William John Morris v Ken Murray; Louise Vergis v Soula Morris
[2014] NSWSC 756
•10 June 2014
Supreme Court
New South Wales
Medium Neutral Citation: William John Morris v Ken Murray; Louise Vergis v Soula Morris [2014] NSWSC 756 Hearing dates: 29 May 2014; 30 May 2014 Decision date: 10 June 2014 Jurisdiction: Equity Division Before: Young AJA Decision: Order extending time for applicant in second proceedings to make application for provision. Order that provision for applicants in both proceedings be made out of out deceased's estate. Applicants' costs to be paid on the party/party basis.
Catchwords: SUCCESSION - the applicants were the recipients of small legacies under the Will of their father - the residuary of estate was given to the defendant in the second proceedings, their sister - whether order for family provision should be made in favour of the applicants where the personal circumstances of the applicants have deteriorated dramatically since the time of the Will was made, and where the reasons stated within the Will for benefiting one child substantially more than the others are inaccurate as to the relative extent to which the deceased benefited his children throughout his lifetime.
COSTS - costs amassed in the two proceedings unusually high - whether applicants' costs should be paid on party/party basis in order to reduce the extent to which residuary received by defendant in second proceedings will be reduced.Legislation Cited: Succession Act 2006 (NSW) s 59, s 59(1)(c) Cases Cited: Singer v Berghouse [1994] HCA 40; 181 CLR 201 Category: Costs Parties: William John Morris (plaintiff)
Ken Murray (defendant)
Louise Vergis (plaintiff)
Soula Morris (defendant)Representation: Counsel:
Mr Brown (plaintiff - William John Morris)
Mr Rollison (defendant - Ken Murray)
Mr Nguyen (plaintiff - Louise Vergis)
Mr Rollison (defendant - Soula Morris)
Solicitors:
Koffels Solicitors & Barristers (plaintiff - William John Morris)
Peter Papadopoulos & Co. Lawyers (defendant - Ken Murray)
Legal and Company (plaintiff - Louise Vergis)
Peter Papadopoulos & Co. Lawyers (defendant - Soula Morris)
File Number(s): 2013/00198166; 2013/00210261 Publication restriction: None
Judgment
These are two applications made under the Family Provision portions of the Succession Act 2006 seeking provision out of the estate of the late Arthur Morris who died on 9 July 2012.
The deceased had three children, Louise Vergis now aged 54 (one of the plaintiffs), William Morris aged 53 (another plaintiff), and Soula Morris aged 50 (a defendant). The deceased's wife Helen died in 2007.
The deceased made and published his last will on 20 February 2007. The Will gave each of the plaintiffs $10,000 and the balance was given to Soula.
Paragraph 5 of the Will is as follows:
I HAVE after proper, clear and considered reflection intentionally benefited my daughter SOULA MORRIS more than my son WILLIAM JOHN MORRIS and my daughter LOUISE JANE VERGIS because of the following reasons: -
(a) My daughter SOULA MORRIS has been living with me in my later years and has looked after me, being of great comfort and support to me.
(b) I have settled property and made cash contributions to my children WILLIAM JOHN MORRIS and LOUISE JANE VERGIS during my lifetime.
(c) My other children have their own families and busy lives and I request that they respect my wishes as set out in this my Will and not challenge or make any further claim on my estate beyond the provisions of this my Will.
The deceased's estate consists of his house at Beverley Hills which was estimated for probate purposes in 2012 at $660,000 to $690,000 plus a very small amount of furniture. Louise Vergis said that there was also a bank account of $150,000 but the evidence to support that allegation is extremely thin and I do not accept that it is so. There is contest over the valuation of the testator's home, which is substantially his only asset, and I will return to this in due course.
The circumstances of the deceased's three children as claimed by them can be summarised as follows.
Louise was formerly employed by Qantas but was then made redundant in March 2013 and has not worked since then. She has been married to her husband Jim for 37 years and has three adult children, none of whom is still dependant on her. She received a redundancy payment of approximately $60,000. She says she has about $40,000 in the bank. She has superannuation of about $135,137 and Qantas shares worth about $1,373. Louise's husband Jim is self-employed and earns about $42,000 as a Painter and Decorator.
Louise and her husband own a car worth $13,000. They own their own home at Prestons and another house at Prospect. Louise reckons the Prestons property is worth $450,000 less a mortgage of $155,000 and the Prospect property is valued at $370,000 with a mortgage of $275,000. The monthly expenses of Louise and her husband are $6,421. Louise has moderately severe health problems and mobility problems. It is unlikely that she would be able to do any further work unless she had a desk job.
William lives in the Gold Coast Hinterland in a unit worth about $230,000 subject to a mortgage of $92,750. He earns about $1,300 per month as a self employed Marine Instructor. Up until 2009 he was living in a de facto relationship with a lady who seems to have subsidised his living expenses. He said that presently his monthly expenses exceed his income by about $300. He has been making up the shortfall by redrawing on his home loan. This has meant that his capital has increased in the last year from $82,000 to $92,750. He was cross-examined as to whether he would be better off in salaried employment. He did not agree. However employment on the Gold Coast is not the easiest to obtain especially for a man in his early fifties so that I was not impressed with the allegation that he might earn more than he is earning at the moment.
Soula works as a receptionist at the Randwick Labour Club at $758 net per week, that is she is netting about $39,500 a year. She has been living apparently rent-free since 2007 in the deceased's house but she has been paying rates and taxes and other expenses of the property. She has her own car. Her expenses are $601 a week. She has debts of $37,000. She is unmarried and has no current permanent boyfriend and no dependants. She has superannuation of about $300,000.
I received in evidence the usual solicitor's affidavits as to their estimated costs. Mr Morris' solicitor claimed $62,000.(on the indemnity basis) Mrs Vergis' solicitor $47,000 and the defendant's solicitor $33,000, a total if allowed would be $142,000.
A major issue is the present value of the deceased's house. In accordance with usual practice no formal valuations were tendered, but there are three appraisals before the court. The defendant's evidence produced a value of $670,250. Mr Morris' appraisal is $860,000 and Mrs Vergis' appraisal $785,000. It is impossible to fix the valuation with any mathematical accuracy.
Seeing that the property was bought for $660,000 I think about three years before death even allowing for rise in CPI and property values generally it would seem to me that Mr Morris' appraisal is wide of the mark. I think the best I can do is to discount Mrs Vergis' valuation by about 8-10% (say 9%) for the estate agents' optimism, this would bring the value down to $715,000.
This figure also gels with a gradual increase from the original purchase money.
Thus for the purposes of applying principles I will take the estate at $715,000 gross. Counsel reckon that the cost of sale will be about $20,000 and it is clear that the property will be sold. That brings the available estate down to $695,000.
In addition, the deceased set aside some $30,000 to cover his funeral expenses and to provide for the two legacies of $10,000 each to Louise and William.
This money passed to Soula. She was cross examined on it. I found her evidence contradictory and confused. In my view she did receive $30,000 on trust to pay the funeral expenses and the legacies. The funeral expenses have been paid, but the $20,000 must form part of the deceased's estate.
Thus we are dealing with a gross estate of $715,000.
Then there are the costs of the proceedings which if allowed would be another $140,000 so that there is approximately $575,000 available for the beneficiaries.
As the Will stands, Soula would receive $555,000 and each of Louise and William $10,000.
Soula gave evidence that she did not wish to continue to live in the house, but that she would prefer to have her own unit in the Eastern Suburbs. This makes my job a little easier because I am dealing with a pot of money rather than working out whether Soula should continue to live in the house in which she has been living in the Beverley Hills area for some time.
I am not at all sure that a wise or just testator would think that it was appropriate in the light of other claims on his bounty to provide Soula with a home in the Eastern Suburbs rather than in the Beverley Hills District.
Soula gave evidence that from her research a one-bedroom unit in the Eastern Suburbs would cost about $500,000. Units in the Beverley Hills area would be about $325,000. Again these were rough figures because the cost of valuations is so prohibitive.
Section 59 of the Succession Act 2006 empowers the court on an application by an eligible person to make an order that provision be made for the applicant for his or her proper maintenance, education or advancement in life.
There is no doubt that each applicant is an eligible person.
Section 59(1)(c) of the Succession Act requires the court to consider whether adequate provision has been made for each applicant at the time it is considering the matter.
The High Court in Singer v Berghouse [1994] HCA 40; 181 CLR 201 at 209 said that when a court is considering this question under s 59, the court is involved in a two stage process. The first stage is whether the provision made for applicant is inadequate for his or her proper maintenance, education and advancement. The second is if the answer to the first enquiry is "yes" what provision ought the deceased have made for the applicant, and accordingly what provision should the court make for the applicant.
At the date when the deceased made his Will, the two elder children were in a far better situation than they are at present. Louise had a good job at Qantas, which was earning her substantial income, she had a stable marriage and her children were either off her hands or close to that situation. At the same time William was apparently in good employment, and he had a steady relationship with a lady who was ensuring that he lived in comfortable circumstances.
As such, one can understand the thinking behind clause 5 in the Will, or at least one can up to a certain point. However, at first blush, clause 5(b) seems to suggest that the deceased gave substantial monies to Louise and William but not to Soula. The deceased certainly did give monies to Louise and William but at least by the time of his death he had given even more to Soula. He gave her $72,000 when he sold his former home in 2010 and he may have given her other monies at other times.
Thus the stated reasons for why Soula was to get virtually the whole of the estate had either changed since the making of the Will or alternatively had been misstated in the Will. This is a significant matter.
There has been some recent discussion in the Court of Appeal as to whether the test in Singer v Berghouse still survives the changes made by the Succession Act, but for present purposes there is no need to delve into those matters and no counsel did so.
Applying the two-stage test, whilst it may have been the case when the Will was made that $10,000 apiece might have sufficed, the statute requires this court to assess matters as at the time of trial.
At today's date circumstances with respect to both William and Louise have drastically changed since the Will was made in 2007. William has lost his support from his former girlfriend, Louise has been retrenched and her health has strongly deteriorated. Apart from that, the gift of $72,000 to Soula (made in 2010 after the Will was made) has minimised or removed the significance of any benefaction that was given to William and Louise.
Accordingly the first stage of the two-fold test has been made out by the applicants.
So far as the second stage is concerned there is just not enough money in the estate to meet the legitimate wants and needs of each of the three children.
Louise says she would like $165,000 to pay off the mortgage on her home. William says that he would like $92,750 to pay off his mortgage, $25,000 for a car, $75,000 for a boat and $50,000 as a buffer to enable him to avoid drawing on capital to meet his current expenses. This is a total of about $247,000. Soula would like $500,000 to buy a unit in the Eastern Suburbs plus a bit more for furnishing or at least $325,000 to buy a unit in the Beverley Hills area plus an additional amount for furnishing etc.
What would a wise and just testator have done in this situation?
As the Will shows, he would have placed great significance on the fact that Soula was caring for him in the last years of his life. There were counterveiling benefits to Soula in that she lived rent-free but on the other hand she was paying the rates and taxes and other outgoings and also she was doubtless spending considerable time looking after her father rather than using her "spare" time for her own enjoyment. However she is in steady employment (she has been in the one job for 35 years) but her wages are not that great only $39,500 per year. She has considerable superannuation accumulated but she will not be able to touch that for another 15 years or so. She has amassed some heavy debts in the amount of $37,000.
It seems to me that all these factors mean that the wise and just testator would have given prime consideration to Soula's needs and Soula's needs are at least $325,000 to purchase a unit and say another $50,000 to meet some current debts and for furnishings, legal expenses etc. which brings the total up to $375,000.
The next needy person in the family is William. It is put critically of William that he really should be getting a more highly paid job. This is very easy to say and there may be some truth in it, but it has not been demonstrated that there are jobs in the area where William is which would be more highly paid. On the other hand it is quite clear that William cannot go on living the way he is, that is, resorting to capital at a high rate in order to maintain his current lifestyle.
The suggestion is that if William had the funds to buy a boat he could expand his business by also offering fishing trips and other leisure trips in the Southport area. Unfortunately it seems to me that this is so much speculation. There is speculation as to whether there will be increased water activity with the proposed cruise ship terminal in Southport, there is no analysis as to whether the pleasure boat industry for tourists and fisherpersons is able to support the proposed venture and if so, how profitable it would be.
Thus, I do not see that a wise and just testator would have thought that buying a boat for $70,000 would be the way to advance William. Furthermore, $25,000 for a car for a single person is again more than a wise and just testator might allow, he might consider perhaps $10,000 to $15,000 if he thought that a new car was needed.
However if one made an order for William to pay off his mortgage and gave him a further $22,000 to buy a car and as a buffer, that would mean a legacy of $115,000 and I consider that that, in all the circumstances, is about the right order of what the testator ought to have done and thus what the court should do in his place.
If one then tries to ensure that Soula receives at least $375,000 (that is $325,000 for a unit and $50,000 for a buffer) that has used up $490,000. That only leaves, on the figures that I have adopted, a further $85,000 and for a legacy of that amount to Louise.
Fortuitously that is an amount which would enable her to pay off about half her mortgage on her home and she could use some of the money she has in the bank to pay off a greater amount if she so wished.
Accordingly, it seems to me that the appropriate order is that in lieu of the legacies left to them in the Will, William should receive a legacy of $115,000, and that Louise should receive a legacy of $85,000.
Although I have arrived at this conclusion by the reasoning process I have stated, I have checked this result with other ways of reaching a fair result. I believe the result fits in with the comparative needs of William and Louise. Louise is supported by her husband and has an income stream through her husband, even if she does not obtain further work herself, and although she will be the only one whose home may bear a small mortgage, she is in many ways better off than the other two children.
I am conscious however that the figures with which I have been working are to a degree rather rubbery and that any short fall will be borne by Soula.
There are two main areas of "rubbery figures" first the estimate of the sale price of the property. If it does not realise $715,000 before expenses then the effect of an order giving legacies to William and Louise will mean that Soula will bear the deficit. The other "rubbery figures" are the estimate of $20,000 for the expenses of sale, the $20,000 that has been retained to pay the initial legacies set out in the Will for William and Louise, and the costs.
It seems to me that the costs are far too high for this sort of case and I consider that the uncertainty about Soula receiving $375,000 would be reduced if I were to order that the applicants only receive their costs on a party and party basis.
I will stand the matter over to Friday 13 June 2014 at 9:30am for Short Minutes to be brought in to carry out what I have said in these reasons. The short minutes should: -
(a) In the case of Louise, include an order extending the time for filing the application.
(b) In both cases in lieu of the provision made in the Will provide for an order that the applicant receive a legacy of $115,000 or $80,000 as the case may be.
(c) An order that the legacy not carry interest if paid within 30 days of the receipt of the proceeds of the sale of the Beverley Hills home.
(d) That the applicants' costs be paid on the party and party basis.
(e) Liberty to apply.
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Decision last updated: 17 June 2014
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