30 June 2000 to 30 June 2005 inclusive, the combined average income for the plaintiff and her husband is $78,208.
In assessing the plaintiff’s future financial position, regard must be had to the bequest to her of $77,464 under the will of the testatrix.
It is also relevant to take into account that the plaintiff, along with her siblings, is one of the specified beneficiaries in the Appletree Trust, a trust deed created on 11 May 1995. The funds in that trust were contributed almost solely by the testatrix. The trust has assets of $1.348m and there is an expectation that the plaintiff will receive distributions from this trust as has occurred in the past. The plaintiff has received the following distributions:
Financial Year Ended 30 June 2004
$ 8,197
Financial Year Ended 30 June 2005
$10,624
November 2005 (6 Monthly)
$4,057
TOTAL:
$22,878
The plaintiff’s son has his own share portfolio which is valued at approximately $20,000.
During her lifetime, the testatrix made a number of gifts of money to the plaintiff. From the time of the separation of the testatrix from her first husband, she gave amounts of money totalling $237,000 to the plaintiff. She also provided a low interest loan to the plaintiff and her husband. When the plaintiff and her husband purchased Mr Hall’s property at Owen, they were allowed a concession of $50,000 by him. The plaintiff also expects to receive a further $50,000 from her father’s estate when he dies.
Section 7(1) of the Inheritance (Family Provision) Act 1972 (“the Act”) provides as follows:
7 (1) Where –
(a) a person has died domiciled in the State or owning real or personal property in the State;
(b) by reason of his testamentary dispositions or the operation of the laws of intestacy or both, a person entitled to claim the benefit of this Act is left without adequate provision for his proper maintenance, education or advancement in life,
the Court may in its discretion, upon application by or on behalf of a person so entitled, order that such provision as the Court thinks fit be made out of the estate of the deceased person for the maintenance, education or advancement of the person so entitled.
The effect of such legislation has been described as a “limited disturbance of the right of testamentary disposition”: Hunter v Hunter (1987) 8 NSWLR 573 per Kirby P at 580.
A frequently adopted starting point for the approach to be taken in considering applications of this nature is the observation made by Mason CJ, Deane and McHugh JJ in Singer v Berghouse (1994) 181 CLR 201 at 208:
It is clear that, under these provisions, the court is required to carry out a two-stage process. The first stage calls for a determination of whether the applicant has been left without adequate provision for his or her proper maintenance, education and advancement in life. The second stage, which only arises if that determination be made in favour of the applicant, requires the court to decide what provision ought to be made out of the deceased’s estate for the applicant.
Their Honours pointed out that the first question, although it involves the making of value judgments, is a question of fact to be determined by the trial judge: 181 CLR at 211. They continued at 209:
The first question is, was the provision (if any) made for the applicant “inadequate for [his or her] proper maintenance, education and advancement in life”? The difference between “adequate” and “proper” and the interrelationship which exists between “adequate provision” and “proper maintenance” etc. were explained in Bosch v Perpetual Trustee Co. Ltd. [1938] AC at p 476. The determination of the first stage in the two-stage process calls for an assessment of whether the provision (if any) made was inadequate for what, in all the circumstances, was the proper level of maintenance etc. appropriate for the applicant having regard, amongst other things, to the applicant’s financial position, the size and nature of the deceased’s estate, the totality of the relationship between the applicant and the deceased, and the relationship between the deceased and other persons who have legitimate claims upon his or her bounty.
In considering what constitutes proper maintenance the court “must consider not only the need for maintenance, but all the circumstances of the case”: Goodman v Windeyer (1980) 144 CLR 490 at 496.
The court may refuse to make an order in favour of any person on the ground that his or her character or conduct is such as to disentitle him or her to the benefit of the Act: s 7(3).
There is no presumption that an able-bodied son or daughter, able to maintain him or herself in the future as in the past, is prevented from succeeding in an application under the Act: McCosker v McCosker (1957) 97 CLR 266.
In considering the threshold question as to whether a person has been left without adequate provision for proper maintenance, education and advancement in life, the situation is to be looked at as at the time of the death of the testatrix. However, events which are reasonably foreseeable at this time may be taken into account. In Coates v National Trustees Executors and Agency Co Ltd (1956) 95 CLR 494 at 508 Dixon CJ explained the relevance of events subsequent to the death of a testator:
But the very question what is proper maintenance and support involves the future of the widow or children to be maintained or supported. It is, however, the future stretching forward from the date of the testator’s death and therefore considered as from that date. It involves what is necessary or appropriate prospectively from that time. To determine that question contingent events must be taken into account as well as what may be considered certain or exceedingly likely to happen. When a court is called upon to consider such a question many years after the date as at which the court must take its stand, all the advantage is available of knowing the events that have occurred. The intervening events may be taken into consideration because they suggest or tend to show what antecedently might have been expected. But they must not be outside the range of reasonable foresight. If all contingencies that might reasonably have been anticipated have been taken into account, it would be difficult to say that the actual occurrence of some event which antecedently no one could reasonably have foreseen shows that the maintenance or support was not proper or the provision therefore was not adequate. It is therefore impossible to treat actual intermediate occurrences as more than evidentiary facts. The ultimate question must remain one of adequate provision for proper maintenance and support as at the date of the testator’s death.
As at 22 January 2006, the assets of the plaintiff and her husband exceeded liabilities to the extent of $2.49m.
As I have said, the testatrix died on 19 December 2003. By this time the plaintiff and her husband had purchased all the land they presently own and had borrowed the monies for those purchases. Although farming equipment has been purchased since the testator’s death, the plaintiff’s financial position as at 22 January 2006 has not changed significantly since the date of her mother’s death, subject to the fact that there has been an increase in the value of the land to the extent of approximately $1m. I think it was reasonably foreseeable at the time of the death of the testatrix that the land would increase in value, although I do not suggest that there could have been any precision about the extent of the increase.
It must be remembered, of course, that the major asset is the land and the plaintiff and her husband are dependent upon ownership of the land to earn their living. However, they have accumulated a significant landholding and their equity in that land is substantial. They live in a house on one of the parcels of land. I am satisfied that they are able to service their loans.
With the help of the testatrix and, to a lesser extent, the plaintiff’s father, and because of their own industry, the plaintiff and her husband have been able to build up a sizeable property which, although not returning a substantial income, has the potential to maintain them in the lifestyle which they lead at present.
It is also reasonable to expect that the plaintiff will receive further distributions from the Appletree Trust. The trustees of the Appletree Trust are Kathleen Smart and Kirsten Wood. The testatrix was also a trustee.
On 16 June 2003, the trustees attended a meeting at which it was agreed that Elinor Appletree would receive $13,000 annually and, subject to emergencies, the remaining income would be distributed equally between the plaintiff, Kathleen Smart and Michael Hall. It was also agreed that the corpus would not be available for distribution.
As the trust is discretionary in nature, there is no guarantee that distributions in the future will follow this pattern. However, the likelihood is that this will be the case.
The plaintiff and her husband have investments to the value of approximately $156,000 and there is a potential for returns from those investments in the future.
In summary, I find that at the time of the death of the testatrix, the plaintiff was established with her husband on properties with a combined value of $1.6m and that the value of the land has now increased to $2.6m. I accept that the value of the land is dictated more by its saleability than the income which is presently derived from it. The plaintiff and her husband have the capacity to supplement their farming income with investments from a portfolio valued at approximately $156,000. It appears that the plaintiff will continue to receive distributions from the Appletree Trust in the order of $8,000 to $10,000 per year. It appears that the plaintiff and her husband are able to service their present borrowings.
I have not lost sight of the fact that the plaintiff is entitled to no more than a one-half share of the partnership assets. However, the assessment as to whether adequate provision has been made for the plaintiff’s proper maintenance, education and advancement in life cannot ignore the reality of the business partnership and the sharing of assets, income and liability.
There was evidence that the plaintiff’s eleven year old son may go to boarding school or the plaintiff may have to commute to and from Adelaide to enable him to be educated. The second alternative appears impractical and it seems more likely that he will be sent to boarding school. The fact that a claimant has to support and educate a child is a relevant circumstance to take into account when considering what is necessary for the claimant’s maintenance: Goodman v Windeyer at 498.
In considering whether the provision made for the plaintiff was inadequate, it is relevant to consider the financial assistance which was given to the plaintiff by the testatrix during her lifetime: In the Estate of Guthrie (1983) 32 SASR 86 at 96. Reference has been made to advances totalling $237,000 and the provision of low interest loans to assist in the purchase of land.
I accept the evidence that, in the course of discussions concerning the purchase of Mr Hall’s property in early 2000, the testatrix commented that the plaintiff’s inheritance would amount to more than the plaintiff and her husband’s borrowings as at that time. The borrowings after that property was purchased totalled $250,000. This included existing borrowings of $50,000.
This is a matter which is appropriate to take into account. However, it must be considered along with the fact that the testatrix subsequently forgave $150,000 of the $200,000 which she lent to the plaintiff and her husband for the purchase of the property.
I have referred to the evidence that approximately $251,000 will be distributed out of the estate to charities. However, this is not one of those cases in which charities have been chosen, not because of any special interest by the testatrix in them, but with the purpose of preventing the children of the testatrix from receiving a greater inheritance: cf. Coates v National Trustees Executors and Agency Co Ltd at 510. The testatrix donated almost $200,000 to charities in the two years before her death and it has not been suggested that her purpose in doing so and in making provision for charities in her will was other than philanthropic.
Nevertheless, it is appropriate to have regard to the bequest to the charities as well as the sizeable bequest to the testatrix’s siblings, their spouses and children, in considering the threshold issue. They are matters to be taken into account along with the size and nature of the deceased’s estate.
Consideration must also be given to the relationship between the plaintiff and her mother, and to any conduct on the part of the plaintiff which might be reflected in the provisions made in the will. There was evidence concerning this relationship. It is clear that there were differences between the plaintiff and her mother, but it is difficult to identify any disagreement or attitude of particular relevance to the case.
It would appear that a serious argument arose in early 1995 when the testatrix indicated that she was intending to sell her property at 9 Mile Paddock to her former husband’s brother, John. The issue was resolved when the testatrix sold approximately half of the property to John and the remainder to the plaintiff and her husband. It seems that the testatrix and the plaintiff had little contact with each other for approximately 12 months thereafter.
Mr Bowyer said that the relationship between his wife and the testatrix had been “frosty” at times, but that it improved considerably over the last three or four years of the life of the testatrix. I accept Mr Bowyer’s assessment. There is support for it in some of the correspondence which was tendered and it is relevant to take into account the fact that the testatrix provided financial assistance to the plaintiff after 1995. The relationship between the plaintiff and her mother was difficult at times, but I would not regard it as explaining or justifying any aspect of the will.
There is no suggestion in the evidence that the plaintiff and her husband were in financial difficulty or that they will be unable to maintain in future years the standard of living which they have attained in previous years.
Reference has been made to the fact that their debt level is approximately $640,000. Prior to the purchase of the Hamley Bridge property in April 2002, it was approximately $100,000. $140,000 of the debt consists of the family loan which is not repayable until 2020. The loan of $442,000 from Elders Rural Bank is not repayable until 2007. When asked about repayment of the principal sum, the plaintiff said that the indication is that the bank “will be reasonably relaxed about that”. It was not suggested that this part of the debt could not be refinanced. There is ample security for the existing borrowings.
The plaintiff said that any further distribution from the estate would be used to retire debt.
Mr Bowyer gave a similar response:
Q… you have discussed with your wife certain things that are required to continue the farm and make life more pleasant for you, yes?
AYes. We see our biggest drawback at this stage to making our farm a more viable farm is that the debt, the debt load is a problem to us. Also, we – it is a conscious decision that we have made to try and concentrate our borrowings into purchasing land and certainly not into machinery. Our machinery is predominantly second-hand machinery, it is predominantly small and outdated but it does the job. It certainly requires a lot of maintenance and we do spend a lot of money on repairs. I am not particularly mechanical and so quite a bit of our repair work needs to be done outside.
Furthermore, it is the desire of the plaintiff and her husband to purchase a new header which would cost approximately $100,000 after a trade-in and more extensive shedding which would cost approximately $45,000.
The plaintiff said in evidence that it was unfair that the charities and the siblings of the testatrix and their families should benefit to the extent provided for in the will. I accept that an increased provision for the plaintiff would be well spent on the properties farmed by the plaintiff and her husband. However, I am of the view that the plaintiff is able to meet the cost of properly maintaining and advancing herself in life from her own resources. After taking into account the plaintiff’s financial position, the provision made for her in the estate and the financial assistance given to her by the testatrix during her lifetime, I am not satisfied that the plaintiff has been left without adequate provision for her proper maintenance, education and advancement in life.
The application will be dismissed.
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