Re: Quagliata (Deceased)
[2001] QSC 51
•26 February 2001
SUPREME COURT OF QUEENSLAND
CITATION: Re: Quagliata (Deceased) [2001] QSC 051 PARTIES: CARMELO ANTONIO QUAGLIATA, ROSEMARY STRANO AND ANTHONY JOHN QUAGLIATA
(Applicants)
v
ROSARIO QUAGLIATA
(Respondant)FILE NO/S: OS53 of 1997 DIVISION: Supreme Court PROCEEDING: Civil Application ORIGINATING COURT: Supreme Court
DELIVERED ON: 26 February 2001 DELIVERED AT: Townsville HEARING DATE: 8 December 2000, 18 February 2001
JUDGES: Cullinane J ORDER: That provision be made out of the estate of the deceased for the Applicant Carmelo Antonio Quagliata in the sum of $150,000. That provision be made out of the estate of the deceased in favour of Anthony John Quagliata in the sum of $100,000. That provision be made out of the estate of the deceased for Rosemary Strano in the sum of $50,000. That the costs of each Applicant and of the executrix be taxed as between solicitor and client and paid out of the estate of the deceased. CATCHWORDS: TESTATOR’S FAMILY MAINTENANCE – APPLICATION OF CHILDREN – Where the Applicants Carmelo and Anthony and the husband of the Applicant Rosemary made substantial contributions to the building up of the deceased’s estate over an extended period of time – Where the value of the contributions substantially exceeded what they received out of the company or from the deceased in respect of the cane farming operation – Whether the deceased had a moral obligation to each of the Applicants to make provision for them under the circumstances of the case COUNSEL: P. Lafferty for the applicants
C. White for the respondantSOLICITORS: McDonald & Leong for the applicants
Roberts Nehmer McKee for the respondant
The Applicants in this matter are three children of the deceased, Rosario Quagliata, who died aged 77 on 17th August 1996.
By his will, he made specific bequests of $10,000 to each of his seven grandchildren (children of the three Applicants) and left the balance of his estate to his widow, Jeannie Quagliata whom he had married in February 1981 after having divorced his former wife, the mother of the three Applicants. There are no children of the deceased’s second marriage. His widow was born on the 1st January 1940. She is the executrix appointed under the will.
The extent of the deceased’s estate appears in a report of accountants which also shows assets owned by the widow which the evidence would suggest she holds by survivorship as a former joint tenant with the deceased or had been acquired in her name by the deceased or transferred into her name by the deceased.
The total value of the estate of the deceased at present is about $926,000. There is after taking into account a tax liability some $32,000 more in the way of funds in a bank account than there was at the date of death. At the time of his death there was some $6,942 in a bank account.
The substantial assets of the estate are two blocks of units in Townsville, one having a value of $735,000 and the other having a value of $150,000.
The Applicant, Carmelo Quagliata is the eldest child of the deceased, having been born in November 1945. The Applicant, Anthony Quagliata was born in July 1951 and the Applicant, Rosemary Strano was born in June 1955.
The deceased man was a cane farmer, having succeeded with his two brothers to cane farming interests from his late father. After a period of time in partnership with his brothers, the deceased and his then wife, acquired one of the farms in their own name. As will be seen, the deceased’s cane farming interests expanded significantly and then at a later time, a farm was acquired from a person who had defaulted under a loan made by the deceased which was secured upon that farming property.
Over a period of time the deceased acquired rental properties in Townsville, some of which constitute the assets of the estate, some of which the deceased’s widow has succeeded to on survivorship and it would seem there is some property which was acquired in the widow’s name or transferred to her.
It is not suggested that there was any other source of the assets which constitute the estate (or for that matter the other assets to which I have referred) other than the profits generated from the cane farming operations, the capital sums obtained on realisation of cane farming properties and income generated from the property acquired from such income and capital.
The Applicants claim that each was owed a moral duty by the deceased which he failed to discharge, having made no provision for them in his will. The duty is said to arise from the role each played as a child of the deceased in building up the assets which constitute the estate.
Each claimed to have made a significant contribution by their largely unpaid work on the cane farm acquired from the debtor of the deceased. In the case of the female Applicant, the work was performed by her husband. I will deal with this aspect of the family history separately a little later. It is necessary also to consider the various financial dealings between the deceased and the Applicants in relation to this property through the company which acquired the property and in which each held shares. This company was Lifgear Pty. Ltd.
PRIOR TO 1986: Both of the male Applicants claim to have made substantial contributions to the building up of the estate by their activities prior to 1986.
According to the evidence of Carmelo, which I accept, he commenced working on the family farm from a very early age. In 1960 after completing two years boarding school he, then aged 15, became interested in undertaking an apprenticeship as a fitter and turner and had approached a tradesman about this. When he spoke to his father, his father told him it would not be possible as he was proposing to acquire two small farms, a little distance away from the family farm and he would require Carmelo to help develop the properties. These were acquired in 1961. At that time the deceased’s cane farming operations were limited to the family farm which produced about 2,500 tonnes per year.
According to Carmelo, the two farms which were acquired grew relatively little cane, (about 1800 tonnes of cane per year) because much of the land was not in a condition that could be used for cane. The deceased bought a bulldozer and Carmelo over the next two years working long hours each day, cleared and levelled land on these farms so that more cane was able to be planted. In 1961, some 2,000 tonnes of cane were grown and in 1962 some 2,500 tonnes or more. (The Affidavit suggests 2,900 tonnes in 1962 and 2,500 tonnes in 1966).
Carmelo received only ten shillings per week for the work that he did at a time when he said the basic wage was about eight pounds. The deceased bought him a second hand vehicle for 75 pounds and told him that that was to be in lieu of wages.
In 1964 when Carmelo was 19, he was approached by a neighbour who indicated an interest in selling some land to the deceased. The deceased agreed to purchase it but only upon the condition that Carmelo carried out the work of clearing it and making it ready for the planting of cane. The land was bushland at the time. The deceased was at this time going overseas for some six months.
The land was cleared throughout the year and cane was planted upon it early the following year. In addition, Carmelo used the bulldozer to bring into production some of the land on the home farm which had not previously grown cane.
Prior to the deceased leaving for Europe in April 1964 he told Carmelo that Carmelo would be included with the deceased and his wife as an equal partner in the partnership conducting the farming operations, that is, the business of cane farming but not including the cane farm itself.
By the end of 1966 the home farm was producing 3,700 tonnes of cane. The two small farms that had been acquired at the beginning of 1961 were producing some 4,300 tonnes of cane. The total production of 8,000 tonnes meant that over the period of five years from the time that the two small farms had been acquired the amount of cane produced by the family had increased by some 320% and there had been a corresponding increase in the value.
A falling out occurred between the deceased and Carmelo in 1967 when Carmelo, who had never had a holiday before, left for a holiday at a time when his parents were away for the new year and weather conditions were such that no work could be performed on the farms. He went to Sydney for a short period and when he arrived home the deceased gave him a cheque of $1,600 and in Carmelo’s words, “kicked me out of the farm”. The cheque was said by the deceased to represent the wages of Carmelo for the previous three years. Carmelo had in fact not received any profits from the partnership and had been receiving only some $20 per week by way of drawings. He did not pursue the question of his entitlement as a partner at that time. In fact, it is unclear whether any partnership was ever formalised.
In the following year the deceased approached him again and told him that he was prepared to lease the home farm to Carmelo if he wished. Carmelo at this time was engaged to be married. He agreed to lease the farm and did so at a commercial rate. (Indeed the rate of interest charged was somewhat in excess of market rates at that time according to Carmelo’s affidavit.)
The Applicant and his wife moved into a small residence on the farm. The deceased and his then wife occupied the main home.
When the deceased in that year acquired a neighbouring farm, he told Carmelo that he and his wife could move into a house on that farm. The offer was accepted and Carmelo and his wife expended monies on installing a water pump system and septic system and also carrying out necessary repairs and refurbishments.
In early 1973, the deceased told him that he had sold the newly-acquired farm to another person. This left Carmelo and his wife in a position where they did not have security of tenure of their home. They were able to rent the house from the new owner for a period but the lease expired in 1973. The result was that they lost the monies which they had expended on the house. When he spoke to his father about this, his father told him it was “bad luck”. By this time Carmelo had two children.
In mid 1973 the Applicant learned that his father proposed to sell the two small farms acquired in 1961 to some other farmers. He approached his father about it, being interested, it would seem, in acquiring the farm but was told that the deceased had already promised it to the other farmers. The property was sold for $290,000 without a cane crop in July 1973. It is Carmelo’s case that his activities had contributed very substantially to the increased value of the farm realised from the sale.
Carmelo says he decided at that time that he would not have any further financial dealings with his father, regarding him as having taken advantage of him over the years, and given that he had a family to support and needed a secure income. He went into the motor vehicle industry from 1974 until 1981 when he went into a partnership in the engineering business with another person whose interest he acquired after some six months. He conducted his business until recently when he closed it down. He currently performs some consulting work for an engineering firm. From the time that he returned from school in December 1960 at age 15 until 1974 when he was 29 he had devoted his time to the family farming operations leasing the home farm from his father in 1968.
Prior to that the work he performed in the family cane farming operations was largely without recompense or he can, at best, be regarded as having received a relatively small amount, certainly not in any way adequately compensating him for his efforts.
The Applicant, Anthony Quagliata was born on 31st July 1951.
He also at an early age commenced to work on the cane farm. He describes how from the age of eight onwards he performed various tasks which the deceased required of him. This is set out in paragraph 8 of his affidavit. By the age of 12 he was driving tractors and would perform various of the cane farming tasks. When he was 14 he was given additional tasks associated with the cultivation of the more recently planted cane. He received no payment for these tasks.
At the age of 17 he obtained his driver’s licence which enabled him to carry out further duties on the farm including driving the haul out truck and taking the cane to the siding.
He commenced an electrical apprenticeship at the age of 17 ½ and has since obtaining his trade qualifications worked as an electrician at a sugar mill.
From the time he commenced his apprenticeship, he continued to work on the farm but also at the deceased’s request, performed electrical work on the property which the deceased was, at that time, commencing to acquire. Anthony says that the houses and flats which the deceased purchased were often run down and needed a good deal of re-wiring work. Anthony worked as a shift worker but says that he was often required by his father to drive to Townsville where the deceased had property to perform extensive electrical work on the buildings. He never received any payment for this work. This is described in some detail in paragraph 13 of his affidavit. He says that this continued right up until the time of his father’s death, notwithstanding the family commitments that he himself had acquired by this time. There was a substantial dispute about the extent of the work he performed. The deceased’s widow produced a document (Ex. 6) purporting to show occasions on which the deceased paid electrical contractors for electrical work. However it is clear that many of those related to equipment or work other than electrical work. Whilst I am satisfied that Anthony did not perform all of the electrical work the deceased required I am satisfied that he performed a substantial part of it.
On one occasion shortly after he was married and had three young children including twins, he found himself in circumstances where he needed monies to pay for an operation which his wife required shortly after the birth of the twins. He approached his father and asked him for a loan of some $500 which the deceased refused. Anthony at that time determined he would not ask his father for anything again.
He has continued to work as an electrician having taken a second job to help meet the family’s expenses. He says that nonetheless he would always do any electrical work that his father required of him. On one occasion the deceased approached him with a document which he said was his will and which he asked Anthony to read, stating that it would prove that he (the deceased) would do the right thing. Anthony says he didn’t want to read the document and told him that he performed the work he asked of him because he was his father, not because of what was in his will.
The third Applicant, Rosemary Strano, is the youngest of the children of the deceased, having been born on 14th June 1955. She is married with two children now in their twenties.
She was still a child at the time that her brothers started working on the farms. It is not the case that she performed any of the tasks associated with the cane farming operations but she says that she used to help her mother around the house and perform tasks such as mowing the lawn. She married in 1976 when she was 20. Her claim that the deceased had a moral duty to her largely arises from the participation of her husband in the cane farming operations conducted by Lifgear Pty Ltd from 1986 onwards. She says that this participation was, as the deceased made clear to her, expected of her husband.
I will return to the present circumstances of each applicant a little later.
There is an affidavit from Maria Josephine Quagliata, the mother of the three Applicants, and the former wife of the deceased. She confirms the truth of what each of the Applicants say in their affidavits. She says that were it not for the efforts of the three children and her own efforts (as well of course of those of the deceased) the deceased and she would not have managed to acquire the assets which they had at the time of the separation. She says she was shocked to find that the deceased had not made any provision for the three children in his will given the contributions that had been made by them to the building up of the estate. She says that when she and the deceased separated she agreed under some pressure from the deceased to accept substantially less than what she claims she would have been entitled to but she did so in the belief that the three children would obtain substantial benefits from the deceased’s estate upon his death.
LIFGEAR PTY LTD : It appears that the deceased had advanced a substantial amount of money to a farmer named Coccilolone which was secured on his cane farm. In mid-1986 the deceased approached each of the Applicants with a proposal. It appears that he was by this time the mortgagee-in-possession and he initially had intended to sell the property but two auctions had been unsuccessful. The deceased at this time had not been active in cane farming for a number of years.
It would seem that he had performed some work on the farm during the period that he was the mortgagee-in-possession.
He proposed to the three Applicants that he would form a company in which each would receive a 1/7th share. He told each of them that he would advance $50,000 which would be required to be lent back to the company. According to Rosemary, he said that the 1/7th share would generate profits of about $10,000 per annum.
In return the two male Applicants and Rosemary’s husband, Colin, were to work the farm. At this time it was, I am satisfied, in very poor condition and required substantial work on it. I infer, that the proposal was largely motivated by the fact that the deceased at his age was not capable of performing the work required on the farm.
The Applicants discussed matters amongst themselves and agreed to accept the offer. The farm was acquired by Lifgear Pty Ltd. This, I assume, was a shelf company.
I am satisfied that each of the male Applicants and the husband of Rosemary performed substantial work on the farm over the period that the company conducted it. There was a period of approximately a year and a half when it was leased when the lessee would have assumed the responsibility for the operations of the farm.
I am satisfied that in the early period it was necessary for a good deal of work to be carried out in order to get it into reasonable condition. Monies had to be borrowed. I am satisfied that Carmelo made some of the farming implements that were required using the facilities of his engineering business and being assisted by the Applicant, Anthony and his brother-in-law Colin Strano.
The deceased performed, I am satisfied, some work but the great bulk of the work fell upon Carmelo, Anthony and Colin Strano.
The Applicants learned that they had not in fact received 1/7th of the shares but instead only one share out of 21 with the deceased holding the balance except for one which his widow held.
The farm did not generate profits. It had substantial debts to be serviced.
Nothing was received by any of the Applicants until 1994 notwithstanding the work performed by Carmelo, Anthony and Colin Strano. Each of these had their own businesses or employment to attend to and the work was carried out on weekends when they were available and at other times before their other work commenced and sometimes after. Carmelo lived on the farm for a period and performed work before going to his business and afterwards. Anthony performed work on rostered days off and during the day when he was working on night shift. Colin Strano lived some distance from the farm and drove to the farm where he worked with his brothers-in-law as his other commitments permitted.
In about August 1991 it appears than an agreement was reached that the deceased would sell his shares to the three Applicants. The agreement which in fact was entered into is Exhibit 9 to the affidavit of Jeannie Quagliata (the deceased’s widow). The evidence of Mr Deuble, the accountant for the company and for various family members, satisfies me that the deceased did not wish to incur the capital gains tax which would be payable on a sale by him of his shares to the Applicants and instead the agreement referred to was entered into.
Its effect was that the Applicants would pay $100,000 to the deceased and his widow which would be used partly to discharge an indebtedness of the company to the deceased and his widow with the balance to be an advance by the company to them. This advance, according to the agreement could be discharged by setting off dividends payable to the deceased and his wife thereafter. Any income tax associated with the payment of such dividends was to be met by the Applicants. They were also to indemnify the deceased in respect of certain sums which had been incurred or might be incurred in relation to litigation or other transactions. The quid pro quo was that the Applicants were entitled to have the deceased and his wife deal with the shareholdings in the company in such manner as the Applicants should direct.
The farm was sold in 1994 and the company wound up shortly thereafter.
In Exhibit 2, Mr Deuble has sought to demonstrate the income generated or losses incurred by the company in its cane farming operations, what funds were received by the company and the application of those funds to the Applicants and to the deceased and his wife. The effect of this was that each Applicant has received $101,000 in respect of their involvement in the company and the cane farming operations conducted by it. I also had evidence from Mr Crane, an accountant called by the Respondent widow. There is I think, when one analyses their evidence fully, not a great deal of difference between the two accountants. It seems to me that each Applicant has received just a little over $100,000 together with the gift of $50,000 which each had received from the deceased when the company acquired the farm and which was gifted to each on the condition that the monies were advanced to the company.
There was, I am satisfied, when everything is taken into account, little in the way of profit on the subsequent sale of the farm.
Whilst I did not have any evidence of what farm workers might have earned during this period and bearing in mind that there was some time when the farm was leased, I am nonetheless satisfied that the two male Applicants and Colin Strano contributed substantially more to the cane farming operations than they received. I am satisfied that as a result of their activities the cane farm which was in poor condition when acquired by the company was put into a condition which enabled it to generate the cane farming income that it did. Whilst the amounts that each received were substantial, it has to be borne in mind that they received nothing for a number of years, receiving monies it would seem, only at about the time that the farm was sold.
There is some dispute as to the nature of the relationship between the deceased and the Applicants in the latter years of the deceased’s life and particularly after his move to Townsville in 1990.
I am satisfied that there was contact and that relations between each of them and the deceased were reasonably good, although I am inclined to accept that they did not see him as frequently as they suggested in evidence. There is nothing to suggest that there had been any breakdown in the relationship of father and son or father and daughter. It would seem that the relationship survived the separation of the deceased from their mother notwithstanding what appears to be a close relationship between the Applicants and their mother.
The Applicant Carmelo had at the date of his father’s death, assets of some $218,500 and liabilities of about $95,000. He held some shares in a manufacturing company in the Burdekin area and he owns a warehouse and has shares in a business to which he is a consultant.
At present his assets remain the same but his liabilities are somewhat greater being a little over $130,000.
The Applicant Anthony has recently separated from his wife. As at the date of his father’s death he had assets of about $325,000 and liabilities of about $184,000. He has since that time reached a property settlement with his wife and his current assets remain the same as they were but he has now a substantial debt to his wife and his total liabilities are $272,000. He is employed as an electrician at a sugar mill.
In the case of the Applicant Rosemary, she and her husband conduct a cane harvesting business in partnership. They also have a small property where they grow mangoes.
At the time of her father’s death her assets were some $456,000 with liabilities of $370,000.
There has been some reduction in her assets to about $428,000 and her liabilities are about $363,000.
Each of the three Applicants have debts owing to their mother.
In each case the Applicant was cross-examined about their financial position. None of them could be described as well-off although each has significant assets. However each also has significant debts. The Applicant Carmelo receives income from consulting work and from investments, the Applicant Anthony is an electrician and also receives income from a warehouse investment. The Applicant Rosemary receives income as a member of a cane harvesting partnership with her husband and at least occasionally from income from mangoes. She and her husband also receive some income from some flats in Townsville. There are debts to be serviced in respect of these.
I am satisfied that the deceased had a moral obligation to each of the Applicants to make provision for them in the circumstances that I have outlined. Each contributed to the building up of the deceased’s estate. This is especially the case with the Applicant Carmelo. His largely unpaid efforts over a number of years whilst very young, contributed very substantially to the building up of the cane farming interests of the deceased.
Whilst the contribution of Anthony to the cane farming operations may not have been as great or extended over as long a period as that of the Applicant Carmelo, they were nonetheless substantial and extended over some years including the period during which he was an apprentice. After that he contributed to his father’s assets by performing the electrical work that I have referred to. Both Carmelo and Anthony also, I am satisfied, contributed to the operations of the cane farming operations of Lifgear Pty Ltd. The value of the contributions substantially exceeded what they received out of the company or from the deceased in respect of the cane farming operation.
In the case of Rosemary the work was performed by her husband and it was made clear to the Applicant by the deceased that this would be required as the quid pro quo for what he represented was 1/7th of the shares in the company. She should be regarded as having made a contribution through her husband to the deceased’s estate in the case of the cane farming operations of Lifgear Pty Ltd.
There of necessity must be a distinction made between the three Applicants in the making of any provision in view of the findings that I have made. It may well be that the deceased had he made provision for the children would not have distinguished between them. However the court’s powers are limited to making good the failure of a testator to discharge a moral duty and no more. The court is not permitted to go beyond this.
I order that provision be made out of the estate of the deceased for the Applicant Carmelo Antonio Quagliata in the sum of $150,000. I order that provision be made out of the estate of the deceased in favour of Anthony John Quagliata in the sum of $100,000. I order that provision be made out of the estate of the deceased for Rosemary Strano in the sum of $50,000.
I order that the costs of each Applicant and of the executrix be taxed as between solicitor and client and paid
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