Collins v McGain - [2003] NSWCA 190

No judgment structure available for this case.

CITATION: Collins v McGain & Anor [2003] NSWCA 190

HEARING DATE(S): 8 May 2003

JUDGMENT DATE:
16 July 2003

JUDGMENT OF: Beazley JA at 1; Hodgson JA at 2; Tobias JA at 14

DECISION: Appeal to be dismissed with costs.

CATCHWORDS: Probate - Appeal an application for order making provision for appellant out of respondent's estate on basis of need. - D

LEGISLATION CITED: Family Provision Act 1982, s7, s9, s9(3), s9(2), s9(2)(a)

CASES CITED: Singer v Berghouse (1994)
Bosch v Perpetual Trustee Company Pty Ltd (1938) AC 463
Permanent Trustee Co Limited v Fraser (1995) 36 NSWLR 24
Eggler v Mitchelmore 11 November 1992 (unreported)
House v The King (1936) 55 CLR 499
O'Loughlin v O'Loughlin 1 May 2003 (unreported)
Akkerman v Ewins 12 October 1999 (unreported)

PARTIES :
David John Collins
Beverley Ann McGain and Lloyd Raymond Mead

FILE NUMBER(S): CA 40814/02

COUNSEL: A - David Davies SC / T Hodgson
R - R Darke SC

SOLICITORS: A - Harris & Company
R - Lane & Lane

LOWER COURTJURISDICTION: Supreme Court

LOWER COURT FILE NUMBER(S): SC 2403/01

LOWER COURT
JUDICIAL OFFICER : Berecry AM

CA 40814/02

BEAZLEY JA
HODGSON JA
TOBIAS JA
16 July 2003

COLLINS v McGAIN & ANOR

Judgment

1 BEAZLEY JA: I have had the advantage of reading in draft the judgments of Hodgson and Tobias JJA. I agree with Hodgson JA, that the Acting Master erred in his finding that “the plaintiff must be able to identify particular needs that have not been adequately provided for”. I otherwise agree with the reasons of Tobias JA and the orders he proposes.

2 HODGSON JA: I agree with the orders proposed by Tobias JA and, subject to what I say below, substantially with his reasons.

3 At [31] of his judgment, the Acting Master correctly stated the question posed by s.9(2) of the Family Provision Act 1982 (the Act) in circumstances where, as in this case, there was no provision in the will for the plaintiff:

4 In those circumstances, I would not have considered it necessarily an error for the Acting Master to have dismissed the claim on the basis that the appellant had not demonstrated a “need”, because “need” could be considered a shorthand expression for inadequacy in provision for proper maintenance.

5 However, the Acting Master went further, in saying that “the plaintiff must be able to identify particular needs that have not been adequately provided for”. I think that is suggestive of error, because there may be a difference between the level of maintenance provided for and what is the “proper” level of maintenance, which is not reflected in any “particular” need. He also said that “the nature of the relationship [of the plaintiff and the deceased] only becomes relevant once it is established that the plaintiff has a need”. In my opinion, that was an error: the nature of the relationship may be relevant to what is “proper” maintenance and what is “adequate” provision, and thus in turn be relevant to whether there is a “need” in the relevant sense.

6 The Acting Master also concluded that the appellant had failed to show need because his marriage was happy and he would not want for anything, because “Any request by him will be met by his wife”. The material before the Acting Master justified that finding, on the balance of probabilities. But that is not conclusive of lack of need: adequate provision for proper maintenance may require provision for contingencies which are no more than mere possibilities, and in my opinion there is a non-negligible possibility that, whether by reason of future marriage difficulties or financial mismanagement or other circumstances, maintenance from the wife’s assets may at some time cease or be substantially reduced. In my opinion, the disregard of this possibility was also an error.

7 Thus, I agree with Tobias JA that error was established, so that this Court should address the relevant issues itself.

8 Although the great contribution by the appellant to the deceased’s estate was a large positive factor in suggesting a generous approach to the question of what was “proper maintenance” and what was “adequate provision”, there were three significant negative factors pointing the other way.

9 First, the appellant had given the deceased reasons for wanting to leave nothing to him, in particular his attempts to limit the payment to her from the proceeds of the business to $2 million and his avoidance of paying her costs of $100,000.00 by going bankrupt. (This is not to say that the total breakdown in the relationship was entirely his fault).

10 Second, in so far as there was any deficiency in the provision the appellant had for his proper maintenance, it was due to his own choice to give over $11 million to his wife, this itself being described by the Acting Master as “a convenient vehicle for the [appellant] to attempt to avoid his liabilities”.

11 Third, as noted earlier, the Acting Master found that the appellant would not “want for anything” because any request by him would “be met by his wife”. Accordingly, any such deficiency in provision can only be in relation to a contingency that the maintenance he has been receiving from his wife’s assets will cease or be substantially reduced.

12 Having regard to all the factors I have mentioned, I would not in this case set a very high standard for what is “proper maintenance” or what is “adequate provision”. However, the question of whether any provision for the appellant is inadequate has to be viewed at the time of the hearing; and I am inclined to think that the complete absence of any provision for the contingency I have referred to is sufficient to justify a conclusion that the provision for the appellant is inadequate.

13 However, I am not satisfied, in terms of s.7 of the Act, that any further provision “ought” to be made. I do not come to this conclusion by considering whether the deceased had a moral duty, but I do take into account the (lack of) strength of the appellant’s legitimate claim against the estate: see Singer v. Berghouse (1994) 181 CLR 201 at 209. If any one of the three factors referred to above had been absent, I believe my conclusion would have been different. But the combination of them, that is, the acts against the deceased’s interests plus the self-inducement of any need plus the fact that any need is a mere contingency rather than a probability, in my view justifies the result proposed by Tobias JA.

14 TOBIAS JA: Beatrice Margaret Mead (the deceased) died on 28 August 2000. Probate of her will dated 5 December 1988 was granted by the Supreme Court in its Equity Division on 20 February 2001. By her will the deceased appointed the respondents executors thereof and, after bequeathing a legacy to her grandson, Andrew, in the sum of $20,000 and providing a right to her husband, the second respondent, to reside at a residence of his choice during his lifetime, she gave the balance of her estate to her daughter, the first respondent.

15 The actual estate of the deceased was valued at approximately $5,500,000 and, apart from a motor vehicle, assorted furniture, antiques and jewellery, was generally comprised of cash. At the time of her death the deceased also held some six properties as joint tenant with her daughter, the first respondent, to a total value of $13,000,000. The first respondent succeeded to those properties by survivorship.

16 The deceased had two children by her first marriage, the first respondent and the appellant. The latter was born on 26 October 1934 and was 67 years of age at the time of the hearing before the Acting Master. On 1 May 2001 the appellant commenced proceedings in the Equity Division of the Court pursuant to s.7 of the Family Provision Act 1982 (the Act) in which he sought an order for his maintenance, education and advancement in life. The proceedings were heard by Acting Master Berecry who, on 21 August 2002, dismissed the appellant’s application and ordered him to pay the respondents’ costs. It is against that decision of the Acting Master that the appellant appeals to this Court.

The facts

17 Although the facts are comprehensively set forth in the Acting Master’s judgment, it is necessary to record them in some detail. However, apart from one matter, there is no challenge by the appellant thereto.

18 The appellant’s father commenced a company known as D A Collins & Sons Pty Limited (the company) in 1953. The company was involved in the importing and wholesaling of manchester and soft goods. The appellant commenced to work for the company at the end of 1955 and, when he turned 21, he was allotted 200 shares in its capital. At that time the shareholders were the appellant, his father and the deceased: each held 200 shares.

19 In 1960 the appellant’s father died. The deceased acquired her husband’s shares in the company and thus became the majority shareholder. Shortly after the death of his father the appellant became a director of the company. Further shares were allotted to him, his sister and the deceased so that by 1962 the issued shares in the company were held as to 9,904 by the deceased; as to 9,502 by the appellant and as to 400 shares by the first respondent. The appellant accepted that it was as a consequence of the deceased exercising her voting power as the majority shareholder that he, the appellant, was allotted a further 9,302 shares after his father’s death. This gave him a 48% shareholding in the company.

20 At the date of the appellant’s father’s death the company was operating on, at the very least, small margins. Thereafter the appellant became very involved in the company’s affairs and became the driving force behind the extensive expansion of its operations. He spent many years cultivating a business relationship with the Chinese so that by 1970 almost 95% of the company’s trade came from China. The company sold its imports to clothing chains such as Target, Coles, Woolworths and Fosseys.

21 In 1977 the appellant’s first marriage was dissolved and later that year he married his second wife. That marriage was later dissolved and he married his current wife in December 1983.

22 In the late 1970’s the Federal Government introduced quotas on certain imported products. The appellant was instrumental in the company gaining significant quotas with respect to the importation of clothing and the like from China. It is common ground that the generous quotas which the appellant achieved for the company arose out of the intensification of the company’s business with the Chinese which was due wholly to his efforts. However, by 1984 he had some concerns about the future of the business and decided to capitalise on the value of the company’s quotas by taking steps to sell them. He thus entered into negotiations with both Coles and later with Fosseys. Those negotiations were complex and stressful but he conducted them, with some professional advice, himself. He was advised that if the sale of the quotas were structured in a certain way then the proceeds of the sale would be tax free. Accordingly, the parties to the negotiations included not only the retailers referred to but also the Australian Tax Office and the Customs Department. Ultimately, an agreement was reached with Coles for the sale of part of the company’s quotas for the sum of $18,830,000 and with Fosseys for the sale of the balance for the sum of $7,100,000 which was reduced to $6,424,000 for early payment, a total of $25,254,000.

23 In order to ensure that the deals went through and the company was able to enjoy a tax-free benefit by treating the proceeds of the sale of the quotas as capital, the appellant implemented the taxation advice that he had received that the company be voluntarily wound up. In late October 1984 he approached the deceased and the first respondent and informed them that the distribution to them of whatever payments were made as a consequence of the sale of the quotas would not depend on their respective shareholdings in the company but that the deceased would receive $2,000,000 and the first respondent $500,000. The Acting Master found that the at the time that the appellant approached the deceased and the first respondent he was aware that the Coles offer was somewhere between $15,000,000 and $19,000,000 but that the deceased was not aware of the precise amount of the offer from either Coles or Fosseys.

24 It is in relation to this last-mentioned finding that there was a dispute before us for, in cross-examination before the Acting Master, the appellant said that he had told the deceased that the only sure thing he had at the time was with Coles and that the company would be able to sell its quota to Coles for between $15,000,000 to 19,000,000. He said that at that time he had not “finally wrapped up Fosseys” with respect to the sale of the balance of the company’s quotas. However, he was cross-examined to accede to the proposition that, when he had the conversation with the deceased referred to, he did not tell her that he, the appellant, would receive more than $20,000,000 if the transactions were brought to fruition. To the extent, therefore, that the Acting Master formed the view that the appellant actively misled the deceased during the conversation in late October 1984, it would appear that he was at least partly in error and that the deceased was probably aware that Coles had offered between $15,000,000 and $19,000,000 for part of the company’s quotas. It could be inferred, therefore, that she would have been aware that, after taking account of the $2,500,000 which the deceased said would be paid to herself and the first respondent, the appellant would receive the balance of somewhere between $12,500,000 and $15,500,000 plus whatever was received for that part of the quotas not sold to Coles. At the end of the day, however, I think little turns on this factual issue for it is clear that the deceased opposed the distribution sought to be imposed on her by the appellant and was resentful of the appellant’s conduct with respect to it.

25 It was from this time onwards that the deceased formed the view that the appellant was trying to cheat her with the consequence that the relationship between her and the appellant deteriorated dramatically and irrevocably.

26 Although it may be that the deceased was not in late October 1984 given information by the appellant as to the precise amount that Coles and Fosseys were prepared to pay for the quotas, she was given some information at least with respect to the range within which Coles’ offer would fall. Nevertheless she was told in no uncertain terms by the appellant that her shareholding in the company had no bearing on the distribution of funds received on the sale of the quotas because he was entitled to the lions share thereof as the enhanced value of the quotas was due entirely to his efforts.

27 As the appellant made it clear that he would not distribute the sale proceeds other than in accordance with what he considered the appellant and the first respondent were entitled to, in April 1985 the deceased sought an injunction to restrain him from distributing the proceeds of sale in the manner he proposed. The dispute which then ensued was ultimately settled upon the basis that, upon the winding up of the company, the assets of the company (which, in the main, comprised the sale proceeds of the quotas) would be distributed to the shareholders in accordance with their respective shareholdings. Accordingly, the deceased received the sum of $12,101,121; the first respondent received $488,740 and the appellant received $11,610,037. However, during the course of 1985 the appellant instructed the liquidator of the company to pay his entitlements upon liquidation to his present wife by way of gift. It was as a consequence of this payment to his wife together with the fact that the appellant has not worked since the company was wound up, that has resulted in the appellant having no assets and no income. As will appear, he has since 1985 been fully dependant upon his wife for his maintenance although he earned some income from investments up until about 1990.

28 I have already referred to the settlement of the proceedings instituted by the deceased in 1985 regarding the proceeds of sale of the quotas. Although not referred to by the Acting Master there was evidence from the appellant that on 15 April 1985 a written offer was put on his behalf to the deceased and the first respondent whereby, on the liquidation of the company and the realisation of its assets, the deceased would receive the sum of $14,000,000, the first respondent $1,000,000 and the appellant the balance. According to the appellant the deceased and the first respondent rejected this offer. It is to be noted, of course, that had it been accepted, each of them would have received more than they eventually received as a consequence of the distribution of the company’s assets in accordance with their respective shareholdings. There appears to be no explanation as to why this offer was refused as by that time the precise amount which was to be paid by Coles and Fosseys for the quotas was known. It is on the basis of this evidence that the appellant submits that the breakdown in the relationship between the appellant and the deceased was, at least in part, to be laid at the door of the deceased. This submission was further supported by reference to the fact that in Family Court proceedings between the appellant and his second wife conducted in 1988 both the deceased and the first respondent gave evidence on behalf of the wife, that evidence relating to the extent to which the appellant’s then wife was involved in the company’s affairs. However, it appears that in cross-examination the deceased conceded that the appellant was the sole driving force behind the company’s success and otherwise, in part, supported aspects of his case.

29 The Family Court’s judgment was delivered on 26 May 1989. In apparent retaliation against what he regarded as the deceased’s disloyalty in voluntarily providing evidence on behalf of his then wife in the Family Court proceedings, the appellant instituted proceedings in the Common Law Division of the Court against the deceased on 26 June 1989 in which he asserted for the first time that an oral agreement between he and the deceased had been made on 29 October 1984 whereby, for consideration, the deceased promised to accept the sum of $2,000,000 on the liquidation of the company irrespective of any increase or decrease in the value of her shareholding therein. The appellant therefore sought judgment for $10,101,221.85 against the deceased plus interest. The deceased was then 76 years of age.

30 These proceedings were bitterly contested on both sides. Thus, for instance, the appellant without warning entered default judgment against the deceased on the basis that she had failed to file a defence. This judgment was set aside by David Hunt J on 30 January 1990. His Honour ordered the appellant to pay the deceased’s costs on an indemnity basis because

“(t)he judgment was snapped up with full knowledge that it could never be retained once the matter came before the court.”

31 The proceedings were finally heard and determined by Finlay J who, on 12 December 1990, found in favour of the deceased essentially upon the ground that there had been no agreement between the parties as alleged by the appellant. In so holding, his Honour preferred the account of the deceased over that of the appellant. Thereafter, on 18 February 1991 the deceased signed a memorandum in which she recorded her strong conviction that the appellant should under no circumstances be entitled to any part of her estate as he had recently subjected her to

“a most distressing and painful experience in the course of protracted legal proceedings which he instituted against me and which attracted considerable media attention and throughout which I experienced considerable personal distress and profound embarrassment as well as invasion of my privacy”.

32 It was further common ground between the parties and the Acting Master so found that from 1960 to 1984 the appellant ensured that the deceased was paid a regular income by the company and received the use of a motor vehicle and other benefits including numerous overseas and interstate trips at the company’s expense and the use of a credit card. At the time she retired as a director in 1984 she received amounts by way of superannuation and long service leave as well as a new Mercedes-Benz motor vehicle purchased by the company. In the same period she also received dividends from the company as a consequence of her shareholding therein amounting to approximately $750,000. On the other hand, the appellant accepted, and the Acting Master found, that he was well paid when he ran the company not only in terms of annual salary but also in relation to the package that he had negotiated which included the provision of a house and a number of motor vehicles.

The basis of the Acting Master’s decision

33 In paragraph 36 of his judgment the Acting Master found that the appellant’s claim was not based on any need that he had, for he had not been able to point to any need. He noted the appellant’s evidence that he had not worked for 17 years and had no assets. The thrust of his claim, according to the Acting Master, was that because of his exertions on behalf of the company during the years 1960 to 1984 an enormous amount of wealth had been created. This notwithstanding he concluded at the end of paragraph 40 that there was no evidence to show that the appellant had needs for which some provision ought to be made from the deceased’s estate. The critical findings of the Acting Master are to be found in paragraphs 53 to 56 of his judgment which I reproduce below:

“53 As the plaintiff demonstrated needs, s 7 of the Act permits the Court to make provision for an eligible person out of the estate of a deceased person where, in the Court’s opinion, it ought, having regard to the circumstances at the time the order is made, make provision for the eligible person’s maintenance, education and advancement in life. Section 9(2) precludes the Court from making an order unless it is satisfied that any provision made during the deceased’s lifetime or out of the deceased’s estate is inadequate for the proper maintenance, education and advancement in life of the eligible person. The plaintiff’s affidavits do not point to any specific need that the plaintiff has. The plaintiff bases his claim solely on the fact that he has no assets.

54. However, in determining what the plaintiff’s needs are, one needs to look not only at his own assets or lack of them but the assets of his wife. The plaintiff by way of gift in 1985 gave his wife $11,600,000. that amount has been used to maintain their lifestyle, to purchase motor vehicles, furniture, realty and enjoy overseas holidays. The gift is now valued at approximately $6,800,000 consisting of realty as well as cash. On the plaintiff’s own evidence he has never wanted for anything. His wife had made funds available when he has needed them except in one instance, namely, the payment of his mother’s costs in the Common Law proceedings. That to me seems to indicate not that he doesn’t have any control over the monies and the assets of his wife but that the failure to pay the mother’s costs was purely a vindictive action taken by both the plaintiff and his wife against the deceased.

Shearer and the Public Trustee; Hawke and the Public Trustee

Eggler and Mitchelmore

Bosch and the Perpetual Trustee Company Pty Ltd

Bosch

The statutory provisions

34 The relevant provisions of the Act are ss.7 and 9 which, so far as are relevant, provide as follows:

Provision out of estate or notional estate of deceased person

Subject to section 9,….if the Court is satisfied that the person is an eligible person, it may order that such provision be made out of the estate or notional estate, or both, of the deceased person as, in the opinion of the Court, ought, having regard to the circumstances at the time the order is made, to be made for the maintenance, education or advancement in life of the eligible person.

Provisions affecting Court’s powers under secs 7 and 8

(2) The Court shall not make an order under section 7 or 8 in favour of an eligible person out of the estate or notional estate of a deceased person unless it is satisfied that:

(a) the provision (if any) made in favour of the eligible person by the deceased person either during the person’s lifetime or out of the person’s estate,…..

is, at the time the court is determining whether or not to make such an order, in adequate for the proper maintenance, education and advancement in life of the eligible person.

(3) In determining what provision (if any) ought to be made in favour of an eligible person out of the estate or notional estate of a deceased person, the Court may take into consideration:

(a) any contribution made by the eligible person, whether of a financial nature or not and whether by way of providing services of any kind or in any other manner, being a contribution directly or indirectly to:

(i) the acquisition, conservation or improvement of property of the deceased person, or

(ii) the welfare of the deceased person, including a contribution as a homemaker,

(b) the character and conduct of the eligible person before and after the death of the deceased person,

(c) the circumstances existing before and after the death of the deceased person, and

(d) any other matter which it considers relevant in the circumstances.”

35 The foregoing provisions were authoritatively discussed by the High Court of Australia in Singer v Berghouse (1994) 181 CLR 201at 208 in the joint judgment of Mason CJ, Deane and McHugh JJ in the following terms:

“It is clear that, under these provisions [sections 7 and 9(2)], 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.”

36 Their Honours elaborated on the first stage of the two stage process at 209 as follows:

37 These passages have been applied in cases too numerous to mention. However, as the appellant submitted that at the first stage of the process contemplated by the majority judgment in Singer the court should have regard to prevailing community standards, I should note the following passage from the judgment Sheller JA in Permanent Trustee Co Limited v Fraser (1995) 36 NSWLR 24 at 46:

Family Provision Act

38 It is also well established that the principles that govern appellate review of discretionary decisions apply to an appeal to this Court from a decision on the jurisdictional question or first stage of the process adumbrated in Singer; ibid at 212; Eggler v Mitchelmore NSW CA No. 40473/90, 11 November 1992, unreported. It is therefore necessary for the appellant to demonstrate that the Acting Master erred in the test which he applied to determine the first or jurisdictional stage or in some other manner consistent with the principles in House v The King (1936) 55 CLR 499 at 504-505.

The submissions

39 The essential thrust of the appellant’s submissions was that the Acting Master erred, when considering the first stage of the process, by confining himself to whether or not the appellant had demonstrated a need for proper maintenance etc., which had not been adequately provided for by the deceased. It appears from paragraph 56 of his judgment that in addressing that stage of the process the Acting Master contented himself with finding that no such need had been established and therefore did not consider the matters referred to in the passage from Singer cited at paragraph 24 above apart from the appellant’s financial position. In particular, he did not find it either necessary or relevant to consider the nature of the relationship between the appellant and the deceased as appears from the following passage in paragraph 56 of his judgment:

“A large part of the evidence in this case was devoted to the relationship of the plaintiff and the deceased. In my view, the nature of their relationship only becomes relevant once it is established that the plaintiff has a need. The plaintiff hasn’t established that in this case.”

40 In these circumstances, the appellant makes two submissions. The first is that when considering the appellant’s needs the Acting Master failed to consider the substantial needs of the appellant in the event that the relationship with his wife might cease at some time in the future whereupon he may be deprived of her financial support upon which, to date, he had been dependent. The second is that when considering the first stage of the process the needs of the appellant were only one consideration to be taken into account so that the Acting Master’s failure to take into consideration the nature of the relationship between the deceased and the appellant involved reviewable error. Accordingly, it was submitted that the Acting Master had erred in following what was said in Bosch v Perpetual Trustee Company Ltd (1938) AC 463 at 477-478 to the effect that the first enquiry in every case must be, what is the need of maintenance and support of the eligible person. It was thus contended that an enquiry into needs was only part of the first stage process referred to by the High Court in Singer so that the statement relied on from Bosch was no longer good law.

Determination of the issues

41 Of itself, the Acting Master did not err in so far as he sought to determine the relevant needs of the appellant. The passage from Bosch cited by him in paragraph 29 of his judgment has been referred to with approval in numerous cases since the decision of the High Court in Singer: see, for example, Permanent Trustee Company Ltd v Fraser ibid at 42; O’Loughlin v O’Loughlin NSW CA, No. 40244/02, 1 May 2003, unreported at paragraphs 7 and 20.

42 Further, there can be no question that, at least as part of the first stage of the process, the question of whether the eligible person has a relevant need of maintenance etc is a proper enquiry. This is so as the proper level of maintenance etc appropriate for an eligible person in all the circumstances clearly calls for a consideration of his or her needs. However, the question of needs must not be too narrowly focussed. It must, in my view, take into account, depending upon the particular circumstances of the case, present and future needs including the need to guard against unforeseen contingencies.

43 The respondents submitted that the Acting Master’s findings in paragraph 56 of his judgment should be read against other statements in his judgment as to the appropriate test. Reference was made to paragraphs 31, 40 and 53. At paragraph 31 the Acting Master set out, practically verbatim, the paragraph from the majority judgment of the High Court in Singer referred to in paragraph 25 above. In paragraph 40 he found that there was

“no evidence to show that the plaintiff has needs for which some provision ought to be made from his mother’s estate.”

44 On the other hand, in paragraph 34 the Acting Master stated that the appellant:

“must be able to identify particular needs that have not been adequately provided for by the deceased”

Eggler

Singer

45 In my opinion the Acting Master did not err when he said that the first enquiry in every case was whether the eligible person had needs for which some provision ought to have been made from the deceased’s estate. His reference in paragraph 56 to “the first enquiry” was intended, correctly, to assert that, when considering the various matters required to be taken into account in the first stage of the process, it was necessary to initially determine whether there were any relevant needs and, if so, to then consider the other matters to which he referred in paragraph 31 of his judgment and which accorded with the statement of the test in Singer. In other words, the Acting Master was not suggesting that the question of needs was not only the first but also the only enquiry required in the first stage of the process. He was saying that unless there was a need for the maintenance etc., of the eligible person and which was appropriate to his or her circumstances, then the first stage enquiry would come to an end. However, if such needs were demonstrated then the first stage of the enquiry still required a consideration of the other factors referred to in the joint judgment of the High Court in Singer so as to determine whether the provision, if any, made by the deceased with respect to the proper maintenance etc of the eligible person was inadequate.

46 However, having said this, I consider that the Acting Master did err in so far as he focussed his attention upon what he referred to as the “particular needs” of the appellant without any adequate consideration of the possibility that there may be a change of circumstances between the appellant and his wife in the future including the possibility that the appellant’s wife may decide to transfer her assets, whether during her lifetime or by her will, to persons or organisations other than the appellant. True it is that in paragraph 55 of his judgment the Acting Master properly considered the previous history of the relationship between the appellant and his wife and the fact that he had had the benefit of his wife’s property to which he had so generously contributed. He found that the history of that relationship was such that he could presume that the appellant would not want for anything in the future. No doubt, that was a finding open to him. But it did not exclude the possibility that in the future things could change and it was against that contingency that the appellant had a need (given his lack of assets) which was unfulfilled.

47 As I have observed, the issue of need is not confined to whether or not an eligible person has, at the date of hearing, a then need for financial assistance with respect to his maintenance etc. It is a broader concept. This is so because the question of needs must be addressed in the context of the statutory requirement of what is “proper maintenance etc” of the eligible person. It is because of that context that, in the present case, the “proper maintenance etc” of the appellant required consideration of a need to guard against the contingency to which I have referred.

48 This Court warned against a narrow focus on an eligible person’s “needs” in Akkerman v Ewins, NSWCA No. 40824/98, 12 October 1999, unreported. In that case the Master had said this:

“There is no suggestion that he is destitute or that he is in urgent need of any financial benefit for any specific purpose. I am not satisfied that he has in any relevant sense established need with the consequence that I am not satisfied that he has established that he has been left without adequate provision for his maintenance, education or advancement in life.”

49 In paragraph 6 of his judgment Handley JA (with whom Beazley JA agreed) commented on this passage as follows:

“Mr Weinstein, counsel for the appellant, submitted that the statement by the Acting Master that the appellant was not destitute or in urgent need of any financial benefit for any specific purpose, while correct factually did not adequately reflect the legal test under s.9(2) of the Family Provision Act . This is, if I may say so, correct. However, I am not persuaded that the error Mr Weinstein has identified in this ex tempore judgment invalidated the Acting Master’s next finding that he had not been satisfied that the appellant had, in any relevant sense, established need or that he had been left without adequate provision for his “maintenance, education or advancement in life”.

50 Fitzgerald JA, whilst agreeing with Handley JA, added the following warning:

“The difficulty with the Acting Master’s reasons which the presiding Judge has mentioned arises from the convenient but potentially inaccurate equation of “need” to the statutory test of “inadequate provision” for the provision for the appellant’s “proper maintenance, education and advancement in life” in s.9(2) of the Family Provision Act 1982.

Although such shorthand is understandable the two concepts are not identical and care is necessary to ensure that where need is referred to, attention is not diverted from the legislative requirement.”

51 It is in the respects referred to above that the Acting Master has erred in this case. He has focussed too much on the particular or specific needs of the appellant rather than upon his needs in the “relevant sense”, namely, in the sense of what was necessary for the appellants’ “proper maintenance, education and advancement in life”.

52 I should, however, observe that the case for the appellant before the Acting Master did not appear to emphasise the need of the appellant that I have identified. Counsel was asked during the course of argument whether any submission was made to the Acting Master to the effect that the appellant had such a need. We were informed by junior counsel for the appellant who appeared below that it had been submitted (at least orally as it does not appear in the appellant’s written submissions to the Acting Master) that if the appellant’s wife refused to continue to fund his living expenses there would be a need in respect of which a provision ought to have been made. The respondent’s counsel, who also appeared below, indicated that he had no recollection of such a submission being made but he did not contest that one was made. Certainly, it was overlooked by the Acting Master. This is not too surprising given that, as the Acting Master himself observed in paragraph 36 of his judgment, the thrust of the appellant’s claim, which was that he should receive half of the actual and notional estate of the deceased, was that it was his exertions on behalf of the company during the years 1960 to 1984 that created the company’s wealth which was distributed to the deceased and formed the bulk of her estate.

53 However, the submission having been put, the Acting Master was required to deal with it. In my view he overlooked it with the consequence that his focus on the needs of the appellant was too narrow and should have included a consideration of a need of the appellant to guard against the contingency that there would be a change in the financial circumstances of the wife in the future and/or in their relationship. For these reasons, I am of the opinion that the error referred to vitiated the Acting Master’s decision with the consequence that it must be set aside.

54 Before leaving this aspect of the matter, there are two further observations that I wish to make. The first relates to the submission by the appellant that the Acting Master erred by failing to take into account in the first stage of the process the nature of the relationship between the appellant and the deceased. It was contended that his reference to that relationship in paragraph 56 included not only the personal relationship between the deceased and the appellant and any conduct of either party which may have affected that relationship but also the contribution made by the appellant to the deceased’s estate. I am not convinced that the Acting Master’s reference to the relationship between the deceased and the appellant was intended to cover other than the personal relationship between them which irretrievably broke down after 1984 and in respect of which it was contended by the respondents that the appellant was the sole contributor.

55 The second concerns the fact that both the contribution made by an eligible person to the acquisition of the deceased’s property and the conduct of that person with respect to the deceased are matters referred to in s 9(3) of the Act which are required to be taken into consideration pursuant to s 7. On one view, it could be said that neither of those matters are relevant to the first stage of the process required by s 9(2) but only to the second. However, the majority judgment of the High Court in Singer in the passage that I have cited in paragraph 23 above is to the contrary. Further, their Honours noted (at 210) that the determination of the second stage, should it arise, involved similar considerations to the first stage. Accordingly, even if the relationship referred to by the Acting Master in paragraph 56 of his judgment is confined as I think it is, nonetheless it was required to be taken into account in the first stage of the process and not, as he appears to have determined, confined to the second stage. It follows that had the Acting Master properly considered the question of needs he would have then been required, when considering further the first stage of the process, to have taken into consideration the nature of the relationship between the deceased and the appellant.

Re-exercise of discretion

56 It is common ground between the parties that if there be a finding that the Acting Master has erred so that his decision is set aside, this Court should make the determination itself as required under the Act.

57 Consistent with the findings set out above, the appellant has established that the proper level of maintenance appropriate to him generated a need which required a provision against the contingency that the situation with his wife would not continue indefinitely into the future. Given the findings of the Acting Master set forth in paragraph 55 of his judgment and which were not challenged on appeal, there can be no doubt that the chance of such a contingency coming to fruition is somewhat remote.

58 There being the need referred to, the next question is whether, in all the circumstances, the deceased, either during her lifetime or out of her estate, made a provision for the appellant which was inadequate for his proper maintenance given the need to provide for the contingency which has been identified. In making that determination regard must be had to the size and nature of the deceased’s estate and the totality of the relationship between the appellant and the deceased as well as the relationship with the deceased and other person who had legitimate claims upon her bounty. As to the last-mentioned factor, we were informed that a claim under the Act was made by the deceased’s grandson, Andrew, and that that claim was settled. No claim upon her estate other than that of the respondents has been identified and it is not suggested that the claims of the respondents have not been adequately provided for by the deceased in her will.

59 Of course, the deceased made no provision for the appellant in her will. Nevertheless, it was submitted by the respondents that she did make provision for him during her lifetime by exercising her majority voting rights in 1962 to cause the company to allot to the appellant 9,302 shares which, with the 200 shares he already held, gave him a 48% shareholding in its capital. It was as a consequence of that shareholding in 1985 that the appellant received $11,610,037 upon the winding up of the company.

60 The appellant somewhat faintly submitted that the foregoing did not constitute a provision by the deceased during her lifetime within the meaning of s 9(2)(a) of the Act but that if it did, the gift constituted by the shares in question should be discounted by the fact that the enhanced value of that shareholding as a result of the sale of the quotas was due entirely to the appellant’s efforts. This is no doubt the case but I do not consider that that fact negatives the provision which, in my opinion, was made for the appellant by the deceased in her lifetime. Without that provision the appellant would not have reaped the considerable sum that he did: on the contrary, his efforts would have contributed solely to the wealth of the deceased rather than to the wealth of both of them. It follows that I reject the proposition that the exercise by the deceased of her voting power did not constitute the making of a provision in favour of the appellant during her lifetime within the meaning of s 9(2) of the Act. There is nothing in the section which restricts such a provision to the transfer of property so as to exclude the exercise of a legal right by a deceased person which creates and vests an asset in the eligible person.

61 There can be no doubt that the appellant was the driving force behind the success of the company and of the ultimate sale of the quotas and that, as a consequence, the extent of the deceased’s estate was due solely to his efforts. Further, the appellant ensured between 1960 and 1984 that the deceased was properly provided for in terms of income from the company and other benefits. Nevertheless, his own efforts in terms of the extensive expansion of the company’s operations were well rewarded as the Acting Master found in paragraph 40 of his judgment. The appellant, by his own evidence, accepted that he was well paid when he ran the company not only in terms of annual salary but also the attached package which included the provision of a house and a number of motor vehicles. There was no suggestion that, whilst he ran the company, he was required to sacrifice his standard of living which he accepted was lavish. On the other hand, the evidence appears to have established that his trips to China to expand the company’s operations took their toll on his health from which he is still suffering. However, from a financial and lifestyle point of view, the appellant reaped the rewards of his efforts.

62 Critical for present purposes is the nature of the personal relationship between the appellant and the deceased. Ultimately the Acting Master did not have to make final findings with respect to the cause of the breakdown of that relationship after 1984 given his view as to the point when it became legally relevant. Further, the submissions to us with respect to this issue, particularly by the appellant, were understandably meagre. Nonetheless, the Acting Master found that as from late 1984, when the appellant approached the deceased and informed her that she should receive only $2,000,000 from the sale of the quotas, their relationship deteriorated dramatically and irrevocably.

63 There are a number of facts relevant to this issue which are established by the evidence. Thus at the time the appellant approached the deceased in late October 1984 on the day of the funeral of her sister, he informed her of the proposed sale of the quotas to Coles and/or Fosseys and that whatever payments were made from those proceeds to the deceased and the first respondent were not dependant on their shareholding in the capital of the company. He informed them that due to the fact that the sale proceeds were generated solely by his efforts, the deceased would receive only $2,000,000. Although as I have observed in paragraph 13 above, there was a dispute about the issue as to whether on that occasion the appellant informed the deceased as to the amount it was expected would be received for the sale of the quotas, I am prepared to accept for present purposes that the appellant did inform the deceased that Coles’ offer was somewhere between $15,000,000 and $19,000,000. The appellant sought to have the deceased and the first respondent sign an agreement whereby they would receive the amounts that he had discussed with them after the funeral, the balance to be paid to him but neither would do so. They thereafter sought legal advice which was no doubt to the effect that, upon the winding up of the company, they would receive the proceeds of sale in accordance with their shareholding.

64 According to the Acting Master it was at this point that the deceased formed the view that the appellant was trying to cheat her: see paragraph 14 above. That finding was justified and, in fact, was not challenged by the appellant.

65 As recorded in paragraph 16 above, proceedings were commenced in the Equity Division of this Court to restrain the appellant from distributing the proceeds of the sale of the quotas cheques received from Coles and Fosseys. Those proceedings were ultimately settled upon the basis that the parties would receive their entitlements upon the winding up of the company in accordance with their shareholding.

66 I have also recorded in paragraph 17 above that the appellant asserted that he had had prepared a further agreement which provided for the payment of $14,000,000 to the deceased, $1,000,000 to the first respondent and the balance of $11,000,000 to himself but, once again, the deceased and the first respondent declined to sign such an agreement. The assertion referred to was contained in an affidavit of the appellant sworn on 16 October 1990 and filed in the proceedings commenced by him against the deceased in June 1989. No evidence was filed by the appellant with respect to this matter in the present proceedings although, in cross-examination, he acknowledged that the deceased had concerns which resulted in the institution by her of proceedings in April 1985 but that, through his solicitors, he had sought to placate her and to indicate that everything would be alright. Although the Acting Master made no particular finding with respect to this matter, for present purposes I am prepared to accept that the offer referred to by the appellant was made but rejected. However, the favourable nature of this offer lost its force when the appellant, out of spite according to the Acting Master, instituted the proceedings in June 1989 against the deceased and to which I have referred in paragraphs 18, 19, and 20 above.

67 In 1984 proceedings were instituted in the Family Court of Australia between the appellant and his second wife. Those proceedings were heard in November 1988 and January and February 1989. The appellant gave evidence before the Acting Master that those proceedings were bitterly contested. The deceased gave evidence on behalf of the wife in those proceedings and the appellant gave evidence before the Acting Master that he found it hard to understand why she had done so. He disagreed in cross-examination that the deceased’s evidence in those proceedings was even handed but conceded that she spoke glowingly of his role in the company and was not critical of his performance in that regard. He further accepted that in her evidence the deceased supported the appellant in some aspects of the matters he was asserting against his second wife but did not support him in others.

68 Judgment in the Family Court was delivered on 26 May 1989 and in June of the same year the appellant commenced proceedings in the Common Law Division of this Court against the deceased claiming breach of an oral agreement which he alleged was entered into between himself and the deceased in late October 1984. In cross-examination in the present proceedings he denied that those proceedings were instituted because he was upset and angry with the role that the deceased had played in his second wife’s Family Court proceedings and maintained that he held no resentment against her in that regard. He asserted that he simply wished to set things right so far as his version of that oral agreement was concerned. Nevertheless, he accepted that the proceedings were conducted vigorously on both sides and that he had snapped a default judgment upon his mother for the sum of $15,700,000 and that he had refused to consent to that judgment being set aside as a consequence whereof there was a contested hearing and the deceased, a woman of 76 years, was cross-examined vigorously and at length.

69 Notwithstanding the appellant’s evidence to the contrary, the Acting Master found that those proceedings were instituted out of spite. Further, he found that although his wife had made funds available for the payment of his own costs in those proceedings, no such funds were made available for the payment of the deceased’s costs which the appellant was ordered to pay by Finlay J. The Acting Master further found that the failure to pay those costs was a purely vindictive action taken by both the appellant and his wife against the deceased. There was no challenge by the appellant to these findings.

70 There are three other matters to be considered. The first is the claim of the appellant that he had not worked since the company was wound up in 1985 because he had been advised that to do so would have an adverse effect on the tax position with respect to the proceeds of sale of the quotas and that, in any event, he was not qualified for any work other than the importation of garments and manchester. As the Acting Master indicated in paragraph 45 of his judgment, the appellant’s reason for not working due to tax implications was not made clear during the course of the hearing before him. Be that as it may, the appellant conceded in cross-examination that, given that he was only 50 years of age at the time of the winding up, he had the skills to engage in businesses other than clothing importation and that although his considerable business experience was confined to the garment import business, nonetheless he also had considerable business experience in the field of international trade. The appellant agreed that, upon receipt of his entitlement to the assets of the company on the winding up, he was in a position to financially retire and never work again and to live comfortably for the rest of his life. This is in fact what he did. It seems to me that this was a conscious choice taken by the appellant at the time replete in the knowledge that there was no financial necessity for him to work notwithstanding that he had the skills to do so if he wished.

71 Secondly, the appellant voluntarily arranged the transfer of his entitlement upon the winding up of the company direct to his wife. According to his evidence, he then became totally dependent upon her. He accepted in cross-examination that that was a considered decision on his part and not contingent upon any demands of his wife. Nevertheless, he maintained that although it was intended that the gift made by him to his wife would be for their mutual benefit, nonetheless he remained dependent upon her good graces so far as his future financial support was concerned. Her assets as a result of the gift were valued at the time of the hearing at approximately $6,800,000 comprising, in the main, real estate, furniture, objects d’art and cash.

72 Although it was suggested to the appellant in cross-examination that the transfer of his entitlement took place in order to frustrate his second wife’s Family Court proceedings, a proposition that he denied, Nygh J in his judgment in the Family Court was of a different view. Although his Honour determined that it was not necessary to find that the gift of funds from the appellant to his wife was made with the intention of defeating any anticipated order of which his second wife might be the beneficiary in the Family Court proceedings, nonetheless he held that it was difficult to escape the conclusion that the appellant’s actions with respect to the making of the gift and its timing was taken with such an intention. He considered that the appellant’s declaration that he disposed of his assets out of love and affection for his then wife 'sounded particularly hollow’.

73 The third matter relates to the affidavit evidence of the appellant, upon which he was not cross-examined, that he had attempted on a number of occasions (presumably after 1990) to contact the deceased to speak to her but was rebuffed. He was informed on one such occasion by the second respondent that the deceased “gets too upset when you speak to her”. It is apparent that the deceased cut herself off from the appellant and his family including his children. In the circumstances, I am not prepared to find that the deceased’s conduct in this regard was unjustified.

Conclusion

74 It is in the foregoing circumstances that I am required to determine whether, taking into account the proper level of maintenance etc., appropriate for the appellant having regard to his financial position, the size and nature of the deceased’s estate and the totality of the relationship between the appellant and the deceased, any provision made by the deceased during her lifetime (there being none made in her will) was, when considered as at the date of the hearing, inadequate.

75 After careful consideration of all the matters recorded above and weighing them all in the balance, I have come to the conclusion that it was not. True it is that in some circumstances prevailing community standards of what is right and appropriate might point to the conclusion that the deceased ought to have made some provision out of her estate to cater for the need to protect the appellant against the contingency that the financial support he receives from his wife might cease. On the other hand, in this case, and notwithstanding the appellant’s efforts in contributing to the acquisition by the deceased of the assets which formed her estate, the appellant, for reasons good or bad, deliberately divested himself of his entitlement which he would not otherwise have obtained were it not for the deceased’s actions that resulted in a substantial increase in his shareholding in the company. Further, when one takes into account his subsequent conduct and, in particular, that related to the 1989 proceedings, I am lead to the inevitable conclusion that the provision made by the deceased in her lifetime for the appellant was not inadequate for his proper maintenance etc., with the consequence that the appellant has not satisfied the condition precedent mandated by s 9(2) of the Act for the making of an order under s 7.

76 I would add that even if the provision made by the deceased during her lifetime was regarded as inadequate, taking into account the matters referred in s 9(3) of the Act which I have detailed above, I would have come to the same conclusion when entering a determination pursuant to s 7 namely, that in the circumstances existing at the date of the hearing, I would not be satisfied that any provision “ought” to be made in favour of the appellant out of the estate of the deceased for his maintenance, education or advancement in life.

77 For the foregoing reasons, I am of the opinion that the Acting Master was correct in dismissing the appellant’s application with the consequence that his appeal to this Court should also be dismissed with costs.

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Last Modified: 07/21/2003

Citations

Collins v McGain [2003] NSWCA 190

Most Recent Citation

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Darveniza v Darveniza [2014] QSC 37

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Statutory Material Cited

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Singer v Berghouse [1994] HCA 40

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CITATION:	Collins v McGain & Anor [2003] NSWCA 190
HEARING DATE(S):	8 May 2003
JUDGMENT DATE:	16 July 2003
JUDGMENT OF:	Beazley JA at 1; Hodgson JA at 2; Tobias JA at 14
DECISION:	Appeal to be dismissed with costs.
CATCHWORDS:	Probate - Appeal an application for order making provision for appellant out of respondent's estate on basis of need. - D
LEGISLATION CITED:	Family Provision Act 1982, s7, s9, s9(3), s9(2), s9(2)(a)
CASES CITED:	Singer v Berghouse (1994) Bosch v Perpetual Trustee Company Pty Ltd (1938) AC 463 Permanent Trustee Co Limited v Fraser (1995) 36 NSWLR 24 Eggler v Mitchelmore 11 November 1992 (unreported) House v The King (1936) 55 CLR 499 O'Loughlin v O'Loughlin 1 May 2003 (unreported) Akkerman v Ewins 12 October 1999 (unreported)
PARTIES :	David John Collins Beverley Ann McGain and Lloyd Raymond Mead
FILE NUMBER(S):	CA 40814/02
COUNSEL:	A - David Davies SC / T Hodgson R - R Darke SC
SOLICITORS:	A - Harris & Company R - Lane & Lane

LOWER COURTJURISDICTION:	Supreme Court
LOWER COURT FILE NUMBER(S):	SC 2403/01
LOWER COURT JUDICIAL OFFICER :	Berecry AM