Kozlowski v Kozlowski
[2013] SASCFC 112
•18 October 2013
SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
KOZLOWSKI v KOZLOWSKI
[2013] SASCFC 112
Judgment of The Full Court
(The Honourable Justice Sulan, The Honourable Justice Vanstone and The Honourable Justice Anderson)
18 October 2013
SUCCESSION - FAMILY PROVISION
SUCCESSION - FAMILY PROVISION - CRITERIA FOR DETERMINING APPLICATION - TREATMENT OF PARTICULAR APPLICANTS - CHILDREN - ADULT SONS
Appeal against orders made pursuant to the Inheritance (Family Provision) Act 1972 (SA) granting the first respondent’s application for provision under s 7 of the Act. The estate consisted of a house purchased by the deceased for the use and benefit of his son, the first respondent. The Judge held that the first respondent had established a moral claim to the house and that the rules of intestacy made inadequate provision for him. The Judge found that the deceased had arranged for the other members of the first respondent’s family to have access to properties during his lifetime. The Judge found that adequate provision under the Act was for the first respondent to receive the proceeds from the sale of the property after deducting the costs of the administration and funeral costs. The Judge ordered that the first respondent’s costs be paid by the appellant.
Whether the Judge erred in exercising his discretion under s 7 of the Inheritance (Family Provision) Act 1972 (SA) by effectively awarding the first respondent the whole of the deceased’s estate. Whether the Judge conflated the concept of a moral claim with a bare promise that would not ordinarily be binding during a person’s life by equating a moral duty with the finding that there was an intention on behalf of the deceased that the Mendez Street property would belong to the first respondent. Whether the Judge’s discretion to award costs in favour of the first respondent miscarried.
Held: per Sulan J (Vanstone and Anderson JJ agreeing)
(1) The Judge fell into error by misconstruing the effect of the finding that the first respondent had established a moral claim. The finding that there was a moral claim was relevant to determining whether adequate provision had been made for the first respondent. It enlivened the Court’s discretion to consider what provision ought to be made. It did not follow that the first respondent was therefore entitled to the whole of the property.
(2) The finding that the first respondent’s proper maintenance, education or advancement in life, assessed against the other claimants to the estate, required that he receive, effectively, all the proceeds of the sale of the property, was not supportable.
(3) Having regard to all the circumstances, the appropriate order is that the deceased’s funeral expenses and the costs of administration to be paid from the proceeds of the sale of the property. Of the remaining balance, one quarter go to the second respondent and the remaining three quarters to be divided equally between the appellant and the first respondent. The personal effects of the deceased be given to the appellant.
(4) In all the circumstances, the appropriate order as to costs of the trial is that each party bear their own costs.
Inheritance ( Family Provision) Act 1972 (SA) s 7, s 9(8); Administration and Probate Act 1919 (SA), referred to.
Singer v Berghouse (1994) 181 CLR 201; McCosker v McCosker (1957) 97 CLR 566; Pontifical Society for the Propogation of the Faith v Scales (1962) 107 CLR 9; Vigolo v Bostin (2005) 221 CLR 191; Bowyer v Wood (2007) 99 SASR 190; Coates v NTE&A (1956) 95 CLR 494; Golosky v Golosky Unreported, New South Wales Court of Appeal, 5 October 1993; House v King (1936) 55 CLR 499; Mudford v Mudford [1947] NZLR 837, considered.
KOZLOWSKI v KOZLOWSKI
[2013] SASCFC 112Full Court: Sulan, Vanstone and Anderson JJ
SULAN J: This is an appeal against orders made pursuant to the Inheritance (Family Provision) Act 1972 (SA) (the Act) by a Judge of the Supreme Court. The Judge granted the application of the plaintiff and respondent, Stefan Andrew Kozlowski, for provision under s 7 of the Act.
The second defendant and appellant, Maria Kozlowski, appeals against the decision on the ground that the trial Judge erred in exercising his discretion to grant the respondent’s application in the terms that he did. The appellant further contends that the trial Judge’s exercise of discretion to award costs in favour of the respondent miscarried.
Background
The deceased, Marian Kozlowski, died intestate on 22 March 2003 at the age of 64. He was survived by his wife Maria Kozlowski (the appellant) and the two children of the marriage, Stefan Kozlowski and Julie Kozlowski, the first and second respondents respectively.
The deceased and the appellant married on 27 February 1971. The first respondent was born on 7 July that year and his sister, the second respondent, was born on 30 May 1975. Sometime between 1982 and 1984 the deceased and the appellant separated. They never divorced and there was no property settlement. At the time, the first respondent was aged 12 years. He went to live with the appellant.
After separating from the appellant, the deceased received a significant compensation claim for an injury he sustained in a serious motor vehicle accident in or around 1986. He used the proceeds of the compensation payment to acquire several properties with the appellant as joint tenants. The following properties were acquired:
·6 Hooper Street, Paralowie (“the Hooper Street property”);
·23 Sansom Street, Woodville North (“the Sansom Street property”); and
·11 Penola Street, Kilkenny (“the Penola Street property”).
From 1996, the second respondent commenced living at the Hooper Street property. The deceased resided at the Penola Street property and the appellant at the Sansom Street property.
The appellant gave evidence that she was not estranged from the deceased but that she was not able to live with him because of his violence towards her. She said that she paid all of the deceased’s bills and provided food and clothing for him. She stated that she assisted the deceased for 21 years, from the time they lived apart until his death. This included a seven month period following the deceased’s car accident during which he required around the clock care.
In 2002, a property located at 3A Farr Street, Woodville North (“the Farr Street property”) was purchased for $356,797. The deceased contributed $240,680.98, the appellant paid $74,319.02 and the second respondent took out a $41,797 mortgage to pay the remainder. Following proceedings in the District Court after the death of the deceased,[1] a Judge found that the Farr Street property was owned by Julie Kozlowski but that the appellant retained a right to occupy it for her life. On 12 December 2002, the second respondent became the registered proprietor of that property. From that date, the appellant began residing at those premises, and was continuing to do so as at the date of trial.
[1] Kozlowski v Kozlowski [2011] SADC 89.
In 1995, the deceased purchased a property on Mendez St, Paralowie (“the Mendez Street property”). It was purchased for $91,990.00 and was registered in the name of the deceased. The first respondent claimed that the property was purchased for him by the deceased for his sole benefit and enjoyment. He commenced living at the Mendez Street property at the invitation of the deceased. He married his wife, Pamela Kozlowski, in 1996. On 23 March 2002, their daughter Maykala Kozlowski was born, followed by their son Dylan Kozlowski on 12 April 2004.
During the time that he occupied the premises, the first respondent made a number of improvements to the property and met all outgoings in relation to rates, taxes and maintenance of the property. The most significant improvements were the installation of the following:
·ducted evaporative air-conditioning, at a cost of $2,716;
·roller shutters, at a cost of $3,794;
·a wall heater/gas furnace, at a cost of $1,540; and
·a carport, roller door, and a shed, at a cost of $2,958.
The deceased died unexpectedly from a heart attack. As at the date of trial, the deceased’s estate comprised:
The Mendez Street house $275,000.00
Furniture and personal effects
at the Penola Street house $500.00
Funeral Expenses $(9,698.10)
Administration costs $(10,385.80)
The case at trial
The first respondent’s initial claim, as pleaded, sought declaratory relief. He sought to establish that he was entitled to the Mendez Street property pursuant to a constructive trust which had arisen by virtue of the deceased’s statements about his intentions to him and the funds he had expended on improving the house. The application for provision under the Inheritance (Family Provision) Act 1972 was pleaded as an alternative should the primary claim fail. Prior to the commencement of the trial, the first respondent indicated that he would not be pursuing his claim for declaratory relief and would be relying solely on his application for provision. The trial proceeded with each of the witnesses being cross-examined on their affidavits. Counsel only addressed on the application for provision.
The application sought provision to be made out of the estate of the deceased for the first respondent’s education, maintenance and advancement of life. The application was resisted by the appellant. The second respondent, the first respondent’s sister, Julie, appeared unrepresented and was joined to the action because she was the Administrator of the estate, having been granted Letters of Administration on 25 January 2012. She made no independent claim for provision and agreed to abide the outcome of the proceedings.
Although the first respondent abandoned his claim that a constructive trust had arisen, he asserted that his entitlement to the estate was inadequate given that he had been promised the Mendez Street property by the deceased during his lifetime. It was contended that this promise gave rise to a moral obligation on the deceased to make proper provision for the respondent in his will.
Trial Judge’s findings
The trial Judge commenced by determining the first respondent’s entitlement to the deceased’s estate under the rules of intestacy. At the date of the deceased’s death, the Administration and Probate Act 1919 provided:
Distribution of intestate estate
72G Subject to this Part, an intestate estate shall be distributed according to the following rules:
(a) where the intestate is survived by a spouse and by no issue—the spouse is entitled to the whole of the intestate estate;
(b) where the intestate is survived by a spouse and by issue—
(i) the spouse is entitled—
(A)if the value of the intestate estate does not exceed $10 000, to the whole of the intestate estate; or
(B)if the value of the intestate estate exceeds $10 000, to the sum of $10 000 and to one-half of the balance of the intestate estate; and
(ii) the issue of the intestate is entitled to the balance (if any) of the intestate estate;
…
72H
(1) where an intestate is survived by a spouse, the spouse is entitled to any personal chattels of the intestate.
…
Pursuant to these rules, the first and second respondents were each entitled to receive $58,729.03.
The Judge then considered the evidence relating to the purchase of the Mendez Street property. The appellant and the first and second respondents were the only witnesses to give evidence.
The first respondent stated that on occasions prior to and following the purchase of the Mendez Street property, the deceased specifically told him that it was to be for his sole use and benefit, despite it being registered in the name of the deceased. His evidence was supported by the evidence of the second respondent. She stated that in 1996 the appellant informed her that the Mendez Street property had been purchased solely for the first respondent’s benefit by the deceased. She said that the appellant told her that the reason the Mendez Street property was placed into the deceased’s name was to protect the first respondent from losing half the value of the property in the event of a relationship breakdown. She also said that during occasions on which she visited the deceased, he frequently spoke of his happiness of being able to secure the first respondent’s future with the property.
The appellant denied that the Mendez Street property was purchased exclusively for the first respondent. She denied ever having conversations with the second respondent to that effect and denied that she said that the house was registered in the deceased’s name to protect the first respondent from losing half the value of the property if he had a relationship breakdown.
The trial Judge made the following findings:
I prefer the evidence of [the first respondent] and [Julie Kozlowski] over that of [the appellant]. Both [the first respondent] and [Julie Kozlowski] were impressive witnesses and performed well under cross-examination. Obviously, [the first respondent] had an interest to serve, but he did not appear to exaggerate or unduly promote his position. I was particularly impressed with [Julie Kozlowski]. She was adamant that she knew the deceased had stated that the house was for [the first respondent] and that [the appellant] had admitted to her that that was so. I thought that she was genuinely offended that [the appellant] was deliberately lying about these matters. I believe [Julie Kozlowski]’s evidence about that and also that she abstained from making a claim herself given that she knew what the deceased’s true wishes were and wanted to abide by them.
I thought that [the appellant] was an unimpressive witness. I positively disbelieved a number of her answers. I reject her evidence that the deceased had not indicated that he wished [the first respondent] to have the house and also her denial of admitting as much to [Julie Kozlowski]. I prefer the evidence of [the first respondent] and [Julie Kozlowski] to that of [the appellant] where their evidence conflicts.
The Judge concluded:
I find that the evidence of [the first respondent] and [Julie Kozlowski] as to statements made by the deceased that the Mendez Street property was purchased for the sole benefit of [the first respondent] were indeed made by the deceased and that [the appellant] admitted as much to [Julie Kozlowski]. I find that it was a great source of pride to the deceased that he was able to buy the Mendez Street house for his son, thereby securing his future to some degree. I find that the Mendez Street house was registered in the name of the deceased to prevent any partner of [the first respondent] from making a claim to it.
…
I consider that the deceased had a positive plan to provide each of the members of his family with a house. His statements to [the first respondent] were entirely consistent with the action the deceased had taken in relation to the other members of his family. Further, the attribution to him of the statement that the house was registered in his name for the purpose of avoiding any claim to it by a partner of [the first respondent] appears to me to be true. It is not inconsistent with the deceased having been left by his own wife some years earlier but I think it mainly reflected a prudent attitude held by the deceased.
On the basis of these findings, the Judge concluded that the first respondent had established a moral claim to the Mendez Street property. He stated:
I find that [the first respondent] has established that it was the intention of the deceased that the Mendez Street property should go to him and that such was known to each of the other family members. Accordingly, I find that [the first respondent] has made out a moral claim for the Mendez Street house.
Counsel for the appellant contends that the conclusion that a moral claim had been made out to support an order that the Mendez Street property be transferred to the first respondent, based on the deceased’s expressed intention, amounts to error. I shall return to that contention later in these reasons.
The Judge then turned to consider whether adequate provision was made for the respondent’s proper maintenance, education, and advancement in life, according to the rules of intestacy, taking into account the finding that he had established a moral claim to the Mendez Street property. The Judge summarised the first respondent’s assets and their estimated values, as well as his income as follows:
Assets
Motor vehicle $1,500
Tools $500
Furniture $2,500
Trailer $300
Motor bike $2,000
Superannuation $175,000
Joint savings with Pamela Kozlowski $15,000
$196,800
Assets belonging to Pamela Kozlowski
Motor vehicle $6,000
Superannuation $7,500
$13,500
Total $210,300
[The first respondent] works for Southern Star Windows and earns $40,000 to $41,000 per year. His wife works for Elsa Cleaning Services, and has an income of approximately $15,000 per year.
The Judge considered the circumstances of the other claimants to the estate, the appellant and the second respondent, and assessed them against the circumstances of the first respondent. The Judge concluded that the appellant was well provided for financially, having acquired the Hooper Street property valued at $300,000, the Sansom Street property valued at $330,000 and the Penola Street property values at $345,000, free from encumbrance by virtue of the doctrine of survivorship. She received $460 per week income from rental of two of those properties. She also received $150 per week for delivering a local newspaper. Under the rules of intestacy, she stood to inherit $137,958.05 (including $500 worth of the deceased’s personal effects) from the remainder of the deceased’s estate. The Judge also noted the appellant’s age and her poor state of health.
The Judge considered the circumstances of the second respondent. He found that she lived with her partner of four and a half years in a property owned by her partner. The property was subject to a mortgage which was serviced by her partner’s work as a butcher. She had a young daughter and was unemployed. She was the registered owner of the Farr Street property which was subject to a mortgage requiring repayments of about $149 per fortnight. She is entitled to possession of the property upon the appellant’s death.
The Judge further considered the first respondent’s relationship with the deceased, the size of the estate and whether the first respondent had engaged in disentitling conduct. These findings are not in dispute and it is not necessary to repeat them here.
Having considered the above matters, the trial Judge finally concluded:
Having come to the conclusion that [the first respondent] has established a very strong moral claim for provision, it falls to be determined whether the Court should exercise its discretion to grant an order for provision, and, if so, what the terms of that order should be.
I have found that [the first respondent] has established that the Mendez Street house was promised to him by the deceased during his lifetime. This is reinforced by a consideration of the evidence of [the first respondent]’s needs and those of his mother and his sister. I note that since the death of the deceased, [the first respondent] has purchased a house at 21 Traverse Avenue, Salisbury North for $250,000 in order to remove his family from some unsavoury behaviour which was taking place in the vicinity of the Mendez Street house. Consequently, he has now assumed a mortgage liability of $242,000. Taking into account the property holdings of the other claimants on the estate, which were put into place by the deceased during his lifetime, I find the Court should exercise its discretion to make an order for provision in favour of [the first respondent].
It was conceded by [the first respondent] at trial that such an order would have to be in terms of the proceeds of the sale of the Mendez Street house to allow for the deduction of the costs of the administration and funeral costs from the estate. As such, the only just order here can be that [the first respondent] is entitled to those proceeds.
In a later judgment,[2] the trial Judge granted the first respondent’s application for costs against the appellant on a party-party basis. In doing so, he stated:
Given the size of the estate and the strength of the plaintiff’s claim, I find that it would not be appropriate for the parties’ costs to be paid out of the estate. The second defendant was the only party to resist the plaintiff’s application and the offer made by the plaintiff was very reasonable, especially considering the size of the estate. I also note that I specifically rejected the material parts of the second defendant’s evidence. The trial would not have been necessary but for her attitude and her evidence has been disbelieved. Accordingly, I considered that the appropriate exercise of the discretion is to grant the plaintiff’s application for costs against the second defendant.
[2] Kozlowski v Kozlowski (No 2) [2013] SASC 66.
The appeal
The appellant advances two grounds of appeal. First, that the trial Judge erred in exercising his discretion under s 7 of the Inheritance (Family Provision) Act 1972 by effectively awarding the first respondent the whole of the deceased’s estate. The appellant does not dispute that the Court had jurisdiction to grant the first respondent greater provision out of the deceased’s estate. However, the appellant contends that the approach of the trial Judge as to ‘moral claim’ confused the issue of a moral duty to make proper provision for an applicant, and the question of, once that duty had been established, the determination of the size of any adjustment to the interests that would otherwise had gone to the competing claimants. It is contended that the Judge confused the concept of a moral claim with a bare promise that would not ordinarily be binding during a person’s life by equating a moral duty with the finding that there was some intention on behalf of the deceased that the Mendez Street property would belong to the first respondent. It is submitted that the Judge’s reasons are more appropriately directed to a constructive trust case, but that that aspect of the first respondent’s case had been abandoned. It is contended that the correct approach, once a Court has decided it is appropriate to make provision in favour of an applicant, is to determine what provision is appropriate for the maintenance, education or advancement of the person.
Secondly, the appellant submits that the trial Judge’s discretion to award costs in favour of the respondent miscarried.
Applications for provision
The Act replaced the Testators Family Maintenance Act 1918 and the Testators Family Maintenance Act 1943. The purpose of the Act is to ensure that those persons specified in s 6 of the Act[3] are entitled to make a claim for adequate provision from an estate for the proper maintenance, support, education or advancement in life of the claimant.
[3] Persons entitled to claim under this Act
The following persons are, in respect of the estate of a deceased person, entitled to claim the benefit of this Act:
(a) the spouse of the deceased person;
(b) a person who has been divorced from the deceased person;
(c) a child of the deceased person;
(g) a child of a spouse or domestic partner of the deceased person being a child who was maintained wholly or partly or who was legally entitled to be maintained wholly or partly by the deceased person immediately before his death;
(h) a child of the child of the deceased person;
(i) a parent of the deceased person who satisfies the court that he cared for, or contributed to the maintenance of, the deceased person during his lifetime;
(j) a brother or sister of the deceased person who satisfies the court that he cared for, or contributed to the maintenance of, the deceased person during his lifetime.
In Vigolo v Bostin,[4] Gleeson CJ referred to the Second Reading Speech of the Western Australian Attorney-General when introducing the equivalent legislation in Western Australia. The Attorney-General’s statement is apposite to the South Australian legislation. He said:[5]
It is considered that society’s attitude to the right of man, or of a woman, for that matter, to dispose of his or her property as he or she thinks fit ... beyond doubt has changed. There is now a feeling that a deceased is under some moral obligation to make provision for the maintenance, education, and advancement in life of persons who in the normal course of human affairs had a close personal relationship with the deceased. Unless provision is made there should be means to satisfy the court that some provision should be made.
The decision to extend the right of application against intestacies or partial intestacies is a logical one. The terms of a will may be irrational or indeed immoral; but the same can apply where distributions of estates are made under a rule of law. For example, a wife who deserted her husband and children could take the whole of a small estate at the expense of children maintained by the deceased, this being pursuant to the present law found in the Administration Act. Such a case is not uncommon and the same redress should be available to deserving claimants in an intestacy as is given to claimants under a will.
[4] (2005) 221 CLR 191.
[5] (2005) 221 CLR 191, [3].
The principles governing applications for family provision in estate matters are well known. They were identified by the trial Judge and are not in dispute.
Section 7 of the Act provides as follows:
7—Spouse and persons entitled may obtain order for maintenance etc out of estate of deceased person
(1) Where—
(a) a person has died domiciled in the State or owning real or personal property in the State; and
(b) by reason of his testamentary dispositions or the operation of the laws of intestacy or both, a person entitled to claim the benefit of this Act is left without adequate provision for his proper maintenance, education or advancement in life,
the Court may in its discretion, upon application by or on behalf of a person so entitled, order that such provision as the Court thinks fit be made out of the estate of the deceased person for the maintenance, education or advancement of the person so entitled.
The inquiry as to whether adequate provision has been made involves a two-stage process. In Singer v Berghouse, the High Court discussed the nature of the inquiry required by family provision legislation. In their majority judgment, Mason CJ, Deane and McHugh JJ said:[6]
It is clear that, under these provisions, the court is required to carry out a two-stage process. The first stage calls for a determination of whether the applicant has been left without adequate provision for his or her proper maintenance, education and advancement in life. The second stage, which only arises if that determination be made in favour of the applicant, requires the court to decide what provision ought to be made out of the deceased's estate for the applicant. The first stage has been described as the "jurisdictional question"
[Citations omitted.]
[6] (1994) 181 CLR 201, 208-209.
They explained:[7]
The first question is, was the provision (if any) made for the applicant "inadequate for [his or her] proper maintenance, education and advancement in life"? The difference between "adequate" and "proper" and the interrelationship which exists between "adequate provision" and "proper maintenance" etc. were explained in Bosch v Perpetual Trustee Co. Ltd. The determination of the first stage in the two-stage process calls for an assessment of whether the provision (if any) made was inadequate for what, in all the circumstances, was the proper level of maintenance etc. appropriate for the applicant having regard, amongst other things, to the applicant's financial position, the size and nature of the deceased's estate, the totality of the relationship between the applicant and the deceased, and the relationship between the deceased and other persons who have legitimate claims upon his or her bounty.
The determination of the second stage, should it arise, involves similar considerations. Indeed, in the first stage of the process, the court may need to arrive at an assessment of what is the proper level of maintenance and what is adequate provision, in which event, if it becomes necessary to embark upon the second stage of the process, that assessment will largely determine the order which should be made in favour of the applicant. In saying that, we are mindful that there may be some circumstances in which a court could refuse to make an order notwithstanding that the applicant is found to have been left without adequate provision for proper maintenance. Take, for example, a case like Ellis v Leeder, where there were no assets from which an order could reasonably be made and making an order could disturb the testator's arrangements to pay creditors.
[Citations omitted.]
[7] (1994) 181 CLR 201, 209-210.
The first stage of the inquiry involves an objective assessment of all the circumstances in the case and determining whether, in fact, adequate provision has been made for the applicant. Where the first stage of the inquiry is answered in the affirmative, the second stage involves the exercise of judicial discretion in determining what provision ought to be made having regard to the factors identified by the legislation.
A number of cases have dealt with the issue of what is “adequate” and “proper” in all of the circumstances. In McCosker v McCosker Dixon CJ and Williams J stated:[8]
The question is whether, in all the circumstances of the case, it can be said that the respondent has been left by the testator without adequate provision for his proper maintenance, education and advancement in life. As the Privy Council said in Bosch v. Perpetual Trustee Co. (Ltd.) the word "proper" in this collocation of words is of considerable importance. It means "proper" in all the circumstances of the case, so that the question whether a widow or child of a testator has been left without adequate provision for his or her proper maintenance, education or advancement in life must be considered in the light of all the competing claims upon the bounty of the testator and their relative urgency, the standard of living his family enjoyed in his lifetime, in the case of a child his or her need of education or of assistance in some chosen occupation and the testator's ability to meet such claims having regard to the size of his fortune.
[Citations omitted.]
[8] (1957) 97 CLR 566, 571-2.
Dixon CJ, in Pontifical Society for the Propagation of the Faith v Scales, further elaborated: [9]
It has often been pointed out that very important words in the statute are "adequate provision for the proper maintenance and support" and that each of these words must be given its value. "Adequate" and "proper" in particular must be considered as words which must always be relative. The "proper" maintenance and support of a son claiming a statutory provision must be relative to his age, sex, condition and mode of life and situation generally. What is "adequate" must be relative not only to his needs but to his own capacity and resources for meeting them. There is then a relation to be considered between these matters on the one hand, and on the other, the nature, extent and character of the estate and the other demands upon it, and also what the testator regarded as superior claims or preferable dispositions. The words "proper maintenance and support", although they must be treated as elastic, cannot be pressed beyond their fair meaning. The Court is given not only a discretion as to the nature and amount of the provision it directs but, what is even more important, a discretion as to making a provision at all.
[9] (1962) 107 CLR 9, 19.
A moral claim?
Neither the phrase “moral claim” nor “moral duty” appear in the Inheritance (Family Provision) Act 1972 or in any equivalent family provision legislation in other Australian jurisdictions. Nonetheless, the concept has been applied by Australian courts in assessing the first, jurisdictional, stage of the inquiry.
While some cases have cast doubt on the usefulness of the concept,[10] more recently in Vigolo v Bostin,[11] Gleeson CJ described the value of considering moral claims and moral duties in explaining the purpose of family provision legislation, and making the value judgments required by the legislation. He said:[12]
In explaining the purpose of testator's family maintenance legislation, and making the value judgments required by the legislation, courts have found considerations of moral claims and moral duty to be valuable currency. It remains of value, and should not be discarded. Such considerations have a proper place in the exposition of the legislative purpose, and in the understanding and application of the statutory text. They are useful as a guide to the meaning of the statute. They are not meant to be a substitute for the text. They connect the general but value-laden language of the statute to the community standards which give it practical meaning. In some respects, those standards change and develop over time. There is no reason to deny to them the description "moral". As McLachlin J pointed out in the Supreme Court of Canada, that is the way in which courts have traditionally described them. Attempts to misapply judicial authority, whatever form they take, can be identified and resisted. There is no occasion to reject the insights contained in such authority.
[10] See for example, Coates v NTE&A (1956) 95 CLR 494, 512; Singer v Berghouse (1994) 181 CLR 201, 209.
[11] (2005) 221 CLR 191.
[12] (2005) 221 CLR 191, [25].
Gummow and Hayne JJ observed that moral duty or moral claims are expressions which are liable to be misunderstood, as they may lead to a court having regard to extraneous factors not encompassed by the relevant legislative provisions. They confirmed that the correct approach to the construction of the first or jurisdictional limb of the provisions of the Act is as stated in Singer as referred to in [43]-[44] herein.
In Bowyer v Wood,[13] this Court held that the failure of the trial Judge to refer to the moral duty of the testatrix to her children or to the reasoning of the High Court in Vigolo v Bostin, notwithstanding counsel’s references in argument, led the Judge into error.
[13] (2007) 99 SASR 190.
Debelle J, with whom Nyland and Anderson JJ agreed, said:[14]
In Vigolo v Bostin a majority of the High Court held that it was helpful, when making the value judgment required on the jurisdictional question whether adequate provision had been made to a plaintiff, to have regard to considerations of moral claim and moral duty. It is a consideration which connects the general but value-laden language of the statute to the community standards which give it practical meaning: Vigolo v Bostin (at [25] per Gleeson CJ and see generally Gleeson CJ (at [[11]-25]). Moral duty and moral obligation may, according to circumstances, be relevant and within the contemplation of the Act but a moral claim cannot be a claim founded upon considerations not contemplated by the Act: Vigolo v Bostin (at 113]-[121]) per Callinan and Heydon JJ. However, considerations of moral duty and moral claim cannot be a substitute for the text of the Act: Vigolo v Bostin (at [25]) per Gleeson CJ. The failure of the judge to consider whether the plaintiff had a moral claim was a serious omission especially given the substantial provision made by the testatrix for charities and her siblings. For the reasons which follow, the judge erred in failing to give consideration to the moral claim of the plaintiff upon the bounty of her mother.
[14] (2007) 99 SASR 190, [44].
Although a moral claim is a relevant consideration in determining whether a valid claim has been made out, that moral claim must be referrable to the factors or circumstances relating to whether adequate provision for the proper maintenance of a claimant has been established.
Interfering with an exercise of discretion
The principles of law that govern the circumstances in which an appellate court can interfere with an exercise of judicial discretion are well established.[15] In Singer v Berghouse,[16] the principles were discussed in the context of family provision cases. Mason CJ, Deane and McHugh JJ cited with approval the remarks of Kirby P (as he was then) in Golosky v Golosky.[17] They said:[18]
However, in the context of family provision cases, the principles governing the review of a decision on the jurisdictional question are not settled. In Goodman v. Windeyer, Gibbs J did not decide whether an appeal from a decision on the jurisdictional question should be governed by the principles that regulate appeals from decisions made in the exercise of a discretion. Similarly, in Kearns v. Ellis, Mahoney JA raised the issue but did not express a concluded view.
Kirby P, by contrast, has held that the principles that govern appellate review of discretionary decisions should apply. In our view, this is the correct approach. In this respect we should express our agreement with the following comments of his Honour in Golosky v. Golosky:
Unless appellate courts show restraint in disturbing the evaluative determinations of primary decision-makers they will inevitably invite appeals to a different evaluation which, objectively speaking, may be no better than the first. Second opinions in such cases would be bought at the cost of diminishing the finality of litigation in a troublesome area and, sometimes at least, with a burden of costs upon the estate which should not be encouraged.
[Citations omitted.]
[15] House v King (1936) 55 CLR 499, 504-5.
[16] (1994) 181 CLR 201, 204.
[17] Unreported, New South Wales Court of Appeal, 5 October 1993.
[18] Singer v Berghouse (1994) 181 CLR 201, 212.
Discussion
The deceased had promised the Mendez Street property to the first respondent. That fact is a relevant matter to which the Court will have regard in determining a claim. In Mudford v Mudford,[19] the New Zealand Court of Appeal observed that a promise made by a testator to his children is a relevant consideration for determining whether adequate provision had been made. Smith J said:[20]
Nevertheless, in order to discharge its duty, the Court must place itself in the position of the testator and consider what claim, if any, each mature child has to participate in the testator’s bounty. The present needs of the children, particularly when claims of the widow are not in issue, are not the only relevant considerations. The extent to which children have contributed to the making of the testator’s estate, the promises which he has made to them of reward under his will, the gifts, if any, which he has made in his lifetime, the advantages, educational or otherwise, which he has conferred upon them, may all be relevant for consideration.
[Emphasis is mine.]
[19] [1947] NZLR 837.
[20] Mudford v Mudford [1947] NZLR 837, 840.
Similarly in Vigolo v Bostin,[21] Callinan and Heydon JJ stated:
Adequacy of the provision that has been made is not to be decided in a vacuum, or by looking simply to the question of whether the applicant has enough upon which to survive or live comfortably. Adequacy or otherwise will depend upon all of the relevant circumstances, which include any promise which the testator made to the applicant, the circumstances in which it was made and, as here, changes in the arrangements between the parties after it was made. These matters however will never be conclusive. The age, capacities, means and competing claims, of all the potential beneficiaries must be taken into account and weighed with all of the other relevant factors.
[21] (2005) 221 CLR 191, [122].
I consider that the Judge fell into error by misconstruing the effect of the finding that the first respondent had established a moral claim. While it is accepted that there is some overlap between relevant factors to be considered at both stages of the inquiry, the finding that there was a moral claim was relevant to determining whether adequate provision for the first respondent had been made. It enlivened the Court’s discretion to consider what provision ought to be made. It did not follow that he was entitled to whole of the Mendez Street property.
There is nothing in the trial Judge’s reasons to support the finding that the first respondent’s proper maintenance, education or advancement in life, assessed against the other claimants to the estate, required that he receive all the proceeds of the sale of the Mendez Street property. The consideration that the first respondent had a moral claim based on the promise of the deceased that he be entitled to the Mendez Street property, therefore entitling him to the benefit of the whole estate, was an error. In considering the second stage of the enquiry, the Judge was required to consider a number of factors, including the relative financial position of the applicant and the relationship between the deceased and other persons who have legitimate claims on the estate. The Judge failed to give adequate weight to those factors, and placed too great a consideration upon the deceased’s statement that he desired the Mendez Street property to go to the first respondent. I am of the view that the exercise of the discretion therefore miscarried.
It is not in dispute that this Court has jurisdiction to exercise the discretion afresh. The appellant does not contend that the first respondent is not entitled to seek greater provision out of the deceased’s estate. Similarly, the circumstances of the parties, as found by the trial Judge are not in dispute.
I have regard to the circumstances of the first respondent. He has a steady but modest income which is supplemented by the smaller earnings of his wife. They have some savings and superannuation. They have a young family and have taken out a mortgage to pay for a substantial part of their new family home. I also have regard to the fact that the first respondent lived rent free at the Mendez Street property for a period during the life of the deceased. The appellant is aged 66 and in poor health. She has a lower income than the first respondent but assets exceeding $1M. She has a right to occupy the Farr Street Property for the remainder of her life. The second respondent is unemployed with a young daughter. She is supported by her partner. She is the registered owner of the Farr Street property for which she services a relatively small mortgage. She will be entitled to possession of it upon the appellant’s death. I also have regard to the relationships of the parties with the deceased and the relatively small size of the estate.
In the circumstances, I order that the deceased’s funeral expenses and the costs of administration be paid from the proceeds of the sale of the Mendez Street property.[22] I also order that, of the remaining balance, one quarter go to the second respondent and the remaining three quarters to be divided equally between the appellant and the first respondent. I further order that the personal effects of the deceased situated at the Penola Street property be given to the appellant.
[22] The Court is informed that the Mendez Street property has now been sold.
Costs of the trial
Given the above findings, it is not necessary to consider the appellant’s submissions as to whether the trial Judge erred in exercising his discretion to award costs in favour of the first respondent. That being the case, I have had regard to those submissions in determining what orders should be made in respect to costs of the trial.
Section 9(8) of the Inheritance (Family Provision) Act 1972 provides that a court has power to make such order as to the costs of any proceeding as it considers just. I also have regard to Practice Direction 8.1.[23]
[23] Direction 8.1 – Costs in Estate Matters (Rule 263)
8.1The Judges have been concerned at the relatively high costs which are being run up in litigation involving estates, particularly when there are a number of separately represented parties. In the past the Court has often as a matter of course tended to allow costs as between lawyer and client on the full Supreme Court scale to all parties out of the estate. Practitioners are reminded that the Court will exercise its general discretion as to costs under Rule 263 as appropriate in the circumstances of a particular case, but having particular regard to:
8.1.1 ordering costs against parties who have not succeeded;
8.1.2ordering costs in the light of whatever offers have been made under Rule 187;
8.1.3not giving full costs to separately represented parties where they could have properly been jointly represented;
8.1.4 awarding less than full costs where the amount in issue is relatively small.
There are several relevant factors to which I have regard. The first consideration is that this is a relatively small estate. It is also relevant that the first respondent has been successful in his application for provision. That being so, the appellant was entitled to defend her entitlement to the estate under the rules of intestacy. It was a short trial with a narrow ambit which proceeded on affidavit. I do not regard the appellant’s conduct as unduly prolonging the proceedings or her position as being unreasonable. While the trial Judge made adverse findings about the appellant’s credit this alone does not warrant that costs orders should be made against her.
There were submissions on the appeal regarding an offer to settle sent by the first respondent’s solicitors to the solicitors for the appellant. That offer was dated 4 May 2012 and preceded the institution of proceedings in this Court. It is sufficient to say that the letter did not comply with r 187 of the Supreme Court Civil Rules 2006. On one interpretation of the letter, the appellant would receive a more favourable outcome under the orders I propose than she would have if she had accepted the offer. The failure of the appellant to respond to the offer is not a reason to order that she pay the first respondent’s costs.
The appellant has received less than her entitlement under the Act. The first respondent has succeeded in his claim for provision greater than his entitlement under the Act. The second respondent made no claim at trial. She supported the first respondent on the appeal. In my view, she should not be required to contribute to the appellant’s or first respondent’s costs out of her share of the estate.
In my view, a just order would be that each party bear their own costs of the trial.
I will hear the parties as to the costs of the appeal.
VANSTONE J: I agree with the orders proposed by Sulan J and with his reasons.
ANDERSON J. I have read the draft reasons of Sulan J and I agree with the orders that he proposes. I also agree with his reasons.
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