Lowe v Lowe (No 2)

[2015] NSWSC 1626

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Lowe v Lowe (No 2) [2015] NSWSC 1626
Hearing dates:	19 - 20 October 2015
Decision date:	04 November 2015
Jurisdiction:	Equity
Before:	Kunc J
Decision:	Additional provision ordered
Catchwords:	FAMILY PROVISION AND MAINTENANCE – Claim by second wife with own home and where she and deceased kept their financial affairs separate - Succession Act 2006, ss 57, 58, 59, 60
Legislation Cited:	Succession Act 2006 (NSW)
Cases Cited:	Camernik v Reholc [2012] NSWSC 1537 Lloyd-Williams v Mayfield [2005] NSWCA 189; (2005) 63 NSWLR 1 Lowe v Lowe [2015] NSWSC 48 Luciano v Rosenblum (1985) 2 NSWLR 65 Milillo v Konnecke [2009] NSWCA 109 Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 Verzar v Verzar [2014] NSWCA 45 West v Mann [2013] NSWSC 1852
Category:	Principal judgment
Parties:	Diana Mae Lowe (Plaintiff) Murray Francis Lowe (First defendant) Cameron Francis Lowe (Second defendant) Jodie Alexandra Lowe (Third defendant)
Representation:	Counsel: A Lakeman (Plaintiff) G Underwood (Defendants)   Solicitors: Yuill Lawyers (Plaintiff) Bull, Son & Schmidt (Defendants)
File Number(s):	2014/263722
Publication restriction:	No

Judgment

Summary

1. Australians are living longer, healthier lives. Consequently, second (or subsequent) marriages later in life are an increasing demographic reality. Often the couple will have children from their previous marriages. While those children may be happy for their respective parents in their new relationship, there is often a concern among those children that when their natural parent dies, the assets of their previous relationship should be applied only for the children of that previous relationship. This case raises that issue in the factual circumstance that the plaintiff and her second husband, the late Francis Alfred Lowe (“Mr Lowe”) agreed to, and did in fact, keep their own assets and financial affairs separate.

2. Mr Lowe died on 9 April 2014 at the age of 79. The plaintiff is Diana Mae Lowe. She is 82 years old and is Mr Lowe’s widow as the result of a second marriage for both of them. They were in a relationship for eight years, the last four of which were as a married couple. Without disrespect, I shall refer to the plaintiff and several others who feature in this judgment by their given names.

3. In addition to Diana, Mr Lowe was survived by his three adopted and now adult children, Murray, Cameron and Jodie. They are the defendants (to whom I shall refer collectively as such) and the only other eligible beneficiaries.

4. The deceased’s estate (the “Estate”) had a sworn value of $3,338,508.42.

5. The deceased left a will made on 14 August 2012 (the “Will”). Probate was granted to the defendants on 11 August 2014. Apart from some furniture and personal effects, all that Diana received under the Will (other than a limited right to reside in and purchase the matrimonial home) was a Mercedes-Benz car, to which the parties gave an agreed value of $45,000.

6. By amended summons filed on 29 September 2014, Diana applies for provision out of the Estate under s 59 of the Succession Act 2006 (NSW) (the “Act”). Mr A. Lakeman of Counsel appeared for Diana. Mr G. Underwood of Counsel appeared for the defendants.

7. The defendants accepted that Diana was entitled to some additional provision. The amount of that provision was in dispute. The Court has determined that Diana is entitled to additional provision of $100,000. That amount is intended to ensure that her position is no better or worse than her circumstances at the time she began her relationship with Mr Lowe.

The Act

8. Part 3.2 of the Act deals with family provision orders. Division 1 of that part identifies, in s 57, who are “eligible persons who may apply to the Court for a family provision order in respect of the estate of a deceased person”. Section 58(2) requires an application for a family provision order to “be made not later than 12 months after the date of the death of the deceased person, unless the Court otherwise orders on sufficient cause being shown”.

9. Division 2 of Part 3.2 of the Act deals with determination of applications for family provision orders. For the purposes of these proceedings, the relevant provisions are:

59(1) The Court may, on application under Division 1, make a family provision order in relation to the estate of a deceased person, if the Court is satisfied that:

(a) the person in whose favour the order is to be made is an eligible person, and

(b) in the case of a person who is an eligible person by reason only of paragraph (d), (e) or (f) of the definition of “eligible person” in section 57 – having regard to all the circumstances of the case (whether past or present) there are factors which warrant the making of the application, and

(c) at the time when the Court is considering the application, adequate provision for the proper maintenance, education or advancement in life of the person in whose favour the order is to be made has not been made by the will of the deceased person, or by the operation of the intestacy rules in relation to the estate of the deceased person, or both.

59(2) The Court may make such order for provision out of the estate of the deceased person as the Court thinks ought to be made for the maintenance, education or advancement in life of the eligible person, having regard to the facts known to the Court at the time the order is made.

…

60(1) The Court may have regard to the matters set out in subsection (2) for the purpose of determining:

(a) whether the person in whose favour the order is sought to be made (the "applicant") is an eligible person, and

(b) whether to make a family provision order and the nature of any such order.

60(2) The following matters may be considered by the Court:

(a) any family or other relationship between the applicant and the deceased person, including the nature and duration of the relationship,

(b) the nature and extent of any obligations or responsibilities owed by the deceased person to the applicant, to any other person in respect of whom an application has been made for a family provision order or to any beneficiary of the deceased person’s estate,

(c) the nature and extent of the deceased person’s estate (including any property that is, or could be, designated as notional estate of the deceased person) and of any liabilities or charges to which the estate is subject, as in existence when the application is being considered,

(d) the financial resources (including earning capacity) and financial needs, both present and future, of the applicant, of any other person in respect of whom an application has been made for a family provision order or of any beneficiary of the deceased person’s estate,

…

(f) any physical, intellectual or mental disability of the applicant, any other person in respect of whom an application has been made for a family provision order or any beneficiary of the deceased person’s estate that is in existence when the application is being considered or that may reasonably be anticipated,

(g) the age of the applicant when the application is being considered,

(h) any contribution (whether financial or otherwise) by the applicant to the acquisition, conservation and improvement of the estate of the deceased person or to the welfare of the deceased person or the deceased person’s family, whether made before or after the deceased person’s death, for which adequate consideration (not including any pension or other benefit) was not received, by the applicant,

(i) any provision made for the applicant by the deceased person, either during the deceased person’s lifetime or made from the deceased person’s estate,

(j) any evidence of the testamentary intentions of the deceased person, including evidence of statements made by the deceased person,

(k) whether the applicant was being maintained, either wholly or partly, by the deceased person before the deceased person’s death and, if the Court considers it relevant, the extent to which and the basis on which the deceased person did so,

(l) whether any other person is liable to support the applicant,

(m) the character and conduct of the applicant before and after the date of the death of the deceased person,

(n) the conduct of any other person before and after the date of the death of the deceased person,

…

(p) any other matter the Court considers relevant, including matters in existence at the time of the deceased person’s death or at the time the application is being considered.

10. In West v Mann [2013] NSWSC 1852 at [9]-[11] I explained the reasons for the approach I adopt to applications under the Act. That is how I will proceed in this case.

11. By reference to the language of the Act, the questions and issues which the Court must take into account are:

1. Is the person who has applied to the Court for a “family provision order” (as defined in s 3 of the Act) an eligible person under s 57 of the Act? In accordance with s 60(1)(a), the Court may (not must) have regard to the matters set out in s 60(2) in determining whether that person is an eligible person. It is not readily apparent how many of those matters could be relevant to the issue of eligible person, but nothing turns on that observation.

2. If the answer to question (1) is “yes”, has the application been filed in the Court’s Registry not later than 12 months after the deceased’s death (ss 58(2) and (3))?

3. If the answer to question (2) is “no”, has the eligible person who has brought the application shown sufficient cause for the Court to order otherwise to extend the date for the filing of the application in the Court’s Registry (ss 58(2) and (3))?

4. If the answer to question (2) is “yes” or the Court has otherwise ordered under s 58(2), is the Court satisfied that the person in whose favour the order is to be made (the “applicant”) is an eligible person (s 59(1)(a))? In reaching the requisite state of satisfaction the Court may (not must) have regard to the matters set out in s 60(2). As a theoretical matter this question admits of the possibility that “the person in whose favour the order is to be made” is not the person who has brought the application (in which case, the latter must also be an eligible person).

5. If the answer to question (4) is “yes”, what provision has been made for the proper maintenance, education or advancement in life of the applicant by the deceased’s will or by the operation of the intestacy laws (the “Provision”)?

6. Is the Court satisfied, at the time when the Court is considering the application, that the Provision is not adequate for the proper maintenance, education or advancement in life of the applicant?

7. If the answer to question (6) is “yes” (i.e. the Court is satisfied the Provision is not adequate for the specified purpose) then the Court’s discretion conferred by the chapeau to s 59(1) to make a family provision order in favour of the applicant (the “Discretion”) is enlivened.

8. Once the Discretion is enlivened then, noting s 59(2), what provision, if any, does the Court think ought to be made for the proper maintenance, education or advancement in life of the applicant, having regard to the facts known to the Court at the time the order is made (the “Proposed Provision”)? This is an evaluative judgment which arises from the word “ought” and requires examination of the applicant’s needs. In making this judgment the Court may (not must) have regard to the matters set out in s 60(2) (“the nature of any such order”: s 60(1)(b)).

9. Having answered question (8), should the Court exercise the Discretion to make an order for the “Proposed Provision”? In deciding whether to exercise the Discretion to make such an order, the Court may (not must) have regard to the matters set out in s 60(2) (“whether to make a family provision order”: s 60(1)(b)).

10. Section 60(2) provides a helpful checklist but it is no more than that. The Court is not obliged to take those matters into account. The extent to which it does (if at all) will depend upon the facts of each particular case.

11. Section 60(2)(p) confirms the breadth of matters the Court can take into account. Once enlivened, the Discretion is expressly fettered only by the requirement in s 59(2) that if an order is made, it must be such order “as the Court thinks ought to be made for the maintenance, education or advancement in life of the eligible person, having regard to the facts known to the Court at the time the order is made”. The Discretion is otherwise unconfined, which means that in answering question (8) the Court is otherwise constrained only by the need to act judicially, that is to say “not arbitrarily, capriciously or so as to frustrate the legislative intent”: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [22] per Gaudron and Gummow JJ. The Court must act rationally and exercise the Discretion for the purpose for which it was conferred.

12. Having identified what I consider to be the correct approach under the Act to an application of this kind, I will deal with some preliminary matters before setting out the facts in relation to the parties. With the exception of the matter dealt with in paragraph [67] below, the facts were not in dispute.

The Will and the Estate

13. The Will is summarised in paragraphs [14] to [20] below.

14. Mr Lowe bequeathed $180,000 to Murray and forgave unspecified debts owed to him by Cameron and Jodie. There was no dispute that the general scheme of the Will (as had been Mr Lowe’s practice in life) was to treat each of his children equally and the bequest and releases were intended to equalise, as between the siblings, the effect of advances that Mr Lowe had made during his lifetime to Cameron and Jodie that had not been matched by similar gifts to Murray.

15. $20,000 was bequeathed to each of his six grandchildren to be held on trust until they attained the age of 21 years.

16. Mr Lowe gave Diana a right of residence in his property at Terrey Hills (the “Matrimonial Home”) for up to 18 months after his death with the option to purchase the Matrimonial Home when that period expired. Diana owns her own home at Terrey Hills (“Her House”) where she had lived with her first husband. The Will provides that she could purchase the Matrimonial Home for the lower of the value of the Matrimonial Home and Her House with the Estate paying the transaction costs of the transfer.

17. The obvious effect and intention of this price provision was that, if she wished, Diana would always be able to buy the Matrimonial Home from her own resources on the assumption that she would sell Her House. If Her House was more valuable than the Matrimonial Home, she would retain the cash difference. If the situation was reversed, she would obtain a windfall gain. However, this consequence fortifies the Court in its conclusion that the primary purpose of this bequest was not to confer any financial benefit as such on Diana, but was intended to ensure that, if she wished to do so, she could continue to live in the Matrimonial Home without borrowing. It also meant that the value of the Matrimonial Home would in any event be realised (albeit perhaps at a discount if it was worth more than Her House) for the benefit of the defendants.

18. At trial the parties agreed that the value of the two properties determined by kerbside valuations was roughly equal: $1.3 million for Her House and $1.4 million for the Matrimonial Home. Diana’s right of residence in the Matrimonial Home expired on 14 October 2015 and she has decided to return to Her House (see further paragraph [39] below).

19. Mr Lowe’s household furniture, furnishings and personal effects were bequeathed to Diana. This gift was the subject of the judgment of Brereton J in Lowe v Lowe [2015] NSWSC 48. His Honour decided that the gift included Mr Lowe’s car but not his moneys on hand, in bank accounts or on term deposits nor his shares or notes in public companies. The parties agreed the car to be valued at $45,000 for the purpose of these proceedings and accepted that no value should be attributed to the furniture and personal effects.

20. Any Lowe family heirlooms, photographs and personal papers were left to the defendants to be divided between them as they saw fit. The residue of the Estate was left to them (or their surviving children) in equal shares.

21. The $20,000 gifts to Mr Lowe’s grandchildren and interim amounts of $70,000 to each of the defendants have been distributed. In accordance with Brereton J’s judgment (see paragraph [19] above), Diana has received Mr Lowe’s car, which she intends to sell.

22. Accounting for these distributions and other actual or estimated Estate expenses, the gross distributable estate at the date of hearing was $3,075,371.34. This figure includes the Matrimonial Home, with its agreed estimated value of $1.4 million. The unpaid legal costs up to and including the hearing for Diana (on the ordinary basis) and the defendants (on the indemnity basis) total $131,742.00. The net distributable value of the Estate is therefore $2,943,629.34. In the absence of further provision for Diana but assuming her costs nevertheless come of out of the Estate, this means each of the defendants will receive a further distribution of $981,209.78 or a total distribution of $1,051,209.78

23. Diana was, at the time of hearing, still living in the Matrimonial Home but planning to move back to Her House in the immediate future. The tenants in Her House had left and it has been painted pending her arrival. Her belated exit from the Matrimonial Home and any issues that may arise as a result of that occupation were not in dispute.

Diana

24. Diana was born in 1933 and at the time of the hearing was aged 82. She married her first husband, Ray, when she was 18 in 1952. Ray died in 2003. They had four, now adult, children: Janice, Sandra, Gillian and Margot. Margot and Gillian gave evidence for their mother at the hearing. Diana was engaged in home duties throughout her marriage to Ray. It was common ground that she has no earning capacity.

25. Diana and Ray bought Her House in 1991. When Ray retired he did not have any superannuation and they lived on their savings and the age pension. Following Ray’s death Diana continued to live in Her House alone. Her income was her savings and a part age pension. She acknowledged that as a part pensioner she received (and would receive if she were to qualify for that pension again) benefits such as reduced rates and cheaper medication.

26. In May 2006, she commenced a relationship with Mr Lowe, whose first wife had died in 2005. They lived in their separate homes until they were married on 6 February 2010 in a low key ceremony with no family members present. After that Diana began to live permanently with Mr Lowe in the Matrimonial Home. She disposed of her furniture from Her House for little, if any, consideration.

27. There was no dispute that during the course of their four year marriage Mr Lowe paid for everything, except for Diana’s current Hyundai car, which she bought from her own savings. He would not allow Diana to pay for anything. She rented out Her House and kept all of that income, building up what might be termed a “nest egg”. To that she added the interest which she earned and kept on her savings which she was able to do because Mr Lowe was paying all her living expenses. By reason of the matters just referred to and paragraphs [28] to [38] below, the Court is well satisfied (and it was only faintly disputed as to the details) that:

1. It was the arrangement or understanding between Mr Lowe and Diana that they would keep their assets and financial affairs separate; and

2. Mr Lowe encouraged Diana to rent out Her House so as to build up a fund from which she could provide for herself if he predeceased her.

28. Mr Lowe was careful about anything relating to money. Two points illustrate this, the second of which also supports the arrangement as to the separation of their financial affairs.

29. First, he left this note for the defendants to be read after his death:

I WANT THE THREE OF YOU TO BE VERUY CAREFUL WITH YOUR INHERITANCE.

IF YOU INVEST IT WISELY, YOU SHOULD BE

COMFORTABLE MONEY WISE IN YOUR LATER YEARS.

SEEK ADVICE FROM A MONEY MANAGER OR SOME ONE SIMILAR

AS TO THE BEST WAY TO INVEST IT. SO THAT YOU RECEIVE A DIVIDEND EACH SIX MONTHS OR YEARLY.

REMEMBER WHEN YOU SPEND IT. IT WILL BE. GONE.

THIS WILL POSSIBLY BE THE ONLY LARGE AMOUNT YOU MAY EVER GET.

ALWAYS RESPECT MONEY

LOOK AFTER IT ----------- AND IT WILL LOOK AFTER YOU

DAD.

30. Second, the day before his marriage to Diana, Mr Lowe arranged for them both to attend his solicitor to update their wills. However, according to Diana and the Court accepts, they did not discuss the contents of their wills with each other. The will which Diana made on that occasion (5 February 2010) only referred to Mr Lowe by stating in terms that it was being made in contemplation of marriage to him, but otherwise never mentioned him and left her estate to her daughters.

31. On 16 January 2013 Diana made a further will leaving everything to her daughters. However, this will also included a paragraph which recorded that she had been advised about the Act and had considered the interests of anyone who may have been an eligible person (which included Mr Lowe), and went on to declare her specific intention that “my husband FRANCES (stet) ALFRED LOWE is not to benefit under this my Will”.

32. As a matter of fact Mr Lowe and Diana did keep their assets and financial affairs separate. According to Diana, and the Court accepts, they never discussed their future financial positions.

33. Diana bought her own car with her own funds (see paragraph [27] above).

34. Murray gave unchallenged evidence that his father had told him the he (Mr Lowe) paid everything for Diana as a way of forward planning and that he was thereby improving her financial position (implicitly, by allowing her to save her rent and interest earned on her savings) so that she could look after herself when he couldn’t.

35. Mr Underwood had the following exchange with the plaintiff during her cross- examination (T27:3-12):

Q. Did you keep your financial records separate from his from the date that you married on 6 February 2010 until 9 April 2014?

A. Yes.

Q. Did your late husband Frank keep his financial records separate from yours from May 2006 until his date of death?

A. Yes.

Q. 9 April 2014?

A. Yes.

36. Diana’s daughter, Margot, recognised that Mr Lowe and her mother had kept their finances separate during their marriage. Margot gave this evidence in cross-examination (T41:46-42:2):

Q. But you knew that their financial records and financial affairs were to be kept separate?

A. Yes.

Q. And that was your understanding at all times between 6 February 2010 and when Frank died in 2014?

A. That their assets were separate, yes.

Q. And Frank had told you that?

A. No.

Q. Never?

A. No.

Q. But your mother had told you that?

A. That they were keeping the houses in their own names and their bank accounts in their own names.

Q. And your mother told you that at no stage was there any mixing of their financial arrangements?

A. Frank supported her through her marriage and paid for everything in living expenses, holidays, but not her car.

37. Each left the other free to deal with his or her own family.

38. By reference to her tax returns, the rental of Her House gave Diana net rental income of $83,500 for the three years ending 30 June 2014 and $25,825 for the year ending 30 June 2015 (this latter period being while Diana exercised her right of residence in the Matrimonial Home).

39. Without intending any criticism, the Court notes that Diana has no particular attachment to the Matrimonial Home and that her future focus is on her own family members and friends rather than maintaining any particular connection with Mr Lowe’s family. I formed the clear impression from her affidavit evidence and her brief cross-examination that, while she obviously had a very happy and mutually fulfilling relationship with Mr Lowe in the course of which she interacted with his family (his children and grandchildren) in an entirely appropriate way, his death means a return to her roots among her own family and friends. That is understandable and, again, no adverse comment is intended in making this point, which is exemplified by the explanation she gave in her principal affidavit:

14.   I wish to return to live at [XXX] for a number of reasons:

(a)   it was my home since 1991.

(b)   I have good friends as neighbours on both sides and opposite.

(c)   My daughter, Gillian, lives nearby being only about 9 houses away.

(d)   My daughter, Margot, lives at Oxford Falls which is quite close.

(e)   My daughter, Janice, lives in the Blue Mountains and is able to come and stay with me.

(f)   My sister, Elaine, lives in South West Rocks and is able to come and stay with me.

(g)   My health is good and I am able to live independently. I love gardening and spend a lot of time in the garden.

15   As stated above, my daughter Gillian lives very close with her husband. They have three children, two of which are still living at home. Gillian works part-time and often calls in to see me.

16   Margot and her husband, Kevin, have 3 children who all still live at home. I see Margot very often.

17   My daughter, Janice and her husband have 3 children, 2 of which have a child/children, so I have not only grandchildren but great grandchildren.

18   My other daughter, Sandra, decided many years ago to go her own way and I do not see her.

19.   I wish to retain my home at [XXX], as it allows me to have my family come and stay, particularly my sister and my daughter, Janice. I hope to have grandchildren and great grandchildren come and stay in the future.

40. Notwithstanding having had a stroke in October 2013, Diana is now in relatively good health and is able to live alone. The parties accepted that, by reference to statistical data that was admitted without objection, the Court should proceed on the basis that Diana has a life expectancy of 9.37 years.

41. Diana’s financial position is set out in paragraphs [64] to [66] below.

Other interested persons

42. The defendants are the only other persons interested in the Estate. Because their competing claims are not a major factor in the Court’s ultimate conclusion, their positions may be recorded briefly.

Murray

43. Murray is 47 years old and the eldest of Mr Lowe’s children. He is an electrician by trade and currently holds a managerial position as the sole director and shareholder of a company in which he has enjoyed a long tenure of employment. He also teaches part time at TAFE with hours which vary greatly in accordance with the teaching demands of the institute. While he has no major health concerns at present, his ability to continue working in a physical capacity will be reduced naturally with the burdens of age. He is married and has two teenage daughters aged 16 and 13.

44. Murray’s net worth was, at the time of hearing, approximately $976,161. This is comprised of his share of the jointly held family home, home contents, cash at bank, a motor vehicle, superannuation and a trailer. His liabilities were credit card debts totalling approximately $9,000. In the year leading up to the hearing he had an average monthly income of approximately $5,000 and monthly outgoings of $8,500. His wife, Lisa earned approximately $4,000 per month, which allowed for them, together, to meet the family’s expenses with a surplus of $500 per month.

45. At the time of hearing, the hours that Murray had been offered for teaching with TAFE had been significantly reduced bringing his monthly income down from approximately $5,000 to $4074.63. While this figure includes a decrease in the income derived from teaching, his income from the electrical business increased during this time. Significantly however, with his wife Lisa’s income having only increased by $300 to $4300 per month, they now fall short of being able to meet their monthly expenses estimated at $8,600 by $226.

46. Murray’s needs were primarily family expenses which included the payment of private school fees, a replacement car, home improvements, holidays, future wedding expenses for his daughters and the replacement of household furniture and appliances. While this figure totalled over $850,000, evidence was only adduced to support approximately $450,000.

Cameron

47. Cameron is the second eldest child of Mr Lowe and was aged 45 at the time of hearing. He is a greenkeeper by trade and is currently employed in that capacity. He was recently married and has one daughter, aged 19, from a previous relationship. He has no known medical conditions affecting his ability to work although, like Murray, his employment is physically demanding and may become unsuitable in time.

48. Cameron’s net worth was, at the time of hearing, approximately $420,000. He has assets totalling almost $500,000 including a property, a car, two boats, a caravan, home contents, superannuation and cash at bank. His liabilities were stated as $78,000 although predominately comprised of his wife’s equitable interests in one of the boats and the caravan, which they purchased together. As such, his only loan liability was a car loan estimated at $23,000.

49. Cameron’s income was estimated in early 2015 to be just over $4,700 per month but he has since been made redundant and is now working part time earning on average between $500 and $1,200 per week. This either brings his monthly income down to approximately $1,070 or, if he earns the higher of those two weekly figures for a full month, up to approximately $5,670.

50. Cameron’s wife has assets of $412,000, liabilities of $90,000 and earns just over $6,500 per month. Together, their monthly expenses total approximately $14,560 resulting in a shortfall of between approximately $2,400 and $7,000.

51. Cameron foresees himself and his wife, Maryann, becoming carers for Maryann’s disabled brother, Jason, when her parents become unable to continue his full time care. This responsibility will require them to purchase a larger house, their preference being to move from the Central Coast to the Northern Beaches in Sydney at an estimated cost of about $1,500,000 to be funded partially by the sale of his and Maryann’s respective houses and the residue by his expected inheritance. Somewhat inconsistently, Cameron and Maryann would also like to expand Maryann’s business in the Central Coast which involves the acquisition of government contracts for the provision of transport to the disabled. To best secure these contracts, they must own their own vehicles unencumbered which would require a sum of $225,000. Cameron asserted other expenses to the Court totalling in excess of $100,000 which fall more properly into the category of wishes rather than needs. These included replacement cars and a new caravan.

Jodie

52. Jodie, aged 41 is the youngest child and only daughter of Mr Lowe. She is a single mother of three and a full time TAFE student.

53. Jodie has assets totalling just over $50,000 all of which are depreciable, with the exception of her cash at bank. Her current monthly income is just under $3,900 per month comprised of Centrelink benefits and child support.

54. Jodie’s monthly expenses are between approximately $5,150 and $5,250 depending on day care fees leaving her with a shortfall of between $1,250 and $1,350.

55. Jodie’s primary need is the purchase of a house, unencumbered, for her and her young family to reside in. The rural properties that she has been looking at are priced between approximately $670,000 and $820,000. In addition, she submits that she will need to pay school fees for her three children at the local Catholic school where her oldest is already enrolled.

Uncontroversial matters

56. Because Diana is Mr Lowe’s widow, she is an eligible person under s 57 of the Act. The summons was filed less than 12 months after the deceased’s death. It follows that the questions set out in sub-paragraphs (1), (2) and (4) of paragraph [11] above are all answered “yes”.

57. The Provision referred to in the question posed in sub-paragraph [11(5)] above is $45,000, being the agreed value of Mr Lowe’s car (see paragraph [19] above) and assuming the other gift of personalty has no monetary value (see paragraph [19] above). It was not suggested by anyone that the Court should take into account the rental earned from Her House during her right of residence in the Matrimonial Home in determining the Provision and the Court does not do so (although that income is taken into account in assessing Diana’s overall financial position).

Has adequate provision not been made for Diana?

58. It is next necessary to consider what is sometimes referred to as the jurisdictional question. This is set out in sub-paragraph [11(6)] above, namely whether the Court is satisfied, at the time when the Court is considering the application, that the Provision for Diana is not adequate for her proper maintenance, education or advancement in life. If that question is answered “yes”, then the Court’s discretion to make a family provision order in favour of Diana is enlivened as set out in sub-paragraph [11(7)].

59. The defendants conceded the jurisdictional question and the case was argued on the basis that the real dispute was what amount of additional provision should be ordered. While the question set out in sub-paragraph [11(6)] above is therefore answered “yes”, it is still helpful to set out the relevant authorities as these also touch on the approach to be followed in exercising the Court’s discretion under the Act as to the amount of additional provision to be ordered.

60. In Verzar v Verzar [2014] NSWCA 45, Meagher JA (with whom Macfarlan and Barrett JJA agreed) summarised the legal principles governing this stage of the inquiry:

39. The primary judge concluded that Stephen's will did not make adequate provision for the respondent's proper maintenance, education and advancement in life. Whether such provision has been made requires an assessment of the applicant's financial position, the size and nature of the deceased's estate, the relationships between the applicant and the deceased and other persons who have legitimate claims upon his or her bounty and the circumstances and needs of those other persons: see Tobin v Ezekiel [2012] NSWCA 285; 83 NSWLR 75 at [70] and McCosker v McCosker [1957] HCA 82; 97 CLR 566 at 571-572; Singer v Berghouse [1994] HCA 40; 181 CLR 201 at 210; and Vigolo v Bostin [2005] HCA 11; 221 CLR 191 at [16], [75], [112]. Such an assessment is necessary because of the inter-relation between "adequate provision" and "proper maintenance". Whilst the inquiry as to what is "adequate" directs particular attention to the needs of the applicant, what is "proper" requires regard to all the circumstances of the case, and in particular the size and nature of the estate and the needs of the other beneficiaries or potential beneficiaries. As was observed by Sackville AJA in Foley v Ellis [2008] NSWCA 288 at [88], a court cannot consider the propriety and adequacy or inadequacy of any testamentary provision for an applicant in isolation from the resources and needs of the other claimants on the deceased's bounty.

61. In addition to the passage from Verzar quoted in the preceding paragraph [33] above, I also respectfully adopt what Hallen J said in Camernik v Reholc [2012] NSWSC 1537 as to the general approach to be adopted to applications for family provision:

154. Yet, in considering the question, the nature and content of what is adequate provision for the proper maintenance, education or advancement in life of an applicant, is not fixed or static. Rather, it is a flexible concept, the measure of which should be adapted to conform with what is considered to be right and proper according to contemporary accepted community standards: Pontifical Society for the Propagation of the Faith v Scales at 19; Walker v Walker (NSWSC, Young J, 17 May 1996, unreported); Vigolo v Bostin at 199 and 204; Stern v Sekers; Sekers v Sekers [2010] NSWSC 59.

155. An important consideration is whether, in all the circumstances, the community expectation would be for greater benefaction to have been made for the proper or adequate provision of the person seeking provision. Gleeson CJ observed in Vigolo v Bostin, at 199, that the justification for interference with freedom of testation is to be found in the failure of a deceased to meet the obligations, which the community would expect in terms of maintenance, for those persons within the class of eligible persons. The process requires the court to "connect the general but value-laden language of the statute to the community standards".

156. As Allsop P said in Andrew v Andrew, at [16]:

"If I may respectfully paraphrase Sheller JA [in Permanent Trustee Co Limited v Fraser (1995) 36 NSWLR 24 at 46F-47B], the Court in assessing the matter at s 59(1) and the order that should be made under s 59(1) and (2), should be guided and assisted by considering what provision, in accordance with prevailing community standards of what is right and appropriate, ought to be made. This, Sheller JA said ... involved speaking for the feeling and judgment of fair and reasonable members of the community. It is to be emphasised that s 59(1)(c) and s 59(2) refer to the time when the Court is considering [an application for a family provision order] and the facts then known to the Court. The evaluative assessment is to be undertaken assuming full knowledge and appreciation of all the circumstances of the case. This ... makes the notion of compliance by the testator with a moral duty (on what he or she knew) apt to distract from the statutory task of the Court."

157. In all cases under the Act, what is adequate and proper provision is necessarily fact specific. An inflexible approach cannot be taken in assessing the questions to be answered.

158 The Act is not a "Destitute Persons Act", and it is not necessary, therefore, that the applicant should be destitute to succeed in obtaining an order: In re Allardice, Allardice v Allardice (1909) 29 NZLR 959 at 966.

62. In Luciano v Rosenblum (1985) 2 NSWLR 65 (“Luciano”), Powell J (as his Honour then was) noted at 69:

It seems to me that, as a broad general rule, and in the absence of special circumstances, the duty of a testator to his widow is, to the extent to which his assets permit him to do so, to ensure that she is secure in her home, to ensure that she has an income sufficient to permit her to live in the style to which she is accustomed, and to provide her with a fund to enable her to meet any unforeseen contingencies.

What provision ought to be made for Diana? – Her financial position and needs

63. With the exception of one minor matter, Diana’s financial circumstances once she returns to Her House and sells Mr Lowe’s car were not in dispute.

64. Her House is valued at $1.3 million.

65. She has cash invested of $352,360.24 which will be supplemented by the car sale proceeds of $45,000 to become $397,360.24. The parties were content to assume interest on that sum would be earned at 3% p.a. producing annual income of $11,921.

66. She has her own car and other assets worth about $23,500 and no liabilities.

67. In relation to her expenses the only matter for debate was an allowance of $4,500 p.a. for tax. Mr Underwood argued that on his submission as to how Diana’s affairs would be structured, no tax would be payable. Mr Lakeman’s hypothetical arrangements gave a different result. On the material available to it, the Court cannot make a reliable conclusion one way or the other. Out of an abundance of caution the Court will assume tax will be payable, although the amount is further considered below (see paragraph [81] below).

68. Making that assumption and otherwise accepting the figures put forward by Diana (which were not relevantly challenged by the defendants other than as to tax) means that her annual expenses would be $35,364. This results in an annual shortfall of $23,443 when measured against her interest income (see paragraph [65] above).

63. In addition, she told the Court that she would need to paint Her House (this has been done ($14,525)), attend to matters such as new carpets, floorboards, curtains and blinds etc ($30,000) and purchase new furniture and appliances ($29,000). It was also submitted on her behalf that she should receive an amount of $16,000 to cover the difference between her costs on the ordinary and the indemnity basis. This last amount is not one the Court considers it appropriate to take into account because it is an ordinary incident of litigation and is de minimis in terms of her overall financial position.

64. Bearing firmly in mind that the Court is applying the Act in its terms and without treating Powell J’s observation in Luciano (see paragraph [62] above) as anything more than a helpful indication, the parties nevertheless found it convenient to frame their submissions by reference to his Honour’s categories. The parties therefore accepted that because she had Her House, community standards would not have expected Mr Lowe to have made any provision for her accommodation. Attention was focussed on funds to keep her in the style to which she had become accustomed and the need for a buffer for vicissitudes. The Court will to some extent follow that approach, but more in the nature of a cross-check, because it is the language of the Act which the Court must apply.

What provision ought to be made for Diana? – Diana’s submissions

71. Mr Lakeman submitted that Diana had a long (eight year) relationship with Mr Lowe and this was a large Estate. There was both a need and a capacity for a generous provision. The Court should not be deterred by the possibility that some windfall might accrue to Diana’s children: Lloyd-Williams v Mayfield [2005] NSWCA 189; ((2005) 63 NSWLR 1.

72. Recognising Diana’s life expectancy of approximately 10 years, he submitted that a lump sum should be awarded to cover the shortfall in her income (say $230,000 based on the figures set out in paragraph [68] above). To this should be added her specific needs of $73,525 (see paragraph [69] above) plus a buffer for vicissitudes. Admittedly working off slightly higher numbers than those that were in his written submissions (some of the figures became more refined during the course of the hearing and they are what I have recorded above), Mr Lakeman submitted that a total provision of $500,000 was warranted. I understood that submission as accepting that the value of the car would have to be deducted to arrive at the additional provision which the Court should order. Finally, he submitted that the majority of such a provision should be borne by Murray’s share with a lesser amount from Cameron and an even smaller proportion from Jodie.

What provision ought to be made for Diana? – the defendants’ submissions

73. Mr Underwood submitted that while it was accepted some additional provision should be ordered, it should be modest, given that Diana had a substantial capital asset in Her Home and savings on which she could live. A smaller amount was also called for because:

1. She and Mr Lowe had kept their financial affairs separate.

2. She had made no financial contribution to her life with Mr Lowe.

3. He had encouraged her to turn her capacity to rent out Her House to her own financial advantage.

4. The Court should be mindful that an order for substantial additional provision would probably produce a windfall to Diana’s children, which was a relevant consideration: Milillo v Konnecke [2009] NSWCA 109. That result would be contrary to the arrangement between her and Mr Lowe and would not be expected by reference to community standards.

74. He proposed an approach based on a part pension and an annuity type analysis.

75. Mr Underwood submitted that, as part of adequate provision, Diana should receive an amount of $73,525 for the painting and other miscellaneous matters she had identified (see paragraph [69] above). In addition, allowance should be made for the fact that she would be entitled to a part pension, which he calculated by reference to the relevant Commonwealth website as $14,872 p.a. This would leave a shortfall which could be funded by a sum which could provide an annuity to make up the shortfall for the expected term of her life. On Mr Underwood’s figures this sum was just under $32,000 but his calculation excluded the annual $4,500 p.a. tax. A higher figure would be required if the taxation amount were to be taken in account.

What provision ought to be made for Diana? – Resolution

76. What would the community’s expectation be for proper provision for Diana’s maintenance, education or advancement in life in this case? The Court has taken into account all of the factors set out in s 60(2) of the Act set out in paragraph [9] insofar as the facts set out in these reasons correspond to those matters. However, the determinative matters are:

1. Diana is in good health, is 82 years old and has a life expectancy of approximately 10 years.

2. She owns Her House and has a sum of money which, leaving the capital intact, will produce some income.

3. Mr Lakeman did not controvert either the submission that Diana would be entitled to a part pension or the amount calculated by Mr Underwood for it.

4. Her interest income and the part pension will not meet her expenses, which are reasonable.

5. While they had a close and loving relationship, Diana and Mr Lowe had an arrangement which was given effect during his lifetime that they would keep their assets and financial affairs separate, including an express provision in Diana’s latest will that Mr Lowe was not to benefit from her estate.

6. Mr Lowe paid for everything during their marriage (except for Diana’s Hyundai car). One of his reasons for doing so was to allow Diana to build up her own resources from rent on Her House and interest income.

77. Diana’s evidence was that prior to her relationship with Mr Lowe she was living in Her House on her savings and a part pension. She did not suggest that she was living other than comfortably. Nothing has happened during the course of her marriage which has significantly changed her personal circumstances (e.g. a significant decline in health). In those circumstances, and giving significant weight to the arrangement which she had with Mr Lowe, community standards would require that adequate provision for Diana would be an amount that would ensure she was neither worse nor better off than she had been at the start of her relationship with Mr Lowe.

78. In reaching this conclusion I have not overlooked that this is not a small estate. The size of the estate may, in some cases, permit greater generosity. In this case generosity is not the factor it might be in some cases: community standards would expect Diana to be left in the status quo ante, the position she was in before her relationship with Mr Lowe. Just as Diana was living in Her House and living on her savings (whether drawing on capital or only interest or some combination was not explored in the evidence) and a part pension before her marriage, that is the position which the community would expect her to be left in now.

79. The Court emphasises that this conclusion is based on the facts of this case. In particular, while arrangements of the kind Diana had with Mr Lowe (or more formal prenuptial agreements) will always be a matter which the Court can take into account, they are not in and of themselves determinative. There will always be cases where, on the facts, the proper application of the Court’s discretion under the Act may mean that such an arrangement or agreement will be given little or no weight in determining the outcome.

80. Applying this approach to Diana’s circumstances, the following analysis presents itself.

81. First, Diana’s expenses (ignoring tax) are $30,864, which I will round up to $31,000. By reference to the ATO online basic tax calculator, her gross income would need to be $34,000 to produce net income of $31,000. Accordingly, the Court finds, assuming tax will be payable, an amount of $3,000 p.a. should be allowed for tax rather than Diana’s estimate.

82. Second, the various expenses identified by Diana totalling $73,525 (see paragraph [69] above) should be allowed as being necessary to put her back into Her Home in a condition as though she had never left it (and perhaps slightly better, although the evidence does not really permit a finding on this).

83. Third, Mr Underwood’s part pension calculation requires amendment because it did not take into account the $45,000 addition to Diana’s savings from the sale of the car. Inserting the slightly higher savings figure into the online pension calculator and the Department of Human Services material in evidence suggests Diana will be entitled to a part pension of $14,838 p.a..

84. Assuming, therefore, that Diana requires income of $34,000 p.a., she will have a shortfall of $7,242 p.a. after allowing for the part pension ($14,838 p.a.) and interest income ($11,920). It is neither appropriate nor desirable for the Court to attempt any sort of complex annuity calculation and the evidence does not include any information on what an annuity to cover that shortfall for ten years would cost today. It will be sufficient to allow an additional provision of $70,000, the capital of which, with interest, should meet that shortfall for the next ten years.

85. Before stating the Court’s final conclusion, three additional comments are required.

86. First, Mr Lakeman submitted that an analysis of the kind set out in paragraphs [81] to [84] above would be contrary to the “broad brush” approach usually adopted by the Court in family provision matters. It is correct to say that the exercise of the Court’s discretion under the Act is not a scientific exercise. It is a principled exercise of discretion founded in the facts proved in any particular case. Nevertheless, given that much of the analysis in these cases focusses on a plaintiff’s needs, some needs will be capable of more precise expression than others. Where they can be identified with precision, then it is desirable to demonstrate the rationality of the exercise of the Court’s discretion that they be taken into account as such.

87. For this reason the Court also rejects Mr Lakeman’s submission that abandonment of the “broad brush” approach would mean his client would be left “to eke out a meagre existence”. Diana has given evidence of her expenses and needs and the Court is acting on that evidence.

88. Second, Mr Lakeman’s approach invited the Court to provide for any additional financial needs by provision of sufficient capital that those needs could be met through income. Thus it could be argued that to meet a shortfall of $7,000 p.a. capital provision of $250,000 should have been provided which, assuming a 3% return p.a., would have made up that shortfall. There are three reasons why the Court declines to do so:

1. Quite apart from the needs of other beneficiaries, the community standards referred to above would carry with them the expectation in this case that any provision should have the minimum effect on Mr Lowe’s testamentary provisions, i.e. consistently with their arrangement during his life, the intrusion of an entitlement in Diana into Mr Lowe’s assets should be as small as justice to Diana permits.

2. Diana has adequate capital even if most of it is in Her House (see further paragraph [90] below) and there is no case to add to it if she can be provided for in a different way.

3. Where a plaintiff is younger, provision of capital to earn income assumes greater importance because of the uncertainties of needs over a longer period of time. In many (but not all) respects, the older a person, the more finite and predictable are their needs, so recourse to capital carries less risk of injustice than in the case of a younger plaintiff. Putting the matter in terms of community expectations, it is well within those expectations for older people to be expected to rely on their capital to some extent.

89. Third, the community expectations which the Court has identified as applicable in this case do not extend to the express provision of a sum for a buffer for vicissitudes, an area where of necessity the Court adopts a “broad brush” approach. The analysis in Luciano is not so directly applicable in this case because the guiding approach I have adopted is to ensure Diana is no better or worse off. A buffer for vicissitudes is inconsistent with that approach.

90. However, the approach in Luciano offers a useful cross-check in support of the outcome in this case. As a result of these proceedings Diana will be left living in Her House (worth $1.3 million) and have a capital sum of just under $400,000. The adequacy of a provision that creates that amount may be demonstrated on the basis that even if she did not invest any of it, her part pension and that capital would meet her expenses for the expected term of her natural life and leave an amount for vicissitudes. This analysis is also generous to Diana because it completely ignores Diana’s capacity to unlock the value of Her House by moving to a smaller home or taking out a reverse mortgage should she need or wish to do so in a few years.

Conclusion and orders

91. The mathematical outcome of the Court’s analysis is that an amount of $143,525 (the amounts referred to in paragraphs [82] and [84] above) is adequate provision. Because the exercise is not just a scientific or mathematical one, the answer to the question posed in paragraph [11(8)] above is $145,000. From this must be deducted the value of the car of $45,000. Allowing for this deduction and noting that the defendants accepted some additional provision should be ordered, the answer to the question posed in paragraph [11(9)] above is ““yes” in the sum of $100,000”. Therefore the Court will order that there be additional provision for Diana of $100,000.

92. Mr Underwood informed the Court that the defendants had agreed that any further provision for Diana would be borne by their shares of the residue of the Estate equally. Given Mr Lowe’s equal treatment of the defendants in life, that would have been the Court’s decision even if they had not so agreed between themselves.

93. The Court will give the parties an opportunity to bring in short minutes to give effect to these reasons and for argument as to costs if they cannot be agreed.

Amendments

04 November 2015 - Amendments to numbering in body of decision

Decision last updated: 04 November 2015