Has adequate provision not been made for Bradley?
42It is next necessary to consider what is sometimes referred to as the jurisdictional question. This is set out in sub-paragraph [10(6)] above, namely whether the Court is satisfied, at the time when the Court is considering the application, that the Provision for Bradley is not adequate for his proper maintenance, education or advancement in life. If that question is answered "yes", then the Court's discretion to make a family provision order in favour of Bradley is enlivened.
43In Verzar v Verzar [2014] NSWCA 45, Meagher JA (with whom Macfarlan and Barrett JJA agreed) summarised the legal principles governing this stage of the inquiry:
39. The primary judge concluded that Stephen's will did not make adequate provision for the respondent's proper maintenance, education and advancement in life. Whether such provision has been made requires an assessment of the applicant's financial position, the size and nature of the deceased's estate, the relationships between the applicant and the deceased and other persons who have legitimate claims upon his or her bounty and the circumstances and needs of those other persons: see Tobin v Ezekiel [2012] NSWCA 285; 83 NSWLR 75 at [70] and McCosker v McCosker [1957] HCA 82; 97 CLR 566 at 571-572; Singer v Berghouse [1994] HCA 40; 181 CLR 201 at 210; and Vigolo v Bostin [2005] HCA 11; 221 CLR 191 at [16], [75], [112]. Such an assessment is necessary because of the inter-relation between "adequate provision" and "proper maintenance". Whilst the inquiry as to what is "adequate" directs particular attention to the needs of the applicant, what is "proper" requires regard to all the circumstances of the case, and in particular the size and nature of the estate and the needs of the other beneficiaries or potential beneficiaries. As was observed by Sackville AJA in Foley v Ellis [2008] NSWCA 288 at [88], a court cannot consider the propriety and adequacy or inadequacy of any testamentary provision for an applicant in isolation from the resources and needs of the other claimants on the deceased's bounty.
44In addition to the passage from Verzar quoted in the preceding paragraph [33] above, I also respectfully adopt what Hallen J said in Camernik v Reholc [2012] NSWSC 1537 both as to the general approach to be adopted to applications for family provision and judicial observations concerning claims by adult children.
154. Yet, in considering the question, the nature and content of what is adequate provision for the proper maintenance, education or advancement in life of an applicant, is not fixed or static. Rather, it is a flexible concept, the measure of which should be adapted to conform with what is considered to be right and proper according to contemporary accepted community standards: Pontifical Society for the Propagation of the Faith v Scales at 19; Walker v Walker (NSWSC, Young J, 17 May 1996, unreported); Vigolo v Bostin at 199 and 204; Stern v Sekers; Sekers v Sekers [2010] NSWSC 59.
155. An important consideration is whether, in all the circumstances, the community expectation would be for greater benefaction to have been made for the proper or adequate provision of the person seeking provision. Gleeson CJ observed in Vigolo v Bostin, at 199, that the justification for interference with freedom of testation is to be found in the failure of a deceased to meet the obligations, which the community would expect in terms of maintenance, for those persons within the class of eligible persons. The process requires the court to "connect the general but value-laden language of the statute to the community standards".
156. As Allsop P said in Andrew v Andrew, at [16]:
"If I may respectfully paraphrase Sheller JA [in Permanent Trustee Co Limited v Fraser (1995) 36 NSWLR 24 at 46F-47B], the Court in assessing the matter at s 59(1) and the order that should be made under s 59(1) and (2), should be guided and assisted by considering what provision, in accordance with prevailing community standards of what is right and appropriate, ought to be made. This, Sheller JA said ... involved speaking for the feeling and judgment of fair and reasonable members of the community. It is to be emphasised that s 59(1)(c) and s 59(2) refer to the time when the Court is considering [an application for a family provision order] and the facts then known to the Court. The evaluative assessment is to be undertaken assuming full knowledge and appreciation of all the circumstances of the case. This ... makes the notion of compliance by the testator with a moral duty (on what he or she knew) apt to distract from the statutory task of the Court."
157. In all cases under the Act, what is adequate and proper provision is necessarily fact specific. An inflexible approach cannot be taken in assessing the questions to be answered.
158 The Act is not a "Destitute Persons Act", and it is not necessary, therefore, that the applicant should be destitute to succeed in obtaining an order: In re Allardice, Allardice v Allardice (1909) 29 NZLR 959 at 966.
159. In relation to a claim by an adult child, the following principles are useful to remember:
(a) The relationship between parent and child changes when the child leaves home. However, a child does not cease to be a natural recipient of parental ties, affection or support, as the bonds of childhood are relaxed.
(b) It is impossible to describe in terms of universal application, the obligation, responsibility, or community expectation, of a parent in respect of an adult child. It can be said that, ordinarily, the community expects parents to raise, and educate, their children to the very best of their ability while they remain children; probably to assist them with a tertiary education, where that is feasible; where funds allow, to provide them with a start in life, such as a deposit on a home, although it might well take a different form. The community does not expect a parent, in ordinary circumstances, to provide an unencumbered house, or to set his, or her, children up in a position where they can acquire a house unencumbered, although in a particular case, where assets permit and the relationship between the parties is such as to justify it, there might be such an obligation: McGrath v Eves [2005] NSWSC 1006; Taylor v Farrugia [2009] NSWSC 801.
(c) Generally, also, the community does not expect a parent to look after his, or her, child for the rest of the child's life and into retirement, especially when there is someone else, such as a spouse, who has a primary obligation to do so. Plainly, if an adult child remains a dependent of a parent, the community usually expects the parent to make provision to fulfil that ongoing dependency after death if he or she is able to do so. But where a child, even an adult child, falls on hard times, and where there are assets available, then the community may expect a parent to provide a buffer against contingencies; and where a child has been unable to accumulate superannuation or make other provision for their retirement, something to assist in retirement where otherwise they would be left destitute: Taylor v Farrugia.
(d) If the applicant has an obligation to support others, such as a parent's obligation to support a dependent child, that will be a relevant factor in determining what is an appropriate provision for the maintenance of the applicant: Re Buckland Deceased [1966] VicRp 58; [1966] VR 404 at 411; Hughes v National Trustees Executors and Agency Co. of Australasia Ltd [1979] HCA 2; (1979) 143 CLR 134 at 148; Goodman v Windeyer at 498, 505. But the Act does not permit orders to be made to provide for the support of third persons to whom the applicant, however reasonably, wishes to support, where there is no obligation to support such persons: Re Buckland Deceased at 411; Kleinig v Neal (No 2) [1981] 2 NSWLR 532 at 537; Mayfield v Lloyd-Williams, at [86].
(e) There is no need for an applicant adult child to show some special need or some special claim: McCosker v McCosker; Kleinig v Neal (No 2), at 545; Bondelmonte v Blanckensee [1989] WAR 305; and Hawkins v Prestage (1989) 1 WAR 37 per Nicholson J at 45.
(f) The adult child's lack of reserves to meet demands, particularly of ill health, which become more likely with advancing years, is a relevant consideration: MacGregor v MacGregor [2003] WASC 169 (28 August 2003) at [181], [182]; Crossman v Riedel [2004] ACTSC 127 at [49]. Likewise, the need for financial security and a fund to protect against the ordinary vicissitudes of life, is relevant: Marks v Marks [2003] WASCA 297 at [43]. In addition, if the applicant is unable to earn, or has a limited means of earning, an income, this could give rise to an increased call on the estate of the deceased: Christie v Manera [2006] WASC 287; Butcher v Craig [2009] WASC 164 at [17].
(g) The applicant has the onus of satisfying the court, on the balance of probabilities, of the justification for the claim: Hughes v National Trustees, Executors and Agency Co of Australasia Ltd at 149.
45Applying the principles just set out, the Court is not satisfied that the Provision is not adequate for Bradley's proper maintenance, education or advancement in life. The question posed in sub-paragraph [10(6)] above is answered "no". The reasons for this conclusion are set out in the following paragraphs.
46Bradley proposed that there were seven interrelated reasons for concluding that adequate provision had not been made for his proper maintenance, education or advancement in life:
(1)Bradley and Leanne were in considerable debt, had only a modest pool of assets and had been able to make only limited provision for their retirement.
(2)Bradley's ability to provide for his retirement was unlikely to increase or greatly increase.
(3)There was a real risk that Mr Cooke would change his will in a way that reduced or removed Bradley's entitlement so that there was a real risk that Bradley would ultimately receive nothing from the estate in circumstances where Bradley would not be an "eligible person" in relation to Mr Cooke's estate.
(4)Mrs Cooke's estate was not a small one if the notional estate was taken into account.
(5)The "net assets of the marriage" were approximately $3,000,000 and a provision of approximately one fifth would still leave Mr Cooke with substantial assets.
(6)Under the mutual wills Bradley was ultimately to receive 20% of the "assets of the marriage".
(7)There was no evidence that Mrs Cooke or her estate "received the benefit" of the borrowings of $1,265,000 from NAB and, furthermore, Mr Cooke had not given proper evidence of how the funds had been applied.
47In addition, Bradley drew attention to the decision of the Court of Appeal in Smilek v Public Trustee [2008] NSWCA 190, which recognised as legitimate two adult brothers' real need for advancement in life by the provision of additional funds for their retirement.
48Mr Cooke's position was summarised in the written submissions provided on his behalf:
The defendant does not comprehend why it is that two people in good health and of working age are unable to manage their financial affairs in circumstances where they are able to own an investment property. The notion that provision should be made for the plaintiff in family provision proceedings to make good an investment property for sale to "top up" superannuation funds is contrary to "community values" ... The community would not expect the Court to radically interfere with the needs of a widower in order to satisfy the wishes of an adult stepson, particularly where the stepson has a non-working wife and an investment property.
49It was further submitted for Mr Cooke that any significant provision for Bradley would have an adverse impact upon Mr Cooke's living standards and that the size of the estate (including notional estate) was such there were insufficient funds with which to make provision for Bradley. While it depends upon the size of any proposed provision, I should record immediately that I do not accept either of these submissions. The size of the notional estate (see paragraph [4] above) is substantial and the mix of assets available to Mr Cooke is such that, for example, a provision of $189,000 could be made without a deleterious effect on Mr Cooke. It was suggested that $250,000 invested this year in superannuation along with 9% annual contributions from Bradley's wages would yield approximately $700,000 by the time Bradley turned 66. Bradley currently has $61,000 in superannuation (see paragraph [29] above).
50However, having dismissed those aspects of Mr Cooke's submissions, for reasons which I will now develop the Court accepts his primary submission that in the circumstances of this case the application of community standards or expectations does not support the conclusion that adequate provision has not been made for Bradley's proper maintenance and advancement in life.
51While I shall refer to some of these matters again in applying the principles set out in paragraphs [43] and [44] above, the reasons I do not accept some of Bradley's submissions are:
(1)Leanne's inheritance of $180,000 from her late mother will substantially eliminate most of the liabilities which are causing Bradley and Leanne financial difficulty and meet Bradley's identified needs save for the question of a supplement to his superannuation. Any remaining drain on his financial resources (including an inability to supplement his superannuation) is a product of their own decision to retain the Katoomba Property rather than to sell it and "cut their losses".
(2)The evidence does not support Bradley's submission that there is a real risk that Mr Cooke will change his will in a way that reduces or removes Bradley's entitlement under it. On the contrary, the Court accepts Mr Cooke's evidence that he has no present intention to change his will and that, at least at the moment, he intends to honour the arrangement between him and Mrs Cooke that their five children should ultimately benefit equally. However, the Court also recognises (as did Mr Cooke) that for entirely proper reasons, including the possibility of re-marriage, circumstances may change. Furthermore, the Court accepts that to the extent there was a binding agreement for mutual wills, Mr Cooke remains absolutely entitled to deal with the assets during his lifetime as he sees fit (Birmingham v Renfrew (1937) 57 CLR 666 at 689 per Dixon J).
(3)As developed in paragraphs [17] to [19] above, the "net assets of the marriage" approach is a distraction which does not reflect the Court's task under the Act.
(4)Contrary to Bradley's submission, the fact that there is a real prospect that he will ultimately receive 20% of Mr Cooke's estate is a factor to be taken into account which weighs against the making of any provision for him from Mrs Cooke's estate.
(5)For the reasons set out in paragraph [16] above, the attack made on Mr Cooke in relation to the NAB Mortgage and how the funds from it have been applied has not been made out.
52Turning to approach the question by reference to the principles set out in paragraphs [43] to [44] above, the critical matter for consideration is Bradley's financial position. Leanne's inheritance of $180,000 significantly changes Bradley's financial position from what might otherwise have been the subject of the Court's consideration. Bradley accepted in cross-examination that he and Leanne would apply the $180,000 first in reduction of their credit card debts and thereafter to matters such as his dental work, the purchase of white goods and repairs to the Katoomba Property.
53Relying on that evidence the Court will assess Bradley's financial position on the basis that the $180,000 will be applied to reduce his and Leanne's credit card debts (see paragraph [30] above) and for his proposed dental work and the foreshadowed maintenance and improvements at the Blacktown House and Katoomba Property (see paragraph [35] above). This would leave a balance of $35,700 to be applied as they saw fit, noting they would otherwise be left with the mortgages over the Blacktown House ($74,000), the Katoomba Property (full drawn to $367,000) and the further line of credit of funds expended in relation to the Katoomba Property (fully drawn at $163,000).
54Analysing Bradley's financial position in this way means that of his total outstanding debt, only 12% would relate to the Blacktown House with the balance being referable to the Katoomba Property. If, however, the Katoomba Property were to be sold for the $360,000 postulated by Bradley (see paragraph [33] above), his remaining debt would be reduced by that amount, leaving the Blacktown House to secure its own mortgage debt ($74,000) and a balance of $170,000 in debt referable to the Katoomba Property. This total debt of $214,000 would be secured against the Blacktown House valued at $460,000.
55The preceding paragraph demonstrates that a substantial part of Bradley's (and Leanne's) financial predicament - including, the Court finds, Bradley's inability to make a larger contribution towards his superannuation - extends from their expenditure on and continuing commitment to the Katoomba Property. That predicament could be significantly eased if they decided to sell the Katoomba Property, even in the current market. However, they continue to wish to spend money on and incur interest in relation to an investment which, while it may have brought them some tax benefits, has always run at a loss and failed to achieve any capital appreciation in twelve years.
56While they are entitled to do with their income and assets as they wish, viewed objectively their decision to retain the Katoomba Property is economically questionable and has the effect of making Bradley's financial position much worse than it otherwise would be. That raises the question of how the Katoomba Property and its impact upon Bradley's financial position should be treated for the purposes of determining whether adequate provision was not made for Bradley under Mrs Cooke's will.
57In Walker v Walker [2005] NSWSC 1024, McLaughlin AsJ said:
43 It is not for the Court to tell people how they should conduct their lives or how they should manage their financial affairs. But if the Plaintiff seeks to obtain an order which will disturb the testamentary provisions of the Deceased and dispositions made by her during her lifetime, then the Court must consider whether the present financial arrangements of the Plaintiff are such that the Plaintiff can be said to have been left without adequate provision for his proper maintenance.
44 Where, as here, the Plaintiff chooses to maintain a lifestyle, as a farmer, which results to him in little financial return, in circumstances where, by giving up the farm he could achieve a greater income from investments without the necessity for conducting either the cartage business or the farming business, I am not satisfied that the Plaintiff has demonstrated that he has been left without adequate provision for his proper maintenance.
58A similar situation was considered by EM Heenan J in Daniels v Hall (as administrator of the estate of Daniel) [2014] WASC 152 where the plaintiff's poor financial condition was due to his insistence upon operating what the evidence disclosed to be an unviable farming operation which had suffered due to the plaintiff's poor farming management and practices.
59Having regard to the principles set out in paragraph [43] above, the impact of Bradley and Leanne's decision to retain the Katoomba Property is captured in this question: did Mrs Cooke fail to meet the obligation, which the community would expect in terms of maintenance and advancement, for Bradley to the extent that Bradley's financial need is the product of Bradley's own economic decisions including where Bradley could significantly ameliorate his financial position by selling the Katoomba Property but has advisedly decided not to do so? In this case the Court concludes that the answer to the question thus posed is "No".
60In other words, I am firmly of the view that insofar as Bradley's (and Leanne's) financial position is attributable to their expenditure on and continuing commitment to the Katoomba Property, provision that would be considered right and proper according to contemporary community standards would not extend to provision to alleviate the need generated by what the Court finds is a deliberate but economically risky course of action on the part of Bradley and Leanne. While respecting the right of Bradley and Leanne to organise their financial affairs as they wish, in the case of the Katoomba Property the Court considers that those standards would reflect a community expectation that as a competent adult Bradley should take responsibility for and accept the consequences of the investment decision rather than look to provision out of Mrs Cooke's estate to ameliorate those consequences. Those consequences are both a significant debt and interest burden and a commensurate inability to build up his superannuation.
61Applying McLaughlin AsJ's approach in Walker, the conclusion which I have just expressed would be sufficient to justify answering the question set out in sub-paragraph [10(6)] above "No" and dismiss Bradley's summons. That is the first basis upon which I reach that conclusion.
62However, an alternative approach, is to look at Bradley's financial circumstances excluding the impact of the Katoomba Property. Approaching the matter in that way, I reach the same conclusion for slightly different reasons.
63This alternative approach clearly raises the issue of whether or not some provision should be made to ensure he has adequate superannuation for his retirement. Although there was no expert evidence to this effect, I will accept for the purposes of this part of the argument Bradley's submission that an amount of $700,000 at retirement will be adequate for Bradley and that a current superannuation account balance of $250,000 would, with 9% annual contributions based on his current wage, yield approximately the desired amount of superannuation by 2036 (when Bradley will be 66). This result would be achieved by making a provision for Bradley of $189,000, given that he currently has superannuation of $61,000 (see paragraph [29] above).
64There is no doubt that, in appropriate cases, ensuring that an adult son has sufficient funds for retirement is a proper matter for an order for provision under the Act. In the present case the extent of Mrs Cooke's notional estate means that such a provision could be made with minimal impact on both Mr Cooke's lifestyle and the overall scheme of the mutual wills to the intention that Mr Cooke's estate is to go to Bradley and his siblings equally.
65However, even granting all of the matters referred to in the preceding paragraph, the Court is of the view that community standards would not have required Mrs Cooke to have made provision for Bradley to assist in building up his superannuation. Rather, those standards would, in the circumstances of this case, respect the overall testamentary intention demonstrated by Mrs Cooke's will made in mutual terms with Mr Cooke to the effect that Mr Cooke was to have the benefit of her estate and then everything was to pass to Bradley and his siblings equally.
66The features of this case which lead to the conclusion in the preceding paragraph are:
(1)On the assumption that Bradley retires at 65, he has 21 years of productive working life ahead of him. He is currently employed and employable and enjoys good health. While it is always possible he may become unemployed, the evidence does not support the conclusion that there is any particular risk of this.
(2)He has $61,000 superannuation and Leanne has $109,000 superannuation (see paragraph [29] above). He will continue to add to that over his working life.
(3)Bradley and Leanne have no dependents and own their own home with a "modest" and "manageable" mortgage..
(4)There is no impediment to Leanne seeking paid employment if she wished to do so.
(5)Assessing the situation at the date of the hearing, the Court is satisfied that Mr Cooke intends to honour his agreement with Mrs Cooke that their combined estate should pass to Bradley and his four siblings equally. The Court reaches that conclusion taking into account the possibility of innocent reasons why that might not occur and that the size of that estate may be depleted in the ordinary course of meeting Mr Cooke's needs for the rest of his life. However, the Court concludes that the prospect of the reasons which motivated Bradley in bringing these proceedings becoming a reality is more theoretical than real.
67For these reasons, even when the Katoomba Property and its financial consequences for Bradley are taken out of consideration, the same conclusion is reached to the effect that, while no provision has been made for Bradley in Mrs Cooke's will, the Court is not satisfied that Mrs Cooke has not made adequate provision for Bradley's proper maintenance and advancement in life. Therefore, the question posed in sub-paragraph [10(6)] above must still be answered "No".