McDonald v Wilkes

[2010] NSWSC 548

CITATION:	McDonald v Wilkes [2010] NSWSC 548
HEARING DATE(S):	24-26 February 2010
JUDGMENT DATE :	28 May 2010
JUDGMENT OF:	McLaughlin AsJ
DECISION:	1. I order that, in lieu of the benefit given to her by clause 5(1) of his will, the Plaintiff receive out of the estate of the late John Barry McDonald (“the Deceased”) a legacy in the sum of $250,000, such legacy not to bear interest if paid on or before 28 August 2010, and if not so paid to bear interest at the rates prescribed for unpaid legacies under the Probate and Administration Act 1898. 2. I order that the costs of the Plaintiff on the party and party basis and the costs of the Defendants on the indemnity basis (such costs of the Defendants not to exceed $50,000) be paid out of the estate of the Deceased. 3. The exhibits may be returned.
CATCHWORDS:	SUCCESSION - family provision - claim by widow - financial and material circumstnaces of Plaintiff - whether Plaintiff has been left without adequate provision for her proper maintenance - right of residence is not appropriate provision for widow in situation of Plaintiff - assertion by the Defendants of matrimonial disharmony between Plaintiff and Deceased - Defendants do not assert conduct disentitling - order capping costs of Defendants
LEGISLATION CITED:	Family Provision Act 1982
CATEGORY:	Principal judgment
CASES CITED:	Blore v Lang (1960) 104 CLR 124 Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201 Vigolo v Bostin [2005] HCA 11; (2005) 221 CLR 19
PARTIES:	Jacqueline Jennifer McDonald (Plaintiff) Debbie Wilkes (First Defendant) Christine Jarrett (Second Defendant)
FILE NUMBER(S):	SC 2008/279070
COUNSEL:	Ms E. Elbourne (Plaintiff) Mr M. King (Defendants)
SOLICITORS:	Sautelle White (Plaintiff) Trenches McKenzie Cox (Defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

ASSOCIATE JUSTICE McLAUGHLIN

Friday, 28 May 2010

2008/279070 JACQUELINE JENNIFER McDONALD –v- DEBBIE WILKES and ANOR

JUDGMENT

1 HIS HONOUR: These are proceedings under the Family Provision Act 1982.

2 By summons filed on 6 June 2008 Jacqueline Jennifer McDonald claims an order for provision for her maintenance, education and advancement in life out of the estate and/or notional estate of her late husband, John Barry McDonald (to whom I shall refer as “the Deceased”).

3 The Deceased died on 11 December 2006, aged 72 years. He left a will dated 5 October 2005, probate whereof was on 8 February 2008, granted to Debbie McDonald (in the will called Debbie Wilkes) and Christine Jarrett (in the will called Christine Jarrat), the executors named in such will (who are the Defendants to the present proceedings).

4 The inventory of property discloses the following assets and the estimated values thereof:

House property at Pambula $420,000
Household and personal effects $1,000
Money in bank account $1,600
Motor vehicles $1,000
Other personal property $300

5 At the outset of the hearing it was noted that the parties were in agreement that the present value of the Pambula property was $400,000, as disclosed in Exhibit A (valuation of Caddey Searl & Jarman, 27 October 2008).

6 Subsequent to the death of the Deceased the Pambula property was transferred into the names of the executors. In January 2008, the executors subdivided the Pambula property, and later sold a very small parcel of land, being part of that property, for $45,000. That sum was deposited in the trust account of the Defendants’ solicitors.

7 From that sum of $45,000 a number of payments were made, in respect to the administration expenses of the estate and the obtaining of the grant of probate, as well as towards the funeral expenses. The solicitors for the Defendants presently hold in trust an amount of about $31,000 on behalf of the estate.

8 A joint account was conducted by the Plaintiff and the Deceased at the time of his death, which, in an amount of $5,870, passed by survivorship to the Plaintiff.

9 After making some specific gifts of chattels the Deceased by his will gave the house property at Pambula (which had been the matrimonial home of himself and the Plaintiff) upon trust to allow the Plaintiff a right of residence therein for her life, subject certain conditions, including payment of specified outgoings, and subject to termination upon remarriage or other specified events. Upon the termination of that right of residence the will provides that the house property be sold and the proceeds of sale divided into two equal parts, one for the Plaintiff, and the other for the five children of the Deceased. The residue of the estate is similarly to be divided into two equal parts, one for the Plaintiff and the other for the five children of the Deceased.

10 In calculating the value of the estate available for distribution, the costs of the present proceedings must be taken into consideration, since the Plaintiff, if successful, will normally be entitled to an order that her costs be paid out of the estate of the Deceased, whilst the Defendants, irrespective of the outcome of the proceedings, will normally be entitled to an order that their costs be paid out of the estate. It was estimated on behalf of the Plaintiff that her costs for a three day hearing will total about $41,000, whilst it was estimated on behalf of the Defendants that their costs for a hearing of the same duration will total about $60,000. Accordingly, it is appropriate that the Court should proceed upon the basis that the distributable estate will be in the order of $330,000. (If, however, it becomes necessary for the Pambula property to be sold, the foregoing sum of $330,000 will be further reduced, on account of costs and expenses associated with the sale.)

11 The Plaintiff, who was born in 1950, is presently aged 59. She was in employment throughout the totality of her marriage to the Deceased. The Plaintiff continues to work part-time in a local nursing home as a cleaner. However, she expressed an intention to retire in about five years, when she is aged about 65.

12 The Plaintiff earns about $30,000 (net) a year, as a laundry assistant, working a nine-day fortnight. She has leave entitlements (long service leave and sick leave), totalling somewhat in excess of $20,000, and also a superannuation entitlement of about $63,000 (which is accessible in 2015). The Plaintiff owns a motor vehicle, to which an estimated value of $4,000 was ascribed; shares worth almost $5,000; and she has savings of $36,000.

13 It was the Plaintiff’s evidence that after she had deposited the sum of $200 a fortnight into a savings account, the totality of her earnings were consumed by the provision of food, clothing, electricity, power, and gas, as well as the payment of local Council rates, and Rural Lands Protection Act taxes associated with the Pambula property (which in 2009 amounted to $1300).

14 The Deceased was married twice. Of his first marriage were born five children, who are all now adults. Those children include the Defendants. The Deceased separated from his first wife in June 1967. More than twenty years later, in 1989, the Deceased and the Plaintiff began to co-habit at the Pambula property. They married in August 1990.

15 The Deceased, who was a self-employed plumber by occupation, retired in about 2001, on account of ill health, and commenced to receive a Centrelink allowance. Nevertheless, at would appear that on occasion thereafter he did some work, for which he received cash in hand (or, at times, payment in kind).

16 The Plaintiff has two children, presently aged 36 years and 30 years. It was asserted by the Plaintiff that the younger of those children is, in fact, a child of the Deceased (born as a result of a liaison between the plaintiff and the Deceased in about 1979, that being about ten years before the Plaintiff and the Deceased commenced cohabitation). There were statements attributed to the Deceased that he married the Plaintiff only because she had led him to believe that he was the father of the Plaintiff’s daughter. At some stage the Plaintiff asserted to the Deceased that, in fact, he was not the father. The Plaintiff offered the explanation that at the time when she said that, she was “in a fit of rage”. At the hearing she was not able to remember the cause of that rage. However, the Plaintiff categorically stated during the course of her cross-examination that her daughter was also the daughter of the Deceased.

17 The explanation attributed to the Deceased for marrying the Plaintiff, does, however, seem somewhat curious. It will be appreciated that the Plaintiff’s daughter was aged about 11 at the time when the Deceased married the Plaintiff, and the Plaintiff and the Deceased had already been living together for about a year before their marriage. The Plaintiff’s children were aged about 14 years and 9 years respectively when the Plaintiff and the Deceased began to cohabit in 1989.

18 A very considerable quantity of evidence was presented on behalf of the Defendants, being evidence given by the Defendants themselves and the other children of the Deceased, as well as by other friends and acquaintances of the Deceased, with a view to establishing that the relationship of the Plaintiff to the Deceased was one of matrimonial disharmony. The Plaintiff asserted that she and the Deceased had a good and loving relationship, but conceded, however, that at the time of his death her relationship with the Deceased was “up and down”.

19 She also agreed that on occasion she gave the Deceased what was referred to in the evidence as “the silent treatment”, by which I understand that, for periods, the Plaintiff declined to speak to the Deceased.

20 There was also considerable evidence given on behalf of the Defendants concerning the asserted dissatisfaction of the Deceased with his financial situation towards the end of his life, and especially after he commenced to receive a pension from Centrelink in about 2001. It would appear that, because of the earnings of the Plaintiff, the Deceased’s pension was reduced, to $50 a week, and the Deceased was subsequently required to refund to Centrelink overpayment of about $3000 beyond the amount of the pension to which he was entitled. The Deceased then in early 2006 made an application to Centrelink grounded upon the assertion that, in effect, he and the Plaintiff were living separately and apart, although residing under the one roof. The Deceased had before making that application consulted his solicitor concerning his pension entitlement, and also concerning his testamentary dispositions. He was advised that if he and the Plaintiff divorced, it was likely that the Plaintiff would claim an entitlement to an interest in the Pambula property. It was in consequence of the discussion which he had had with his solicitor in October 2005, that the Deceased made his will of 5 October 2005.

21 The Defendants, despite the foregoing evidence offered by them, ultimately did not assert that the Plaintiff had been guilty of what in claims of this nature is sometimes compendiously referred to as “conduct disentitling”, being conduct which would preclude an applicant from receiving from the estate of a testator provision to which she might otherwise have established an entitlement.

22 The claim of the Plaintiff must be approached in the light of any competing claims upon the testamentary bounty of the Deceased. Such competing claims are those of the five children of the Deceased. Evidence was placed before the Court concerning the financial and material circumstances of each of those children.

23 Some of the children of the Deceased are in better circumstances than others. However, it is fair to say that none of them are particularly affluent, and some are in what might be described as difficult financial circumstances.

24 Despite the evidence offered on behalf of the Defendants concerning the nature of the relationship between the Plaintiff and the Deceased during the period of their marriage and their previous cohabitation, and despite the encouragement and suggestion on behalf of at least one of the children of the Deceased that the Deceased should divorce the Plaintiff, the Plaintiff and the Deceased remained married for sixteen years and were living together in their matrimonial home until the death of the Deceased.

25 It is in the light of the foregoing facts and circumstances that the Court must proceed to a consideration of the claim of the Plaintiff.

26 I have had the benefit of receiving a written outline of submissions from Counsel for the respective parties, together with a chronology from Counsel for the Plaintiff. Those documents will be retained in the Court file.

27 The Plaintiff as the widow of the Deceased is an eligible person within paragraph (a) of the definition of that phrase contained in section 6(1) of the Family Provision Act. As such she has the standing to bring the present proceedings.

28 It will be appreciated that each of the Defendants, as well as the other children of the Deceased, is also an eligible person in relation to the Deceased, being such within paragraph (b) of the foregoing definition. The only other eligible persons in relation to the Deceased are the Plaintiff’s children. Whether or not the younger of those two children was in fact a child of the Plaintiff, each of those two children is an eligible person within paragraph (d) of the foregoing definition, in that each of those two children was, at least at the outset of the cohabitation between their mother and the Deceased, a member of the same household as the Deceased and throughout that period was partly dependent upon the Deceased. Neither of those two children of the Plaintiff has made a claim for provision out of the estate of the Deceased.

29 Each of the five children born to the first marriage of the Deceased, whose status as an eligible person within paragraph (b) of the foregoing definition is unchallenged, seeks to uphold his or her entitlement under the will of the Deceased. But, as I understand it, none of those children seeks any greater provision from the estate than that which such child is entitled to receive under the terms of the will.

30 In carrying out the first stage in the two-stage process identified by the High Court of Australia in Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201 at 208 – 210 (the correctness of which test was affirmed by the High Court in Vigolo v Bostin [2005] HCA 11; (2005) 221 CLR 191) the Court must determine whether in consequence of the provisions of the will of a testator the applicant has been left without adequate provision for his or her proper maintenance.

31 The High Court in Singer v Berghouse (at 209 – 210) said that the determination of the first stage

calls for an assessment of whether the provision (if any) made was inadequate for what, in all the circumstances, was the proper level of maintenance etc appropriate for the applicant having regard, amongst other things, to the applicant’s financial position, the size and nature of the deceased’s estate, the totality of the relationship between the applicant and the deceased, and the relationship between the deceased and other persons who have legitimate claims upon his or her bounty.

32 I have already referred to the considerable quantity of evidence adduced on behalf of the Defendants, with a view to establishing that the marriage between the Plaintiff and the Deceased was an unsatisfactory one, and was little more than a marriage only in name. I have also recorded that, despite the foregoing submissions, the Defendants do not assert that the Plaintiff has engaged in conduct which would disentitle her from any order for provision out of the estate of the Deceased.

33 It should be emphasised that an order for provision is not made as a reward for good conduct or services performed by an applicant for a testator. Neither is such an order withheld as punishment for perceived bad conduct on the part of the applicant.

34 In this regard, it is appropriate that I should set forth the following salutary admonition of Windeyer J, in the High Court of Australia, in Blore v Lang (1960) 104 CLR 124 at 137,

The jurisdiction under the Testator's Family Maintenance Act [the statutory predecessor to the Family Provision Act ] is to provide for deserving persons according to their requirements, not to reward past services. This is sometimes overlooked and evidence concerning the present and probable future requirements of the applicant is subordinated to or submerged in evidence of past services to the testator. Allegations and denials concerning episodes in the past are then likely to become emphasized at the expense of evidence directed to the central issues in the case.

35 Although the Plaintiff expressed a desire to remain in what had been her matrimonial home for the past 21 years, the evidence disclosed that the residence on that property requires a considerable quantity of repairs and maintenance work. It will be appreciated that under the terms of the will, it is for the Plaintiff herself to effect and pay for such repairs and maintenance, and to pay for the other outgoings upon the house property. If she fails to do so, her right of residence terminates.

36 In any event, it is inevitable that the house property must be sold, if only to meet the costs of the present proceedings.

37 The house property is the only significant asset in the estate of the Deceased, and, as has already been recorded, has an agreed current market value of $400,000. In this regard it should not be overlooked that the Deceased was already the owner of the Pambula property at the time when he and the Plaintiff commenced cohabitation. (He had purchased the property in 1985 conjointly with his sister. In 2002 the original purchase had been subdivided, the Plaintiff retaining the part which is now the only significant asset in his estate.)

38 Even if the costs of the present proceedings did not make it inevitable that the house property should be sold, I am satisfied that the Plaintiff, by the terms of the will of the Deceased, has been left without adequate provision for her proper maintenance.

39 To give to a widow merely a right of residence in what had been the matrimonial home of the testator and the widow, subject to the widow meeting all outgoings, and subject to that right of residence being terminated in the event that she were not to meet all such outgoings, is not adequate provision - let alone appropriate provision - for a widow’s maintenance. The Plaintiff, in her stage of life, has need for security, and flexibility in her accommodation. The right of residence given to her under the will of the Deceased gave her neither security nor flexibility.

40 I am satisfied that the Plaintiff has been left without adequate provision for her proper maintenance.

41 If the house property were to be sold for $400,000, I consider that it is appropriate that the Plaintiff should from that sum receive a sufficient amount to enable her to purchase some alternative accommodation, more appropriate to her years and circumstances. By such purchase she should no longer be required to remain in a continuing relationship with the Defendants as executors of the estate of the Deceased, or with any of the other children from the Deceased’s first marriage. It is quite apparent that those children intensely dislike the Plaintiff, and that the Plaintiff warmly reciprocates that sentiment.

42 In the light of the attitude of the Deceased’s children towards the Plaintiff, it is quite undesirable that, on account of the terms of the will, either the children or the Plaintiff should be required to maintain a continuing relationship regarding the house property, which clearly none of them desires to do.

43 Valuation evidence was provided on behalf of the Defendant concerning the recent sales of strata unit residences in the Pambula area (Exhibit 1and Exhibit 10). The valuer emphasised that, on account of the age or condition of the estate property, no such equivalent residential units exist in Pambula. In summary, the valuer provided the following figures, representing the value of a hypothetical strata unit,

One bedroom accommodation $90,000
Two bedroom accommodation $120,000
Three bedroom accommodation $140,000

44 The median unit price in the Pambula area in September 2009 was $178,500.

45 I appreciate that it is the desire of the Plaintiff that she should live in a house rather than a strata unit. The valuer provided evidence of two relatively recent sales in the Merimbula area (near Pambula) of three bedroom cottages, each of which he described as being “overall superior”, one at $235,000 the other at $245,000.

46 I consider it appropriate, upon the assumption that the Pambula property would attain a sale price of $400,000 (and after payment of the costs associated with such sale, and the costs of the present proceedings in a total amount of about $101,000), that the Plaintiff should out of the proceeds of such sale receive an amount of $250,000. A legacy in that amount, together with her present savings, would enable her to purchase a cottage, and have a small fund left over to meet unexpected contingencies. If, however, she chose to purchase a three bedroom home unit, for an estimated price of $140,000 (or even for $178,500), she would have a considerable fund to meet unexpected contingencies.

47 As the absolute owner of such an unencumbered residence, the Plaintiff would be able, as her years advance and her circumstances alter, to acquire other substitutionary residences, at each stage appropriate to her advancing years and to her changing physical and material circumstances.

48 A legacy in the foregoing amount of $250,000 would (subject to what I will later say concerning the capping of the amount of the Defendants’ costs) leave the sum of about $80,000 to be divided among the five children of the Deceased’s first marriage, each of whom would thus receive about $16,000.

49 I am not persuaded that the competing claims of each of those children of the Deceased are such as would have the effect of reducing, let alone extinguishing, an order for provision of the foregoing nature, an entitlement to which I am satisfied that the Plaintiff has otherwise established.

50 The Plaintiff sought an order that the costs of the Defendants be capped, in accordance with Practice Note SCEq 7 and/or section 98 of the Civil Procedure Act 2005.

51 I have already recorded that it was estimated on behalf of the Defendants that their costs will total about $60,000.

52 It was the submission of the Plaintiff that those costs are out of all proportion to an estate of the size of that of the Deceased, and that unnecessary costs have been incurred on the part of the Defendants. For all practical purposes the net value of the estate (before taking into account the costs of the present proceedings) would, upon the sale of the Pambula property be little more than $400,000. The other assets included in the inventory of property have an estimated value of less than $4,000.

53 In support of her application that the costs of the Defendant be capped, the Plaintiff relies upon the following matters:

The Defendants served fifteen affidavits (fourteen of which were read at the hearing) from thirteen witnesses, twelve of whom gave oral evidence.
A significant amount of evidence contained in the foregoing affidavits consisted of inadmissible or irrelevant material, some of which was not read when objected to. Much of the balance of that material was held to be inadmissible. Some of those witnesses had to travel from rural areas of New South Wales, or from interstate, in order to attend Court in what was minor corroborative evidence about minor ancillary or irrelevant matters
The Plaintiff submitted that subpoenas for production were issued at the instance of the Defendants after the matter had already been listed for hearing and the primary affidavits had already been served, despite the Plaintiffs having already annexed financial documentation to her affidavit. Those subpoenas for production were wide ranging, and, in the event, the material produced was not relied upon by the Defendants. Much of the material subpoeaned by the Defendants was not relevant and was not relied upon. It is submitted by the Plaintiff that many of those subpoenas were quite unnecessary (for example, those addressed to the Deceased’s solicitor and to his medical practitioner), and that the material sought therein could have been obtained by the Defendants as executors, merely by request upon the solicitor and the medical practitioner.

54 Regarding the affidavits referred to in the first of the foregoing items, it should be noted that the reading of affidavits and the ruling upon objections thereto occupied from the commencement of the hearing of the proceedings, at 10.26am on Wednesday, 24 February, until 2.20pm on that first day of the hearing.

55 What is sometimes overlooked in cases such as this is that executors must act even-handedly among beneficiaries. Whilst executors have an obligation to uphold the terms of a will, it is quite apparent in the instant case that the Defendants (who, it will be appreciated, are two of the five beneficiaries, apart from the Plaintiff) were as executors acting in the interests of themselves and their siblings, and were disregarding the interests of the Plaintiff.

56 The Defendants were quite obviously conducting this litigation in an adversarial capacity. I am in agreement with the submission made on behalf of the Plaintiff that the costs of the Defendants, in an amount of about $60,000, where the net estate (before the deduction of costs) is expected to have a value of little more than $400,000, are disproportionate; further, that much of the costs incurred by the Defendants and evidence presented by them (especially regarding the paternity of the Plaintiff’s younger child) was unnecessary. I consider it appropriate that the costs of the Defendants should be capped.

57 Accordingly, I propose to order that the costs of the Defendants payable out of the estate are not to exceed the sum of $50,000. The effect of such an order will be to increase the value of the distributable estate (and, in consequence, the value of the residue available to be shared by the five children of the Deceased, from about $80,000 to about $90,000). Thus, the amount which each of those five children will receive will increase from about $16,000 to about $18,000.

58 I make the following orders:

1. I order that, in lieu of the benefit given to her by clause 5(1) of his will, the Plaintiff receive out of the estate of the late John Barry McDonald (“the Deceased”) a legacy in the sum of $250,000, such legacy not to bear interest if paid on or before 28 August 2010, and if not so paid to bear interest at the rates prescribed for unpaid legacies under the Probate and Administration Act 1898.

2. I order that the costs of the Plaintiff on the party and party basis and the costs of the Defendants on the indemnity basis (such costs of the Defendants not to exceed $50,000) be paid out of the estate of the Deceased.

3. The exhibits may be returned.
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