Litchfield v Smith
[2010] VSC 466
•20 October 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 10329 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 CHRISTINA EMMA TINGATE deceased
BETWEEN:
| JENNIFER NANCY LITCHFIELD | Plaintiff |
| v | |
| JEAN CHRISTINE SMITH and RODERICK REX TINGATE (who are sued as the Executors of the Estate of CHRISTINA EMMA TINGATE, deceased) | Defendants |
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JUDGE: | HARGRAVE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 5, 6 and 7 October 2010 | |
DATE OF JUDGMENT: | 20 October 2010 | |
CASE MAY BE CITED AS: | Litchfield v Smith & Tingate | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 466 | |
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TESTATOR’S FAMILY MAINTENANCE – Acknowledged moral responsibility – Whether will made adequate provision for applicant – Relevance of parental conduct depriving applicant of opportunities in life – Further provision ordered – Administration and Probate Act 1958 (Vic), s 91.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R T A Waddell | Johansson Solicitors |
| For the Defendant | Mr R H Miller | Paul B Connor |
TABLE OF CONTENTS
Introduction and parties................................................................................................................... 2
Facts....................................................................................................................................................... 3
Does the will make adequate provision for Nancy?.................................................................... 8
What amount of provision should be ordered?......................................................................... 23
Conclusion and orders.................................................................................................................... 28
HIS HONOUR:
Introduction and parties
Christina Emma Tingate (‘the deceased’) died on 1 December 2007 aged 87 years. She was pre-deceased by her husband, who died 15 years earlier in 1992. They had three children: Jean (now aged 64 years), Roderick (‘Rod’, now aged 62 years) and Jennifer Nancy (‘Nancy’, now aged 56 years). The deceased made her last will in 1992, shortly after her husband’s death and after obtaining opinions of value for probate purposes. By that will, the deceased made provision for her children in the following manner:
(1) Nancy was left two properties, a residence in Croydon and a commercial property in Nunawading (then valued at $163,000).
(2) Jean was left the family home in Blackburn (then valued at $140,000).
(3) Rod was left a commercial property in Gardenvale (then valued at $275,000).
(4) The residuary estate was left to the three children in equal shares.
At the time the will was made, Nancy was divorced, had a young dependent child and no significant assets. She had been living in the Croydon property for approximately nine years, paying a nominal rent to her parents when circumstances permitted and at other times living rent-free. In contrast, Jean and Rod were each happily married, had three children and owned or were purchasing their family homes.
By the time of the deceased’s death, Nancy’s financial position had not improved. Although she had married her present husband Dennis in 2001, they earned little income and had no significant savings. They resided in the Croydon property, having ceased paying any rent to the deceased about six months earlier, at her direction. In contrast, the asset positions of Jean and Rod had markedly improved since the will was made. Together with their respective spouses, they owned their matrimonial homes without any encumbrance and had acquired other assets. In particular, Jean and her husband had acquired significant assets and were earning a good income.
Nancy contends that her poor financial position is, to a significant extent, attributable to the conduct of her parents towards her. However, in contrast, she acknowledges that her parents provided her with considerable financial assistance, in the form of free or subsidised rent for the Croydon property since 1983, and in providing other support at critical times in her life.
In these circumstances, Nancy believes that her mother’s will did not make adequate provision for her proper maintenance and support. In this proceeding, Nancy seeks orders from the Court for further provision for her from the estate. Her sister and brother, as executors of the will, oppose the making of any orders for further provision. They contend that the will makes adequate provision for Nancy.
Accordingly, the issues for determination in the proceeding are:
(1) Does the will make adequate provision for Nancy?
(2) If not: What amount of provision should be ordered?
Each of the children gave evidence and presented as an honest witness. However, there were some aspects of the evidence which involved over-emphasis, to the point of exaggeration, of matters which were perceived to be in the interests of the witness. This was particularly so with Nancy, in respect of her parents’ conduct towards her, her health and the condition and location of the Croydon property. However, I find that there is nevertheless some substance in her evidence concerning each of these matters.
Facts
Nancy is the youngest child of the deceased. In summary, her life followed the following course:
(1) She left school at 15 years of age, after completing her Leaving Certificate (now Year 11).
(2) At about this time, her parents left her in the care of her older sister Jean and her husband, while her parents travelled to Europe on an extended caravan holiday for approximately two years.
(3) While her parents were still overseas, she accompanied her older brother Rod to England. She was then aged 17. She spent time in England and Greece for about two years, and returned to Australia in February 1974.
(4) At the age of 22, she married Don Litchfield. They had one son, Ross, born in 1977.
(5) The marriage to Don Litchfield did not last, and the couple separated and then divorced. She took no money from the marriage, and Mr Litchfield did not pay his maintenance obligations to her.
(6) By 1983, she was a divorced mother with a young child. She had no money. In these circumstances, her parents invited her to move into the Croydon property, to live there with her son Ross and create a home. Her parents provided some assistance with the care of Ross while she worked part-time. Further, for a few months her parents lived in a caravan on the Croydon property, in order to protect Nancy from Mr Litchfield, who had a propensity for violence.
(7) She has resided in the Croydon property ever since. She has paid rental of $100, $75 and $50 per week at various times. When she has not been employed, she has lived there rent-free. On her own estimate, Nancy paid rent of approximately $60 per week on average for the 27 year period that she occupied the Croydon property prior to her mother’s death.
(8) About six months before her death, the deceased told her to stop paying rent, and she did so. She has lived in the Croydon property rent-free ever since with her current husband.
(9) She balanced motherhood and work commitments, usually part-time but sometimes full-time, for many years. At one stage, while she was in full-time employment, she saved a house deposit of approximately $15,000. She obtained approval for a home loan, but the approval was subject to her parents guaranteeing the loan. They refused to act as guarantors.
(10) In 1997, following experience gained in her employment, she commenced her own business from the Croydon property, selling ultra-violet lamps for use in the print industry. Her mother provided a small loan of $1,000 when this business was in its infancy, and that loan was repaid. The business was never very profitable, and she relied upon cheap rent for the Croydon property to make ends meet.
(11) In 2001, she married Dennis Hirschfield. At this time, Dennis was employed. They lived in the Croydon property from the time of the marriage, paying $50 per week rental until the end of June 2007, when they stopped paying rent at the request of the deceased.
(12) In 2002, Dennis was retrenched from his employment. He has been unable to obtain further employment. Accordingly, he has assisted Nancy in the conduct of her business and is paid a wage which amounts to most of the profit in that business. It is a low wage because the profits are small. The net profit of the business before wages in the year ended 30 June 2007 was $30,927, and in the year ended 30 June 2008 $35,264. Since that time, the profits have decreased, notwithstanding some increased turnover, and the profit for the year ended 30 June 2010 was only $26,577.
At the time of the deceased’s death on 1 December 2007, Nancy and her husband had no significant assets. Even with low rent (and from 1 July 2007 no rent) for the Croydon property, they had been unable to save or acquire assets. The retrenchment package paid to Dennis when he ceased work in 2002 had been dissipated, in circumstances which do not call for further comment.
The present financial position of Nancy and her husband has not significantly altered since the deceased’s death. Indeed, their income would appear to have decreased. In summary:
(a) they have only approximately $28,000 in assets;
(b) their current income is below $30,000 per annum and the business is in probable decline;
(c) their expenditure on normal living expenses exceeds their present income; and
(d) given their ages (Nancy is 56 and Dennis is 63) they have little prospect of re‑training or securing full-time employment or improving their business income. Further, they are each affected by ill health to some degree, particularly Nancy, and this affects their ability to earn income.
Nancy and her husband have an obvious need for both capital and income.
In contrast, Jean and her husband are, and have at all relevant times been, in a sound financial position. In summary, they own their own home, which is unencumbered, their income exceeds their expenditure and they have combined superannuation and cash reserves of approximately $350,000. Jean’s health is good, but she is 62 years old and is unlikely to work for much longer. Her husband Geoffrey’s health is uncertain due to a rare form of prostate cancer, and his ability to continue earning his present salary is in doubt. In any event, he is nearly 64 years old and intends to retire at 65. Notwithstanding their relative comfort, they have a need for income in their retirement.
Rod and his wife are also in a secure financial position. They own their own home and manage to live on their modest incomes. Rod gave evidence that he was happy with his lot in life and had no intention of moving from his present home, which is unencumbered. He has other assets, including approximately $100,000 in savings and superannuation. Notwithstanding this, given his age and the limited income earned by him and his wife, Rod has a real need for increased income, both now and in retirement. He also needs further capital to cover contingencies.
As appears above, Nancy contends that her present poor financial position has been contributed to by the conduct of her parents towards her, which has limited her opportunities in life.
First, she contends that her parents required her to finish schooling after she completed her Leaving Certificate, for the selfish reason that they wished to travel overseas for two years. She contends that she was a sufficiently bright student to pursue her ambition to become a vet. On the evidence before the Court, it is impossible to reach any confident finding as to whether this was a realistic aim.
Second, she contends that her parents abandoned her on two occasions: when they went overseas and later when she was living with Don Litchfield before their marriage. She contends, in effect, that she only married Mr Litchfield because her parents ostracised her whilst she was living with him out of wedlock. In these circumstances, not wishing to be ostracised, she felt pressure to marry. When she did marry, she was welcomed back into the family. However, the marriage was a failure and it left her without assets as a divorced woman with a child. This forced her to accept her parents’ invitation to live in the Croydon property and act according to their wishes, as she was beholden to them.
Third, she contends that her parents inability or refusal to provide full-time childcare for her son, especially when they travelled to Western Australia each year during the winter months, deprived her of pursuing a promising career in full-time work. This conduct necessitated her working part-time only so she could care for her son.
Fourth, she contends that her childhood was not entirely happy, because she felt unwanted as the youngest child who was referred to by an aunt as being an ‘accident’.
On balance, Nancy contends that she was disadvantaged in life by the attitude of her parents towards her and that her siblings, Jean and Rod, benefited from greater support from their parents during their formative years and into early adulthood. She contends her parents let her down during that period of her life.
Does the will make adequate provision for Nancy?
The Court’s power to make an order for provision, or 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).
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 was that stated by Lord Romer, in delivering the judgment of the Privy Council in Bosch v Perpetual Trustee Company Ltd:[1]
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.
[1][1938] AC 463, 478-9.
That standard or test continues to apply to the determination of the two jurisdictional questions. 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 applicant.[2]
[2]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 considering the two jurisdictional questions, the question arises as to the time at which the relevant facts and circumstances must be considered. A similar temporal question arises if the two jurisdictional pre-conditions are satisfied and the court reaches the stage of considering the amount of any provision which should be ordered and the terms of any such order. Both questions are dealt with by authority. In Prosser v Twiss,[3] Lush J said:
There is of course conclusive authority for the proposition that the question whether adequate provision has been made must be determined by a consideration of the facts existing and eventualities which might reasonably have been foreseen at the date of the testator’s death, whereas the question what order should be made is to be decided by reference to the state of facts existing at the time of the hearing by the court...
[3][1970] VR 225, 232. See also McKenzie v Topp [2004] VSC 90, [15], decided after s 91(4) of the Act came into force.
A related question to be considered in all applications under s 91 is the knowledge which is to be attributed to the hypothetical wise and just testator for the purpose of considering whether he or she has complied with his or her moral duty to make adequate provision for the proper maintenance and support of the applicant. In this regard, the conduct of the testator is to be considered on the basis that he or she was, at the time of death, fully aware of all the relevant circumstances.[4] The fact that this is so emphasises the role of the court to consider the conduct of the testator having regard to all of the relevant circumstances, including reasonably foreseeable eventualities existing at the date of death, whether or not actually known to the testator.
[4]McKenzie v Topp [2004] VSC 90, [15], per Nettle J.
In this case, the first jurisdictional requirement is not in issue. Jean and Rod, as executors, rightly acknowledge that the deceased had responsibility to make provision for the proper maintenance and support of Nancy. However, as noted, they contest the second jurisdictional requirement. They contend that Nancy has not satisfied the Court that the will does not make adequate provision for her proper maintenance and support.
As stated above, the financial needs of Nancy and her husband at the time of the deceased’s death were substantial. They owned no real estate and had little income or assets. The executors accept this, and accordingly acknowledge that the deceased had a moral responsibility to make adequate provision for Nancy in her will.
It was submitted on behalf of the executors that the deceased fulfilled her moral responsibility to make adequate provision for Nancy. Reliance was placed upon the nature and value of the assets bequeathed to Nancy. Under the will, she was left an unencumbered home (the Croydon property), an unencumbered commercial premises providing net income of $11,624 per year (the Nunawading property) and one-third of the residuary estate (a share of approximately $40,000). It was submitted that, by these bequests, the deceased fulfilled her moral responsibility to make adequate and proper provision for Nancy, by addressing her undoubted needs for a home and some further income. In addition, the one-third share of the residuary estate provided a small fund to be used to pay any existing debts and, for example, to engage in necessary maintenance or renovations to the two properties.
There was no question that the deceased recognised her moral responsibility to provide for Nancy’s needs. Nancy recalled a discussion with her mother in which she was told that she was to be left the Croydon and Nunawading properties. She recalled her mother explaining her reasons in the following terms: ‘There’s a house to live in and there’s an investment property that will bring in some income’.
This evidence was consistent with Jean’s conservations with the deceased concerning her intentions to provide for Nancy in her will. Jean recalled discussions with her mother to the effect that she wished to ensure that Nancy was secure in three respects. First, a desire to ensure that Nancy ‘would always have that roof over her head’ (a reference to the Croydon property). Second, a desire to provide Nancy with an income stream to supplement her income (a reference to the Nunawading property). Third, a desire to provide Nancy the option, in circumstances of ‘dire difficulty’ of selling the Nunawading property and thus remaining secure in her home. Further, Jean’s evidence supports the conclusion that the deceased viewed her moral responsibility to provide for Nancy as paramount, taking precedence over her responsibility towards her other children. Based on her conversations with her mother concerning her will, Jean gave the following evidence to this effect:
my sister’s personal and financial history had meant that Mum was going to may jolly sure that Nancy had a secure future and that she was going to provide her with the house at Lee Ann [the Croydon property] and the shop at Worrell Street [the Nunawading property]. So Nancy was the one Mum considered first.
The question remains as to whether the desire of the deceased to make adequate provision for Nancy’s proper maintenance and support was carried into effect, taking the facts existing and eventualities which might reasonably have been foreseen at the date of the deceased’s death. In answering that question, the Court is obliged to consider 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 these matters.
Section 91(4)(e) of the Act requires the Court to consider the relationship between the deceased and Nancy. Nancy is her daughter and responsibility to make adequate provision 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 her three children. As stated above, the deceased recognised that she had a special responsibility to provide for Nancy, because of her poor financial position and, at the date of the will, the fact that Nancy was a divorced woman with a dependent son. However, it is clear that the deceased also had a moral responsibility to provide for Jean and Rod, and intended to do so.
Section 91(4)(g) of the Act requires the Court to consider the size and nature of the estate. For present purposes, the relevant date to value the estate is the date of death. At that time, the residuary estate approximated $118,000. A valuer was appointed to value the real estate for probate purposes. He valued the properties at the date of death as follows:
(1) the Croydon property - $320,000;
(2) the Nunawading property - $225,000;
(3) the Blackburn property - $540,000;
(4) the Gardenvale property - $590,000.
Although Nancy had been involved the selection of the probate valuer, she was dissatisfied with his valuations. She felt that he had over-valued the properties left to her, Croydon and Nunawading, and under-valued the properties left to Jean and Rod, Blackburn and Gardenvale. Accordingly, Nancy commissioned further valuations as at the date of death. Separate valuers were appointed for each property. They valued the properties in the following amounts:
(1) the Croydon property - $300,000;
(2) the Nunawading property - $200,000;
(3) the Blackburn property - $914,000;
(4) the Gardenvale property - $1,017,000.
None of these valuers was called to give evidence. In these circumstances, it is not possible to reach a concluded view as to which valuation should be preferred in respect of each of the relevant properties. Further valuations performed in 2009 and 2010 reveal varying rates of inflation between the properties, and significant changes in value. For the purposes of determining whether adequate provision was made for Nancy at the date of her mother’s death, it is unnecessary to reach a conclusion as to the real estate values at that time. This is because there is no material difference between the values given for the two properties left to Nancy, Croydon and Nunawading. Further, even if the probate valuations for the Gardenvale and Blackburn properties are adopted, the total value of the real estate was $1,675,000. There was also the residuary estate of $118,000. An estate of that size was sufficient to allow the deceased to make adequate provision for the proper maintenance and support of all of her children.
As to the nature of the estate, it was overwhelmingly comprised of real estate. If any of that real estate is sold, capital gains tax will be payable.
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’. As appears above, the traditional view has been that the jurisdictional question as to whether adequate provision has been made for the applicant in the will is to be determined at the date of death. A question arises as to whether these words alter that position when considering this matter. It is unnecessary to decide that issue in this case. The case proceeded on the basis that there was no material difference between the financial resources and needs of the beneficiaries at the date of death and at the date of hearing. As appears above, at all relevant times Nancy was in a poor financial position and both Jean and Rod were in comfortable financial positions; with Jean and her husband occupying the best financial position of all.
Section 91(4)(i) and (j) of the Act require the Court to consider the health and age of the applicant and other beneficiaries of the estate. Nancy is six years younger than Rod and eight years younger than Jean. This suggests that she has a longer working life in front of her than her siblings and their spouses, each of whom is nearing retirement age. However, Nancy’s health is uncertain and this may limit her ability to obtain gainful employment. She gave evidence of a number of health issues, and said that illness has disrupted her life. There have been numerous medical procedures including two knee operations, two operations to remove her ovaries, an operation to remove some pre-cancerous dysplasia and other medical procedures. In particular, she relies upon continuing problems with her right knee joint, which may require bone grafts, continuing neck and back problems arising from two car accidents and shoulder pain necessitating cortisone injections. She deposed that her health problems make it ‘virtually impossible’ for her to find other employment outside her existing business.
Nancy also relies upon her husband’s health issues. She referred to him having a ‘serious shoulder operation’, numerous kidney stones and hepatitis C. She contends that these medical conditions also make it ‘virtually impossible’ for her husband to obtain employment outside her business.
In oral evidence, Nancy expanded upon her health problems in the context of her ability to obtain other employment which may yield a greater income than her business. She said that her health issues mean that she can no longer stand or sit all day and that she doubts that she could cope with alternative employment. She said that she can only continue in her current business with the help of her husband, who is ‘able to do a lot of things when I am incapacitated’.
Nancy produced an exhibit containing copies of medical records, which provide some support for her contentions about her health and that of her husband. The records indicate that most of the health problems were existing at the date of the deceased’s death and have continued afterwards.
The evidence before the Court concerning these health issues is of a general nature and was not seriously challenged. However, in evidence and submissions by the executors, reference was made to the fact that the degree of health problems deposed to by Nancy appears overstated, as her evidence is inconsistent with she and her husband being able to perform the manual labour to improve the Blackburn property in 2007, as deposed to by Nancy in her affidavits. There is some force in this evidence and submission. I am satisfied that there is a degree of exaggeration in Nancy’s evidence concerning health issues. However, taking the evidence as a whole, and notwithstanding a degree of exaggeration, I am satisfied that Nancy’s health issues are a fetter on her obtaining alternative employment outside of her existing business, where she has the benefit of assistance from her husband Dennis. At the very least, the health issues facing Nancy and her husband (together with her husband’s age) reveal considerable uncertainty in Nancy’s income position as to both amount and duration.
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. In that regard, Nancy gave evidence of contributions, involving both labour and expenditure, made by her and her husband in maintaining, and to a more limited extent improving, the Croydon and the Blackburn properties. In my view, these contributions were adequately compensated for by the reduced rent paid by Nancy for the Croydon property over a 27 year period. Further, I am not satisfied that the contributions resulted in any significant increase in the value of the deceased’s estate. The work performed on the Croydon property would appear to be largely of a maintenance nature, benefiting Nancy, and later Nancy and her husband, as the occupants of that home. The improvements to the Blackburn property are unlikely to have any significant effect upon its value.
As to contributions to the welfare of the deceased, I am not satisfied that there is any significant difference between the contributions made by Nancy over those made by her brother and sister.
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 again raises the issue of the subsidised rent charged by the deceased to Nancy for occupation of the Croydon property. It was submitted on behalf of Nancy that any benefit which she obtained from this cheap rent was offset by her contributions to building up the estate, constituted by maintenance and improvements to the Croydon and Blackburn properties, and that these contributions resulted in a net benefit by her to the estate. I have no hesitation in rejecting that submission. At best, the contributions partly offset the benefits, which were substantial.
There is no evidence of any significant monetary benefits being provided by the deceased to Jean or Rod.
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. In this regard, the deceased was in part maintaining a home for Nancy and her husband, by charging them cheap rent for many years and, for the last six months of her life, insisting that they pay her no rent at all. This maintenance was provided on the express assumption that the Croydon property was, in any event, to be left to Nancy by the deceased’s will. The assumed responsibility was met by leaving the Croydon property to Nancy in the will.
Section 91(4)(n) of the Act requires the Court to consider the liability of any other person to maintain the applicant. In that regard, Nancy’s husband Dennis has an obvious moral obligation to contribute to her maintenance. However, he has no legal liability to do so and limited capacity. In fact, he depends for his income upon employment in Nancy’s business.
Section 91(4)(o) of the Act requires the Court to consider the character and conduct of the applicant or any other person. No party relied upon this matter as constituting a relevant consideration in the circumstances of this case. In particular, no disentitling conduct on the part of Nancy 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, although it may be relevant to other specific matters which the Court is obliged to take into account concerning family relationships, it is necessary to consider Nancy’s contention that the deceased’s conduct towards her deprived her of opportunities in life, thus contributing to her present need.
The matters relied upon by Nancy are of some relevance. However, the Court’s task is to assess whether the deceased has made adequate provision for Nancy’s proper maintenance and support. In doing so, the Court’s focus in the circumstances of this case is on Nancy’s need, assessed in light of the other matters which must be taken into account. In this context, the following statement by Kirby P (as he then was) in Robinson v Tame is apposite:
It is a constant source of surprise to me in this, as in other cases under the Act, that so much attention is spent upon personal recrimination and insufficient attention is paid to the proof of precise financial means of the parties and the precise needs of the claimant. The Act is not about the righting of moral wrongs, as such, but about the making of adequate provision. In short, the focus of the Act is upon property – dollars and cents; not emotion and ethical desserts.[5]
[5]Unreported, New South Wales Court of Appeal, 9 December 1994 (BC9403378 at 13).
In this case, it was common ground that the Court should proceed on the basis of proven need, and that the need was proved by reference to financial evidence. It is that evidence which provides the principal focus in determining whether or not the deceased made adequate provision for Nancy’s proper maintenance and support.
It was submitted on behalf of Nancy that where a parent fails in his or her parental duty there is a moral duty on the parent to ‘make amends’ by leaving his or her estate, or at least a large part of it, to the child who suffered by reason of the breach of parental duty. Reliance was placed upon the statements by Harper J (as he then was) in Baird v National Mutual Trustees Ltd & Anor.[6] I do not accept that submission. That was an extraordinary case involving a drunken father engaging in reprehensible conduct towards his wife and children, including significant assaults, making the children witness assaults upon the mother, forcing the children to live in unheated accommodation with broken windows, and other abuses. The language of Harper J lays down no general principle of a ‘moral duty to make amends’.
[6]Unreported, Supreme Court of Victoria, 22 November 1995.
Further, Harper J recognised that even an abused child has no claim for adequate provision for his or her proper maintenance and support unless the child can demonstrate need.[7] I agree with that approach. The Court’s task in assessing the amount of any further provision does not include providing compensation for any moral or parental failings of the deceased towards the applicant.[8]
[7]Ibid, 4.
[8]Re Bull deceased; Bentley v Brennan [2006] VSC 113, [30].
However, I accept the general submission that this aspect of the deceased’s conduct is not irrelevant to the deceased’s moral duty. Where the conduct of the deceased has the effect of depriving an applicant for provision of opportunities in life, and there is some causal connection between the conduct and the applicant’s need for further provision, the Court may take that into account in determining whether adequate provision has been made. Further, although not relevant in this case, as it is acknowledged, such conduct may also be taken into account in determining whether the deceased had a moral responsibility to make adequate provision for the applicant.
In light of all relevant matters, I have reached the conclusion that the deceased did not make adequate provision for Nancy’s proper maintenance and support. The principal matters leading me to this conclusion are as follows.
First, as stated above, Nancy’s income at the date of death was modest and barely enabled her and her husband to make ends meet. This was so, even with the benefit of little or no rent being paid by them for the Croydon property. Further, at the date of death, the health issues referred to above, and her husband’s age, rendered this small income uncertain in extent and duration. At best, and assuming health issues did not intervene, the income stream was unlikely to continue for more than 10 to 15 years, at which stage Nancy would be in her mid-sixties.
Additionally, it was reasonably foreseeable that Nancy’s business may be affected by external factors. It is a specialised business supporting the print industry, in an age of ever-evolving technology and the consequent decreased reliance of industry and the market upon the printed word. These issues were the subject of some trade journal articles which were placed in evidence without objection, relating to the position in 2009 and at present. These articles refer to these technological changes as a challenge for the printing industry, and cite a number of examples of print company failures. There have been some failures which have affected Nancy’s business, resulting in bad debts and the need to file proofs of debt in company liquidations. In my view, all of this was foreseeable at the date of the deceased’s death. This reinforced Nancy’s need for further income at that time and for the remainder of her life.
Second, the extra net income of $11,600 from the Nunawading shop was not, in my view, sufficient to meet Nancy’s need for further income. At the date of the deceased’s death, Nancy and her husband were earning between $30,000 and $35,000 per year from Nancy’s business. They were sharing that income, presumably to reduce taxation in a legitimate manner. Another $11,600 per year would no doubt improve their quality of life, but it would still place them in a position of need and, at least, be insufficient to provide for a comfortable existence involving more than the bare necessities of life.
However, even if that not be so, a substantial part of the extra income would be required to meet the costs of owning the Croydon property (for example, rates, insurance and maintenance) and the rental income also carried some risk. The evidence indicates that the Nunawading shop is in fair or average structural condition, requires new floor coverings and was described by a valuer engaged by Nancy as ‘lower quality retail space’. The photographs contained in the valuation evidence indicate that this was an accurate statement. Further, the Nunawading property is not ideally situated for commercial premises, being in an area of mainly residential properties. It is also dated in appearance. Accordingly, the risk of vacancies from time to time needs to be considered. If vacant, the Nunawading property carries annual costs of approximately $2,280. If it became vacant for any substantial period, it may be necessary to refurbish it in order to attract a new tenant. The extra income was in no sense guaranteed and, in due course, is likely to have given rise to further costs to maintain it.
Third, I have considered whether the gift of one-third of the residuary estate (approximately $40,000 to each beneficiary) was adequate to meet Nancy’s immediate and likely future capital needs. In my view, the share of the residuary estate was insufficient for this purpose. The evidence does not include a statement of their assets and liabilities as at the date of death. However, from the statement of assets and liabilities as at September this year, which I infer would be little different to that pertaining at the date of death, it is apparent that Nancy and her husband had few assets. They had a small amount in superannuation (only $19,000 at present) and small fluctuating bank balances ($3,800 at present). They had other assets, including two old cars and some furniture and appliances. However, these are not assets which are likely to be sold, unless being replaced or in extreme circumstances. Old cars cost money to maintain and run. Furniture and appliances are necessary for day to day living. At the date of her death, it would have been reasonable for the deceased to consider the need for Nancy and her husband to purchase replacement cars, especially as they live in an outer suburb and conduct a business which requires urgent deliveries to be made from time to time. A reliable car or cars was both necessary for the business and for a comfortable life. On any view, the cars would need replacing within a few years.
Further, the evidence disclosed the need for some expenditure on the Croydon and Nunawading properties. As stated above, the valuation evidence indicates the likelihood of replacing the floor coverings in the Nunawading property to meet the tenant’s needs. Certainly, it is to be expected that this would be required if there was a change of tenant. As to the Croydon property, the evidence disclosed that it is in need of some repair. In particular, there is some reasonably significant cracking in brickwork and window sills and there is the possibility of underpinning at a future time. Although there was no evidence as to the likely cost of necessary repairs and maintenance in this regard, they are not insignificant matters.
I do not accept Nancy’s evidence that the Croydon property is in a ‘bad condition and has many problems’. However, it was accepted that the Croydon property is in a flood zone and that floods are not rare events. The last one was in 2005. Although the floodwaters did not reach the inside of the home, there was damage to the verandah and surrounds. At the date of the deceased’s death, the Croydon property required some immediate repairs, and it was of an age, character and position where it was likely to require future repairs.
The $40,000 bequest from the residuary estate would no doubt contribute to some of these issues. However, even if it was sufficient to pay for the identified needs at the date of death, comprising some repairs to the Croydon property, floor coverings to the Nunawading property and replacement of one or both of the aging cars, this would leave no capital for Nancy to fall back on in hard times. In that regard, although the deceased had in mind the sale of the Nunawading property if Nancy’s circumstances necessitated it, that would bring the extra income from rental of the Nunawading property to an end. At best, it would be replaced with a more modest income from investment of the remainder of the sale proceeds, after attending to the expenditure necessitating a sale.
Fourth, even if it be assumed that the combined income from Nancy’s business and the rent from the Nunawading property is sufficient to allow Nancy and her husband to live in reasonable comfort, that position will not continue. As stated, the income from Nancy’s business is of uncertain amount and duration. At the date of death, the business was unlikely to continue for more than between 10 and 15 years. The anticipated income from the business during this period is highly unlikely to have provided sufficient means to save a retirement fund to replace the business income when it ceases. There was no evidence that the business has any capital value which could be sold.
Fifth, the deceased’s estate was large enough to provide for further provision to Nancy without unduly prejudicing her siblings.
It was not contended that, if modest further provision is ordered for Nancy, either Jean or Rod will be placed in a position where the will fails to make adequate provision for their proper maintenance and support. Of course it is a matter of degree, ultimately to be taken into account in formulating the amount of further provision to be ordered.
Sixth, the conduct of Nancy’s parents toward her has some relevance. I accept that the evidence, when taken as a whole, provides support for Nancy’s contention that her parents’ conduct deprived her of opportunities at critical periods of her life, and has contributed to her current poor financial position. In particular, the combined effect of the decision by the parents to force Nancy to leave school at an early age so that they could travel overseas for a two year period deprived Nancy of the ability to continue her education. If Nancy had continued her education, her life would probably have taken a different course. I do not intend to review all of the evidence concerning these matters, some of which was in contest. However, in the mix of matters which I have taken into account in reaching my conclusion that the deceased failed to make adequate provision for Nancy’s proper maintenance and support, this factor is of least significance. I would nevertheless have reached that conclusion, in the absence of this conduct by the parents.
What amount of provision should be ordered?
If the two jurisdictional requirements are established, as here, the Court proceeds to consider what order for further provision (if any) should be made. 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.[9]
[9][2004] VSC 90, [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’.[10]
[10](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.[11]
[11](1957) 97 CLR 1, 12 – citing Re Harris (1936) 5 SASR 497, 501.
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.[12]
[12]For example, Penn v Richards [2002] VSC 378, [33].
It is clear that there is no presumption of equality among children.[13] Insofar as Nancy’s evidence refers to unfairness to her because the deceased did not divide her estate equally among her children, it is misconceived. The deceased obtained valuations for probate purposes in 1992, following her husband’s death. She was conscious of those valuations when she made her will. The valuations revealed that the deceased knew she was dividing her real estate between her children in an unequal manner, with approximately 24.3 per cent going to Jean, 47.5 per cent to Rod, and 28.2 per cent to Nancy. Subject to her moral responsibility to make adequate provision for each of her children, it was her right to make that unequal division.
[13]Re Allardice (1910) 29 NZLR 959, 969; Bosch v Perpetual Trustee Co Ltd [1938] AC 463; Re Hodgson (dec’d) [1955] VLR 481.
I turn to consider what order for further provision should be made in this case. As stated above, this requires me to consider the facts as they presently exist.
I have referred above to Jean and Rod’s general financial positions. Although they are much better placed financially than Nancy, they nevertheless have their own needs. However, the estate is sufficiently large to enable the Court to make an order for Nancy’s further provision without placing Jean or Rod in a position where the will fails to make adequate provision for them.
Jean was left the Blackburn property, which is now valued at between $880,000 and $950,000. It is a residential property which can be sold or used as security for finance to provide further provision for Nancy.
Rod was left the Gardenvale property. It is valued for sale purposes at between $750,000 and $800,000. The respective valuers engaged by the parties gave concurrent evidence about their revised opinions of value, having previously valued the property at $695,000 and $930,000 respectively.
The increase in value by the valuer engaged by the executors, from $695,000 to $750,000 was in a spirit of compromise, following a conference between the valuers. The decrease in value by Nancy’s valuer, from $930,000 to $800,000, reflected concerns brought to his attention about petroleum contamination in the soil underneath the buildings on the property. Having regard to that contamination, and the uncertainty attending any remediation works to remove the contamination, the valuers agreed that the best and most prudent continuing use of the property was its present use as a used car yard and outdoor advertising site. These uses can continue without attending to the contamination issues.
Further, the valuers agreed that the existing rental for the used car yard is well below market rent, and the valuer for the executors candidly acknowledged that the tenant was aware of this and may be prepared to pay an increased rent. Together with the advertising rental, the valuers agreed that the Gardenvale property is capable of returning a market rent of approximately $54,000 per year.
As noted, there are uncertainties attaching to the sale of the Gardenvale property, having regard to the contamination issues. Furthermore, a sale of either of the Blackburn or Gardenvale properties will result in capital gains tax to the estate.
The two properties left to Nancy are of lesser value. The Croydon property is valued at between $340,000 and $420,000, which is significantly below the median house price in Melbourne. The Nunawading property is valued at between $180,000 and $230,000.
Nancy contends that, in ordering further provision, the Court should order the estate to pay her an amount sufficient to fund the purchase of a ‘suitable’ home and a ‘nest egg’ fund, to provide for further income and future contingencies of life.
I will deal first with the claim for a fund to purchase a ‘suitable’ home.
Nancy contends that she needs to move from the Croydon property because it is unsuitable for her and her husband. Four principal reasons are given.
First, Nancy contends that the Croydon property is an unsuitable home because the creek running across the rear, which gives rise to periodic flooding, is bad for her husband’s asthma. This assertion was not supported by any medical evidence and I do not accept it. Nancy’s husband did not give evidence.
Second, because the Croydon property has only one toilet; and she and her husband need two toilets because they both suffer from bladder and bowel problems. It seems to me that this issue can be dealt with by provision of a further capital sum to enable the necessary alterations to be made to the Croydon property. The problems do not necessitate a move.
Third, it is contended that the Croydon property is too small because, in addition to the need for two bathrooms, there is a need for a three bedroom home. Three bedrooms are needed because Nancy and her husband require separate bedrooms due to his sleep apnoea, and a third bedroom is needed for the conduct of Nancy’s business. The Croydon property has three bedrooms, but it is contended that they are too small – with the result that there are filing cabinets scattered throughout the house and in outbuildings. The filing cabinets apparently relate to both business and personal matters. I do not accept that this evidence justifies a conclusion that Nancy and her husband need a larger home in order for adequate provision to be made for her. There are many other ways in which difficulties of document management can be attended to. Further, the Croydon home has been used for Nancy’s business for many years now and there is no evidence that the size of the home has had a negative impact on earnings.
Fourth, Nancy contends that the Croydon home is unsuitable because of its location in an outer suburb of Melbourne. She contends that this makes it difficult to obtain couriers whenever needed for her business, and that the home is not sufficiently close to medical facilities. I do not accept this. Nancy’s own evidence was that urgent deliveries are made by her husband. Where delivery is not urgent, a short delay in obtaining a courier has not been proved to have any material effect upon the profitability of the business. There are adequate medical facilities in the Croydon area and nearby.
Taking the evidence as a whole concerning this issue, I reject the claim that the Croydon property needs to be sold and a new home purchased by the estate in order to make adequate provision for Nancy’s proper maintenance and support. I find that the difficulties with the Croydon property have been exaggerated in an endeavour to justify an increase in the size of any order made for further provision. I conclude that it is not necessary for Nancy’s adequate provision and support that she move to a larger house.
I turn to consider Nancy’s claim for a ‘nest egg’ fund. As will be apparent, I accept that Nancy has a real need for a ‘nest egg’ fund, to provide further income to meet any contingencies without having to sell either of the two properties given to her by the deceased. It was submitted on behalf of Nancy that, in addition to a more suitable home, Nancy in any event requires a ‘nest egg’ of $300,000 to supplement the income from her business and the Nunawading shop, and to provide for contingencies. I do not accept that submission. Having regard to the matters specified in s 91(4)(e) to (p) of the Act as discussed above, I will order further provision of $250,000 for Nancy’s proper maintenance and support. Such an amount will enable Nancy to attend to any necessary repairs to the Croydon and Nunawading properties, purchase a new car, pay existing debts and invest the balance for income purposes and as a cash reserve for contingencies and retirement. If Nancy proceeds in this or another prudent manner, she will be in a reasonably comfortable position. She can live more than a mere hand to mouth existence, in the knowledge that she can probably withstand the challenges and contingencies of life in the future.
Conclusion and orders
For the above reasons, the Court will order that further provision be made out of the estate for Nancy in the sum of $250,000. I will hear the parties as to the orders to be made and as to costs.
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