Squire v Squire

[2019] NSWCA 90

Court of Appeal

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Squire v Squire [2019] NSWCA 90
Hearing dates:	29 November 2018
Decision date:	30 April 2019
Before:	Macfarlan JA at [1]; Meagher JA at [2]; Simpson AJA at [47]
Decision:	1. Appeal allowed. 2. Set aside orders 1, 2, 3 and 4 made by Kunc J on 4 May 2018 and entered on 7 May 2018, this order not to affect the costs order made by Hallen J on 14 November 2016. 3. Parties to prepare and provide to the Associate to Justice Macfarlan by 5pm on 14 May 2019 short minutes formulating the orders described above. 4. In the event that the parties contend for costs orders different from or in addition to those proposed above, they are to provide to the Associate to Justice Macfarlan by 5pm on 14 May 2019 written submissions, not to exceed 5 pages, in support of the orders sought. The Court will decide what orders should be made.
Catchwords:	SUCCESSION – Succession Act 2006 (NSW), s 59 – family provision claim – where deceased’s will left entire estate to respondent – where deceased and respondent separated shortly before deceased’s death – where deceased proposed to make a new will in light of separation – where before deceased’s death, deceased and respondent contracted to sell jointly held property and divide proceeds equally – whether deceased and respondent effected final financial settlement following separation – whether deceased’s share of sale proceeds, settlement occurring after death, should be designated as notional estate – whether adequate provision made for proper maintenance and advancement in life of two adult children
Legislation Cited:	Civil Procedure Act 2005 (NSW), s 60 Succession Act 2006 (NSW), ss 58, 59, 60, 61, 75, 76, 77, 80, 83, 87, 88, 99
Cases Cited:	Dijkhuijs (formerly Coney) v Barclay (1988) 13 NSWLR 639 House v The King (1936) 55 CLR 499; [1936] HCA 40 Lodin v Lodin [2017] NSWCA 327 Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17 Pontifical Society for the Propagation of the Faith v Scales (1962) 107 CLR 9; [1962] HCA 19 Scott v Scott [2009] NSWSC 567 Sgro v Thompson [2017] NSWCA 326 Singer v Berghouse (1994) 181 CLR 201; [1994] HCA 40 Vigolo v Bostin (2005) 221 CLR 191; [2005] HCA 11
Texts Cited:	Peter Butt, Land Law (6th ed, Law Book Co, 2010)
Category:	Principal judgment
Parties:	Paul Francis Aubrey Squire (First Appellant) Claire Louise Isobel Beech (Second Appellant) Corinne Ann Squire in her capacity as executrix of the estate of the late Richard Squire (Respondent)
Representation:	Counsel: AG Martin, MA Tovey (Appellants) P Glissan (Respondent)   Solicitors: Branston Neville Lawyers (Appellants) Roderick Storie Solicitors (Respondent)
File Number(s):	2018/170879
Publication restriction:	N/A
Decision under appeal	Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Citation: [2018] NSWSC 594 Date of Decision: 04 May 2018 Before: Kunc J File Number(s): 2016/122471

headnote

[This headnote is not to be read as part of the decision]

The appellants are two adult children of the first marriage of Richard Squire (the Deceased) who died unexpectedly on 29 April 2015. The respondent was the Deceased’s second wife and is the executrix named in his will made on 21 March 2007. By that will, the Deceased left the whole of his estate to the respondent and if she did not survive him by 30 days, that estate was to be divided equally between his three children and the two children by her first marriage.

Shortly before the Deceased’s death, he and the respondent ended their relationship and took steps to effect a permanent separation, including by systematically dividing their assets. The Deceased made statements to his children about writing a new will to reflect his fundamentally changed circumstances. The principal asset of the marriage was a jointly held interest in a home unit, which was sold on 20 March 2015 with settlement occurring shortly after the Deceased’s death. The Deceased’s half-share of those proceeds is capable of being made the subject of a “notional estate” order under Succession Act 2006 (NSW), Ch 3 Pt 3.3. Upon the Deceased’s death, the respondent became entitled by survivorship to the whole of the sale proceeds.

The appellants applied under Succession Act 2006 (NSW), Ch 3 Pt 3.2, for family provision orders in the form of payments from that proposed notional estate of $85,000 each. The primary judge dismissed their claims, describing the respondent’s claim as “superior” and finding that the Deceased had an ongoing obligation to make testamentary provision for the respondent as his “former” spouse. In those circumstances, the primary judge was not satisfied that the appellants had been left without adequate provision for their proper maintenance, education or advancement in life.

The principal issues in the appeal were:

(i)   whether the primary judge erred in his assessment of the respondent’s financial position.

(ii)   whether the primary judge erred in his finding that the respondent had not received a financial settlement.

(iii)   whether it was “reasonable” for the respondent to expect the Deceased to make a provision that would allow her to own an unencumbered property worth up to $600,000.

(iv)   whether the Court should conclude that adequate provision for the appellants was not made from the Deceased’s estate.

Held, allowing the appeal (per Meagher JA, Macfarlan JA and Simpson AJA agreeing):

As to issue (i):

(1) The primary judge did not err in his assessment of the respondent’s financial position, which took account of her half-share of the sale proceeds and the superannuation benefit she had received upon the Deceased’s death. The $120,000 advanced to her daughter was not an asset that she could readily draw on: [1], [22], [23], [47].

As to issue (ii):

(2) By engaging in a deliberate and systematic division of their jointly held assets and liabilities, the Deceased and the respondent had agreed on a final albeit informal financial settlement which terminated any obligation of the Deceased to make any ongoing testamentary provision for the respondent’s maintenance or advancement in life: [1], [29], [30], [47].

Lodin v Lodin [2017] NSWCA 327; Dijkhuijs (formerly Coney) v Barclay (1988) 13 NSWLR 639 applied.

As to issue (iii):

(3) Given their economic and social circumstances, the respondent could reasonably be expected to live in much more modestly priced permanent accommodation than an unencumbered property worth up to $600,000: [1], [31], [47].

As to issue (iv):

(4) At the time of the Deceased’s death, the natural objects of his testamentary bounty were his adult children. The nil provision for the appellants in the Deceased’s last will was not adequate; adequate provision extended to the making of the provisions claimed; and the Deceased’s half-share of the sale proceeds should be designated as notional estate to enable those claims to be satisfied: [1], [34], [36], [38], [47].

Judgment

1. MACFARLAN JA: I agree with Meagher JA.

MEAGHER JA

Overview

2. The appellants, Claire Beech and Paul Squire (each aged in their late thirties), are two of three adult children of the first marriage of Richard Squire (the Deceased) who died unexpectedly on the evening of 29 April 2015, aged 64. His third adult child, Catherine, was originally a party to the proceedings, but abandoned her claim in August 2016. It follows that in determining the appellants’ claims for family provision orders under Succession Act 2006 (NSW), Ch 3, her interests can be disregarded (s 61). The respondent, Corrine Squire, was the Deceased’s second wife and is the executrix named in his last will made on 21 March 2007. By that will he left the whole of his estate to the respondent and if she did not survive him by 30 days, that estate was to be divided equally between his three children and the respondent’s two children by her first marriage.

3. The respondent and the Deceased first met in about August 2004 and married in October 2005. Some two or three weeks before the Deceased’s death, he and the respondent ended their relationship and took steps to effect a permanent separation, including by dividing their assets. The principal asset of the marriage was a jointly held interest in a home unit in Baulkham Hills, purchased with funds of the Deceased in 2007 or 2008. In April 2015 that joint interest, after repayment of secured debts, was worth about $500,000. The home unit was sold on 20 March 2015, with settlement occurring on 7 May 2015, shortly after the Deceased’s death. Putting to one side pension and superannuation benefits to which the Deceased was entitled, for his part the divided assets represented all of the assets he held. In the course of that separation process the Deceased indicated to his children that he proposed to make a new will.

4. On the Deceased’s death the respondent, as joint owner of the Baulkham Hills property, became entitled to the proceeds of sale of that unit. The Deceased’s share of those proceeds, an amount of $249,779, is capable of being made the subject of a “notional estate” order under Succession Act, Ch 3 Pt 3.3. The Deceased did not sever the joint tenancy before his death, resulting in the respondent’s entitlement to his share by right of survivorship. That was a “relevant property transaction” enabling such an order, and deemed to have been entered into immediately before, and to have taken effect on, the Deceased’s death (ss 75, 76(2)(b), 77(3), 80).

5. In proceedings in the Equity Division the appellants applied under Succession Act, Ch 3 Pt 3.2, for family provision orders in the form of payments from those proceeds of sale, designated as “notional estate”, each claiming a sum of $85,000. The appellants are eligible persons within s 57, and brought those applications within twelve months of their father’s death (s 58(2)). Each sought to justify their claim by reference to specific financial needs. In the case of Claire Beech, that need was “to secure a fund of $25,000 to enable her to build a shed to improve the productivity and profitability of the [family’s] farming business” as along with “$60,000 for her 3 young children’s schooling costs”, two of whom suffer from medical difficulties, one also having been severely bullied at a previous school. In the case of Paul Squire, the provision sought was “$10,000 to enable him to pay for his wedding to his [fiancée], as well as a fund of $75,000 to enable them to enter the Sydney property market”.

6. The primary judge (Kunc J) dismissed the appellants’ claims because he was not satisfied that “adequate” provision had not been made for them by the Deceased’s will (s 59(1)(c)). His Honour held that nil provision for the appellants was not inadequate in circumstances where the Deceased continued to have a moral duty to provide financial support to the respondent, notwithstanding their permanent separation. The primary judge considered that the respondent’s claim to provision was “superior” to those of the appellants, and would be satisfied by her retaining the Deceased’s half-share of the proceeds of sale of the Baulkham Hills property, but would not be satisfied if that money was used to make the provision sought by the appellants: Beech v Squire [2018] NSWSC 594, esp at [110], [114]-[117].

7. The primary judge found that as at October 2017 the Deceased’s estate was insolvent by approximately $48,079 (Judgment [59], [60]). That analysis assumed and brought to account the respondent’s entitlement to an indemnity for legal costs properly or reasonably incurred in defending the proceedings. If those legal costs are excluded, at that time the estate had net assets of about $10,000.

8. As matters now stand, following the hearing of the appeal, the parties have incurred an amount in excess of $117,000 on legal costs at first instance and about $74,000 on the costs of the appeal. That outcome is inconsistent with the “object of resolving the issues between the parties in such a way that the cost [to them] is proportionate to the importance and complexity of the subject-matter in dispute”: cf. Civil Procedure Act 2005 (NSW), s 60. On the face of it, the parties have incurred legal costs in excess of $190,000 prosecuting or defending claims to provision totalling $170,000 in relation to an estate with net assets of $10,000 before regard is had to the proposed notional estate. It will be necessary to return to this subject when addressing the costs orders that should be made in disposing of this appeal.

The reasoning of the primary judge

9. Succession Act, ss 59(1) and (2) relevantly provide:

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

…

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

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

10. This discretionary power is to be used sparingly and with regard to the deceased’s freedom of testamentary disposition, as “it was never meant that the Court should re-write the will of a testator”: Pontifical Society for the Propagation of the Faith v Scales (1962) 107 CLR 9 at 19; [1962] HCA 19 (Dixon CJ); Vigolo v Bostin (2005) 221 CLR 191; [2005] HCA 11 at [10] (Gleeson CJ). That discretionary power is enlivened if the court is satisfied that the provision made is less than adequate. As the passages from Sgro v Thompson [2017] NSWCA 326 cited by his Honour at Judgment [95] and [96] make clear, the question whether “adequate” provision has been made directs attention, not merely to an applicant’s financial needs, but also to the size and nature of the deceased’s estate, the relationships between the deceased and the applicant and others with claims upon his bounty, and the circumstances and needs of those other persons. The evaluation involved in deciding whether “adequate” provision has been made is to be guided by applying the Court’s assessment of what would, in the circumstances, be right and appropriate, according to prevailing community standards and expectations.

11. Although the Deceased’s testamentary intentions at an earlier time were recorded in his last will, the primary judge was right to give that will little weight as it did not take account of his recent and final separation from the respondent (Judgment [100]). His Honour described the respondent’s claim as “superior” and rejected the appellants’ claims because “any provision for them would have defeated” that superior claim (Judgment [117]). The matters taken into account in support of that conclusion included (Judgment [110]):

(1) At the time of Richard’s unexpected death, Corinne and Richard had only been separated for a period of weeks and had not yet resolved all of their matrimonial affairs or even discussed a final resolution, although they had taken some practical steps. Critically for present purposes, Corinne had certainly not received anything in the nature of a financial settlement.

(2) They had been married for about nine and a half years. There is nothing to suggest that for much of that period it was anything other than a happy marriage, especially for Richard who, in his own words, thought Corinne was “the one”. While Corinne had not contributed to the purchase price of the Baulkham Hills Property, there was undisputed evidence that she had paid a number of Richard’s debts totalling about $35,474 and contributed to their living expenses. I also infer that she at least would have made some contribution to the mortgage on the Property once Richard had retired, although the evidence does not permit that to be quantified.

12. The primary judge accepted the respondent’s submission that having regard to her financial circumstances and the state of her relationship with the Deceased at the time of his death, his obligation to make testamentary provision for her as his “former” spouse, judged by reference to prevailing community standards, extended to providing her with sufficient funds to purchase a home unit, and to do so without taking out a mortgage.

13. The primary judge held that it was reasonable for the respondent to aspire to own a home unit valued at between $500,000 and $600,000: Judgment [85], [110](5), [114]. At the time of the hearing the respondent estimated her assets, excluding the Deceased’s share of the sale proceeds, to be in the range of $400,000-$410,000: Judgment [81]. Those assets included the Deceased’s Australian superannuation benefit of $169,061, but not an English benefit of about $30,900 which when paid formed part of the assets of his estate. That estimate of the respondent’s assets did not make any allowance for an amount of $120,000 paid to her daughter, Gabrielle, in about April 2014 to assist her in purchasing an apartment in which the respondent lived for some time after her separation from the Deceased.

14. Accepting that the respondent was “obviously able to work”, the primary judge considered that if the appellants’ claims were rejected she would be able to purchase a home unit, and would have “her own income to meet her daily needs, but nothing for vicissitudes”: Judgment [110](4), [114]. On the other hand, if the provision sought was made, the respondent would not have “enough to purchase a unit without taking out a mortgage of around $200,000” which, assuming she could get such a mortgage, would be “a real burden to pay off” and she would have nothing for vicissitudes: Judgment [115].

15. In the result, the primary judge was not satisfied that the appellants had been left without adequate provision for their “proper maintenance, education or advancement in life”: Judgment [117]. Notwithstanding that conclusion meant the power to make a family provision order was not engaged, his Honour considered that the same reasoning supported a conclusion that no such order should be made for either appellant: Judgment [118].

The issues in the appeal

16. The standard of appellate review is that identified in House v The King (1936) 55 CLR 499; [1936] HCA 40, and applied in cases such as Norbis v Norbis (1986) 161 CLR 513 at 518; [1986] HCA 17, and in the present context, Singer v Berghouse (1994) 181 CLR 201 at 212; [1994] HCA 40.

17. The appellants’ arguments focus on three aspects of his Honour’s reasoning, as involving error. First, it is said that he made factual errors in his assessment of the respondent’s financial position, and in particular in relation to the characterisation of the $120,000 payment to her daughter. That challenge is made by grounds 2 and 3 of the notice of appeal. Secondly, and more fundamentally, it is submitted that his Honour erred in treating the respondent’s claim to provision from the Deceased’s estate as “superior” to the claims of the appellants because, although there had been a permanent and final separation, the respondent had “not received anything in the nature of a financial settlement”. Grounds 4(a) and 5(a) challenge that finding, the appellants contending that in circumstances where there was consensus that their assets would be divided equally, the Deceased had no ongoing obligation to make testamentary provision for the respondent.

18. Thirdly, it is submitted that his Honour erred in treating as “reasonable”, and within the range of what community standards would expect the Deceased to provide by way of support, a provision sufficient to enable the respondent to acquire an unencumbered home unit valued at up to $600,000. This argument is made by grounds 4(b) and 4(c) and 5(b). The remaining grounds of appeal 1, 5(c) and 5(d) challenge the correctness of the primary judge’s overall conclusion, without identifying any further error, whether of fact or law, or asserting that some such error was necessarily manifest in that conclusion.

16. In the event this Court is satisfied that the primary judge’s evaluation miscarried in any of the respects contended, the appellants submit that it should conclude on a rehearing that adequate provision for the appellants was not made from the proposed designated "notional" estate, and that provision should be made in the sums claimed, or in such lesser amounts as the Court determines.

Analysis of respondent’s financial circumstances (grounds 2 and 3)

20. As the summary at [13] above shows, the primary judge proceeded on the basis that the respondent had net assets of between $400,000 and $410,000, including a bank deposit of $135,775 and the superannuation benefit of $169,061. As to the amount of $120,000 advanced to her daughter in April 2014, the primary judge correctly records the effect of the respondent’s evidence at Judgment [23]:

In about April 2014, Corinne gave Gabrielle $120,000 to buy an apartment. Corinne’s evidence was that the only documentation noting this arrangement were documents Corinne was made to sign by the bank confirming the status of the money as a gift, but these documents were not in evidence. Corinne gave evidence that she does not expect that amount to be repaid.

21. The primary judge did not thereafter expressly resolve the question whether in law this payment should be treated as a debt or gift, although his Honour’s analysis at Judgment [110] and [115] assumes that the $120,000 could not with reasonable confidence be regarded as repayable and available to fund the purchase of a home unit. That treatment is consistent with acceptance of the following evidence of the respondent in response to questions from the primary judge:

Q: Do you intend to ask your daughter to repay the money to you when the house is sold?

A: I don’t think that she’ll sell it but she’ll probably need it for the next place.

Q: So sitting there in the witness box, do you regard yourself as having given away that money and you’re never going to see it again?

A: That’s kind of how I think about it because it was from my first marriage and ---

22. The reference to this money being from the respondent’s “first marriage” confirms that the $120,000 advanced in April 2014 was ultimately funded from the proceeds of sale of the Kurrajong Heights property which the respondent had purchased in 2004, and before she met the Deceased, with the proceeds of her first divorce settlement. In paying this amount to her daughter, the respondent was treating those moneys as separate from the assets of her marriage to the Deceased: Judgment [14], [15], [23], [24].

23. Given the circumstances in which this payment was made, the primary judge was justified in concluding that this amount should not to be regarded as an asset of the respondent which could readily be drawn on or applied for the purpose of her securing permanent accommodation. Accordingly the challenge to his Honour’s treatment of this amount is not shown to have involved error. However the fact of the payment makes it more likely that the respondent’s daughter could be regarded as a source from which the respondent might reasonably expect to receive financial support or accommodation in the future, if such a need arose.

24. Ground 3 also contends that his Honour’s statement (Judgment [110](4)) that the respondent did not “have any property or significant assets” was wrong because she had a half-share of the net proceeds of sale of the Baulkham Hills property, originally worth $249,779, and the superannuation benefit of $169,061. This ground misreads his Honour’s finding which is as to the respondent not having any real property or other substantial assets. The challenged finding is not contradicted by her having those other assets to which his Honour had regard, including the former as a bank deposit then totalling $135,775. The evidence did not explain how the balance may have been expended, and the primary judge made no findings as to that matter. It follows that grounds 2 and 3 are not made out.

Significance of absence of any “financial settlement” (grounds 4(a) and 5(a))

25. The appellants rely upon the following statement of Ward J (as her Honour then was) in Scott v Scott [2009] NSWSC 567 at [136]-[137]:

[136] What then is the position of a spouse, separated from her husband, in circumstances where an informal division of assets has taken place and where it would seem the marital relationship is to all intents and purposes at an end?

[137] Considering the above authorities, it seems to me that, while Mrs Scott remained the deceased’s wife even after their separation, and hence was a person for whom the community might expect the deceased to have made some provision for her continued support and maintenance in life (in recognition of the long marriage and her contribution to the building up of their joint assets and to his welfare in life), the community might also consider that a testator in the deceased’s position had done “the right thing” by effecting an amicable division of their assets prior to his death and had limited, if any, further moral duty to support his widow.

26. The authorities referred to in her Honour’s earlier consideration include Dijkhuijs (formerly Coney) v Barclay (1988) 13 NSWLR 639, an appeal from an order made before the close of evidence which permanently stayed a former spouse’s application for a family provision order where there had been a formal property settlement sanctioned by the Family Court of Australia. In Lodin v Lodin [2017] NSWCA 327, Sackville AJA (Basten and White JJA agreeing) described at [121] the propositions to be derived from Dijkhuijs as including:

[121]…

(iii) While in most cases a final property settlement in the Family Court will be seen as terminating any moral claim of a former spouse to provision from the estate of the deceased, that policy must accommodate itself to the reforming provisions of the legislation. These expressly contemplate that a former spouse may be entitled to make a claim for family provision. Thus the public policy in favour of the finality of property settlements has to compete “in all the circumstances of the case” with the claims of the former spouse. Paramountcy should not always be given to the policy of a “clean break” over other factors having regard to the statutory instruction to take account of all the circumstances.

27. Sackville AJA also observed at [128] that as “Dijkhuijs shows, a final property settlement is not necessarily an absolute bar to a family provision application being considered on its merits, but in most cases such a settlement, if otherwise unimpeachable, is likely to terminate any obligation on the deceased to make testamentary provision for his or her former spouse”.

28. Whilst in the present case there was no formal or designated “final” financial settlement between the Deceased and the respondent, the appellants submit that there was in substance such an arrangement made by the informal division of the assets of their marriage. With the exception of the Deceased’s pension and superannuation entitlements arising on his death, there were no other funds available to the Deceased. And as to those entitlements, the respondent was to receive, and received, $169,061 with a further benefit of $30,900 forming part of his estate. In such circumstances the appellants submit that any obligation of the Deceased to make testamentary provision for the respondent had come to an end, and would only have been enlivened by some unforeseen or unexpected event.

29. The primary judge’s findings and the evidence confirm that in April 2015 the parties to the marriage had engaged in a “systematic division of their jointly held assets and possessions”, demonstrating that they regarded their separation as permanent (Judgment [54]). At the same time the Deceased made clear in conversations with his children that his intention was to make a new will to reflect his fundamentally changed circumstances. Whilst the evidence does not show that the Baulkham Hills property was listed for sale as a result of that separation, it does establish that the agreement to divide their assets was to do so equally, and that those assets included the proceeds of that sale. The appellants’ evidence, extracted by the primary judge at Judgment [47] and [48], included that the Deceased announced his intention to “divide the funds from the sale of the apartment into separate accounts”, and to use his share to assist his children financially. In addition Claire Beech gave evidence that she spoke to her father about opening a bank account in his name into which his portion of those sale proceeds was to be deposited: Judgment [45].

30. In cross-examination the respondent agreed that in the weeks before the Deceased died she also had “engaged in a fairly deliberate and accurate splitting up of all of the jointly held assets”. Her text message communication to the Deceased on 26 April 2015 confirms the division of assets was to be in equal parts and applied to liabilities as well as to moneys on deposit or receivable: Judgment [52]. The “systematic” nature of the division of assets confirmed the correctness of his Honour’s conclusion that it was understood between the parties that their separation was final. That separation extended to the respondent returning rings that had belonged to the Deceased’s mother, as well as to their agreement that the respondent would keep her wedding and engagement rings in exchange for the Deceased retaining a Subaru motor vehicle.

31. The evidence does not suggest that the Deceased had any other significant assets which, at the time of the parties’ separation, might have been regarded as the subject of some further and final financial settlement. In the circumstances, the settlement agreed and effected between the Deceased and the respondent was for all practical purposes final, and for that reason to be regarded as terminating any obligation of the Deceased to make any ongoing testamentary provision for the respondent’s maintenance or advancement in life. In my view the primary judge erred in proceeding otherwise and treating the absence of a more formal “financial settlement” as critical to the determination of the appellants’ claims. Ultimately the question is whether in the circumstances, community standards and expectations required more of the Deceased and by means of a testamentary disposition. In Dijkhuijs, Kirby P (at 651) identified the critical matter as being whether the parties were to be taken to have finally settled their financial affairs on the basis that they “could go their separate ways”, each no longer restrained in dealing with their assets by any obligation to consider the financial position of the other, and thus able to “start a new life”. Although not the outcome the Deceased preferred, that was the position with the respondent at the time of his death. It follows that the argument made by these grounds should be upheld.

Respondent’s aspiration to own unencumbered home unit in Baulkham Hills (grounds 4(b), (c) and 5(b))

32. The short point made by the appellants is that taking account of the size of the Deceased’s estate and the lifestyle which he and the respondent had enjoyed during the nine and a half years of their marriage, he had no ongoing obligation to make a testamentary provision which secured permanent accommodation for the respondent in an unencumbered property worth between $500,000 and $600,000. At no stage during their marriage did the parties live in a property which was not the subject of a significant mortgage. And it could not be proposed, at the time they separated, that either of them would have been in a position to live in a property which had a value in excess of $500,000 and was unencumbered. The Deceased’s expectation was that he might move to Bathurst with his share of the sale proceeds, although it was “not financially viable” for him to retire to Bathurst without looking for work in Sydney (Judgment [48]). The reality of their economic and social circumstances, which must ultimately prevail, was that going forward the respondent could reasonably be expected to live in much more modestly priced accommodation. In my view the argument, made by these grounds of appeal, should also be upheld.

Reconsideration of the questions as to adequacy of provision

33. In deciding whether to make a family provision order the matters which may be considered (s 60(2)) include:

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

…

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

34. At the time of his death the Deceased was intending to make a new will which took account of his permanent separation from the respondent and by which he would leave his estate equally to his children: Judgment [38], [48]. He also did not intend to give his half-share of the proceeds of sale of the Baulkham Hills property to the respondent. Those proceeds were to be banked and available to be used as he chose.

35. At that time, his having no obligation to make any ongoing testamentary provision for the respondent, the natural objects of the Deceased’s testamentary bounty were his three adult children. Furthermore, that was his stated testamentary intention, and was consistent with the alteration of his existing will to exclude reference to the respondent and her two children: Judgment [49].

36. In these circumstances it is not necessary for the Court to be satisfied that adequate provision was not made for the appellants by that existing will, that the evidence establishes that each of the appellants had particular financial needs that justify the making of provision for them, either equally or on some other basis. The adult children were the only objects of the Deceased’s bounty and his testamentary intention reflected in the earlier will, and in his more recent statements, showed a desire to treat them equally and not to prefer one over the other, whatever their individual circumstances. It follows that the primary judge’s findings as to the evidence leaving the financial position of Claire Beech and her family “unclear” (Judgment [107]), and as to the questionable ability of Paul Squire to secure finance to enable him to purchase a property (Judgment [108]), are not determinative of the appellants’ claims. The position might have been otherwise if there were competing claims between the adult children, or between them and the respondent which could not be fully accommodated by the Deceased’s estate.

37. It remains necessary to consider whether the nil provision for the appellants in the Deceased’s last will was “adequate” (s 59(1)(c)). The matters relevant to that question include whether the Deceased’s share of the sale proceeds could be designated as notional estate (s 60(2)(c)). In my view it can and should be so designated. The relevant property transaction is described at [4] above. That transaction directly disadvantaged the appellants as persons entitled to apply for a family provision order because, had the Deceased severed his joint interest in the Baulkham Hills property prior to his sudden death, that interest and the proceeds of its sale would have formed part of his estate (s 83(1)(a)). That interest could have been severed by the Deceased transferring his joint interest to himself: Peter Butt, Land Law (6th ed, Law Book Co, 2010) at [1476].

38. The making of a notional estate order will not “interfere” with the reasonable expectations of the Deceased or the respondent in relation to those proceeds and their disposition (s 87(a)). Each understood that those moneys would be paid to the Deceased, to be applied or used as he saw fit. If the proposed notional estate order is not made, the respondent will retain “property” to which she was not entitled under their informal financial settlement, and is only entitled by survivorship because he died suddenly and before the completion of the sale.

39. Accordingly the making of the notional estate order would “restore” to the Deceased’s estate property to which he and his estate would have been entitled but for the timing of his unexpected death. That restoration accords with the justice of the position as between the estate and those potentially having claims on the Deceased’s bounty, including the respondent (s 87(b)), and does so in circumstances where no consideration passed from the respondent to the Deceased or his estate under the relevant property transaction (s 89(1)(b)). Taking account of that half-share of the sale proceeds as part of the Deceased’s estate, his last will does not make “adequate” provision for the proper maintenance and advancement in life of the appellants, there being no other persons having a claim on his bounty. I am also satisfied that “adequate” provision for the appellants in the circumstances extends at the very least to the making of the provisions claimed. As the Deceased’s estate is otherwise insufficient to accommodate those provisions (s 88), an order must be made that they be paid out of the notional estate.

Costs

40. As I have already observed, the costs incurred by the parties exceed the amount of the provisions to be ordered. That is a wholly unsatisfactory outcome, having regard to the legislated objective that the parties and their advisors, as well as the court, strive to maintain proportionality between the importance and complexity of the subject matter of the dispute and the legal costs incurred in determining or resolving it. For the parties to the present proceedings, that outcome means that a significant part of the subject matter of their dispute will ultimately find its way to the lawyers. Looking at the position from the perspective of the parties, it is unfortunate and perhaps short-sighted that they have been unable to reach a resolution which would have likely meant that a significant part of those legal costs remained available to them.

41. What follows are my tentative views as to the costs orders which should be made. As the parties have not had an opportunity to be heard on the question of costs, I propose they be given 14 days in which to do so, either by accepting the orders proposed or providing written submissions, not to exceed 5 pages, in support of the costs orders they seek.

42. The costs orders made by the primary judge must be set aside. Provision should be made for the payment of the appellants’ costs as plaintiffs in the proceedings below. The Court is told that those costs are nearly $60,000, calculated on the ordinary basis. That amount should be reduced by $10,000 to take account of costs incurred in relation to the vacating of the 14 November 2016 hearing date. The respondent’s costs of that adjournment were accepted to be about $9,000 and the appellants ordered to pay those costs. That costs order should remain in place. As the Deceased’s estate is insufficient to meet an order for payment of the appellants’ costs at first instance, those costs, assessed on the ordinary basis and capped at $50,000, should be paid out of the designated notional estate (ss 88(b), 99).

43. As to the costs of the appeal, the Court is told that the appellants’ costs, presumably also calculated on the ordinary basis, are in excess of $53,000, whereas the respondent’s costs are $21,000. In the absence of a justifiable explanation for that difference in costs, and I do not suggest that there may not be such an explanation, the appellants’ costs of the appeal, assessed on the ordinary basis and capped at $21,000, also should be paid out of the designated notional estate.

44. In view of the fact that the respondent is the sole beneficiary of the Deceased’s estate, as well as his executrix, I would not propose any order that she is entitled to an indemnity out of that estate for her costs of the proceedings. The litigation has effectively been inter partes litigation between the appellants and the respondent, with the respondent being the unsuccessful party. I consider that in these circumstances the ordinary rules concerning costs should apply. To the extent that there are any funds remaining in the notional estate after satisfaction of the appellants’ costs, those funds would be available as part of the estate to meet the respondent’s costs.

Conclusion

45. In the result, I propose that the appeal be allowed, that the amount representing the Deceased’s share of the proceeds of sale of the Baulkham Hills property currently held in an account with ING Australia be designated as notional estate of Richard Squire, and that provision by way of payments of $85,000 be made from that estate for each of Claire Louise Isobel Beech and Paul Frances Aubrey Squire. No interest should be payable on those amounts provided that they are paid within 28 days of the date of delivery of this judgment.

46. In accordance with the above, the orders I propose are:

1. Appeal allowed.

2. Set aside orders 1, 2, 3 and 4 made by Kunc J on 4 May 2018 and entered on 7 May 2018, this order not to affect the costs order made by Hallen J on 14 November 2016.

3. Parties to prepare and provide to the Associate to Justice Macfarlan by 5pm on 14 May 2019 short minutes formulating the orders described above.

4. In the event that the parties contend for costs orders different from or in addition to those proposed above, they are to provide to the Associate to Justice Macfarlan by 5pm on 14 May 2019 written submissions, not to exceed 5 pages, in support of the orders sought. The Court will decide what orders should be made.

47. SIMPSON AJA: I agree with Meagher JA.

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Amendments

01 May 2019 - addition of "notional" in [19]

Decision last updated: 01 May 2019