Rowan v Roche
[2005] WASCA 6
•19 JANUARY 2005
ROWAN & ANOR -v- ROCHE [2005] WASCA 6
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2005] WASCA 6 | |
| THE FULL COURT (WA) | |||
| Case No: | FUL:140/2003 | 18 AUGUST 2004 | |
| Coram: | MURRAY J STEYTLER J TEMPLEMAN J | 19/01/05 | |
| 15 | Judgment Part: | 1 of 1 | |
| Result: | Appeals allowed Order for provision out of estate varied | ||
| B | |||
| PDF Version |
| Parties: | ZENOBIA MERLE ROWAN RONALD FRED DOUGLAS as Administrator of the Estate of EDWARD JOHN HAMILTON ROWAN (DEC) SUSAN FLORENCE ROCHE |
Catchwords: | Succession Large estate left by Will Application for provision out of estate by adult child Test to be applied in exercising discretion Turns on own facts |
Legislation: | Inheritance (Family and Dependants Provision) Act 1972 (WA), s 6 |
Case References: | Bondelmonte v Blanckensee [1989] WAR 305 Knight v Anderson (1997) 17 WAR 85 Singer v Berghouse (1994) 181 CLR 201 Vigolo v Bostin (2002) 27 WAR 121 Bowcock v Bowcock [1969] 2 NSWR 755 Browne v Macaulay [1999] WASC 217 Dijkhuijs v Barclay (1988) 13 NSWLR 639 Fiorentini v O'Neill, unreported; SCt of NSW; Library No CA 40046/97; 4 December 1998 Kennedy v Jvancich [2003] NSWSC 441 Kitson & Anor v Franks & Anor [2001] WASCA 134 Lawrence v Lawrence [2004] WASC 90 Mayield v Lloyd-Williams [2004] NSWSC 419 Re Newell (1932) 49 WN (NSW) 181 Re Pope (1975) 11 SASR 571 Roche v Varnavides [2004] WASC 164 Vasiljev v Public Trustee [1974] 2 NSWLR 497 Warren v McKnight (1996) 40 NSWLR 390 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE FULL COURT (WA) CITATION : ROWAN & ANOR -v- ROCHE [2005] WASCA 6 CORAM : MURRAY J
- STEYTLER J
TEMPLEMAN J
- FUL 143 of 2003
- First Appellant
RONALD FRED DOUGLAS as Administrator of the Estate of EDWARD JOHN HAMILTON ROWAN (DEC)
Second Appellant
AND
SUSAN FLORENCE ROCHE
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : MASTER SANDERSON
Citation : ROCHE -v- DOUGLAS [2000] WASC 22
File No : CIV 2115 of 1999
(Page 2)
Catchwords:
Succession - Large estate left by Will - Application for provision out of estate by adult child - Test to be applied in exercising discretion - Turns on own facts
Legislation:
Inheritance (Family and Dependants Provision) Act 1972 (WA), s 6
Result:
Appeals allowed
Order for provision out of estate varied
Category: B
Representation:
Counsel:
First Appellant : Mr J G Young
Second Appellant : Mr K G Robson
Respondent : Mr M J McCusker QC & Mr K F Sleight
Solicitors:
First Appellant : Franklyn Simon Wheatley
Second Appellant : Robertson Hayles
Respondent : Mayberry Hammond
Case(s) referred to in judgment(s):
Bondelmonte v Blanckensee [1989] WAR 305
Knight v Anderson (1997) 17 WAR 85
Singer v Berghouse (1994) 181 CLR 201
Vigolo v Bostin (2002) 27 WAR 121
(Page 3)
Case(s) also cited:
Bowcock v Bowcock [1969] 2 NSWR 755
Browne v Macaulay [1999] WASC 217
Dijkhuijs v Barclay (1988) 13 NSWLR 639
Fiorentini v O'Neill, unreported; SCt of NSW; Library No CA 40046/97; 4 December 1998
Kennedy v Jvancich [2003] NSWSC 441
Kitson & Anor v Franks & Anor [2001] WASCA 134
Lawrence v Lawrence [2004] WASC 90
Mayield v Lloyd-Williams [2004] NSWSC 419
Re Newell (1932) 49 WN (NSW) 181
Re Pope (1975) 11 SASR 571
Roche v Varnavides [2004] WASC 164
Vasiljev v Public Trustee [1974] 2 NSWLR 497
Warren v McKnight (1996) 40 NSWLR 390
(Page 4)
1 MURRAY J: On 29 July 1999 Mr Rowan died. He was 90 as at the date of his death. He was principally a grazier and the principal asset of his estate was the station property near Geraldton known as "Woorree".
2 The first appellant, Mrs Rowan, is his widow. She was born in 1923 and she would, therefore, have been 75 or 76 when he died. She was his third wife. They were married in 1988, but she had first been employed by the deceased in 1970 and entered into a relationship with him in 1974. It was from that time until his death a loving and mutually supportive relationship. They moved to Woorree where they lived until Mr Rowan's death. During this period Mrs Rowan worked with the deceased for their mutual benefit, but also to assist to substantially increase the value of his assets. She effectively performed a managerial function, although there was during their marriage and their preceding domestic relationship no formal employment relationship.
3 At the time of Mr Rowan's death, he and Mrs Rowan held as joint tenants an investment portfolio valued at $876,420. In addition, they had just completed the purchase for $310,000 of a strata titled unit in Mounts Bay Road, Perth. Mrs Rowan showed these as her principal assets as at the date of her husband's death as they had accrued to her by right of survivorship. Financially, therefore, on Mr Rowan's death his widow benefited by the accretion to her assets of his interest in these joint tenancies, a benefit in the order of $593,210. She then had assets valued by her at just over $1.3 million. She had no liabilities and a taxable income of $38,000 per annum.
4 The respondent, Mrs Roche, was Mr Rowan's only child. She was born in 1936 and so, as at the date of his death, she was 63 years of age. Mrs Roche is not Mrs Rowan's daughter. She was born of a previous relationship which Mr Rowan had, but it seems to be clear that throughout her life she was very much a daughter of the Rowan family. When she entered upon her secondary schooling, they sent her to boarding school. She continued to come home to Woorree for holidays. Mrs Roche herself has had three marriages. There were two daughters of her first marriage, born in 1959 and 1961. I think it fair to say that, generally speaking, over most of the years until 1979 there was supportive contact between Mrs Roche and her father, but that seems to have substantially ceased in 1979 when Mr and Mrs Rowan moved to Woorree. At that time it appears that Mrs Roche was in financial difficulties. She sought help from her father. He gave some limited assistance. The episode appears to have generated some ill-feeling.
(Page 5)
5 Mrs Roche's position improved, however, when she married Mr Roche, her third husband, in 1984. She describes him as a "very wealthy man". They lived in Adelaide, but were divorced in 1988. Mrs Roche accepted a property settlement, a net amount of $275,000, in 1989. In 1991 Mrs Roche appears to have been substantially involved in running a bed and breakfast establishment known as "Penhaligons" in Burra in South Australia, but she was back and forth to Western Australia to maintain contact with her daughters. She appears to have made one visit only to her father. She saw him in 1994 at Woorree. They reminisced about old times. It was an emotional meeting. Mrs Roche gave her father photographs of his grandchildren, with whom he appears to have had no contact. There were tears when they parted, but she did not see him again prior to his death.
6 I have mentioned Mr Rowan's assets which passed directly by right of survivorship to his widow; otherwise, it seems that he had the entire ownership of Woorree, which was valued for probate purposes in a statement of assets and liabilities filed in support of the application for probate by the second appellant, Mr Rowan's executor, at over $5 million. But in an affidavit sworn on 4 October 2001 Mr Douglas deposed that a sworn valuation obtained since then would set the value of the real estate at $2.5 million. There were various items of agricultural equipment, a caravan, a 1977 motorcar, all of which had little value. To household furniture and effects a value of $50,000 was attributed, but that had been a value provided for insurance purposes and Mr Douglas thought it to be excessive. Finally, there were very few liabilities as at the date of death and at that time Mr Rowan appears to have had about $180,000 in a deposit account and cheque account at his bank.
7 As will be evident from what I have written above, Mr Rowan left a will. As I have said, he appointed Mr Douglas, his accountant, as his executor. By cl 4 of the Will, he made a specific gift of $250,000 to his widow absolutely, but with the intention, although without importing any legal obligation, that she might buy a residence for herself. In the meantime, she was to be permitted to occupy their present home rent free and it was to be maintained by the estate. To Mrs Rowan he gave all his household and personal effects and she was the sole residuary beneficiary of his estate. He made no provision for Mrs Roche.
8 In October 1999 Mrs Roche made an application for provision out of the estate under the Inheritance (Family and Dependants Provisions) Act 1972 (WA), s 6(1) on the grounds provided by the subsection that the disposition of the deceased's estate effected by his Will "is not such as to
(Page 6)
- make adequate provision from his estate for the proper maintenance, support, education or advancement in life" of his daughter. If the Court is of that opinion, it may, at its discretion, order that such provision as the Court thinks fit is to be made out of the estate of the deceased for the purpose mentioned.
9 The law is clear. It is trite law that on the face of the subsection there is a two-part process to be undertaken by the Court. The first question is whether the Court is to form the opinion mentioned in the section that the provision out of the estate is inadequate for the purpose mentioned. This is sometimes called the jurisdictional question: Bondelmonte v Blanckensee [1989] WAR 305. By the reference to the jurisdiction of the Court in this context is meant no more than that the Court forms the opinion as to the adequacy of the provision from the estate which will trigger the requirement to exercise the discretion whether or not to make provision out of the estate and, if so, how much and in what form. As is apparent from the way the section of the Act is worded, the threshold question requires consideration of the factual circumstances as at the date of death. Again, as is apparent from the way the section is worded, when the Court comes, if it does, to exercise its discretion, it is to consider the position as at the time when it is called upon to do so.
10 I do not propose in this case to discuss the first question. As I have said, no provision was made for Mrs Roche by the Will of the deceased. There seems to have been no contest between the parties that the threshold or jurisdictional question would be answered affirmatively in Mrs Roche's favour.
11 But her application was opposed by Mrs Rowan and Mr Douglas actively participated in its decision, as was proper, given his role as executor of the estate. The live question on the hearing of Mrs Roche's application appears to have been whether in the exercise of discretion the Court ought to make any provision out of the estate for her at all and, if so, what that provision ought to be and in what form the Court's order should be made.
12 A question of that kind is often in the decided cases described as involving consideration of the moral claim which may be advanced by the applicant, sometimes, although not, I think, in this case, in competition with the claims made by others interested in provision out of the estate of the deceased. But the courts have rightly warned against focusing attention upon such considerations. The courts have reminded litigants
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- that to speak in such terms is to place a gloss, perhaps a convenient gloss, upon the words of the section.
13 In the end it must be recalled that by the section the court is asked to exercise its discretion to make the provision it thinks fit out of the estate of the deceased for the proper maintenance, support, education or advancement in life of the applicant. That is the extent and limit of the court's power. It is not concerned otherwise, or indeed at all, with the fairness of the disposition by Will and it has no mandate under the section to rewrite the Will of the deceased. Indeed, the court's obligation is to preserve the disposition made by the deceased, except to the extent necessary to make the provision which in the exercise of its discretion the court thinks the justice of the case before it requires: Singer v Berghouse (1994) 181 CLR 201, 209 - 211; Vigolo v Bostin (2002) 27 WAR 121, 144 [101] - [103].
14 Because the second part of the inquiry by the court involves an exercise of discretion, a challenge on appeal to the order made at first instance will require the appellant to demonstrate in the ordinary way that the discretion has miscarried, either because the court at first instance has made an error of principle, or because the court has mistaken the facts in a material way, taking into account in the exercise of its discretion some matter of fact to which it ought not to have had regard or omitting to consider some matter of fact to which it ought to have had regard, or, if no identifiable error of any such kind appears, because the award made cannot be regarded as being a proper exercise of discretion reasonably open to the court, properly understanding the nature of the task before it: Singer v Berghouse at 212.
15 The Master who heard the application gave his reasons ex tempore. They are brief. He expressed the view that the concession made on behalf of Mrs Rowan that the jurisdictional question should be answered in Mrs Roche's favour was rightly made. The Master then moved on to state for himself the question, "What should the provision be which ought to be made out of the estate?" He valued the estate at in the region of $2.6 million, noting that it essentially comprised the property known as Woorree Station.
16 The Master said that Mrs Roche sought an amount of $1.7 million, which claim, he said, was supported by the evidence. It would enable her to acquire accommodation in Perth, to allow her to live near her family. It would enable her to cover the cost of her removal to WA and other incidental expenses, and it would allow her to cover her anticipated future
(Page 8)
- living expenses, which the Master thought were reasonable in all the circumstances. The Master then said that it appeared to him that that provision could be made because, although it would "take a substantial proportion of the estate, it still means that there would be a significant amount left to [Mrs Rowan]" who had already, by survivorship, received a considerable sum. In the end the Master expressed the view that he could make the provision he had in mind, leaving Mrs Rowan "comfortably placed", "by any measure".
17 The Master ordered the sale of Woorree. Out of the net proceeds of the sale he ordered the payment of $1.7 million to Mrs Roche. The costs of the parties, with the limit under the scale removed, were to be paid out of the estate, taxed as in an action commenced by writ. A certificate was granted for second counsel to Mrs Roche, who appeared by senior counsel and junior, both on the hearing of the application and of the appeal.
18 There are in fact two appeals; one by Mrs Rowan and, unusually in such cases, one by Mr Douglas as executor of the estate.
19 In essence, the grounds relied upon in Mrs Rowan's appeal are that the Master failed to apply the test for the exercise of the discretion provided by the Act. It is asserted that the Master rewrote the deceased's Will and did not have regard to the position of Mrs Rowan, particularly as she was provided for by the Will, including by the specific bequest of the sum of $250,000. In particular, it is asserted that the Master failed to have regard to the totality of the relationship between Mrs Roche and the deceased, including the fact that she only met with him once in 1994 during the 20-year period before Mr Rowan's death. There are some specific complaints that the Master failed to take into account the income earning capacity of Mrs Roche and that her living expenses, as projected into the future, were excessive. There is a complaint about the form of the order, given that there may be difficulty, so it is asserted, in selling Woorree for $2.6 million. It is not asserted that there should be no provision out of the estate for the respondent, but it is asserted that the discretion miscarried because the provision made by the Master was manifestly excessive.
20 Mr Douglas' appeal was instituted at about the same time as that of Mrs Rowan. Again, his complaint is not that there should have been no order made in favour of Mrs Roche but about the quantum. He makes a complaint about the form of the order, saying that there might be difficulty in realising even $1.7 million from the sale of Woorree and suggesting that the order should have been that the respondent be paid a
(Page 9)
- specified percentage of the net value of the estate after the payment of the specific bequest in favour of Mrs Rowan. Finally, it is asserted that the costs orders made by the Master were inappropriate.
21 One matter raised in both appeals, the question of the form of the order, having regard to uncertainty as to the net worth of the estate, may, I think, be set at rest immediately. I need not here discuss the evidence to which the Master briefly referred and which was placed before him in respect of the net value of the estate. I have referred to the substance of that evidence as at the date of death in more detail above. The Master found, upon the evidence before him, that the net value of the estate was probably about $2.6 million.
22 At the hearing of the appeals Mr Douglas sought to tender an affidavit sworn on 4 August 2004 suggesting that efforts made to sell Woorree since the hearing before the Master had produced only one offer, originally of $1.1 million and increased to $1.5 million. Mr Douglas sought, by the affidavit, to tender hearsay evidence that the agent he had appointed to handle the sale had suggested that his view, and that of other real estate agents with whom he had spoken, was that a price of over $2,000,000 could not be achieved.
23 I would not receive this evidence for two reasons. In the first place, it is new evidence directed to events occurring after the Master's orders were made. In the second place, its probative value as illuminating the relevant question of fact before the Master is very slight. So far as it was not hearsay, it referred to one offer only and no evidence was provided as to the worth of that offer and as to the relevance of the amount offered as a measure of the value of the estate in September 2003.
24 Further, since the hearing of the appeal, the respondent's solicitors have sought to lodge a further affidavit sworn by junior counsel, Mr Sleight. Mr Sleight would depose that Woorree was sold for $2.6 million. The settlement date provided in the contract is 27 May 2005. The contract was executed by Mr Douglas on 3 December 2004. I would receive that affidavit and its annexure into evidence simply because it is new evidence which effectively confirms the finding made by the Master and removes from consideration in the appeals the question of the value of the estate. Those circumstances seem to me to be sufficiently special, if special leave is required, to justify receipt of the evidence: Rules of the Supreme Court 1971 (WA), O 63 r 10(1); Knight v Anderson (1997) 17 WAR 85, 87 - 91, 94.
(Page 10)
25 Between the date of death and the time of the exercise of discretion by the Master the material change would appear to be that expenditure over the intervening years had consumed a substantial portion of the approximately $160,000 held in the deceased's cheque account at his bank. Further, some half of the money held on fixed deposit, approximately $10,000 and interest, had been transferred into the cheque account, which held a balance as at March 2003 of about $11,000; otherwise a sum of $90,000 had been lodged on fixed deposit on 1 February 2003, accruing interest at 4.7 per cent. The finding that the major asset of the estate, Woorree Station, was valued at $2.6 million was well open and it might be supposed that other funds would be consumed to some extent by ongoing expenditure on the upkeep of Woorree until its sale, by legal costs, particularly arising out of proceedings before the Master, and by the expense occasioned by the executor's administration of the estate.
26 I turn, otherwise, to the grounds of appeal which, in effect, may be taken to express the proposition, fleshed out by reference to particular aspects of the evidence, that the exercise of discretion by the Master miscarried because he merely allowed the claim, as he perceived it to be, of the respondent without making a proper assessment of what, having regard to the evidence, would constitute adequate provision from the estate for the purpose relevant in this case, that of providing proper maintenance and support for Mrs Roche, having regard, in this case, to her station in life, her reasonable needs, her financial position and the nature of her relationship with her father. In this case one might stop there, I think, having regard to what was found by the Master to be the size of the estate, now converted to the form of liquid assets, and its capacity to satisfy the reasonable need for provision from the estate for Mrs Roche without in any way impinging upon the legitimate claim of Mrs Rowan as the widow of the deceased and the sole beneficiary under his Will.
27 I have said something about the financial position of Mrs Rowan as at the date of death. By the time the matter was before the Master she had expended some portion of the portfolio of investments of which she became the sole owner by survivorship on Mr Rowan's death. She had bought a retirement apartment in Jolimont, which she valued at about $330,000. She had money in an operating account with a building society and in a term deposit there, a total of nearly $29,000, to which could be added a cheque account with a bank containing about $12,000. She had a 1995 motorcar which she thought would shortly need replacement. It was valued at $12,000. She valued her furniture and personal effects at $30,000. She had no liabilities but, of course, reasonable living expenses.
(Page 11)
- She had a taxable income of about $25,000 per annum and calculated her expenses, including an allowance of $5000-$6000 for an annual holiday, at about $58,000. It might be accepted, therefore, that if one took her estimated needs to be reasonable, and they seem to me to be so, she had a shortfall of about $30,000 per annum. That was Mrs Rowan's evidence; a comfortable existence at the age of about 80, but one which could only be supported into the future by drawing upon capital, most of which had come to her from the deceased.
28 I mention those matters only to put specific content into the point that it would not appear to me that, having regard to the size of the estate, the Master needed to approach the matter of the assessment of a claim of Mrs Roche in any way upon the basis that her claim should be regarded as being in some way in competition with the legitimate expectation of Mrs Rowan to benefit from the estate.
29 Indeed, the matter was not approached in that way by the Master, whose judgment as to the provision to be made for the respondent is supported by a brief reference to the evidence in the following terms:
"The plaintiff seeks an amount of $1.7 million and she has set out her requirements in her affidavit evidence. In summary, she is looking to acquire accommodation in the western suburbs of Perth to allow her to live near her family. She seeks costs associated with removing herself to Western Australia; she seeks costs associated with ensuring that the property is in proper liveable condition.
She also seeks an amount which would allow her to cover her anticipated future living expenses. Her evidence on this point is supported by the evidence of Mr Coombes, whose evidence is unchallenged. Taking all of the evidence led on behalf of the plaintiff, I am satisfied that her requirements are reasonable in all the circumstances."
30 I have mentioned that Mrs Roche was born in 1936 and so when the matter was before the Master, she was aged 67 years. I have mentioned something of her history and of her relationship with her father. It seems to have been unremarkable and close in her childhood years as she grew to adulthood. It seems to have been naturally less close when she married and had her daughters. It did not become strained until about 1979 or 1980 when the way Mr Rowan handled her request for financial assistance seems to have caused difficulties between them, but it should be noted
(Page 12)
- that at that time, according to her evidence, unchallenged on the point, her father promised her that on his death she would be comfortably provided for and this he failed to do.
31 There may have been other matters of family history causing difficulty between father and daughter. I think it is unnecessary to discuss the evidence and it would certainly be inappropriate to apportion blame for a cooling of the relationship between father and daughter. They appear to have reconciled upon Mrs Roche's visit to Woorree in 1994, but even thereafter neither Mr Rowan nor Mrs Roche appears to have made particular efforts to re-establish a close relationship and, as I have said, she did not see him again before his death in July 1999.
32 Really, I think none of that history is greatly material, because neither Mrs Rowan nor the executor, Mr Douglas (who justifies his active participation in the proceedings by reference to a proper consciousness that he owes a duty to preserve the estate and, to the extent proper, the disposition by Will made by the deceased) takes the view that no provision should be made out of the estate for Mrs Roche. The question is simply this. Given that she is the sort of elderly lady which she is, respectable with a good background, and given the substantial size of the estate, what provision was it reasonable for the Master to make in the exercise of his discretion so as to adequately provide for Mrs Roche's proper maintenance and support?
33 At that time she was, and had for many years been, in rather straitened financial circumstances. She was living in an old cottage in South Australia. As I understand it, she had given the cottage to a trustee company, of which she is a beneficiary, to qualify for a pension. She was living there rent free, but the cottage offered only basic accommodation and she appears to have had, at the time of the hearing, no capacity to renovate it, improve the quality of the accommodation it offered or maintain it adequately. The aged pension was her sole income and so she had no financial capacity to cover unexpected contingencies. She was driving a 1981 Mercedes car of little value which required replacement.
34 Her evidence was that she had long wanted to relocate to Perth where her daughters live so as to be near them and her grandchildren. The Master thought it was reasonable that she should be assisted to do so and to re-establish herself here, rather than to make provision for her to maintain and improve her existing accommodation and, for my part, in the circumstances of this case, I think that was a view which was well open to the Master.
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35 Mrs Roche led evidence suggesting that the accommodation she had in mind, a unit in the western suburbs of Perth, might cost $450,000 to $500,000 to acquire. For my part, however, I would consider that there is no justification for more affluent accommodation than the unit in Jolimont occupied by Mrs Rowan, that is, a unit in a retirement village. It is irrelevant that there are, or may be, financial penalties attached to relinquishing such an investment. I have mentioned the cost of Mrs Rowan's unit.
36 For my part, I would think that an allowance for the purchase of suitable accommodation of $350,000 would be more than adequate and should cover reasonable establishment expenses such as household appliances and items of furniture. I note that such things were the subject of evidence. I take it that the costs that would be incurred in this regard are to supplement the minimal material by way of furniture and personal effects which Mrs Roche would hope to bring from South Australia. I think it would be reasonable then to include in the provision to be made an allowance, rounded off in the sum of $10,000, for removal expenses.
37 I have mentioned Mrs Roche's motor vehicle. She valued it as at the date of the hearing at $5000. In my view, it would be reasonable to pay no regard to that estimate and to simply provide the sum of $30,000 for the purpose of enabling the acquisition of a new motor vehicle of a suitable kind.
38 In relation to the above matters, I should say that I have taken into account a loan of $90,000 made by Mrs Roche to a family trust company. She is apparently paid interest on that loan of in the order of $5000 per annum. The loan was at the relevant time her most substantial asset, but it is not clear to me from the evidence how readily Mrs Roche might call upon the trustee company to repay all or part of the capital value of the loan, the income-producing potential of which is, in any event, small.
39 The remaining question, I think, is whether it is necessary, if adequate provision for the proper maintenance and support of Mrs Roche was to be made from the estate, to provide her with an income sufficient to meet her reasonable needs. As has been seen, that is effectively what has occurred in Mrs Rowan's case and I think in the circumstances of this case the Master's decision, effectively to replace Mrs Roche's pension with an income stream designed to provide for her reasonable needs, was reasonable. The way to do that, according to the evidence to which the Master referred, was to provide sufficient to purchase an annuity for a period equivalent to Mrs Roche's life expectancy according to the
(Page 14)
- accepted tables. The evidence led was that of the expert witness, Mr Coombes, a financial planner, investment adviser and chartered accountant, whose evidence was, as we have seen, accepted by the Master.
40 Mr Coombes' initial instructions were to provide for a net income stream of $36,145 per annum, allowing for inflation and taxation, by way of an annuity drawing on the capital in the ordinary way. The Master accepted that the sum mentioned, which was derived from the evidence of Mrs Roche, represented the cost of requirements which were reasonable in all the circumstances. That finding was clearly open to the learned Master and the question then was, how might that most reasonably be provided? Mr Coombes discussed four methods. They had regard to Mrs Roche's life expectancy of about 22 years on the Australian Life Tables. On that basis I would not propose to refer to one of the proposed methods which was based on a term of 25 years. The first method discussed was to provide a capital sum sufficient to fund a discretionary investment portfolio which could be managed and would provide an anticipated net income of $36,145. The amount required to fund such a portfolio was $792,500. As I understand it, the need was to provide a gross income, upon which income tax would be paid and Medicare provided for, so as to result in the net income mentioned.
41 To provide that income by the purchase of an annuity is cheaper because the major part of the income would not be assessable for income tax and that should enable the assessable income to be brought below the tax-free threshold. Mr Coombes recommended a lifetime annuity with a 10-year guarantee period to ensure that if the annuitant dies within the first 10 years after the commencement of the annuity, the residual capital sum is paid to the annuitant's estate. An annuity calculated over a period of 20 years, indexed as required by the instructions, it was calculated would cost $627,500 or, alternatively, at a cost of $650,670 a lifetime annuity could be purchased for the period of the annuitant's life, again with a 10-year guarantee period and indexed for cost of living adjustments.
42 Given that the aim behind each form of investment was the same, to provide Mrs Roche with a reasonable income having regard to her station in life and her circumstances for the rest of her life, it seems to me that the lifetime annuity was the appropriate investment to be funded by provision out of the estate.
(Page 15)
43 In the final analysis then, having regard to the evidence, in my opinion an award out of the estate of somewhat over $1,000,000 would represent a reasonable and supportable exercise of discretion. I would round the provision off at $1,050,000 to ensure that what was reasonably to be provided could be achieved. It follows, in my opinion, that the award of $1.7 million was beyond the fair and reasonable exercise of discretionary judgment upon the evidence before the Master. I am driven to the conclusion that the exercise of discretion miscarried and the orders made by the Master should be set aside.
44 The sale of Woorree after the Master's orders were made removes any difficulty as to the form of the order. There is no need, I think, to further consider those grounds which assert that the Master erred by not awarding a proportion of the net residuary estate to the respondent. An order for the payment of a lump sum under s 6(4) of the Act is appropriate and perfectly safe, to accommodate not only that order and the expenses to which the estate remains subject, but also the specific bequest of $250,000 made in favour of Mrs Rowan and to result in a sizeable residue. Under s 14(1) of the Act the order should specify that the sum awarded is to be paid out of the net residuary estate before its final distribution.
45 Finally, as to costs, I think it is unnecessary to give consideration to the orders 4 - 6 made by the Master. I would simply set aside the costs orders and would hear the parties both as to the proper orders as to the costs of the appeals and as to the costs of the parties of the proceedings before the Master.
46 STEYTLER J: I have had the advantage of reading the judgment of Murray J. I agree with it and with the orders proposed by his Honour. There is nothing I wish to add.
47 TEMPLEMAN J: I have had the advantage of reading in draft the reasons published by Murray J. I agree with his Honour's reasons and with the orders he proposes. There is nothing I wish to add.
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