Klemke v Lustig
[2010] VSC 502
•11 November 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 7734 of 2008
IN THE MATTER of Part IV of the Administration and Probate Act 1958
and
IN THE MATTER of the Will and Estate of LESLIE FREDERICK KLEMKE deceased
BETWEEN:
| LUCIENNE ISABEL KLEMKE | Plaintiff |
| v | |
| DANIEL BERNARD LUSTIG (who is sued as the executor of the Will and Estate of LESLIE FREDERICK KLEMKE, deceased) | Defendant |
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JUDGE: | HARGRAVE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 22 October 2010 | |
DATE OF JUDGMENT: | 11 November 2010 | |
CASE MAY BE CITED AS: | Klemke v Lustig | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 502 | |
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TESTATOR’S FAMILY MAINTENANCE – Acknowledged moral responsibility to provide for daughter – Will made inadequate provision for the daughter – Whether estate included property previously owned by deceased’s second wife – Whether invalid delegation of testamentary power - Administration and Probate Act 1958 (Vic), s 91 – Tatham v Huxtable (1950) 81 CLR 639 applied.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A G Uren QC with Mr J Isles | Judge & Papaleo Solicitors |
| For the Defendant | Mr R Phillips | Sterling & Sheink |
TABLE OF CONTENTS
Parties and introduction.................................................................................................................... 2
What is the value of the estate?........................................................................................................ 3
What amount of further provision should be ordered?.............................................................. 7
Conclusion and orders.................................................................................................................... 20
HIS HONOUR:
Parties and introduction
Leslie Klemke (‘the deceased’) died on 3 December 2007. He was pre-deceased by his second wife, Sophie Klemke (‘Sophie’), who died on 25 August 1991. He was survived by his daughter from his first marriage, Lucienne Klemke, who is the plaintiff in this proceeding, and by his close friend and lover of more than 30 years, Heather Collicoat.
As appears below, the plaintiff suffers from physical and psychiatric illnesses, and her financial affairs are controlled by an administrator.
The deceased made his last will on 4 October 2006 and subsequently varied it by two codicils dated 31 July 2007 and 28 November 2007 respectively (collectively ‘the will’). The will makes provision for both the plaintiff and Ms Collicoat. However, the principal bequests made by the will are in favour of charities and friends of the deceased.
The plaintiff claims that the will fails to make adequate provision for her proper maintenance and support. She claims an order for further provision to be made for her out of the estate. The defendant is the executor under the will. Following the deceased’s death, he is also the sole executor under Sophie’s will.
The defendant acknowledges that the deceased had a moral responsibility to provide for the plaintiff, and that the bequests made to her under the will are inadequate for her proper maintenance and support. However, the parties cannot agree as to the amount of further provision that should be ordered. Further, there is a dispute between the parties as to the value of the estate. Of course, before determining what amount of further provision should be ordered for the plaintiff, it is necessary to first determine the value of the estate.
Ms Collicoat is satisfied with the provision made for her by the will. However, she has sworn an affidavit as to her needs and opposes any order for further provision to the plaintiff which interferes with her entitlements under the will.
The following questions arise for determination:
(1) What is the value of the estate?
(2) What amount of further provision should be ordered?
What is the value of the estate?
The issue concerning the value of the deceased’s estate is not free from difficulty. It requires the Court to consider the provisions of both the deceased’s will and Sophie’s will.
By clause 6 of Sophie’s will, she made the following bequest:
I GIVE DEVISE AND BEQUEATH my property situate at and known as 88 Atherton Road, Oakleigh in the said state to my trustees upon trust to pay the income, after payment of all outgoings, to my said husband LESLIE FREDERICK KLEMKE for life and upon the death of my said husband to sell, call in and convert the same into money and to pay legacies according to the provisions of my husband’s will.
As I have said, Sophie died before the deceased. Probate of her will was granted to the deceased and the defendant. Accordingly, when the deceased made his will he was well aware of the terms of Sophie’s will. In that context, clause 3 of the deceased’s will provides:
I GIVE DEVISE AND BEQUEATH my inheritance from the Estate of my late wife SOPHIE SARAH KLEMKE to my Trustee UPON TRUST to sell, call in and convert the same into money and to make the following payments …
For present purposes, it is sufficient to note that clause 3 specifies 10 separate bequests, including bequests of 10 per cent of the deceased’s inheritance from Sophie to each of the plaintiff and Ms Collicoat. The relevant inheritance by the deceased from Sophie was in respect of the property at 88 Atherton Road, Oakleigh (‘the Atherton Road property’). Further, Sophie left her residuary estate to the deceased.
Notwithstanding clause 6 of Sophie’s will, her executors (the deceased and the defendant) sold the Atherton Road property during the life of the deceased. The net sale proceeds amounted to $1,280,000. Subsequently, this amount was reduced by $361,000, to $919,000. The $361,000 was paid to compromise a claim made against the estates of both the deceased and Sophie by their daughter. When interest on the balance of the net sale proceeds of the Atherton Road property is considered, it was agreed in submissions that the remaining proceeds amount to approximately $1 million (‘the $1 million’).
The dispute between the parties concerns whether the $1 million forms part of Sophie’s estate, to be distributed by the defendant in his capacity as executor of her estate but in accordance with clause 3 of the deceased’s will, or whether the $1 million forms part of the deceased’s estate and is thus available to fund further provision for the plaintiff.
The resolution of the issue concerning the size of the deceased’s estate depends upon the application of the common law rule against delegation of testamentary power.
In Tatham v Huxtable,[1] Kitto J stated the effect of the common law rule against delegation of testamentary power, which he described as a ‘cardinal rule’, in the following terms:
It is therefore necessary in all cases (other than charity cases) that the persons or objects to benefit under the will shall be, by the will itself, ascertained or made ascertainable. They may be made ascertainable by reference to a specified future event, including an act to be done by another person provided that that act does not amount to the making by one man of another man's will … Thus a testator may, consistently with the "cardinal rule", confer upon another person a power of appointment in respect of all or any of his property, provided that its creation does not amount to a delegation by the testator of his right of testamentary disposition.[2]
[1](1950) 81 CLR 639.
[2]Ibid, 653.
Kitto J then identified two ways in which a testator or testatrix may validly create a power of appointment in another person without breaching the rule against delegation of testamentary power: by a general or special power of appointment.[3]
[3]Ibid.
Kitto J described a valid general power of appointment as comprising ‘a gift by will to such person or persons as X shall appoint, the power being exercisable in favour of X himself or his legal personal representatives.’[4]
[4]Ibid, 653-4.
Kitto J described a special power of appointment as ‘a gift by will to such of a limited class or group of persons as X shall appoint’.[5] He added that the validity of such a power ‘depends on the certainty of description of the class or group’.[6]
[5]Ibid, 654.
[6]Ibid.
Kitto J concluded with the following summary of valid powers of appointment:
Having regard to these principles, the proposition should, I think, be accepted that a testamentary disposition in favour of a person or persons to be selected by someone other than the testator himself, if it is not to fail as infringing the general rule forbidding the delegation of testamentary power, must either confer upon the person authorized to make the selection a general power equivalent to ownership or define with certainty a class or group from which the selection is to be made.[7]
[7]Ibid, 655.
The common law rule against delegation of testamentary power has been criticised in academic writings and some cases, but it remains in force until overruled by the High Court or statutory abrogation.[8] The rule was abolished by s 48 of the Wills Act 1997 (Vic). However, that section is not applicable to Sophie’s will, as she died before commencement of the section.[9]
[8]Horan v James [1982] 2 NSWLR 376; Gregory v Hudson (1998) 45 NSWLR 300.
[9]Wills Act, s 52(4).
It was submitted on behalf of the defendant that the $1 million forms part of Sophie’s estate because there are no words in Sophie’s will which are capable of constituting a gift to the deceased of the Atherton Road property or the proceeds of its sale. It was submitted that, to the contrary, clause 6 of Sophie’s will directs the trustees of that will to pay legacies from her estate according to the legacies, if any, in the will of the deceased. It was submitted that this was akin to a special power of appointment, which is a recognised exception to the common law rule against delegation of testamentary power. The suggested class of appointees is those persons designated by clause 3 of the deceased’s will to receive his inheritance from Sophie’s estate.
I do not accept the submissions made on behalf of the defendant. The $1 million forms part of the deceased’s estate. Clause 6 of Sophie’s will does not confer any power or discretion on her trustees to appoint the person or persons who are to receive the proceeds of sale of the Atherton Road property, following the death of the deceased. Sophie’s trustees are obliged by clause 6 to pay legacies according to the provisions in the deceased’s will. Accordingly, clause 6 conferred a power of appointment upon the deceased. Clause 6 contains no limit upon the persons or objects which may be chosen by the deceased as the recipient of the sale proceeds. This is not a case where the class of persons or objects has been described with insufficient precision. There is no class at all. Accordingly, clause 6 did not confer a valid special power of appointment upon the deceased.
Counsel for the defendant did not seek to uphold the validity of clause 6 of Sophie’s will upon the ground that it was a valid general power of appointment.
In these circumstances, clause 6 constitutes an invalid delegation of Sophie’s testamentary power.
Counsel for the defendant acknowledged that, if clause 6 was invalid, the $1 million forms part of Sophie’s residuary estate. Sophie left her residuary estate to the deceased. Accordingly, the $1 million forms part of the deceased’s estate.
The evidence concerning the net value of the other assets of the deceased’s estate was confusing, largely because the defendant adopted inconsistent positions as to whether the $1 million should be included in the deceased’s estate. During the trial, the evidence comprised: the defendant’s initial Inventory of Assets and Liabilities filed with the Registrar of Probates on 23 January 2008; a summary of the estate’s assets and liabilities as at 1 February 2010; a further summary of the estate’s assets and liabilities as at 1 April 2009; and the defendant’s affidavit of financial position sworn 14 October 2010.
Subsequently, the Court asked the defendant to prepare a further affidavit of financial position, on the basis that the $1 million formed part of the deceased’s estate. That affidavit was sworn on 3 November 2010. The affidavit deposes to a net estate, including the $1 million, of approximately $2.5 million. It is unnecessary to be more precise.
What amount of further provision should be ordered?
The Court’s power to make an order for further provision out of the estate of a deceased person is contained in s 91 of the Administration and Probate Act 1958 (Vic) (‘the Act’).
There are two jurisdictional requirements to the making of an order under s 91. First, it must be established that the deceased had responsibility to make provision for the proper maintenance and support of the applicant for the order: s 91(1). Secondly, if such responsibility is established, the court must be of the opinion that the will of the deceased does not make adequate provision for the proper maintenance and support of the applicant for the order: s 91(3). As appears above, the defendant acknowledges that these jurisdictional requirements have been satisfied.
By s 91(4) the court is commanded, in determining each of these two jurisdictional requirements, and also in determining the amount of any provision or further provision to be ordered if the two jurisdictional requirements are met, to have regard to the matters set out in paragraphs 91(4)(e) to (o) of the Act and, under paragraph 91(4)(p), to have regard ‘to any other matter the Court considers relevant’.
The mandatory command of the legislature to take account of the specified matters was introduced by the amendments to the Act in 1997. Prior to these amendments, the standard or test to be applied in determining the two jurisdictional requirements, and in determining the amount of any further provision, was that stated by Lord Romer, in delivering the judgment of the Privy Council in Bosch v Perpetual Trustee Company Ltd:[10]
Their Lordships agree that in every case the Court must place itself in the position of the testator and consider what he ought to have done in all the circumstances of the case, treating the testator for that purpose as a wise and just, rather than a fond and foolish, husband or father.
[10][1938] AC 463, 478-9.
That standard or test continues to apply. The Court must consider, in light of the specified matters, what provision a wise and just testator would have thought it was his or her moral duty to make for the proper maintenance and support of the applicant.[11]
[11]Blair v Blair [2004] VSCA 149, [40]-[41]; Lee v Hearn (2005) 11 VR 270, [4]; Vigolo v Bostin (2005) 221 CLR 191, [11]-[25] per Gleeson CJ, [117]-[121] per Callinan and Heydon JJ.
In determining the amount of any further provision to be ordered, the Court considers the facts and circumstances existing at the time of the hearing.[12] The Court’s general approach to this task was conveniently summarised by Nettle J (as he then was) in McKenzie v Topp in the following terms:
Section 91 of the Act confers wide power to make such order as is thought fit in all the circumstances of the case. It is plain, however, that the discretion is not untrammelled or to be exercised according to idiosyncratic notions of what is thought to be fair or in such a way as to transgress unnecessarily upon the testatrix’s freedom of testation, but rather carefully and conservatively according to current community perceptions of the provision which would be made by a wise and just testatrix.[13]
[12]McKenzie v Topp [2004] VSC 90, [15], decided after s 91(4) of the Act came into force.
[13]Ibid, [63].
Where a will does not make adequate provision for the proper maintenance and support of the particular applicant, and further provision for the applicant will not unduly prejudice other beneficiaries for whom the deceased had a responsibility to make provision, the Court adopts a reasonably generous approach. The cases include some colourful statements of this approach. For example, in Blore v Lang Fullagar and Menzies JJ stated that, in assessing the need of an applicant for further provision, that need may extend beyond ‘the bread and butter of life’ to include ‘a little of the cheese or jam that a wise and just parent would appreciate should be provided if circumstances permit’.[14]
[14](1960) 104 CLR 124, 135.
To similar effect is the approach in Worladge v Doddridge, where Williams and Fullagar JJ approved the following statement:
Proper maintenance is (if circumstances permit) something more than a provision to keep the wolf from the door – it should at least be sufficient to keep the wolf from pattering around the house or lurking in some outhouse in the backyard – it should be sufficient to free the mind from any reasonable fear of any insufficiency as age increases and health and strength gradually fail.[15]
[15](1957) 97 CLR 1, 12 – citing Re Harris (1936) 5 SASR 497, 501.
In fixing the amount of any further provision, the Court should have regard to ‘the station in life’ of the applicant and the expectations to which that has given rise, including how the applicant might reasonably expect to live in the future.[16]
[16]Vigolo v Bostin (2005) 221 CLR, 191, [114].
The authorities also permit the Court, where the size of the estate permits and there will be no serious prejudice to the rights of other beneficiaries, to order further provision beyond the immediate and likely future needs of the applicant. In addition, the Court should consider the contingencies of life and may provide for a ‘nest egg’ to guard against unforeseen events.[17]
[17]For example, Penn v Richards [2002] VSC 378, [33].
I turn to consider what order for further provision should be made in this case. As stated above, this requires me to consider each of the specific matters set out in paragraphs 91(4)(e) to (o) of the Act and, by paragraph 91(4)(p), any other matters considered by the Court to be relevant. I proceed to consider those matters.
Section 91(4)(e) of the Act requires the Court to consider the relationship between the deceased and the plaintiff. Lucienne is the daughter of the deceased and his first wife, and responsibility to make adequate provision for her proper maintenance and support is recognised.
Section 91(4)(f) of the Act requires the Court to consider any obligations or responsibilities of the deceased to the applicant and other beneficiaries. In this case, the only relevant obligations and responsibilities are those which the deceased owed to the plaintiff and Ms Collicoat.
Section 91(4)(g) of the Act requires the Court to consider the size and nature of the estate. As appears above, the net value of the estate is approximately $2.5 million. It is unnecessary to be more precise. However, not all of this value is presently available for distribution. The deceased left Ms Collicoat a life interest in the Armadale property. That property is valued at $400,000. Ms Collicoat is 56 years of age and is likely to live at least as long as the plaintiff, if not longer. The plaintiff is 61 years old. Having regard to the size of the estate, it is unnecessary to consider the value of this property further. The submissions of the parties proceeded on the assumption that it should be excluded from the net distributable value of the estate. Accordingly, the net distributable value of the estate is approximately $2.1 million.
Section 91(4)(h) of the Act requires the Court to consider the financial resources and needs of the applicant and of any other beneficiary of the estate at the time of the hearing and for the foreseeable future. The plaintiff is in financial need. This is not in contest. It founds the basis of the defendant’s acknowledgment that the will fails to make adequate provision for the plaintiff’s proper maintenance and support. The plaintiff’s present financial position and needs are considered below, when assessing the amount of further provision to be ordered.
Ms Collicoat also has needs. However, it is unnecessary to consider them. This is because she makes no claim for further provision and, having regard to my conclusion that the $1 million forms part of the estate, there are sufficient funds in the estate to make adequate provision for the plaintiff’s proper maintenance and support without affecting the bequests to Ms Collicoat in the will or her life interest in the Armadale property.
Section 91(4)(i) and (j) of the Act requires the Court to consider the health and age of the applicant and other beneficiaries of the estate. The plaintiff is 61 years of age and in poor health. She has a past psychiatric history involving various diagnoses, including bipolar affective disorder, major depressive illness, and schizoid and paranoid personality traits. Her current treating psychiatrists have assessed her as having a major depressive episode with the possibility of an underlying bipolar affective illness. She takes psychotropic medication, including Lithium Carbonate. She also takes an anti-depressant. Her mental illness has a significant impact on her ability to work and this is likely to continue into the future. In summary, her mental health state is likely to be long term and to continue to fluctuate, with an uncertain prognosis. However, the psychiatric evidence indicates that the plaintiff’s present mental state is aggravated by the stress of this litigation, and the resolution of this proceeding with a satisfactory outcome is likely to lessen the current impact of her fragile mental state.
In addition to her psychiatric illness, the plaintiff has a number of physical ailments. She has osteoarthritis of her left knee, which may require a total knee replacement in the future, neck and back problems, parathesia of both arms and suffers from migraines. She takes various medications for her pain.
In all the circumstances, I conclude that the plaintiff is no longer fit for employment and is unlikely to earn any significant income in the future. In order to enjoy a reasonable standard of living, she requires a significant fund to provide her with an income to meet her predicted expenses which, due to her health problems, are considerable.
Section 91(4)(k) of the Act requires the Court to consider any contribution (not for adequate consideration) of the applicant to the building up of the estate or to the welfare of the deceased. This is not a relevant factor in the exercise of the Court’s discretion in this case.
Section 91(4)(l) of the Act requires the Court to consider any benefits previously given by the deceased to the applicant or any beneficiary. This issue is of no relevance to the Court’s discretion in determining the amount of further provision to be made in this case. The plaintiff’s home was left to her by her mother, not the deceased.
Section 91(4)(m) of the Act requires the Court to consider whether the applicant was being maintained by the deceased before death and the extent to which the deceased had assumed any responsibility for that maintenance. Again, this factor has no relevance to the exercise of the Court’s discretion in this case.
Section 91(4)(n) of the Act requires the Court to consider the liability of any other person to maintain the applicant. Apart from the plaintiff’s entitlement to a pension in her present circumstances, there is no relevant liability to consider in the exercise of the Court’s discretion in this case. In my view, the Court should ignore the plaintiff’s pension entitlements in a case such as the present, where the value of the estate is sufficiently large to enable proper provision to be made for the plaintiff’s maintenance and support without taking pension entitlements into account.[18] The position may be different where a small estate is met with a number of claims for further provision, and there is insufficient money in the estate to provide for proper provision for all legitimate claimants. In a case such as that, the pension entitlements of the claimants may be relevant.
[18]Cf Coller v Coller [1998] VSC 80, [15].
Section 91(4)(o) of the Act requires the Court to consider the character and conduct of the applicant or any other person. The alleged character and conduct of the deceased may have some relevance in this regard. The issue is considered below. No disentitling conduct on the part of the plaintiff was identified or relied upon.
Section 91(4)(p) of the Act requires the Court to have regard to any other matter that it considers relevant. In this regard, it is convenient to make mention of the plaintiff’s evidence concerning the deceased’s extra-marital affairs and his conduct towards her. In summary, the plaintiff contends that these matters have contributed to her inability to marry or obtain a life partner. It is in my view unnecessary to consider this evidence further. This is because there is no issue that the deceased had a moral obligation to provide for the plaintiff, that his will fails to make adequate provision for her, and that the plaintiff has demonstrated real need by appropriate evidence. Further, with the inclusion of the $1 million, the estate is sufficiently large to enable the Court to order further provision for the plaintiff without causing prejudice to other beneficiaries for whom the deceased had a moral obligation to make provision. In this regard, I refer to my recent comments in Litchfield v Smith & Tingate.[19]
[19][2010] VSC 466, [52]-[57].
As appears above, the only other beneficiary under the will for whom the deceased had a moral obligation to make adequate provision is Ms Collicoat. The remaining beneficiaries are either charities or friends of the deceased, for whom no moral obligation has been shown. Accordingly, the Court may more readily disturb the bequests to those beneficiaries;[20] but only to the extent necessary to provide adequate provision for the plaintiff’s proper maintenance and support. The Court’s task is not to re-write the will.
[20]Vigolo v Bostin (2005) 221 CLR 191, [13].
In considering the amount of further provision to be ordered for the plaintiff, it is necessary to summarise the provisions of the will, in order to identify the available funds from which further provision may be ordered. The $1 million which the deceased inherited from Sophie is dealt with in clause 3 of the will. Ten per cent of that amount is given to each of the plaintiff and Ms Collicoat. Neither of those bequests should be disturbed. The other beneficiaries are charities or friends of the deceased for whom no moral obligation has been established. Accordingly, there is approximately $800,000 available to fund further provision from this source. The remaining $1.1 million, which forms the deceased’s residuary estate, includes a gift of $200,000 to the plaintiff and gifts totalling $200,000 to Ms Collicoat. Again, neither of these bequests should be disturbed. Once again, the remaining beneficiaries are charities and friends for whom no moral responsibility has been proved. Accordingly, there is a further $700,000 available from the residuary estate to fund further provision for the plaintiff.
On this basis, there is approximately $1,500,000 available to fund further provision for the plaintiff.
The starting point is to consider the plaintiff’s present position. In summary, the plaintiff’s financial position is as follows:
(1) She owns a dilapidated house in South Yarra, valued at approximately $1.1 million. The house is in need of extensive renovation throughout. If the plaintiff is to continue residing there, those renovations must be performed forthwith. No evidence was filed by either party as to the likely cost of the necessary renovations. The Court was asked to do its best and make an estimate, having regard to the condition of the house as described in the evidence. This matter is considered further below, in light of the need for the renovations to cater for the plaintiff’s health issues.
(2) Under the will, the plaintiff is to receive a bequest of $200,000 and 10 per cent of the $1 million representing the remainder of the net proceeds of sale of the Atherton Road property; a sum of $100,000. Accordingly, the plaintiff is entitled to a total sum of approximately $300,000 from the will.
(3) The plaintiff has an insignificant amount of money in her bank account. She has had only one full time job in the past 14 years and has not worked at all since 2003. In the past 12 months, she has received pension entitlements of approximately $18,000, or $340 per week. This is clearly insufficient for her needs, particularly having regard to her health problems.
(4) According to a report prepared by Melanie Atkins, a consultant in the area of disability and aged care, the plaintiff may require annual recurring expenditure of approximately $115,000. Of these costs, senior counsel for the plaintiff characterised $76,500 as being of a ‘bedrock’ character, recognising that some of the remaining costs may not be recurring or may be unnecessary to provide for the plaintiff’s proper maintenance and support. Counsel for the defendant did not contest the nature of these ‘bedrock’ costs, although he questioned whether all of them would need to be incurred in every year of the plaintiff’s life.
In these circumstances, the plaintiff’s needs may be summarised as follows. She needs to have her home renovated or to relocate to a suitable home in an appropriate area, having regard to her familiarity with South Yarra and her acquaintances in that area. This issue is considered further below. She needs a fund to provide for her annual expenses, and for the contingencies of life. It is acknowledged that the $300,000 presently available to her is insufficient for this purpose, even if she was to sell her existing home and purchase a suitable home with the net sale proceeds.
The evidence and submissions concerning these issues left much to be desired. There was no evidence of the likely cost of renovations to the home, or of what renovations were in fact required. There was no evidence as to the purchase price of an appropriate alternate home in the South Yarra area. There was no evidence as to the capital sum required to fund the plaintiff’s proven, likely and foreseeable expenditure for the rest of her life. The Court was simply asked to do the best it could, having regard to common sense and experience.
I will first consider the plaintiff’s accommodation needs. It was submitted on behalf of the defendant that it was open to the plaintiff to sell her home for approximately $1.1 million and purchase another home, which is not in need of substantial renovation or rebuilding, with the net sale proceeds. This would avoid the cost of renovating the plaintiff’s present home. I do not accept that submission. In my view, a wise and just testator would have recognised his daughter’s familiarity with the South Yarra area and, especially having regard to her mental afflictions, the desirability of preserving that familiarity and her acquaintances in the area. Accordingly, proper maintenance and support of the plaintiff requires either that her home be renovated to an acceptable standard to make it habitable, or that she purchase another suitable home in the vicinity which needs no renovation. She will also need some new furnishings. Doing the best I can, based on common sense and experience, I find that an amount of $350,000 would be adequate and proper for either of these purposes. In fixing that amount, I have regard to the plaintiff’s station in life prior to the onset of her various illnesses, as described below, and the need for any renovation to be complete, internal and external, and include all appliances, landscaping, window coverings and some new furnishings. On this basis, further provision of $50,000 is required above the plaintiff’s present entitlement under the will.
I turn to consider the amount of a sufficient fund to provide for the plaintiff’s reasonable needs for the balance of her life, and for contingencies. No evidence was put forward as to the plaintiff’s life expectancy. However, in submissions, the Court was asked to assume that the plaintiff’s life expectancy was at least 20 years. In fixing further provision to provide for income and contingencies, I will adopt a 20 year period. Although the plaintiff may live longer, she nevertheless will have a substantial unencumbered home to call on for purposes of, for example, funding an accommodation bond for a nursing home in later life.
The principal issue between the parties concerned the amount of the plaintiff’s income needs. The only evidence in that regard is contained in the report prepared by Ms Atkins. Although that report was unchallenged, it was acknowledged by counsel for the plaintiff that some of the estimated costs to be incurred by the plaintiff may be unnecessary to provide for her proper maintenance and support. Accordingly, it is necessary to consider the report in some detail.
Ms Atkins has considerable experience to enable her to express an opinion as to the plaintiff’s likely future needs. This was not challenged by the defendant. In summary, Ms Atkins commenced her working life as a nurse and obtained considerable experience in developing and implementing accommodation and support programs for people with disabilities; primarily people with acquired brain injuries. She has over 20 years experience in preparing needs-based reports for disabled persons and, since 2002, has been involved in conducting project work and training to promote participation by disabled people in the community.
Ms Atkins has interviewed the plaintiff on two occasions, in April 2009 and October 2010. She has reviewed reports prepared by the plaintiff’s treating doctors, the report filed in support of the application for an administrator to be appointed to manage the plaintiff’s affairs and a written history prepared by the plaintiff. On the basis of the information gained by these means, and the application of her experience, Ms Atkins has prepared a report detailing recommendations to bring about the result that the plaintiff can live a ‘good life’ and participate in the community.
Based on the information available to her, Ms Atkins has prepared a summary of the plaintiff’s relevant history and current living situation. I accept this as an accurate summary and, from it and the plaintiff’s own affidavit, note the following relevant matters:
(1) The plaintiff has lived most of her life in the suburbs of Toorak and South Yarra. She has lived in her current home since her mother’s death in 1996. Because of the dilapidated condition of the home, she fears that she may be removed from it. For this reason, she is reluctant to allow people to have access to her home.
(2) The plaintiff has been visited by local council representatives in the past few years, following complaints from neighbours about matters including alleged odour from rubbish and cat faeces in the back garden. The plaintiff is embarrassed about this and wants to renovate the house, but lacks the money to do so.
(3) The plaintiff has considered moving home to an area which is less expensive than South Yarra, however she is reluctant to move out of the area as this would mean moving from friends and familiar surroundings.
(4) The plaintiff is open to selling her existing property and moving to a home in good condition in the same area. She has reasonable views as to her requirements for an alternative home, including that it be fully renovated, have a library to accommodate her books, have a design which is consistent with her physical needs and a garden for her animals.
(5) If she is to move, the plaintiff recognises that her existing home will need to be prepared for sale and she will require assistance in that regard.
The report contains a description of the plaintiff’s wishes for leisure and recreation. The plaintiff describes a love of art and design history and wishes to continue purchasing art books to add to her collection. She has a reasonable desire to travel, preferably with friends, and to visit a friend in London. She would like to pursue an interest in drawing, particularly portraiture, and requires furniture and equipment to accommodate her physical disabilities while undertaking this interest. She has a desire to listen to music on a good quality stereo system, and to attend the theatre, cinema and concerts.
The report states that the plaintiff enjoyed an affluent lifestyle as a child. This is in contrast to her present poor financial state. She has had problems with excessive spending, leading to the appointment of an administrator to manage her affairs by the Victorian Civil and Administrative Tribunal on 10 January 2008. An example of her tendency to engage in excessive spending is the use made by her of inheritance from her aunt’s estate. She spent $225,000 over a two year period. This excessive spending was thought to be the result of mania associated with bipolar disorder and this was one of the triggers for an administration order. The plaintiff had not been receiving regular psychiatric treatment or counselling during this period. The plaintiff accepts that she needs help in managing her financial affairs, and her administrator fulfils that role.
The report contains a series of recommendations concerning the plaintiff’s primary needs. The following ‘priority needs’ are identified:
(1) an appropriate place to live;
(2) sufficient resources and support to enable her to care for herself and live a full and meaningful life; and
(3) access to quality, appropriate and timely healthcare and support.
Based on these needs, the report contains estimates of the likely future annual costs of providing for the plaintiff. As I have said, counsel for the plaintiff contended on her behalf that approximately $76,000 of these expenses were of a ‘bedrock’ category, and could not be questioned. It was submitted that the plaintiff requires annual recurring expenditure for the following matters:
(1)
Psychologist -
$11,440
(2)
Dental care -
$5,000
(3)
Holidays -
$5,000
(4)
Home help -
$7,800
(5)
Support worker -
$30,000
(6)
Gardening -
$4,000
(7)
Transport -
$4,000
(8)
Home delivered meals -
$9,000
$76,240
Applying commonsense and experience, I take the view that some of these costs have been over-stated and others are not likely to recur in every year. For example, dental care of $5,000 per year, and gardening expenses of $4,000 per year for a small garden, seem excessive. Further, I am not satisfied that the evidence establishes that the plaintiff has a need for a support worker at a rate of approximately $30,000 per year for the rest of her life, or that she needs home delivered meals on a regular basis. On the other hand, the claimed recurring expenditure makes no provision for other normal costs of living. Reading the report as a whole, it would appear as though it has been written with a view to describing an ‘ideal life’ for the plaintiff based on her ‘wish list’. The plaintiff has a significant mental illness, but is not incompetent. She is intelligent and articulate and, reading the report as a whole, obviously wishes to live an enjoyable life in the community and not as a recluse receiving total support in her own home.
Doing the best I can, and taking into account the plaintiff’s obvious needs for food, utilities, rates and taxes and other normal costs of living, together with reasonable leisure, recreation and travel costs, an annual amount of $65,000 before tax, or $1,250 per week, would be sufficient. Further, I would allow an amount of $100,000 to provide a ‘nest egg’ for contingencies. In reaching these figures, I have taken into consideration the fact that the plaintiff will be residing in a valuable home without any encumbrance.
Assuming a 20 year life expectancy for the plaintiff and 5 per cent discount rate, a fund of $830,000 will provide the plaintiff with a combination of capital and income of $1,250 per week. The amount of this fund has been calculated by reference to actuarial tables.[21] The $100,000 ‘nest egg’ and the further $50,000 in respect of the plaintiff’s home should be added to this fund, making a total further provision of $980,000.
[21]Cumpston Sargeant Pty Ltd, Consulting Actuaries, Table of Fixed Term Factors: applying a multiplier of 666.4 to the weekly amount of $1,250.
Conclusion and orders
For the above reasons, I conclude that the estate of the deceased includes the net sale proceeds of the Atherton Road property, comprising $1 million; that the value of the estate is approximately $2.5 million; and that further provision of $980,000 should be ordered for the plaintiff’s proper maintenance and support. I will hear the parties as to the precise form of orders, and as to costs.
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CERTIFICATE
I certify that this and the 20 preceding pages are a true copy of the reasons for Judgment of Justice Hargrave of the Supreme Court of Victoria delivered on 11 November 2010.
DATED this eleventh day of November 2010.
Associate
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