D'Andrea v McKenzie

[2012] VCC 659

IN THE COUNTY COURT OF VICTORIA  Revised
Not Restricted

AT MELBOURNE

CIVIL DIVISION
COMMERCIAL LIST
FAMILY PROPERTY DIVISION

Case No.  CI-11-02920

IN THE MATTER of the Will and Estate of Fiona Joy McKenzie, deceased

– and –

IN THE MATTER of PART IV of the Administration & Probate Act 1958

BETWEEN:

LORENZO D'ANDREA	Plaintiff
v
GISELLE ROSE McKENZIE (as Executrix of the Will and Estate of FIONA JOY McKENZIE, deceased)	Defendant

JUDGE:	HIS HONOUR JUDGE SMITH
WHERE HELD:	Melbourne
DATE OF HEARING:	11, 14, 15 and 16 May 2012
DATE OF JUDGMENT:	5 June 2012
CASE MAY BE CITED AS:	D'Andrea v McKenzie
MEDIUM NEUTRAL CITATION:	[2012] VCC 659

REASONS FOR JUDGMENT

Catchwords: PART IV Administration & Probate Act 1958 – application for an order for provision for proper maintenance and support from the estate of the deceased – application by de facto spouse of the deceased where the deceased’s estate had been left to her sibling – consideration of the financial circumstances of de facto spouse and beneficiary – moral responsibility to make provision for proper maintenance and support of de facto spouse – freedom of testamentary disposition.

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms L Engelfield	Juliano Lawyers
For the Defendant	Ms E Konstantinou	Nevett Ford

HIS HONOUR:

1       Lorenzo D’Andrea resided with Fiona Joy McKenzie (“the deceased”) in a de facto relationship for approximately nine years prior to her death on 2 September 2010.

2       In her Will, made on 26 June 2008, the deceased appointed her sister, Giselle Rose McKenzie, as Executrix of her Will and Estate.  By her Will, the deceased left her estate to Ms McKenzie.

3       In this proceeding, Mr D’Andrea seeks, pursuant to Part IV of the Administration & Probate Act 1958 (“the Act”), an order that provision be made out of the estate for his proper maintenance and support.

4       The application is opposed by Ms McKenzie.

Legislative Framework and Legal Principles

5       The Court has jurisdiction to order that provision be made out of the estate of a deceased person for the proper maintenance and support of a person for whom the deceased had responsibility to make provision.[1]

[1]S.91(1) of the Act

6       The Court must not make such an order unless the Court is of the opinion that the distribution of the estate of the deceased person affected by her Will does not make adequate provision for the proper maintenance and support of that person.[2]

[2]S.91(3) of the Act

7       By reason of the provisions of s.91(4) of the Act, Mr D’Andrea’s application for provision requires determination of three questions:

·     Whether or not at the date of her death the deceased had responsibility to make provision for his proper maintenance and support?

·     Whether or not the distribution of the deceased’s estate makes adequate provision for his proper maintenance and support?

·     If not, what provision should be made?[3]

[3]Forsyth v Sinclair [2010] VSCA 147 at [58]

8       In answering each of those questions, s.91(4) of the Act requires the Court to have regard to a number of matters set out in sub-paragraphs (e) to (p) of that sub-section.  These are as follows:

“(e)         any family or other relationship between the deceased person and the applicant, including the nature of the relationship and, where relevant, the length of the relationship;

(f)any obligations or responsibilities of the deceased person to the applicant, any other applicant and the beneficiaries of the estate;

(g)the size and nature of the estate of the deceased person and any charges and liabilities to which the estate is subject;

(h)the financial resources (including earning capacity) and the financial needs of the applicant, of any other applicant and of any beneficiary of the estate at the time of the hearing and for the foreseeable future;

(i)any physical, mental or intellectual disability of any applicant or any beneficiary of the estate;

(j)the age of the applicant;

(k)any contribution (not for adequate consideration) of the applicant to building up the estate or to the welfare of the deceased or the family of the deceased;

(l)any benefits previously given by the deceased person to any applicant or to any beneficiary;

(m)whether the applicant was being maintained by the deceased person before that person's death either wholly or partly and, where the Court considers it relevant, the extent to which and the basis upon which the deceased had assumed that responsibility;

(n)the liability of any other person to maintain the applicant;

(o)the character and conduct of the applicant or any other person;

(p)any other matter the Court considers relevant.”

9       In Forsyth v Sinclair, Neave JA (with whom Redlich JA and Habersberger AJA agreed), said:

“In deciding whether to exercise its limited discretion to order provision from the estate of a deceased person, courts have given considerable weight to freedom of testation.  It is only if the deceased has failed to make adequate provision for the proper maintenance and support of the applicant, that an order interfering with the terms of a Will is justified.  The test which was traditionally applied was whether a ‘wise and just’ testator would have considered that he or she had a moral duty to make further provision for the applicant.”[4]

[4]Forsyth v Sinclair (supra) at [60]

10      In this matter, Ms McKenzie concedes:

(a)      that on the basis of Mr D’Andrea’s evidence, it is more likely than not that a de facto relationship existed between he and the deceased at the time of her death;

(b)      as a consequence of that de facto relationship, the deceased had a moral responsibility to make provision from her estate for Mr D’Andrea’s proper maintenance and support.[5]

[5]paragraphs 4 and 5 of the defendant’s written submissions

11      Notwithstanding the existence of that moral responsibility, Ms McKenzie submits that there was no breach by the deceased of that duty and that her testamentary freedom ought not be disturbed.  She submits that the deceased acted as a wise and just testator in relation to the manner in which she left her estate.

12      Nevertheless, in her closing submissions, counsel for the defendant submitted that, having regard to the circumstances of the defendant and on the evidence before the Court, it was appropriate to split the estate between the parties, 60/40 in Ms McKenzie’s favour.[6]

[6]T 271-2

13      Counsel for the plaintiff submits that the issue as to whether or not there has been a breach of the moral duty owed by the deceased to make provision for Mr D’Andrea is effectively conceded by Ms McKenzie by her counsel’s submission that a 40 per cent provision from the estate for him would be appropriate.  I consider that the submission relating to the 60/40 split must amount to such a concession.  In any event, for the reasons expressed briefly below, even if such concessions had not been made, I would have found that in all the circumstances there was a duty owed by the deceased to Mr D’Andrea to make adequate provision for his proper maintenance and support and that there had been a breach of that duty by the deceased.

14      After considering each of the matters mentioned in s.91(4)(e) to (p), I am required to determine what provision (if any) the deceased, as a wise and just testator, would have thought it was her moral duty to make in the interests of Mr D’Andrea.

“That test remains one of whether and if so what provision a wise and just testator would have thought it his moral duty to make in the interests of the claimant.”[7]

[7]Blair v Blair (2004) 10 VR 69 at [41]

Background

15      The deceased died on 2 September 2010, aged fifty-two.

16      Mr D’Andrea is presently aged fifty-nine.

17      Ms McKenzie is presently aged forty-seven.

18      Mr D’Andrea had previously married in 1975.  There were three children from that marriage who are presently aged approximately thirty-six, thirty-four and thirty-two.  He was divorced from his wife in 1998. 

19      He was a commercial house painter and plasterer and worked in that capacity up until about 1990, at which time he opened a restaurant and pizza business.  He owned a house in Hopper’s Crossing but it was rented out.  He lived above the restaurant. 

20      The deceased had three siblings, Ian McKenzie, Felicity McKenzie and Giselle McKenzie (the defendant in this proceeding).  Felicity died in May 2004. 

21      The deceased was, by occupation, an industrial chemist and worked in that field for many years.  She was, for some years, employed in product management and sales with ICI/Orica.  She was made redundant from that company at some time in the early 2000s but after a few months obtained employment with GE Finance and HBA, and more recently as a licensing officer in the office with the Essential Services Commission.

22      The couple met and formed a relationship in the latter part of 2001.  At about that time, Mr D’Andrea had considered selling his restaurant and acquiring another with better facilities.  The deceased expressed her concern to him that this would involve him working weekends and at nights and that they would have little time together.  As a consequence, he agreed to sell his business and return to his commercial painting business. 

23      From about March 2002, Mr D’Andrea lived with the deceased at her home at 4 Naismith Street Footscray (“the Footscray property”).  He worked as a painter and plasterer.  She worked in the occupations referred to above.

24      In about 2005, the deceased was diagnosed with a cardiac condition and was advised that she had a life expectancy or some four or five years.  Nevertheless, she continued in employment and experienced relatively good health for some years. 

25      The couple continued to reside together at the Footscray property in a de facto relationship until her death in September 2010. 

26      In 2006, the father of the deceased and Ms McKenzie died.  His estate, consisting mainly of a rural property, was sold and the proceeds distributed equally between the deceased, Ms McKenzie and their brother Ian.  In early 2008, they each received approximately $419,000, being a one-third share of their father’s net estate.  The deceased applied most of that inheritance to pay off a bank loan secured by a mortgage over the Footscray property.  From that time, the Footscray property was unencumbered and remains so. 

27      In the early part of 2008, the deceased and Mr D’Andrea decided to renovate the home at the Footscray property.  It was, at that time, a relatively simple single storey weatherboard structure.  They arranged for plans to be drawn up for a two-storey extension and significant renovation.

28      In mid-2008, the deceased and Mr D’Andrea decided that, rather than rent accommodation whilst the renovation works were taking place at the Footscray property, they would purchase another house in which they would live temporarily.  In mid-2008, they purchased, as joint tenants, a home in Marsh Street, Maidstone (“the Maidstone property”) for $610,000.  Mr D’Andrea’s evidence was that the purchase was funded as follows:

(a)      a cash contribution by the deceased of $100,000;

(b)      a cash contribution by Mr D’Andrea of $100,000;

(c)       a bank loan of $400,000 secured by a mortgage over the Maidstone property.

I appreciate that this reflects a shortfall of some $10,000 plus costs and duty associated with purchase but nothing appears to turn on this.  There was no evidence concerning that shortfall.

29      It was their intention to obtain a dual occupancy permit in respect of the Maidstone property and to sell it when the renovations to the Footscray property had been completed.  They anticipated that, with the dual occupancy permit in place, they would be able to sell the Maidstone property at a considerable profit. 

30      The couple moved into the Maidstone property in late 2008, by which time the renovations to the Footscray property had commenced.  Mr D’Andrea intended to personally perform part of the renovation work, including painting, plastering, and some of the labouring work.

31      In June 2009, Mr D’Andrea was diagnosed with a cancer condition known as Burkitt’s Lymphoma.  He was admitted to hospital, where he remained for approximately five months. 

32      By February 2010, it was clear that the renovations of the Footscray property were taking longer and costing more than expected.  The couple arranged to extend the bank loan (secured by the mortgage over the Maidstone property) by an additional sum of $45,000.  That sum was used for additional costs of renovating the Footscray property.  In early 2010, the renovations were largely completed and the couple resumed occupancy.

33      On 12 July 2010, the deceased fell, fracturing her arm.  She was treated at the Western General Hospital.  In July 2010, she suffered a stroke.  She was treated again at the Western General Hospital for approximately ten days, following which she was able to return home.  She died a little over a month later, on 2 September 2010, from a cardiac condition.

34      The deceased had made her last Will[8] on 26 June 2008.  It provided that her half share in the Maidstone property should go to Mr D’Andrea.  The Maidstone property was treated as if it were part of her estate.  However, this appears to be a misunderstanding on her part or possibly on the part of those who prepared the Will for her.  In fact, the Maidstone property was owned by the deceased and Mr D’Andrea as joint tenants.  Accordingly, on the death of either of them, the deceased’s share automatically passed to the survivor and would never have formed part of the deceased’s estate. 

[8]PCB 13

35      The deceased left the residue of her estate, both real and personal, to Ms McKenzie subject only to her surviving the deceased for thirty days.

36      It follows that, in reality, the deceased left her entire estate to Ms McKenzie.

37      Mr D’Andrea’s evidence, which I accept, was that around mid 2008, he and the deceased had discussed making new wills.  The deceased had told him that she had superannuation entitlements of approximately $500,000 and that, on her death, that entitlement would “automatically” go to Mr D’Andrea.  He stated that, at that time, it was anticipated that they would make a profit upon the sale of the Maidstone property in due course.  They had discussed that she would leave the Footscray property to Ms McKenzie, and that he would leave his house in Hoppers Crossing to his children.  He thought, at the time, that that was fair.  In fact, the deceased’s Will gives effect to what was arranged in these discussions.

38      The evidence discloses that, after the making of the deceased’s Will, a number of events occurred which would not have been anticipated by Mr D’Andrea or, on his evidence, by the deceased.  I shall refer to these later in these Reasons.

39      I shall now turn to the matters that I am required by s.91(4) of the Act to take into account.

The Relationship between Mr D’Andrea and the Deceased

40      Section 94(4)(e) of the Act requires me to have regard to the nature of the relationship between Mr D’Andrea and the deceased.

41      Mr D’Andrea had resided with the deceased in a de facto relationship for approximately nine years prior to her death.  During that period, both had suffered significant illnesses.  It is clear that both had supported the other admirably through these difficult periods. 

42      The evidence points to the relationship being a close and loving one.  Although it appears that Ms McKenzie had some doubts as to the closeness of the relationship, the affidavits of Mr D’Andrea and Mr Sardelic,[9] the cards written by the deceased to Mr D’Andrea[10], and the letters tendered from Mr Lahn,[11] Mr Adams,[12] Mr Ozzimo,[13] Ms Larubina[14] and Mr Basile[15] provide strong evidence as to the closeness of the relationship.

[9]PCB 84-88

[10]PCB 140A to 141A

[11]PCB 147

[12]PCB 148

[13]PCB 149

[14]PCB 151

[15]PCB 152

43      I further note that, in cross-examination, Mr D’Andrea was not challenged regarding the nature of and closeness of the relationship.

44      There are a number of objective signs pointing to a close relationship:

(a)      Between 2008 and 2010, Mr D’Andrea and the deceased embarked upon a significant renovation to the Footscray property, conduct that I consider is indicative of an intention to continue living together in the long term;

(b)      The purchase of the Maidstone property jointly for the dual purpose of living in it whilst the Footscray property was being renovated and also for investment purposes;

(c)       Mr D’Andrea and the deceased embarked upon a number of holidays together between 2004 and 2009.  These included holidays in Queensland and the United States and cruise ship holidays.  They embarked on the same or similar cruise holidays on three different occasions in 2007 and 2008, indicating to me that they thoroughly enjoyed them;

(d)      The nature of the words written by the deceased on cards given by her to Mr D’Andrea are indicative of a close and loving relationship.

The Size and Nature of the Estate

45      S.91(4)(g) of the Act requires me to have regard to the size and nature of the estate of the deceased and any charges or liabilities to which the estate is subject.[16]   The estate consists of the following:

[16]S.91(4)(g) of the Act

(a)      The Footscray property, which the parties agree has a current value of $800,000;

(b)      A 2004 BMW 318i motor vehicle, which the parties agree has a current value of approximately $14,000;

(c)       Sundry investments and deposits with Westpac Bank and BT totalling approximately $5,315;

(d)      Shares in Dulux Group Ltd valued at approximately $420;

(e)      A loan to one Richard Bunting of $7,000, which he has acknowledged is owing;

(f)       An asset described in the inventory of the estate[17] as “Unpaid employment benefits Department of Treasury & Finance”, valued at $6,231;

(g)      Other sundry amounts totalling approximately $670.

[17]PCB 42

46      Although the inventory lists an item entitled “Personal Effects/Household Items” valued at $10,000[18], the parties were in agreement that this item ought to be disregarded.  It appears that a number of items of household furniture are in fact the property of Mr D’Andrea rather than the Estate. 

[18]PCB 42

47      It follows that the estate has assets valued at approximately $833,636.  It had liabilities of approximately $9,471[19] leaving a net value of about $824,000 in round figures.

[19]PCB 44

48      It should be noted that in the inventory of the assets of the estate[20] prepared by or on behalf of Ms McKenzie, two superannuation funds totalling approximately $212,000 were included.  It was agreed by the parties that these funds did not form part of the deceased’s estate.  I shall refer to these funds later in these Reasons.

[20]PCB 41-43

The Financial Resources of the Parties

49      S.91(4)(h) of the Act requires me to have regard to the financial resources (including earning capacity) and the financial needs of Mr D’Andrea and of Ms McKenzie at the current time and in the foreseeable future. 

Mr D’Andrea’s Financial Position

50      In 2001, and prior to the commencement of Mr D’Andrea’s relationship with the deceased, he owned a house in Hoppers Crossing which he had originally purchased in 1976 as his first matrimonial home.  It was unencumbered; the mortgage over it having been discharged in about 1980.  He owned and operated a restaurant in Collingwood and was living at those premises.  The Hoppers Crossing house was rented.  In early 2002, he sold the restaurant for about $70,000.  He moved in to live with the deceased at the Footscray property.  He continued to rent out the Hoppers Crossing house until it was sold in 2011 for a sum of $260,000. 

51      At the present time, Mr D’Andrea’s assets consist of the following:

(a)      The Maidstone property, which the parties agreed was currently valued at $750,000.  It is encumbered by a mortgage securing a loan of $445,000.  This amount represents the original loan of $400,000 taken out at the time of the purchase of the property plus the additional amount of $45,000 borrowed in order to complete the renovations of the Footscray property.  This is an interest only loan.  Payments are $3,200 per month.  The property is presently rented for $400 per week, but has been empty at times.  When occupied, I calculate the rental to be $1,733 per month.  Mr D’Andrea attempted to sell the Maidstone property in 2011, having finally obtained a permit for dual occupancy.  It was placed on the market with an asking price of $800,000.  At auction, there was only a “vendor’s bid” for $750,000.  No other offer was made.  The parties agreed that for the purposes of this proceeding, the Maidstone property is currently valued at $750,000.  I take into account that the loan secured by way of mortgage over the property is $445,000, leaving a net value of $305,000.

(b)      An entitlement to his own superannuation benefits, agreed by the parties to have a value of about $60,000.

(c)       A bank deposit of about $200,000, being what is left of the proceeds of the sale of his Hopper’s Crossing home in 2011. 

52      Mr D’Andrea has continued to live in the Footscray property since the death of the deceased.

53      From the commencement of his relationship with the deceased in 2001, Mr D’Andrea operated a commercial painting business known as Lordan Painting.  His taxation returns for recent years were tendered.[21]  In his affidavit evidence, Mr D’Andrea says little about that business, save for setting out his taxable income figures for the financial years ending 30 June 2007 to 30 June 2011, inclusive.  An inspection of those taxation returns discloses the following gross income and net income (before income tax) derived from the business.

[21]Exhibit 4

Year Ending	Total Business Income	Net Income After Expenses (before income tax)
30 June 2007	$32,131	$8,617
30 June 2008	$62,764	$16,475
30 June 2009	$83,445	$34,669
30 June 2010	$81,565	$26,133
30 June 2011	$151,045	$41,825

54      Those returns disclose that in each of the last three years, expenses have included amounts paid to contractors or sub-contractors of $14,198, $20,391, and most recently, $58,537.

55      Those returns indicate to me that the painting business has expanded in recent times.  The gross income has nearly doubled between the 2010 and the 2011 financial years.  The expenditure relating to contractors more than doubled in that period. 

56      Mr D’Andrea suffered a serious illness in mid-2009.  It seems that he did not work for approximately six months and only returned to work around Christmas 2009.  Notwithstanding, the gross income for the year ending 30 June 2009 was about the same as in the previous year.  The net income was reduced no doubt because he was unable to work for much of the 2010 year. 

57      He deposes that his health now is reasonable.[22]  He still attends his cancer specialist for a check up and tests every six months.  There has been no indication of recurrence of his cancer.  However, he understands from his doctor that he will not get a final “all clear” in respect of his cancer for another two or three years[23] (assuming he remains well).  At the present time, he is optimistic of a complete recovery.  Naturally, one could never be guaranteed continuing good health.

[22]PCB 105

[23]T 101

58      Mr D’Andrea has also been diagnosed with osteoarthritis in both thumbs which has impeded his handling of paint brushes and painting duties in general.  He tendered a report from Dr Louis Luu of the Footscray West Medical Clinic dated 4 May 2012.[24]  Dr Luu has reported that:

“Mr Laurie D’Andrea has been diagnosed with severe degenerative osteoarthritis of his left thumb and mild to moderate in other joint in both hand (sic).  This has prevented him from working as a painter.”

[24]PCB 145

59      Notwithstanding that condition, it appears that the gross takings of the business have increased significantly in financial year ending 30 June 2011, along with the net profit after expenses.  He did not produce any figures for the period 1 July 2011 to date and I infer that such figures, if produced, would not have reflected any fall in income over that period. 

60      Further, in oral evidence, Mr D’Andrea candidly stated that he considered that he would be able to perform work for a commercial painting company providing quotations for jobs.[25]  In addition, he volunteered that another option for him was that he could go back to operating a café and further, that he had considered doing so.[26] 

[25]T 102-3

[26]T 103

61      As a consequence of the death of the deceased, superannuation benefits became payable at the discretion of trustees of three different superannuation funds of which she was a member - namely, VicSuper, SuperTrace and CareSuper.  Prior to the hearing of this proceeding, the trustees of each of those funds had made determinations concerning distribution from those funds as follows:

(a)VicSuper - $67,767 – 100 per cent to be paid to Ms McKenzie

(b)SuperTrace - $116,964.93 – 100 per cent to be paid to Mr D’Andrea

(c)CareSuper - $172,605.45 – to be distributed as to 50 per cent to each of Mr D’Andrea and Ms McKenzie – that is, each would receive from this fund the sum of $86,302.72.

62      Both Mr D’Andrea and Ms McKenzie have objected to those decisions by the respective trustees and each of those decisions has been the subject of a complaint to the Superannuation Complaints Tribunal.  No decision had been made by that Tribunal as at the date of this hearing.  The parties agreed, during the course of the hearing, that each would withdraw its complaint to that Tribunal and will advise those trustees that they consent to the trustees making payments to the parties in accordance with their original decisions.

63      It follows that the combined decisions of those trustees resulted in (or would result in) a payment of $203,267.65 to Mr D’Andrea and $154,069.72 to Ms McKenzie. 

64      Mr D’Andrea’s asset position can be summarised (in round figures) as:

Cash in Bank  $200,000

Superannuation entitlements (his own)               $60,000

Entitlement to superannuation benefits

from deceased’s superannuation  $203,267

Maidstone property (net of bank loan)               $305,000

Total  $768,267

65      In addition, he appears to currently be capable of earning in the vicinity of $40,000 from his painting business net of expenses and before income tax.  Given his age, I think it unlikely that such potential for income will last more than another five years or so.  I consider that his suggestion that he may be able to recommence operation of a café business to be highly speculative.  He will, until the Maidstone property is sold, incur a monthly expense, being the shortfall between the monthly interest on the loan and the monthly rental received.  I appreciate the property might increase or fall in value.

Ms McKenzie’s Financial Position

66      Pursuant to the arrangement reached between the parties in relation to distribution from the three superannuation funds referred to above, the sum of $154,069 will be paid to her.

67      In 2008, Ms McKenzie inherited a sum of approximately $419,000 from her father’s estate.  The evidence as to what had happened to that inheritance between 2008 and the present time was vague and somewhat unsatisfactory.   

68      In her affidavit affirmed on 26 October 2011, she stated that she had an account with ING Direct with a balance of about $200,000, which she described as her share of the proceeds from the sale of her late parents’ farm.[27]  She tendered statements from ING Direct which indicate that:

[27]PCB 32

(a)      immediately prior to April 2011, the ING Direct account balance was $322,308.82; 

(b)      at 8 October 2011, the balance of the account was $200,088.57;[28]

[28]PCB 76

(c)       the balance as at the end of 2011 was $192,499.85;

(d)      the balance as at 20 April 2012 was $170,578.[29] 

[29]DCB 19

69      Ms McKenzie’s evidence as to what had happened to the proceeds of her father’s estate and to the ING Direct balance was unsatisfactory.  Those statements indicate that from early 2008 to April 2012, some $250,000 was withdrawn.

70      At the commencement of the second day of the hearing, whilst still under cross-examination, she volunteered that in 2011 she had loaned her brother a sum of $95,000, interest free, for an indefinite period.  The loan was to assist him in a business venture involving a covered market somewhere in the Philippines.  She appeared to have little if any knowledge of whereabouts the market was to be constructed or any details of the venture. 

71      She made no mention of the loan in her affidavits sworn or affirmed by her in the proceeding, even though she had purported to set out her financial circumstances.[30]  The loan was not evidenced by any note or document.[31]  The loan was provided to her brother at a time when he owned three other investment properties plus his own home.[32]

[30]PCB 31-32

[31]T 164

[32]T 161

72      I find it most unlikely that Ms McKenzie did not appreciate that the loan formed part of her assets or, at least, was a matter relevant to her financial circumstances.

73      Her evidence concerning the withdrawals of substantial amounts from her ING Direct account during 2010 and 2011 was unsatisfactory to say the least.  Between early 2008, when she received her share of her father’s estate, and April 2012, it appears that some $250,000 was withdrawn.  Withdrawals between 10 April 2011 and 31 December 2011 totalled $139,000.  Withdrawals totalling about $20,000 had been made between 1 January and 20 April 2012.   Apart from the loan to her brother, she stated that the balance had been paid on estate expenses and personal expenses.  I find that she did not satisfactorily explain or identify such expenses of anything like that amount. 

74      Her list of estate expenses totalled $43,412.99, of which more than $24,500 was legal expenses incurred in defending this proceeding.  The list included funeral expenses of $3,033.[33]  It was pointed out to her in cross-examination, that Mr D’Andrea had sworn that it was he that had paid the funeral expenses.  Ms McKenzie indicated that that amount had not been paid by the estate as yet, although it was intended to repay Mr D’Andrea.[34]

[33]DCB 5

[34]T 169-170

75      Further, in cross-examination, Ms McKenzie disclosed that she owned some company shares.  She was asked to produce documentation relating to her shareholdings which disclosed that she has at the present time shares in companies valued at approximately $17,000.[35] 

[35]Exhibit 8

76      It also became clear during cross-examination of Ms McKenzie that she had an account with the Bendigo Bank.  She gave evidence that various sums had been transferred from the ING Direct account to her Bendigo Bank account.  She did not disclose or produce any documents relating to that account. 

77      Ms McKenzie also disclosed that she had a small investment of approximately $4,710 with Advance Asset Management Limited.[36]   

[36]T 186; Exhibit 6.

78      In her taxation return for the year ended 30 June 2011,[37] Ms McKenzie disclosed a taxable income of $23,461.  This was made up of interest payments of $17,035, dividends of $9,897 and a further sundry amount of $1,102 (which I understand relates to income received in respect of writing work performed by her some years before), less deductions of $4,573 made up of unidentified donations of $4,071 and the cost of managing tax affairs of $502).

[37]DCB 28

79      In addition, Ms McKenzie receives $566 per fortnight by way of a disability pension, equating to $14,716 per year.

80      Accordingly, it appears that Ms McKenzie presently has an income (including her pension and excluding donations) of approximately $40,000 before income tax. 

81      I find her assets to be as follows:

ING Direct deposit  $170,000

Advance deposit  $4,710

Entitlement to superannuation funds

(as a consequence of death of the deceased)      $154,000

Value of shares  $17,000

Loan to her brother  $95,000

Total  $440,710

82      In addition, I find that Ms McKenzie has an account with the Bendigo Bank, details of which she has not disclosed to the Court.

83      Ms McKenzie’s income, other than her disability pension, is derived from interest and dividends.  The interest figure for the current and future years may be somewhat less than for the year ended 30 June 2011 as the balance of her investment with ING Direct has reduced.  However, one reason for that reduction is that she has chosen to make an interest free loan to her brother of $95,000.  Accordingly, when looking at her income, I take into account that she could earn interest on that sum if she chose to do so.

84      Counsel for Mr D’Andrea submitted that Ms McKenzie has not made a frank disclosure of her income and assets.  She points out that in her three affidavits filed with the Court, she did not disclose her share income, the fact that she held a Bendigo Bank account and the fact that she had been financially able to make an interest free loan of $95,000 to her brother only last year.  It is submitted further, that she has not adequately explained the various withdrawals from the ING Direct account in 2011 and 2012 as disclosed by the account statements tendered.  It was submitted that in those circumstances, I should assume that she has no special claim upon the deceased’s estate based upon her financial circumstances.  It is submitted that, to establish some financial need, she was effectively obliged to make a full disclosure of her financial circumstances and has not done so.

85      Whilst I accept that Ms McKenzie did not initially make a full disclosure of her financial circumstances and has not disclosed details of her Bendigo Bank account, I nevertheless formed the view that her failure to do so was probably not due to any deliberate intent to mislead Mr D’Andrea or the Court.  I consider that she is a person with a significant disability and one who appears to be relatively confused and unfamiliar with financial and taxation issues.  I do conclude that she must have been aware as to the relevance of disclosing the interest free loan of $95,000 to her brother in 2011.  That loan was disclosed eventually, albeit on the second day of the hearing.

86      With respect to the Bendigo Bank account, it is of concern that details of it have not been disclosed.  However, I note that in her taxation return for the year ending 30 June 2011, there appears to be no interest earned from such an account, which enables me to infer, on balance of probabilities, that the balance of that account would not have been large.    

Disabilities of the Parties

87      Section 91(4)(i) of the Act requires me to have regard to any physical, mental or intellectual disabilities of the parties. 

Mr D’Andrea

88      I have previously referred to the illness suffered by Mr D’Andrea in 2008.  This was on any view a serious condition requiring some five months in hospital and treatment by way of chemotherapy.  However, it does appear that he has made a good recovery.  However, his evidence, which I accept, was that he has been told by his doctor that he would not be classed as fully recovered at least for another two to three years.  If the illness recurred, it would have a very serious impact on his ability to work.  At present, although Mr D’Andrea is limited by osteoarthritis in both thumbs in carrying out the physical parts of his painting occupation, his business appears to have expanded in more recent years, and I have previously made note of his concession that there are other employment options currently open to him.

Ms McKenzie

89      Ms McKenzie deposed that in early 1993 she was diagnosed with a large left acoustic neuroma.  She underwent surgery to remove the tumour and later contracted bacterial meningitis.  These medical episodes have left her with permanent, ongoing health problems.  She has a facial palsy.  Her left eyelid does not close properly.  Her tear ducts do not function.  She has a weight fitted to the eyelid to help it close but is required to use a lubricant several times each day in order to retain the sight in her eye.  She is deaf in the left ear and has impaired coordination and muscle control on her left side.  She has fine and gross deficits in motor skills, difficulty with comprehension and problems with balance and stability.  Bright sunlight and glare from any source induces migraines which limit her ability to function normally.  She can only spend very short periods of time working with a computer because of the glare from the monitor.  She needs to wear dark sunglasses when outside and often needs to wear them inside where lighting causes glare.  During the hearing of this proceeding, Ms McKenzie sought and was granted permission to wear sunglasses and a peaked cap in the Court room.  For portions of the case, she requested that the lights in the Court room be partially dimmed.  She was not challenged about these problems and I accept her evidence concerning them.

90      She has been in receipt of a disability support pension since 1994.  She is able to supplement her pension with limited activities such as dog walking and house sitting.  However, these occur on an irregular basis.  She also does some occasional volunteer work with the Riding for the Disabled Association and assists them in fund raising by running cake stalls. 

91      She has ongoing problems with her teeth on the right side.  She deposes that these are deteriorating as a consequence of excess use because due to her left facial palsy, she is only able to chew food on the right side of her mouth.

92      A medical report from Dr Jane Lottkowitz, dated 2 May 2012, was tendered.[38]  The report confirms Ms McKenzie’s inability to work at her chosen profession in horse husbandry and confirms that her other employment options are markedly narrowed due to balance, hearing and ophthalmological problems.

[38]DCB 23

93      I accept that as a consequence of the matters referred to, Ms McKenzie is significantly disabled and is unlikely to obtain employment of any substance in the future.  I find that she has no capacity to earn any significant level of income and it is likely that she will continue in receipt of a disability support pension indefinitely.

94      A letter from Dr Paul Gleeson, dentist, dated 2 December 2011,[39] a treatment plan prepared by him on 16 April 2012[40] and an undated outline of surgical treatment from Mr Michael Lace (oral and maxillofacial surgeon)[41] indicate that Ms McKenzie will be likely to require significant dental/facial work in the future.  On the limited evidence concerning such treatment, I am unable to conclude the likely overall cost of such treatment or the period over which it is likely to be required.

[39]DCB 52

[40]DCB 52

[41]DCB 53

Contributions of Mr D’Andrea

95      Section 91(4)(k) of the Act requires me to have regard to any contribution (other than for adequate consideration) of Mr D’Andrea in building up the estate or contributions to the welfare of the deceased. 

96      I accept Mr D’Andrea’s evidence that he played a significant role in the planning and preparation of the renovations to the Footscray property.  Further, upon his release from hospital and in the period leading up to the deceased’s death, I am satisfied that he made significant physical contributions to the property.  These contributions included painting, plastering, demolition, tiling, decking and other physical work. 

97      In addition, I am satisfied that he contributed cash payments of approximately $32,000 to the renovation and that the additional $45,000 borrowed in early 2010 was used solely for the renovation of the Footscray property.  I was advised by the parties that the loan secured by the mortgage over the Maidstone property, including the $45,000, was to be treated as payable solely by Mr D’Andrea and not by the estate.

98      I accept Mr D’Andrea’s evidence that throughout the period that he resided with the deceased at the Footscray property, he contributed to the general upkeep and maintenance of the home, including such activities as removal of carpets, polishing of floorboards, painting, insertion of picture rails and other decorative finishing, installation of floor tiles, gardening and car maintenance.[42] Mr D’Andrea estimates that the renovations cost approximately $180,000 in all, of which he directly contributed $77,000, being about $32,500 cash contributions[43] and the additional $45,000 borrowed and repayable by him.  He states, and I accept, that he did hundreds of hours of physical work in connection with the renovation and, in effect, he managed the project for the deceased.[44] 

[42]PCB 91-92

[43]Set out at PCB 128

[44]PCB 100

99      Photographs of the Footscray property before and after the renovation were tendered.[45] Mr D’Andrea estimated that the Footscray property was worth approximately $500,000 prior to the renovations.  He was not challenged about this and I accept that evidence.  The parties agree that it is now valued at $800,000. 

[45]PCB 112, 138

100     Accordingly, I am able to comfortably conclude that Mr D’Andrea did make a significant contribution to the building up of the estate and to the welfare of the deceased during the period that they were together.

Benefits previously given by the Deceased

101     Section 91(4)(l) of the Act requires me to have regard to any benefit previously given by the deceased to either Mr D’Andrea or to Ms McKenzie. 

102     Ms McKenzie deposes that whilst the deceased was alive, she gave her amounts of between $250 and $500 per fortnight, which she used to supplement her pension.[46]  In oral evidence, Ms McKenzie stated that these payments were made by cash contained in envelopes mailed to her by the deceased every fortnight or so.  There was no other evidence confirming that such moneys were sent.  Ms McKenzie was challenged in cross-examination concerning the making of such payments.  I conclude that whilst some cash payments may have been made from time to time by the deceased, in the manner alleged by Ms McKenzie, I am unable to say what amounts were involved or how regularly such payments were made.  In cross-examination, Ms McKenzie was vague as to the amount and regularity of such payments.  I am not satisfied they were substantial.

[46]PCB 32

103     Counsel for the plaintiff submitted that the evidence showed that at the date of her death, the deceased owed money on her credit card and did not appear to have been in a financial position to have made the alleged payments on any regular basis.  Further, it was submitted that the deceased would have been fully aware that Ms McKenzie had received in excess of $400,000 from her father’s estate in early 2008.  I consider these matters cast doubt over the extent to which such payments were made.

104     I place little weight on the evidence of the alleged payments in coming to my ultimate decision.

105     It is clear that the deceased provided Mr D’Andrea with a home for some nine years before her death, although this needs to be balanced with his contribution to the maintenance of the home and his role in its renovation. 

106     I also take into account the deceased’s contribution to the purchase of the Maidstone property.

Dependence Upon the Deceased

107     Section 91(4)(m) of the Act requires me to have regard to whether Mr D’Andrea was being maintained by the deceased before her death, either wholly or partly.  It does not expressly require me to consider whether Ms McKenzie was being maintained by the deceased wholly or partly.  Nevertheless, any such dependency alleged by Ms McKenzie would be relevant to the overall considerations that I am required to make.  For the reasons set out above, I am not satisfied that Ms McKenzie was being maintained wholly or partly by the deceased prior to her death. 

108     Mr D’Andrea was receiving the benefit of housing provided by the deceased from early 2002.

Other Relevant Matters

109     Section 91(4)(p) of the Act requires me to have regard to any other matter that the Court considers relevant. 

110     I do consider it relevant that at the time the deceased made her will in 2008, she had discussed it with Mr D’Andrea and, at that time, he had thought that its terms were fair.  Although not in evidence, I understand that he made a will at about the same time, leaving his estate to his children.  Naturally, his interest in the Maidstone property would have passed to the deceased, had he predeceased her. 

111     However, I think it is relevant that, after the time the deceased’s will was made, there were significant changes that occurred. 

(a)Superannuation payments, thought (mistakenly or otherwise) at that time to be valued at $500,000, fell in value to a figure nearer $350,000.

(b)Contrary to the deceased’s apparent belief, those superannuation benefits did not pass automatically to Mr D’Andrea.  The trustees of the three funds concerned made distributions in the manner previously detailed.  In effect, Mr D’Andrea will receive less than 60 per cent of those benefits.

(c)The anticipated profit on the resale of the Maidstone property has not yet materialized.  Notwithstanding, the parties agree the property is now valued $750,000.  It is rented.  Rental does not cover the monthly mortgage payments borne by Mr D’Andrea.  The mortgage loan remains at $445,000 which will have to be repaid by him.

(d)Whilst Mr D’Andrea was in good health at the time the deceased made her will in mid-2008, by 2009 he had contracted a serious illness.  Although he appears to have made a good recovery from that illness, his future remains somewhat clouded.  Further, he developed an osteoarthritic condition in his thumbs that restricts the amount of physical work that he is able to perform.

112     These changes in circumstances are relevant and I do take them into account in reaching my decision.

113     Counsel did not submit that other sub-sections of s.91(4) were relevant to the issues to be determined.

Conclusion

114     In assessing what provision should be made for Mr D’Andrea from the deceased’s estate, I consider that attention should be given not only to the value of the estate but also to other changes in the financial positions of the parties as a consequence of the deceased’s death.   I shall take into account:

(a)the distribution of the deceased’s superannuation benefits.

(b)the likely financial gain by Mr D’Andrea as a consequence of the investment in the Maidstone property made jointly with the deceased and which involved a contribution by her to the purchase price.

(c)the distribution of the estate, the subject of this application.

115     Assessing the value of the gain to Mr D’Andrea relating to his assuming sole proprietorship of the Maidstone property is not an easy task.  The property was purchased for $610,000 and is now valued at $750,000.  There has been a gain of about $140,000 less the costs, stamp duty and agency fees associated with its purchase and sale.  As best I can, I consider that a net gain of about $100,000 will result if the Maidstone property is sold now.  I take into account that Mr D’Andrea has incurred the difference between the monthly mortgage payments and the monthly rental received but that he is likely to have claimed the difference in reducing his taxable income.

116     Counsel for the plaintiff submits that the estate should be divided on a 75/25 basis in favour of Mr D’Andrea.  Such a division would, in round terms, result in an overall position as follows:

Mr D’Andrea	Ms McKenzie
Division of Superannuation Benefits	$203,000	$154,000
Net Profit from the Maidstone Property	$100,000	Nil
Division of Estate 75/25	$618,000	$206,000
Sub-total	$921,000	$360,000

117     I consider that such a result would be overly favourable to Mr D’Andrea. 

118     I must have due regard to the principle of freedom of testamentary disposition.  I consider it likely that the deceased would have been conscious of her sister’s disabilities and that her prospects of ever working were slim.  I can understand why she would have wanted to make substantial provision for her.

119     I conclude that, at the time the deceased made her will in mid-2008, she would have believed that her superannuation benefits of $500,000 would have gone to Mr D’Andrea, and that her house, in unrenovated condition, would have been valued at approximately $500,000.  This was Mr D’Andrea’s view of its valuation at that time.[47]  I consider that the effect of her will, viewed by her at that time, would have been as follows:

[47]PCB 101

Mr D’Andrea	Ms McKenzie
Distribution of Superannuation Benefits	$500,000	Nil
Distribution of estate (consisting almost entirely of the Footscray property)	Nil	$500,000
Total	$500,000	$500,000

120     I consider it likely that the deceased, at the time she made her will, considered that she was probably providing equally for Mr D’Andrea and for Ms McKenzie by leaving her will as she did, with the exception that any profit gained from the eventual sale of the Maidstone property, partly resulting from her investment in it, would flow to Mr D’Andrea.  On the other hand, he would have to service the mortgage loan and, in the event that the Maidstone property was sold at a loss, such loss would be borne by him.

121     Nevertheless, I must take into account that at the time the deceased’s will was made, none of the changes that later occurred, as set out in paragraph 111 above, would have been foreseen by her.  I consider that, had she been able to foresee those changes, as a reasonable and prudent testator she would have made a greater allowance in her will for Mr D’Andrea. 

122     Counsel for Ms McKenzie submits that the estate should be distributed on a 60/40 basis in favour of her client.  Such a distribution would result in the following overall position:

Mr D’Andrea	Ms McKenzie
The deceased’s superannuation	$203,000	$154,000
Net Profit from the Maidstone Property	$100,000	Nil
Division of Estate 40/60	$330,000	$494,000
Total	$633,000	$648,000

123     It can be seen that the distribution proposed by counsel for Ms McKenzie will lead to a relatively even result as a consequence of the deceased’s death.

124     I consider that such a result is fair.  It takes into account that Ms McKenzie is unlikely to work in any meaningful way in the future.  She is presently only forty-seven years old.  Mr D’Andrea, on the other hand, concedes that he may well be able to return to work in the future in a non-physical capacity.  I appreciate that his good health in the future is not guaranteed.  He may encounter further problems with his cancer.  Nevertheless, he is presently enjoying good health.  Mr D’Andrea is twelve years older than Ms McKenzie and has, on balance of probabilities, a shorter life expectancy.

125     I consider that a provision for Mr D’Andrea of 40 per cent of the Estate of the deceased is a provision which the deceased would, as a wise and just testator, have considered her moral duty to make in his interests. 

126     Such a provision will, I consider, enable Mr D’Andrea to purchase a home and still have something of a nest egg for future contingencies.

127     In reaching that decision I have taken into account the comments of Callaway JA in Grey v Harrison[48] concerning the caution that should be exercised when interfering with testamentary dispositions. 

[48][1997] 2 VR 359 at 366

128     Having regard to each of the matters set out in s.91(4) of the Act, I am satisfied that the deceased did breach her moral duty to properly provide for Mr D’Andrea and that I should order that he receive 40 per cent of the estate.

129     I shall hear the parties as to the precise form of order to be made and as to costs.

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