Smith v Daniels

[2010] NSWSC 604

CITATION:	Smith v Daniels & Anor [2010] NSWSC 604 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	20/007/09, 21/07/09, 22/07/09, 23/07/09, 24/07/09, , 22/10/09
JUDGMENT DATE :	7 June 2010
JURISDICTION:	Equity
JUDGMENT OF:	Slattery J at 1
DECISION:	See paragraphs 87 and 88.
CATCHWORDS:	EQUITY - succession - family provision - eligible person - close personal relationship between the plaintiff and the testator found - plaintiff an eligible person under Family Provision Act - provision made for plaintiff in her lifetime inadequate for her proper maintenance, education and advancement in life - relief claimed by plaintiff would place estate in financial deficit - real financial need of beneficiaries - legacy provided for out of estate.
LEGISLATION CITED:	Family Provision Act 1982 ss 6, 7, 9 Property (Relationships) Act 1984 s 1, 4, 5 Succession Act 2006
CATEGORY:	Principal judgment
CASES CITED:	Dridi v Fillmore [2001] NSWSC 319 Ellis v Leeder (1951) 82 CLR 645 Singer v Berghouse (No 2) (1994) 181 CLR 201 Vigolo v Bostin (2005) 221 CLR 191
PARTIES:	Plaintiff: Lynette Anne Smith First Defendant: Michelle Daniels Second Defendant: Daniel Duarte
FILE NUMBER(S):	SC 06/257056
COUNSEL:	Plaintiff: Mr R J Colquhoun Defendant: Mr A Bulley
SOLICITORS:	Plaintiff: Defendant: Toomey Pegg Drevikovsky Lawyers

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

SLATTERY J

MONDAY 7 JUNE 2010

2006/257056 LYNETTE ANNE SMITH v MICHELLE DANIELS & DANIEL DUARTE

JUDGMENT

1 HIS HONOUR: Ms Lynette Smith, the plaintiff, seeks an order under Family Provision Act1982 s 7 for her maintenance, education or advancement in life from the estate of the late Mrs Pamela Joyce Duarte. Ms Smith claims to be an “eligible person” under the Family Provision Act1982, entitling her to the making of such an order in her favour because she alleges she was in a domestic relationship with Mrs Duarte. The estate contests that Ms Smith was in such a relationship with Mrs Duarte and alternatively contends that in the circumstances of this case no order for provision should be made out of the estate in Ms Smith’s favour.

2 This court has a policy of not publishing information concerning the identity of witnesses and parties, which may facilitate identity theft. Accordingly, the addresses of properties and bank account details associated with witnesses and parties to these proceedings are not published in this judgment. If such details are required, they can be obtained from the court file.

3 The parties raised very many issues of fact in these proceedings. It is neither practical to refer to all of them and nor is it necessary to decide all of them to resolve the main questions in issue in the proceedings and to decide whether Ms Smith should have any of the relief she claims. Some background to these issues is necessary.

Background

4 The late Pamela Duarte made her last will on 10 March 2003. She named her five children, Michelle Daniels, Ashley Duarte, Arndria Seymour, Adrienne Duarte and David Duarte as equal beneficiaries of her estate as tenants in common. She appointed Ms Smith as executrix of her will in the event that the executor, Pamela‘s husband, Laurence Cajetan Duarte predeceased her. Laurence Duarte had passed away on 14 December 2003, leaving Ms Smith as the executrix.

5 Mrs Duarte met Ms Smith when Mrs Duarte ran a dress shop in the Bexley Shopping Centre. Ms Smith and her mother frequently visited Mrs Duarte’s shop. They often conversed with Mrs Duarte and struck up a friendship with her. This resulted in Mrs Duarte visiting the plaintiff and her mother at their home. Mrs Duarte continued to visit Ms Smith in this way after her mother died.

6 In the early 1980s Ms Smith and Mrs Duarte saw more of one another when Ms Smith began working for Mrs Duarte in her bridal business in Bexley called the ‘House of Dreams’. After approximately a year of their working together Mrs Duarte suggested that Mrs Smith move into the Duarte family home in Harrow Road Bexley for a period of time. Ms Smith was having accommodation problems at the time and did move into the household. This was not unusual for Mrs Duarte who had often over the years, to the consternation of her own children, taken in boarders and people in need. But Ms Smith was the only boarder who stayed for a long period of time in the Duarte household.

7 In the early 1980s Ms Smith did not only work in Ms Duarte’s shop. She also drove cabs for St George Cabs. Ms Smith had left school at 15 and prior to working for Mrs Duarte had some experience running a café, working in a fabric shop and operating a pet shop. Later she obtained qualifications as a driving instructor and worked for a driving school.

8 When a Mr Ian Prior, Mrs Duarte’s business partner, left the House of Dreams business, Ms Smith joined Mrs Duarte as an equal partner in the firm. Neither partner received regular wages from the business. Monies were withdrawn from the business as needed. Ms Smith says she never took a wage from the business and I accept that this is correct.

9 Ms Smith says that close feelings of affection developed between her and Mrs Duarte by mid April 1982, when a heart to heart talk between the two of them in a car revealed that they had feelings for one another. As I explain below, I generally do not accept Ms Smith’s evidence where it is in conflict with that of Mrs Duarte’s children, who I regard as far more reliable witnesses. Yet on this matter, which was a private conversation between Mrs Duarte and Ms Smith I do accept the correctness of Ms Smith’s account. It remained a private matter between them though. Mrs Duarte certainly did not declare her feelings to her own family. Ms Smith did not feel the need to make public declarations of the situation.

10 Nevertheless there was closeness between the two of them and it was observed by some becoming the subject of public comment. I accept Ms Smith’s evidence that Mrs Duarte’s mother became aware of a close relationship between Ms Smith and Mrs Duarte and expressed her unhappiness about it. I also accept Ms Smith’s evidence that from a time not long after a relationship commenced between Ms Smith and Mrs Duarte that Mrs Duarte would occasionally not go home to the Duarte family home in Harrow Road but would stay on at the business premises overnight with Ms Smith, starting with Thursday nights and then extending over more evenings. I also accept Ms Smith’s evidence that on some weekends they would visit a caravan that they had set up together at Norah Head Tourist Park on the Central Coast. In addition they went out to dinner and socialised together. More detailed findings about the nature of their relationship are made later in these reasons.

11 Mrs Duarte took a substantial role in the financial organisation and control of the House of Dreams business. Although Ms Smith was qualified for clerical work she was not as close to the financial decision-making for the business as was Mrs Duarte.

12 In the early 1980s the House of Dreams rented premises at Bexley. The owner of these premises sold them in late 1984 or early 1985. The business was forced to look for new premises. On 22 January 1985 Ms Smith and Mrs Duarte moved the House of Dreams business into new rented premises on the Princes Highway in Rockdale. I accept Ms Smith’s evidence that Mrs Duarte stayed overnight at these premises too and that she and Mrs Duarte purchased a bed to use there.

13 The Princes Highway premises were of two storeys. Mrs Duarte used the upstairs part of the premises for operating as a made to order specialty business where Mrs Duarte designed, cut and made wedding dresses. Mrs Duarte set up the downstairs section for fabric sales by acquiring the stock of the fabric store Greig’s, which was then closing down. This aspect of their business operations was not ultimately a success. There was a dispute between the parties as to why this part of the business failed. Ms Smith thought that the employee concerned was inexperienced. The evidence is that the employee blamed factors including Ms Smith’s attitude and interference in the employee’s work. Ms Smith’s evidence also is that Mrs Duarte did not consult her about partnership decisions. I do not accept this evidence. Although Ms Smith was the junior partner in age and experience in the business, she was well able to look after her interests and to forcefully assert her opinion in joint decision-making of any kind.

14 Later in about 1988, Mrs Duarte suffered fractured legs in a car accident, rendering her immobile for a period. Ms Smith helped care for her and did a great deal to help make Mrs Duarte more comfortable when she was staying at the shop. As Mrs Duarte was less mobile during her convalescence she spent even more time at the Princes Highway shop premises. Ms Smith slept by Mrs Duarte’s bedside at the shop. I do not accept Ms Smith’s evidence that Mr Duarte did nothing to assist her during this period or that in effect the full burden of Mrs Duarte’s care fell on Ms Smith. Other family members cared for her too during this period.

15 Ms Smith and Mrs Duarte tried to expand their business. They opened two shops on the Central Coast. This venture was unsuccessful. After that they decided to focus on acquiring more secure premises in the metropolitan area.

16 In 1994 Ms Smith and Mrs Duarte bought a property at Cameron St Rockdale together as tenants in common in equal shares. They relocated the business to this property from the Princes Highway at Rockdale. Ms Smith says that she thought that they had purchased the Cameron St property as joint tenants and that Mrs Duarte had led her to believe this. I do not accept that Mrs Duarte said anything to suggest to Ms Smith that the Cameron Street property would be held in a joint tenancy. They purchased this property in tenancy in common as an asset of their partnership, not as an incident of a personal relationship in contemplation of how they might benefit after the death of one or other of them. They operated the House of Dreams business from this new location in much the same way as they had operated at the Princes Highway premises.

17 In 1996 a property in Bay St in Rockdale, which adjoined the Cameron Street property became available for purchase. Mrs Duarte and Ms Smith purchased that Bay Street property in Ms Smith’s name in April 1996. Ms Smith claimed that Mrs Duarte explained the purchase of the property in Ms Smith’s name when she said, “The property will be bought in your name because you have worked so hard in the business and have never taken any money from the business for yourself. You should have it in your name so that you have something to fall back on if I die.” I find that Mrs Duarte did say this to Ms Smith. But family members say that Mrs Duarte gave them other explanations for the purchase in Ms Smith’s name including Mrs Duarte wishing to reduce the incidence of taxation upon herself. It is likely that both sides are right about what Mrs Duarte said about the purchase of Bay Street. There was already tension between Mrs Duarte’s children and Ms Smith. Mrs Duarte was trying to reduce suspicions on all sides. She is likely to have given a somewhat different explanation to each of them.

18 Ms Smith paid a deposit of $40,000 on the Bay Street property purchase on 6 December 1995. This was funded from the partnership. Ms Smith then took out a loan for $144,000 from the National Australia Bank to fund the balance of the total purchase price of $180,000 together with legal and sale expenses. The purchase was completed in April 1996.

19 Mrs Duarte’s mother was then 95. I accept Ms Smith’s evidence that she and Mrs Duarte arranged for Mrs Duarte’s mother to move into the Bay St property so that Mrs Duarte could drop in to see her mother when Mrs Duarte was at work. I also accept Ms Smith’s evidence that Mrs Duarte and she did spend quite a bit of time with Mrs Duarte’s mother after she moved into the Bay Street property, making her dinner, afternoon tea and driving her around. Mrs Duarte’s mother died in 1997. The Bay Street property was empty for a period until Mrs Duarte’s daughter Arndria moved into it in early 1998. Arndria lived at the Bay Street property until late 2003. She occupied the property rent-free by arrangement provided she paid the rates and taxes on the property.

20 There was much dispute in the proceedings about aspects of the decision to purchase the Bay Street property and Arndria’s occupation of and making of improvements to the Bay Street property. This went to the issue of whether Mrs Duarte really retained a beneficial interest in the Bay Street property although it was in Ms Smith’s name and, if beneficially held by Ms Smith, whether Ms Smith had the advantage of certain improvements that Arndria had made to the property. In the result I accept that Mrs Duarte stated to Ms Smith that she wanted Ms Smith to hold it beneficially. The family point to evidence that shows that Mrs Duarte maintained a degree of decision making control over the Bay Street property even after its acquisition in Ms Smith’s name. This evidence merely shows that Ms Smith acquiesced in Mrs Duarte having a say in what was done with the Bay Street property because Ms Smith was the beneficiary of Mrs Duarte’s generosity with respect to this property.

21 The ‘House of Dreams’ bridal business was not profitable from the late 1990s and business began to fall away or become more marginal. The precise reasons for this are unclear. But neither Mrs Duarte nor Ms Smith was able to make a substantial income from the business from this period. The pressures on earnings increased in December 2003 when Mrs Duarte was involved in an accident whist she was doing some cleaning at the Harrow Road property on 11 December 2003. She suffered a fractured elbow and foot in a fall. This took her away from the business and accelerated its decline. Mrs Duarte was the artistic and creative centre of the business. It could not be expected to do well in her absence. Ms Smith’s contribution was more in the area of supporting Mrs Duarte’s work in the business.

22 At the time of Mrs Duarte’s accident, Mr Duarte was very ill. He died three days later. The family home at Harrow Road passed into Mrs Duarte’s name upon his death.

23 The business needed capital by 2004. Ms Smith and Mrs Duarte arranged two business loans from Citibank over the Cameron Street property and the Harrow Rd property to help fund the continued operation of the business. Mrs Duarte had kept it going over many years before this by periodic injections of capital sourced from her family. This probably partly explains the ultimate state of the respective capital accounts of the two business partners, which is outlined below shortly.

24 Mrs Duarte developed breast cancer in mid 2004. Her health rapidly declined. She collapsed at the Cameron Street property on 10 June 2005 and died in hospital on 11 June 2005. Ms Smith undertook much of the close care and support for Mrs Duarte in the final months and weeks of her life. Ms Smith’s evidence was of little involvement on the part of Mrs Duarte’s children in her care in this final period.

25 I do not accept Ms Smith’s evidence as to the absence of Mrs Duarte’s children at this time. They mostly had busy lives of their own and their own children to care for and did what they could for her. But I accept their evidence over Ms Smith’s as to the level of their involvement in visiting their mother in the last year of her life. This particular area of Ms Smith’s evidence, as to Mrs Duarte’s relationship with her children, is most unreliable and overlaid with a strong tendency to exaggerate their physical and emotional distance from their mother. That is not the impression the Court gained of each of them through their oral evidence. Rather the opposite came through in Court. Other witnesses called on behalf of Ms Smith, Ms Roma Cook in particular, also attest to the lack of involvement of Mrs Duarte’s children. But such witnesses were not able to observe every visit made to Mrs Duarte over this final period.

26 During the last year of Mrs Duarte’s life, the debts of the business understandably increased as turnover declined due to Mrs Duarte’s growing incapacity for work within it. The mortgage over the Cameron Street property went into default. Ms Smith rented out the property at Bay Street.

27 When in September 2008 a Court appointed receiver, Mr Scott Turner completed satisfactory final accounts for the House of Dreams business for the year ended 30 June 2006 he found a very substantial difference in the state of the capital accounts of the two partners. He found that the partnership owed Mrs Duarte $360,913 but that Ms Smith owed the partnership a gross amount of $325,635 (less a distribution of available cash of $17,639), leaving a net distribution of $307,996. The estate called expert accounting evidence in the proceedings about the partnership accounts. This evidence came from Mr Craig Edwards a chartered accountant and a director of Lonergan Edwards and Associates. Ms Smith did not call any opposing expert evidence. Mr Edwards’ evidence contains no apparent flaw and I accept it in its entirety. Mr Edwards explained from the reconstructed progressive balance sheets for the partnership during the late 1990s and the current decade, that Ms Smith’s capital account was constantly in deficit from 1994 through until 1999 and from 2000 until the winding up of the business in the 2006 financial year. He concluded that the explanation for the deficiency in Ms Smith’s capital account was Ms Smith’s low level of contributions relative to Mrs Duarte, the low levels of profit generated by the business and the level of Ms Smith’s drawings from the business.

28 Mr Edwards also analysed Ms Smith’s capital account. Using figures only slightly different from those of Mr Turner, the receiver, Mr Edwards concluded that Ms Smith’s capital account was in deficit $164,744 excluding drawings for the making of mortgage payments on the Bay Street property. Ms Smith’s partnership drawings for making mortgage payments on the Bay Street property would increase the deficiency on her reconstructed capital account by another $143,297. Interest would add to the overall deficiency. The combination of what the partnership owes the estate and what Ms Smith owes the partnership are important factors in the Court’s consideration of what relief if any should be granted to Ms Smith in these proceedings.

29 At the time of Mrs Duarte’s death, high levels of distrust existed between Ms Smith and Mrs Duarte’s children. After her death there was no ready agreement among them about either the terms on which the partnership would be wound up or about the beneficial ownership of the Bay Street property. This distrust led to litigation among them. The current Family Provision Act proceeding is the last action in this series. Three sets of legal proceedings were launched among the parties apart from the current proceedings.

30 First in September 2005, Ms Smith applied for probate of Mrs Duarte’s will, the Probate proceedings. Mrs Duarte’s children opposed the grant to Ms Smith on the basis that she would be in a position of conflict of interest and duty as executor because she was a substantial debtor to the estate through the partnership, because she was claiming against the estate to be the beneficial owner of the Bay Street property and because she was threatening to bring Family Provision Act proceedings against the estate. On 30 May 2006 the Duarte children filed a notice of motion seeking orders that Adrienne Duarte and Yvonne Lennox be appointed as administrators of the estate, passing over Ms Smith. On 31 May 2006, Ms Smith lodged a notice of motion for an order that the caveat lodged by Adrienne Duarte be removed in the Probate proceedings. Under orders made by consent between Ms Smith and the defendants on 27 July 2006 Michelle Daniels (the first defendant) and Daniel Duarte (the second defendant) became administrators of the estate. From an early stage after Mrs Duarte’s death there was in this case a high potential for conflict between the duties of Ms Smith’s position as executor and her self-interest sufficient to prompt the idea that she should have retired as executor early.

31 The Duarte children commenced proceedings for a declaration that Ms Smith held the Bay Street property on trust for them, the Bay Street proceedings. There was some procedural overlap between the Bay Street proceedings and the present action as some of the affidavits from the Bay Street proceedings were read in this action. The Bay Street proceedings resolved by agreement on 8 November 2007 that Ms Smith was the legal and beneficial owner of the Bay Street property and entitled to its income and liable for its outgoings. The administrators and Ms Smith agreed each to bear their own costs of the Bay Street proceedings.

32 There was no agreement about the winding up of the partnership. That too resulted in litigation, the Partnership proceedings. The administrators of the estate commenced the Partnership proceedings on 31 August 2006 seeking the appointment of a receiver to partnership property and the winding up of the partnership. The Partnership proceedings were resolved in April 2009 with orders that Mr Scott Turner’s receiver’s accounts be the final accounts of the partnership, that Ms Smith pay to the receiver the sum of $325,635.00 plus interest of $106,496.03 and continuing and that the receiver should pay those sums to the administrators of the estate. In the course of these proceedings there were allegations of missing stock, improper sales and disputes about debts owed to and by the partnership. It is highly improbable with such issues in play that the work done by Mr Turner could have been undertaken co-operatively between these two groups of parties without him.

33 Ms Smith commenced this present action in 2006. She herself says that the launch of this action was “only because the Duarte children have commenced proceedings for a declaration that the Bay Street property is held in trust for them.” When Ms Smith put her case in final submissions she said that she should be awarded a legacy, which had the equivalent of eliminating any debt to the partnership or the estate. That would be a legacy of over $430,000 in addition to her retention of the Bay Street property.

34 This intensity of litigation is apt to attract adverse comment from the Court. It has undoubtedly been very wasteful of the estate’s and the parties’ resources. Having read the pre litigation correspondence, noted that the parties had the benefit of mediation and having seen the outcome of the various actions, I am of the view that the parties’ fundamental mutual distrust was one strong driving factor in generating this litigation. Final submissions in these proceedings saw a contest of blame as to the cause of all these legal costs. As will be seen later in these reasons, the cumulative level of these costs also creates practical constraints on any relief that the Court may be inclined to give. This part of the background may also call for some attempt to contain costs recovery at the time of moulding costs orders in the proceedings.

35 It is necessary to examine the statutory provisions and principles that must be applied in relation to Ms Smith’s claim for relief.

Applicable Principles of Law

Eligible Person under s 6 Family Provision Act

36 The Family Provision Act has been replaced by the Succession Act 2006 (NSW). But it continues to apply in this case as Mrs Duarte died before 1 March 2009. Family Provision Act s 7 provides that for an order to be made for the maintenance, education or advancement in life of an applicant that, the applicant must be an “eligible person”:

“Subject to section 9, on an application in relation to a deceased person in respect of whom administration has been granted, being an application made by or on behalf of a person in whose favour an order for provision out of the estate or notional estate of the deceased person has not previously been made, if the Court is satisfied that the person is an eligible person, it may order that such provision be made out of the estate or notional estate, or both, of the deceased person as, in the opinion of the Court, ought, having regard to the circumstances at the time the order is made, to be made for the maintenance, education or advancement in life of the eligible person.”

37 Ms Smith claims to be an eligible person. The definition of “eligible person” is in Family Provision Act s 6:

“eligible person , in relation to a deceased person, means:
(a) a person:

(i) who was the wife or husband of the deceased person at the time of the deceased person’s death, or
(ii) with whom the deceased person was living in a domestic relationship at the time of the deceased person’s death, or

…

(d) a person:
(i) who was, at any particular time, wholly or partly dependent upon the deceased person, and
(ii) who is a grandchild of the deceased person or was, at that particular time or at any other time, a member of a household of which the deceased person was a member.”

38 Ms Smith claims specifically that she was in a “domestic relationship” with Mrs Duarte as defined under Family Provision Act s 6(a)(ii). The defendants contend that Ms Smith and Mrs Duarte had a business relationship and were ‘two friends who were business partners’.

39 The Family Provision Act s 6 draws upon the definition of “domestic relationship” in the Property (Relationships) Act 1984:

“1) For the purposes of this Act, a domestic relationship is:

(a) a de facto relationship, or
(b) a close personal relationship (other than a marriage or a de facto relationship) between two adult persons, whether or not related by family, who are living together, one or each of whom provides the other with domestic support and personal care.”

40 Ms Smith puts the domestic relationship claim two ways. She says there was a “de facto relationship” between herself and Mrs Duarte. She submits in the alternative that she and the deceased were in a close personal relationship.

41 A de facto relationship for the purpose of the Family Provision Act is defined in Property (Relationships) Act 1984 s 4:

(1) For the purposes of this Act, a de facto relationship is a relationship between two adult persons:

(a) who live together as a couple, and
(b) who are not married to one another or related by family.

(2) In determining whether two persons are in a de facto relationship, all the circumstances of the relationship are to be taken into account, including such of the following matters as may be relevant in a particular case:

(a) the duration of the relationship,

(b) the nature and extent of common residence,

(c) whether or not a sexual relationship exists,

(d) the degree of financial dependence or interdependence, and any arrangements for financial support, between the parties,

(e) the ownership, use and acquisition of property,

(f) the degree of mutual commitment to a shared life,

(g) the care and support of children,

(h) the performance of household duties,

(i) the reputation and public aspects of the relationship.

42 In Dridi v Fillmore [2001] NSWSC 319 at [102]-[104] Macready M considers what elements needs to present in order for the two people to be considered to be in a close personal relationship as defined under the Property Relationships Act:

“I have earlier referred to aspects of what the Act describes as a “close personal relationship”. It has to be between two adult persons who are “living together”. Given that they may be members of the same family, such as a grandparent and grandchild and the different definition for a “de facto relationship” concepts relating to a “couple” are not relevant. Instead the definition calls for two different links. The first is that the parties are “living together”. The second is that “one or each of whom provides the other with domestic support and personal care”.

So far as the first requirement is concerned we are not concerned with concepts applicable to couples; the requirement would be met if the parties shared accommodation together. For example, a border in an elderly widow’s home would qualify. It may not be necessary for there to be sharing of food or eating arrangements together. In the present case this is not important as it seems that the parties ate together when they were both at home.

The second requirement is cumulative. There must be both domestic support and personal care. In this case there is evidence of domestic support as the defendant provided for the plaintiff free accommodation and meals, which he cooked for the plaintiff when the plaintiff was at home. There are other matters, not present in this case, which could be domestic support, eg shopping for both parties, washing clothes etc.”

Partial Dependence

43 Ms Smith further submits that if she is not an ‘eligible person’ under s 6(a)(ii) of the Family Provision Act, then should be considered to be an “eligible person” under subparagraph (d)(i) the definition as a person “who was at any particular time wholly or partly dependent upon the deceased person”. Ms Smith submits that she was at least partly dependent on Mrs Duarte.

The Family Provision Act s 9 Considerations

s 9 sets out the steps the Court must consider. It relevantly provides as follows:

“9 Provisions affecting Court’s powers under secs 7 and 8

(1) Where an application is made for an order under section 7 by an eligible person who is such a person by reason only of paragraph (c) or (d) of the definition of eligible person in section 6 (1), the Court shall first determine whether, in its opinion, having regard to all the circumstances of the case (whether past or present), there are factors which warrant the making of the application and shall refuse to proceed with the determination of the application and to make the order unless it is satisfied that there are those factors.
(2) The Court shall not make an order under section 7 or 8 in favour of an eligible person out of the estate or notional estate of a deceased person unless it is satisfied that:
(a) the provision (if any) made in favour of the eligible person by the deceased person either during the person’s lifetime or out of the person’s estate, or

(b) in the case of an order under section 8:

(i) if no provision was made in favour of the eligible person by the deceased person, the provision made in favour of the eligible person under this Act out of the estate or notional estate, or both, of the deceased person, or

(ii) the provision made in favour of the eligible person by the deceased person either during the person’s lifetime or out of the person’s estate as well as the provision made in favour of the eligible person under this Act out of the estate or notional estate, or both, of the deceased person,
is, at the time the Court is determining whether or not to make such an order, inadequate for the proper maintenance, education and advancement in life of the eligible person.

(3) In determining what provision (if any) ought to be made in favour of an eligible person out of the estate or notional estate of a deceased person, the Court may take into consideration:

(a) any contribution made by the eligible person, whether of a financial nature or not and whether by way of providing services of any kind or in any other manner, being a contribution directly or indirectly to:


(i) the acquisition, conservation or improvement of property of the deceased person, or

(ii) the welfare of the deceased person, including a contribution as a homemaker,


(b) the character and conduct of the eligible person before and after the death of the deceased person,

(c) circumstances existing before and after the death of the deceased person, and

(d) any other matter which it considers relevant in the circumstances.

(4) Nothing in subsection (3) (a) limits the generality of subsection (3) (b), (c) and (d) and the Court may consider a contribution of the same nature as that referred to in subsection (3) (a) or of a different nature in so far as it considers it relevant under subsection (3) (b), (c) or (d).”

45 The operation of s 9(2) and s 9(3) are well established in authority. The Court must consider in a Family Provision Act application whether or not the provision made in favour of the plaintiff by the deceased either during the deceased’s lifetime or out of the deceased’s estate is now “inadequate for the proper maintenance, education and advancement in life of the eligible person”: Family Provision Act s 9(2). If the Court makes that determination of inadequacy, the Court must then determine “what provision (if any) ought to be made in favour” of the plaintiff taking into consideration the matters set out in Family Provision Act s 9(3)(a)-(d).

46 The separate nature of these two questions under Family Provision Act s 9(2) and (3) was affirmed by a majority of the High Court in Singer v Berghouse (No 2) (1994) 181 CLR 201 at 209:

“The first question is, was the provision (if any) made for the applicant ``inadequate for [his or her] proper maintenance, education and advancement in life'’? The difference between ``adequate'’ and ``proper'’ and the interrelationship which exists between ``adequate provision'’ and ``proper maintenance'’ etc were explained in Bosch v Perpetual Trustee Co Ltd . [1938] AC. The determination of the first stage in the two-stage process 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.

The determination of the second stage, should it arise, involves similar considerations. Indeed, in the first stage of the process, the court may need to arrive at an assessment of what is the proper level of maintenance and what is adequate provision, in which event, if it becomes necessary to embark upon the second stage of the process, that assessment will largely determine the order which should be made in favour of the applicant. In saying that, we are mindful that there may be some circumstances in which a court could refuse to make an order notwithstanding that the applicant is found to have been left without adequate provision for proper maintenance. Take, for example, a case like Ellis v Leeder (1951) 82 CLR 645, where there were no assets from which an order could reasonably be made and making an order could disturb the testator's arrangements to pay creditors.”

The High Court recently confirmed this approach to the operation of Family Provision Act s 9 in Vigolo v Bostin (2005) 221 CLR 191 at [112]. There was a close contest in this case about whether or not the plaintiff had established what was necessary under Family Provision Act s 9(2) and s 9(3) in order for provision to be made in her favour. That contest is explained below after analysis of the credit of the parties is undertaken.

Credit Issues and related findings

Ms Smith’s Dealings with ING

47 Ms Smith’s credibility was substantially diminished by her involvement in the withdrawal of funds from Mrs Duarte’s ING deposit account in the days before Mrs Duarte’s death on 11 June 2005. This was a discreditable episode, which affects my assessment of the whole of Ms Smith’s evidence. Ms Smith’s conversations with the ING bank officer are relevant to the contributions, which Mrs Duarte’s assets made to Ms Smith’s beneficial ownership of the Bay St property. But more importantly the conversations and the circumstances in which the transfers occurred are also relevant to the plaintiff’s credibility.

48 The plaintiff first sought to give directions to ING for transfer of funds on 28 May 2005. It was a short conversation fully recorded on ING’s digital audio recording system. The Court had available in evidence a copy of the digital audio file and a transcript of the conversation. The transcript appears below:

“Recording signal… beep

ING: Welcome to ING Direct my name is Jo

Smith: Yes, Hi love, um I’m wondering if you can tell me how I transfer money from the ING account across to (1) my credit account card and and some into my bank account.

ING: Ok well we can only transfer funds back into the account that you have previously told us about. So we can’t send it your credit card or to my bank account or any where else. It has to go to the account that you previously told us about.

Smith: Oh, great OK and how long does that take?

ING: If you do a transaction before 4pm on a business it’s available the next business day.

Smith: So if I do it today what happens?

ING: It’s available Tuesday

Smith: Oh God ok, that’s a bigger problem, um, jeez. So, the account that we’ve nominated is the credit union isn’t it?

ING: Um I would need to bring up your details there to confirm any information.

Smith: Ok

ING: Do you have your client number there?

Smith: Yep, its 13178384

ING: Alright, and your name please?

Smith: Pamela Duarte, D.U.A.R.T. E

ING: Mrs Duarte can I just verify you by asking your mother’s name?

Smith: Barwick. Oh maiden name, sorry um Potts

ING: Your date of birth?

Smith: the 14th of the 9th 41

ING: And your phone number?

Smith: OK this could tricky. It could either be 9567 1998

ING: Or

Smith: 599 3244

ING: I need the number that was missing right from the very beginning of that beginning of that number.

Smith: What 9599

ING: That’s it, keep going

Smith: 3244

ING: That’s it

Smith: OK, because they’re both home lines. Yeh because its valid, because I’m validating with the account holder I need to get that 95.

Smith: Yeh , I

ING: Even though its

Smith: Yeh, its its standard, but I keep forgetting it every time

ING: Yeh I know.

Smith: By the time they’ve taken the 9s off love, I’m remember them then and then everybody else will be saying what are you talking about lady.

ING: Yeh exactly. Ok we’ll just go have a look at your bank account details.
Ok we’ve got your credit union account. That’s account ending in 45, sorry the whole number is 45234.

Smith: Yep, and that’s an S1 account is it?

ING: I can’t tell if its an S1, S10 or whatever the case may be.

Smith: Right

ING: We don’t allow for that, we just put through to that particular number

Smith: Oh, ok.

ING: and it’s up to whatever you have arranged with your credit union if it goes to the S1 or S3 or somewhere, wherever

Smith: Oh ok. So when you’re saying that would be there Tuesday.
Ah, is that morning or afternoon or?

ING: Our Terms and Conditions state that its going to be there during the day that’s any time that day. 9 times out of 10 its available first thing in the morning

Smith: Ok

ING: But it depends on when your credit union

Smith: It pays to check

ING: Yeh it depends on when your credit union runs their file

Smith: Ok

ING: To put the funds in your account so if they don’t run it until, you know, 3 o’clock that afternoon that’s when you get the funds

Smith: Yep

ING: But they usually all run it in the morning when they open up first thing in the morning at around about 9.30

Smith: Ok then. Ok can I arrange to have $20,000 sent across

ING: Certainly can. I’ll do that for you now. The other alternative for you that I’ll let you know is that you can do the same transaction on Monday, still have the same funds on Tuesday, but you’d earn interest over Saturday night and Sunday night.

Smith: Ah, ok. Um

ING: So when you’ve talking about $20,000 its probably a big difference. It’s going to be cut, you know it’s going to be a lot of interest that you could be losing out on.

Smith: Ok, so what time do I have to do it before Monday morning?

ING: As long as you call us before 4pm Monday afternoon

Smith: Oh ok

ING: Still have the funds Tuesday and that way you would have earned the interest over those extra couple of days.

Smith: Oh ok then, oh I’ll do that then.

ING: Alrighty then.

Smith: Forget I asked

ING: No problem I’ll leave everything as is

Smith: Thank you very much love.

ING: Alright take care and have a great weekend.

Smith: You too love. Bye bye”

49 Ms Smith went back to ING for more money a week later. Her second conversation on 6 June 2005 with an ING operator was also recorded on a digital audio file which was available to the Court together with the transcript:

“6 June 2005 (20050606_Duarte CIF 13178384_Colacicco.wav)

Recording signal… beep

ING: Welcome to ING Direct, this is Vanessa

Smith: Yes hi love look I’m wondering how I transfer money from my ING over to my credit union.

ING: Ok now um do you have an external bank account that’s linked to the savings maximiser there

Smith: What’s that mean?

ING: Ok do you hold an account with ING Direct?

Smith: Yep

ING: A savings maximiser

Smith: Yep

ING: Now because we’ve branchless we have, we we require a um an

Smith: Oh um yes I do

ING: Linked bank account

Smith: Yes I do, it’s a credit union

ING: Ok so with your credit union now you have different ways that you can actually transfer

Smith: Right

ING: With your client number and your access code you can log onto either the internet, do telephone banking or you can do that through a direct associate, like myself and we can transfer the funds back to your external bank account from your savings maximiser account for you.

Smith: Ok, so can I do that with you?

ING: Yes certainly

Smith: I like talk to somebody rather then push buttons.

ING: Ok, for future reference as well would you like me to note that down on your account so that way you actually speak to someone over phone.

Smith: Oh, it doesn’t really matter, I I also use the internet.
ING: Oh you do, ok

Smith: This is the first time I’ve ever done this so I’d rather talk to you

ING: Ok so when ever you are going to be using the internet, just use your client number and your access code

Smith: Right

ING: Ok and you’ll be able to log on with those details there.

Smith: Oh ok

ING: Ok now your full name?

Smith: Pamela Duarte, D.U.

ING: Ok that’s fine that’s fine Pamela. Can I have your mother’s maiden name?

Smith: Potts

ING: Your home phone number?

Smith: Ok it can be one of a couple, it can be 9599 3244

ING: Ok and your date of birth?

Smith: 14th of the 9th, 41

ING: Ok, great. Now it’s a withdrawal from the savings maximiser?

Smith: Yes love, Yeh

ING: And how much did you want to withdraw?

Smith: $10,000

ING: OK. I’ll just confirm these details with you there, Pamela, that you are about to withdraw $10,000 from your savings maximiser account ending in 225 and that’s going back to your external bank account held with credit union ending in 234. Is this correct?

Smith: Um oh God I haven’t got the credit union…yes, yes, yes, yes

ING: Ok I’ll give you a receipt number

Smith: Ok

ING: Receipt number is 436

Smith: 436

ING: 486

Smith: 486

ING: Ok now that leaves your total and your available balance in your account this morning there Pamela at $27,289.27

Smith: Hm

ING: And those funds will be available to you in your external bank account for you tomorrow

Smith: Any particular time love? Or just

ING: Well, depending on what time those funds are released to you from your external bank but we do let you know that they will be there tomorrow for you

Smith: Terrific

ING: Ok

Smith: Thank you very much

ING: Is there anything else I can help you with Pamela?

Smith: No that’s the lot thank you.

ING: Thank you for calling ING Direct and you have a good day

Smith: Thank you very much

ING: Thank you

Smith: Bye bye love

ING: Bye”

50 The ING transfers from Mrs Duarte’s account were effected so that Ms Smith would have funds to pay the mortgage payments on the Bay Street Property. The electronic transfers the subject of these proceedings were not disclosed by Ms Smith. It is difficult to see how Mrs Duarte could authorise the payments as of the dates concerned. There was no evidence that she was incapable of speaking to ING. The most remarkable thing about the tapes is the casual confidence with which Ms Smith dishonestly represents herself to ING employees as Mrs Duarte. I conclude from this episode that all her evidence should be approached with great caution.

51 This has strongest implications in one area of her evidence. She had in my view a strong bias against all the Duarte children and consciously downplayed their roles in their mother’s life. Because of her impaired credibility I accept their evidence and not hers about this issue which is importantly relevant to their claims upon their mother’s estate.

Eligible Person – De Facto Relationship or Close Personal Relationship

52 I do accept that there was a domestic relationship between Ms Smith and Mrs Duarte. In one respect I was much impressed by the evidence of Mrs Roma Cook one of the plaintiff’s witnesses who said the following about the relationship:

“Pam and Lyn worked and lived together. They seemed to share whatever they had. They lived frugally particularly since the business had its ups and downs. I know that they were struggling with their business especially for the last three years before Pam’s death. Pam had been diagnosed with breast cancer and had been on chemotherapy during this time. She lost all of her hair on at least two occasions. She was sick but continued to work downstairs where they had installed a bed for her to rest from time to time. Lyn continued to look after and take care of Pam right through her illness until her death. During her illness if Pam craved for a curry Lyn would go out and get her the curry whether they could afford to or not – I was there on occasion when this happened. Lyn said to me in words to the effect: “On the day Ma died in hospital she had gone to the toilet and was feeling so ill that she did not have the strength to get out. I tried to help her without success and had to seek the assistance of both Michelle and her son who lifted Ma from the toilet seat. Ma was then taken to hospital where she died that day”.

53 But I do not find that it was a de facto relationship. Ms Smith never claims especially to have had a sexual relationship with Mrs Duarte and I do not find such a relationship existed. Secondly, the relationship was not proclaimed publicly by Mrs Duarte in particular.

54 There was clearly the necessary companionship and living together and mutual support necessary for a close personal relationship under the Family Provision Act and I so find. This was especially true after Mr Duarte’s death. But even before that Mrs Duarte spent most of her day and night time with Ms Smith although she never lost her connection with her husband and her home.

An Eligible Person – Wholly or Partially Dependent

55 The Court has found that the plaintiff was an eligible person for whose benefit an order could be made under Family Provision Act s 7. Special rules however apply to an eligible person who is such by reason only of paragraphs (c) or (d) of the definition of “eligible person” in Family Provision Act s 6 (1). If the Court were to have found that Ms Smith was wholly or partly dependent upon the deceased “at any particular time” within (d) of the definition of “eligible person” then it would be necessary for the Court to first determine whether having regard to all the circumstances of the case “there are factors which warrant the making of the application”. The Court should refuse to proceed with the determination of the application unless the Court is satisfied those factors exist: Family Provision Act s 9.

56 The parties have made submissions about those factors for the purposes of s 9(1) but it is not necessary for the Court to decide such issues. The Court has now found that Ms Smith is an eligible person because she was living in a domestic relationship with the deceased at the time of her death: Family Provision Act s 6 “eligible person” (a)(ii).

57 The Court has found that Ms Smith was not living in a de facto relationship with Mrs Duarte at the time of her death but that she was living in a “close personal relationship” with her. They were living together and they each provided the other with domestic support and personal care: Property (Relationships)Act: s 5(1)(b). Family Provision Act s 9(1) is not engaged in this case.

58 Nevertheless the Court must attend to the considerations in Family Provision Act s 9 (2) and (3) which the parties closely disputed in this case.

Family Provision Act s 9(2)

59 In the first instance the Court must decide the provision made in favour of Ms Smith during her lifetime is inadequate for her proper maintenance, education and advancement in life: Family Provision Act s 9(2). The conclusion on this issue is reasonably clear in this case. Ms Smith is in poor health. Considering her age with her working history, despite the expert evidence called on behalf of the estate, in my view Ms Smith should be regarded as unemployable. Returning to taxi driving at her age would be extremely difficult. I do not see her readily finding clerical work. She has made major surgery herself. She receives social security benefits and lives on the assistance of friends. The rental income on the Bay Street Property is insufficient to cover mortgage outgoings. If that does not change the property will have to be sold in any event.

60 But as the following paragraphs explain the Bay St Property was designed to provide a security fund for Ms Smith. Once Ms Smith satisfies her obligations to the estate there will not be much if anything left from that property (after its mortgage is paid out).

61 It was common ground between the parties that in 1996 Ms Smith and Mrs Duarte had discussions about Mrs Duarte making provision for Ms Smith to assist her in the event of Mrs Duarte’s death. Mrs Duarte and Ms Smith had these discussions when they were contemplating the purchase of the Bay Street property. They were discussing in whose name the title to the property would be placed. Ms Smith gave evidence which I have accepted that in the course of these discussions Mrs Duarte said to her of the Bay Street property: “the property will be bought in your name because you have worked so hard in the business and have never taken any money from the business for yourself. You should have it in your name so that you have something to fall back on if I die.”

62 Ms Smith and Mrs Duarte went ahead with the purchase, in the name of Ms Smith. Only two years before, in 1994, Ms Smith and Mrs Duarte had purchased the Cameron Street property as tenants in common in equal shares. They were making a different title arrangement for the Bay Street property. Some conversation such as this must explain the difference.

63 Ms Smith benefited from Mrs Duarte’s commitment of partnership funds on the deposit of the Bay Street property and for all mortgage repayments, with the possible exception of a few years when the repayments were funded out of Ms Smith’s Formalwear Boutique business. Ms Smith gained a benefit in her ownership of the Bay Street property from Mrs Duarte in another way. Upon moving in to the Bay Street property in early 1998 Arndria Seymour renovated the property, installed a new kitchen, bathroom and internal laundry at her cost. Her renovations were substantial. A tenant, letting at arm’s length, would not have undertaken such renovations. Arndria Seymour was in the Bay Street property and undertaking renovations there because she was Mrs Duarte’s daughter. Although the value of the renovations is disputed they added value to the Bay Street property sufficient to allow it to be offered for rent after Arndria’s departure as a renovated property.

64 At the time of the hearing, the parties agreed the value of the Bay Street premises at $470,000. Mrs Duarte conferred approximately half this value on Ms Smith during Mrs Duarte’s lifetime. The estate contends that Mrs Duarte’s provision of this value to Ms Smith during her lifetime is now, at the time of this determination, adequate forms Smith’s proper maintenance, education and advancement in life. The estate’s argument must be assessed in light of a broader picture of the plaintiff’s financial circumstances and the financial position of the estate.

Family Provision Act s 9(3)

Financial Position of the Estate

65 Before considering the form of any relief that might be granted to Ms Smith it is necessary to understand the general financial position of the estate and specifically the burden of legal costs incurred. The estate has incurred total legal costs of $847,263.91 as at 31 August 2009, including disbursements and GST. These costs were incurred in respect of the four separate proceedings in which the estate has been involved since the deceased’s death. The legal costs have been paid by Adrienne Duarte on behalf of the estate as follows (table taken from the defendants’ closing submissions):

(i)	seeking to have the Plaintiff renounce probate, culminating in the Probate proceedings (Supreme Court of New South Wales No. 114059 of 2005), including the costs of the costs assessment process in relation to those proceedings:	$146,032.22 (17.2%)
(ii)	seeking to have the property at 128 Bay Street, Rockdale transferred to the estate, culminating in the Bay Street proceedings (Supreme Court of New South Wales No. 5023 of 2005). Much of the evidence in the Bay Street proceedings was used in the FPA proceedings and some of it was used in the Partnership proceedings:	$189,599.22(22.4%)
(iii)	the Plaintiff's claim for provision, culminating in the FPA proceedings (Supreme Court of New South Wales No. 3154 of 2006):	$330,988.13 (39.1%)
(iv)	the appointment of a Receiver to the Partnership to take accounts and to wind the Partnership up, culminating in the Partnership proceedings and Orders made by the Court on 30 April 2009 (Supreme Court of New South Wales No. 4559 of 2006):	$180,644.34 (21.3%)
Total		$847,263.91

66 In addition to these amounts, the estate has incurred accounting fees for Craig Edwards of Lonergan Edwards in the sum of $27,707.21. Adrienne Duarte paid these fees on behalf of the estate. They relate to Mr Edwards' examination of the financial records of the partnership and the preparation of his reports exhibited to his affidavits of 21 December 2005 and 12 December 2006. Mr Edwards’ analysis of the accounts of the partnership formed the basis of the final accounts of the partnership prepared by the Receiver, Mr Turner in accordance with the Orders of the Court on 8 November 2007.

67 One of the matters the estate says the Court can take into account in the exercise of its powers under Family Provision Act s 9(3) is that the Court ought have regard to the role of the Ms Smith in causing the estate to incur these legal costs. The estate submits that the costs to which it has been put have diminished the assets available either for distribution or for an order for provision for Ms Smith.

68 The administrator Michelle Daniels gives recent evidence of the general financial position of the estate in her affidavit sworn 17 July 2009. Since her affidavit of 17 July 2009 the value of the Harrow Road property has been agreed at $650,000.00. As at 31 August 2009, the estate has incurred legal costs of $847,263.91. The assets and liabilities of the estate are summarised in the estate’s closing submissions:

Assets

No.	Description	Amount	Currently held
1. Debt due from the partnership	$360,913.00	--
2. Estate's share of the interest due to the partnership from the Plaintiff (as at 30 April 2009)	$53,248.02	--
3. Cash at bank	$144.51	$144.51
4. Doll collection, say	$3,500.00	$3,500.00
5. Jewellery	$37,940.00	$37,940.00
6. Wine and spirits, value not known, but negligible	--	--
7. 60 Harrow Road, Bexley	$650,000.00	$650,000.00
8. Debt due to the estate from the Duarte siblings in respect of furniture and possessions	$3,364.00	--
9. Debt due from the Plaintiff to the estate	$35,771.00	--
10. Interest on the debt due from the Plaintiff to the estate, amount not known	--	--
11. Debt due from the Plaintiff in respect of the costs of the Probate proceedings	$55,489.14	--
Total		$1,200,369.67	$691,584.51

Liabilities

No.	Description	Amount
1. Debt due to the Commonwealth Bank re Visa Card account no 4940 5213 0542 3519	$7,809.53
2. Amounts due to the Duarte siblings in respect of insurance, rates, storage costs, maintenance, administrators' expenses and Laurie Duarte's gravestone	$11,962.76
3. Costs claimed by the Plaintiff in respect of the Probate proceedings	$24,849.23
4. Amount due to Adrienne Duarte in respect of accounting fees paid by her on behalf of the estate	$27,707.21
5. Amount due to Adrienne Duarte in respect of legal costs she has paid on behalf of the estate, as at 17 September 2009	$597,263.91
6. Interest due to Adrienne Duarte in respect of legal costs she has paid on behalf of the estate (as at 17 July 2009)	$58,351.80
Total		$727,944.44

69 The Harrow Road property was recently re-valued upwards to $650,000. But despite this, most of the limited surplus of assets over liabilities in respect of which an order for provision could be made in favour of Ms Smith is accounted for by the debt due from the partnership to the estate ($360,913) and interest ($53,248.02) or the other debts due to the estate. The only other realisable asset is Mrs Duarte’s jewellery, which for understandable reasons the Duarte children do not wish to sell. If Ms Smith’s liabilities to the estate are excluded entirely there is a deficit in the estate.

70 Were the Court to make the order for provision which Ms Smith seeks it would extinguish the debts due by Ms Smith to the estate and the partnership in excess of $470,000.00. The net position of the estate would be a deficit of the order of $36,500.00. Ms Smith would get a benefit of over $470,000 if all debts she owes are released. The Duarte children would be left without anything under their mother’s will. The defendants, the administrators would be left to meet the liabilities of the estate.

71 There would be a deficit even if the deceased's jewellery is liquidated. As that is not a course the Duarte children wish to undertake the deficit to be met would be even greater if the relief the plaintiff seeks is granted.

72 This analysis reveals that there is no easy way of granting relief to the plaintiff, and to Ms Smith in these proceedings without having a serious impact upon the interest of Mrs Duarte’s children or the solvency of the estate. Where there are few or no assets from which an order could be reasonably made, there may well be circumstances which a court should refuse to make such an order: Ellis v Leeder (1951) 82 CLR 645 and Singer v Berghouse (No.2) (1994) 181 CLR 201 at 210. Although Ms Smith is an eligible person, in this case an order should not be made if it were to place the estate in financial deficit.

73 Provision out of the estate of far less than what Ms Smith seeks may be the only way of preserving the solvency of the estate and satisfying any further claim that Ms Smith has on the estate. This of course must be balanced in this case against the interests of the beneficiaries under the will and the conduct of Ms Smith both prior to and after the death of Mrs Duarte.

74 As has already been seen Ms Smith herself has a need of further capital. She has realistically made out a case of need for capital. She says she needs forgiveness of the debts that she owes to the estate. In my view an order of that kind should not be made for three main reasons. The first reason has already been discussed, that it would place the estate in financial deficit.

75 The second reason that the order that Ms Smith seeks should not be made is that it destroys any benefit that Mrs Duarte’s children would obtain under the will. That is not an outcome that should be contemplated in circumstances where Mrs Duarte attempted to confer a substantial benefit on Ms Smith in the form of the Bay Street Property during her lifetime. With some considerable degree of wisdom Mrs Duarte was attempting to provide Ms Smith with an investment property to set her up so that the children could still inherit the family home. Any outcome which destroyed that objective entirely would be most unfair to Mrs Duarte’s children. It is noteworthy that even though Mrs Duarte’s husband died in December 2003, in the 18 months before she died, Mrs Duarte herself did not change her will or attempt to do so. She believed in the integrity of the division of assets that she had set up. The Court should not lightly interfere what she has done. The only difficulty is that she did not anticipate the size of the debt that Ms Smith would owe the partnership and that the partnership would owe the estate. She did not anticipate the litigation which would occur after her death. I will say a little more about this shortly.

76 The third reason that the full extent of the provision sought by Ms Smith should not be made is that whilst Ms Smith’s medical condition and financial need are demonstrated in the evidence, there is compelling need on the balance against it on the part of the beneficiaries. In particular David Duarte is a person of relatively modest financial circumstances who has real, current and demanding financial need and who would greatly benefit from something from his mother’s estate. He is plainly struggling hard to make his way in life and do the best he can with and for his family and he has an identifiable need of capital. Similarly Michelle Daniels has a need for capital from her mother’s estate. She does not have any assets of significant value. Her only income is a fortnightly Centrelink benefit and she has substantial debts. She suffers from depression and other serious health issues. There is no particular financial need demonstrated on the part of the other beneficiaries of the will but I accept the importance of the fact that Mrs Duarte wished all her children to benefit from her estate. Whilst the decline of the House of Dreams business can be seen as a by-product of Mrs Duarte’s declining health, the size of the deficit in Ms Smith’s capital account of the partnership is also partly accounted for by the fact that she has been supported through the life of the partnership by taking substantial drawings from it relative to Mrs Duarte.

77 Not making any provision from Ms Smith would have the odd practical result that the support that Mrs Duarte provided to Ms Smith during Ms Duarte’s lifetime would be taken back after Mrs Duarte’s death by collection of the debt on the capital account. Leaving Ms Smith in a position where she has to repay all these monies would also work unfairness upon her. This is especially so when it is seen from Mr Edwards’ evidence that approximately 140,000 of the deficit in the capital account is accounted for by the partnership’s payments on account of the Bay Street property, the property which Mrs Duarte wanted Ms Smith to have for her security after Mrs Duarte’s death. To require all of this to be returned now would undermine the logic of Mrs Duarte’s sensible provision of the Bay Street property during her lifetime to Ms Smith.

78 This prompts the conclusion that the wise and just testator in t he present circumstances would try even now to balance the needs and financial interests of Ms Smith and the beneficiaries by giving Ms Smith some small further legacy, well short of what she is asking for in these proceedings, but having the effect of reducing the impact of the debts that she owes to the partnership upon her. One of the factors though that must be considered when the size of that legacy is in contemplation is why the debts of the estate are so high and whether Ms Smith has contributed to them in any way. In this respect the evidence is against Ms Smith and this factor is one further reason that although the Court is prepared to award her a further legacy it is not one that will satisfy everything that she owes to the estate.

The Prior Proceedings

79 As the introductory factual summary shows the estate has incurred costs in relation to the Probate proceedings, the Partnership proceedings and the Bay Street proceedings. In my view the costs to the estate have been increased by Ms Smith’s conduct in relation to those proceedings. This is one of the factors that I take into account under Family Provision Act s 9(3) in determining the extent of the provision for Ms Smith out of the estate.

80 First in relation to the Probate proceedings, I have already identified the several conflicts of interest and duty which apply to Ms Smith. She had intimated by September 2005, three months after the death of Mrs Duarte that she, Ms Smith, might pursue remedies under the Family Provision Act. This was evident within weeks of Mrs Duarte’s death but there were serious issues about partnership assets and what she individually might owe the estate. Serious and early consideration should have been given on her part to renouncing probate long before the Court contest took place in mid 2006. She was a substantial cause of the incurring of those costs.

81 The Bay Street proceedings were commenced by the Duarte children. None of the costs of those proceedings were caused in any way by the conduct of Ms Smith. On the other hand, the parties agreed that the costs of those proceedings should lie where they fall.

82 The costs of the Bay Street proceedings were a burden on Ms Smith which she did not cause. If anything that burden weighs in her favour.

83 Finally, partnership proceedings were necessary because of the uncertainty about the financial dealings of the partnership, the distrust of the parties and their very different views of the capital accounts of the partners. Ms Smith’s proposals for the partnership fell well short of acknowledging the debt which the receivership established that she owed the partnership and that the partnership owed the estate. The proceedings were entirely justified and were necessary to resolve the uncertainty that existed. Much of the costs of the partnership proceedings were incurred not due to any resistance to those proceedings on the part of Ms Smith but rather due to the cost of processing and analysing partnership transactions. Some of the costs were contributed to by Ms Smith as the correspondence set out below shows. This correspondence in 2006 occurs immediately before the launch of these proceedings and shows Ms Smith even then resisting the idea of the appointment of a receiver.

84 In a letter dated 21 August 2006, Mr Pelletier of Messers Toomey Pegg Drevikovsky wrote the following to Messers Maurice Harrison & Associates:

“ Estate of the late Pamela Joyce Duarte
Ms Daniels and Mr David Duarte wish to apply to the Court on an urgent basis to appoint a receiver to deal with Citibank and to wind up the business and affairs of the partnership generally. Would you please let us know if your client will consent to such an application by 5.00pm tomorrow.
We are instructed to seek to have Mr Scott Turner of Hedge & Associates appointed as Receiver. The fees charged by that firm are as follows (excluding GST):
(a) Partner - $395.00;
(b) Director - $345.00;
(c) Manager - $285.00;
(d) Supervisor - $180.00;
(e) Secretary - $120.00;
(f) Junior - $50.00.
We look forward to hearing from you.”

85 In a letter dated 22 August 2006, Grace Silveira of Messers Maurice Harrison & Associates wrote the following to Messers Toomey Pegg Drevikovsky:

“RE: THE ESTATE OF THE LATE PAMELA JOYCE DUARTE
We refer to your facsimile letter received at 16.55 hours yesterday requesting a response by 5.00pm today.
While it is our client’s intention to co-operate fully with all issues including interlocutory matters we raise the following matter with regard to your proposal:
1. Why do you propose to have a Receiver to deal with Citibank?
2. The business had been on the decline for some years prior to the death of Pamela Duarte and has ceased to operate since her death. The only assets of the business are the real estate property at 122 Cameron Street, Rockdale and the stock. Please advise why you suggest that a Receiver be appointed to presumably attend to the sale of the real estate property and the stock. As you are aware our client is impecunious and the appointment of a Receiver will add to unnecessary costs.
3. In the appointment of a Receiver, what would you be proposing as the terms of reference of this officer.
We request your urgent response to the matters raised about so that we may confer with our client and seek her instructions in the matter.”

86 In a letter dated 23 August 2006, Mr Pelletier of Messers Toomey Pegg Drevikovsky wrote the following to Messers Maurice Harrison & Associates:

“Estate of the late Pamela Joyce Duarte
We refer to your facsimile of 22 August 2006.
The absence of mutual trust between our respective clients is the main reason why our clients seek to have a receiver appointed. The history of the dispute between our respective clients illustrates the complexity and expense that is entailed when parties do not trust each other.
We also point out that our respective clients have completely different views of the true financial position of the partnership – especially in relation to the capital accounts of the two partners.
In the absence of a receiver, the lack of trust and the disagreement as to the true financial position of the partners create a significant risk that the winding up of the partnership will be substantially more time consuming and expensive than it need be.
Essentially, we see the duty of the receiver as winding up the affairs and business of the House of Dreams. An urgent duty for the receiver would be to sell 122 Cameron Street to discharge the mortgages on that property and 60 Harrow Road, Bexley. The receiver would also be charged with all other responsibilities necessary to wind up the affairs of the partnership.
We look forward to hearing from you.”

87 Taking into account these factors I am of the view that a further legacy needs to be provided for the plaintiff out of the estate for Ms Smith of $100,000. I am conscious of the fact that this will not meet all of her liabilities but to do more would unacceptably reduce from what has become a small liquid estate, the benefits to which Mrs Duarte’s children are entitled under the will.

Conclusion and Orders

88 In the result I have found that Ms Smith is an eligible person by reason of her being in a close personal relationship with the late Mrs Duarte. However, for the reasons I have indicated this is not a case where the full relief sought by Ms Smith by way of provision out of the estate of Ms Duarte should be granted. The needs of the beneficiaries under Mrs Duarte’s will are real and must be taken into account against the Ms Smith’s need and what the Ms Smith has received in her lifetime. In the result I will order that a further legacy of $100,000 be given to Ms Smith out of the estate of Mrs Duarte.

89 I direct the parties to bring in short minutes of order to give effect to these reasons. I reserve the question of costs. As indicated earlier in these reasons containing the effect of cost orders is very important for the final resolution of these proceedings.

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28/07/2010 - typographical error. The word "announcing" has been replaced by the word "renouncing". - Paragraph(s) 80