Court of Appeal (WA)|2013-02-04|Before: Newnes JA

CHAPPELL -v- ALEXANDER ROBERT HEWSON by his next friend CHRISTOPHER ROBERT HEWSON [2013] WASCA 15 (4 February 2013)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : CHAPPELL -v- ALEXANDER ROBERT HEWSON by his next friend CHRISTOPHER ROBERT HEWSON [2013] WASCA 15

ALEXANDER ROBERT HEWSON by his next friend CHRISTOPHER ROBERT HEWSON

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : HEWSON -v- CHAPPELL [2012] WASC 86

Succession law - Application under Inheritance (Family and Dependants Provision) Act 1972 (WA) - Provision made for respondent from estate - Sufficiency of evidence for assessment of amount of provision - Time from when interest is payable on provision made under Inheritance (Family and Dependants Provision) Act 1972 (WA) - Whether 'executor's year' principle applies to applications under s 6(1) of the Inheritance (Family and Dependants Provision) Act 1972 (WA)

First Appellant : Mr C P Shanahan SC & Mr A P Hershowitz

Second Appellant : Mr C P Shanahan SC & Mr A P Hershowitz

Bondelmonte v Blanckensee [1989] WAR 305

Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194

Devenish v Devenish [2011] WASC 129

Devereaux-Warnes v Hall (No 3) [2007] WASCA 235

Goodman v Windeyer [1980] HCA 31; (1980) 144 CLR 490

Hewson v Chappell [2012] WASC 86

Kitson v Franks [2010] WASCA 134

Lawrence v Lawrence [2004] WASC 90

Murdocca v Murdocca (No 2) [2002] NSWSC 505

Pacella v Sherborne (No 2) [2010] WASC 186

Re Richards (1869) LR 8 Eq 119

Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201

Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491

1 This appeal concerns the provision made in the will of Mr Ronald Chappell for his grandson, Mr Alexander Hewson. When the testator died, on 6 May 2009, Alexander was 9 years old. It was not in dispute that the testator did not provide adequately for Alexander by a legacy of $50,000. Alexander's mother had predeceased her father, the testator. Alexander's father is on a disability pension and he has very limited means. In all the circumstances, the learned Master was correct to make provision from the estate for Alexander under s 6(1) of the Inheritance (Family and Dependants Provision) Act 1972 (WA) (the Inheritance Act) for Alexander's proper maintenance, support, education or advancement in life.

2 This central issue in this appeal is whether the discretion of the learned Master miscarried in the provision of $1 million that his Honour made for Alexander. That provision was from the estate which was valued at the date of death at $4,877,376.90. The Master's conclusion was based upon assessing provision in sub-categories of (i) housing, (ii) education, (iii) living expenses, and (iv) expenses of the Public Trustee. The appeal must be allowed because in each of the first three categories the Master's conclusions cannot be supported by the evidence before him. In the conclusion to these reasons we explain the difficult situation created by the lack of evidence presented by the parties.

3 The issue in the cross-appeal concerns the date from which interest should run on the provision under s 6(1) of the Inheritance Act. Nearly three years had elapsed from the date of the testator's death until the date of delivery of the learned Master's reasons. As the learned Master, with respect, correctly concluded, the executor needed to take steps to sell various properties during that period. The appropriate time from which interest should run is from the date of the Master's order (as varied by these reasons). In the circumstances of this case, this conclusion is not affected by the principles of construction of testamentary instruments or the 'executor's year' principle which sometimes applies to the exercise of discretion in relation to an award of interest.

4 For the sake of clarity, and with no disrespect intended, at various points in these reasons we refer to individuals involved by their first names.

Mr Ronald Chappell's family and his Will and Codicil

5 On 6 May 2009, Mr Ronald Chappell died. He had four children: Jennifer, Peter, Dianne and Warren. He was survived only by Jennifer and Peter. The deceased was also survived by ten grandchildren. One of those grandchildren is Mr Alexander Hewson.

6 On 21 August 2009, probate was granted to Mr Peter Chappell of the deceased's Will dated 9 August 2006 and a Codicil dated 15 March 2007. Under the Will and Codicil, the deceased gave his estate in the following manner:

(i) to his grandson Matthew who is the child of his daughter Dianne who predeceased him: a property at 8 Comet Street, Beckenham, subject to certain conditions limiting his right to sell the property;

(ii) to his grandson Ben, who is another child of his daughter Dianne who predeceased him: a property at 33 Galaxy Street, Beckenham, subject to certain conditions limiting his right to sell that property;

(iv) to the widow of his son Warren who predeceased him: a property at 58 Burnett Street, Leeming;

(v) to his surviving two children, Jennifer and Peter: the residue of his estate in equal shares as tenants in common.

7 At the date of trial, the value of the estate less the properties in (i) and (ii) was $4,294,116.43. Therefore, after deduction of the $50,000 gift to each of the grandchildren, the value of the residuary estate at the date of trial was $3,844,116.43 less costs and expenses of administration.

8 The effect of the deceased's Will and Codicil can be summarised below by reference to each of his children living and deceased:

(i) Jennifer (daughter): $1,922,058.21 less administration costs and $50,000 to each of Jennifer's two adult children;

(ii) Peter (son): $1,922,058.21 less administration costs and $50,000 to each of Peter's two adult children and his one 10-year-old child;

(iii) Warren (predeceased son): a property to Warren's widow (value at date of death: $550,000) and $50,000 to her two adult children;

(iv) Dianne (predeceased daughter): nothing to either her previous partner with whom she had two children (Ben and Matthew) nor to her husband prior to her death (Mr Christopher Hewson) but

(a) properties (values at date of death: $300,000 each) and $50,000 to each of the two adult children (Ben and Matthew) from her partner prior to Mr Christopher Hewson; and

(b) $50,000 to the child with Mr Christopher Hewson (Mr Alexander Hewson).

9 The trial was an application by Mr Alexander Hewson under the Inheritance Act. Alexander claimed that the Will and Codicil of his deceased grandfather does not make adequate provision from the deceased's estate for Alexander's proper maintenance, support, education or advancement in life. The claim was brought against Peter (as executor) and the deceased's children, Jennifer and Peter (as legatees). It was initially also brought against the nine other grandchildren but subsequently discontinued against them.

10 At the time of trial, Alexander was 11 years of age. He brought his claim by his next friend, his father Mr Christopher Hewson. The means of Mr Christopher Hewson to provide for his son are very limited. Mr Christopher Hewson is on a disability pension and is unable to work. He has limited assets. He is a tenant of a Homeswest home with his mother, who is in ill health. Alexander lives with them.

The Inheritance Act and the Master's decision

11 Section 6(1) of the Inheritance Act provides as follows:

(1) If any person (in this Act called 'the deceased' ) dies, then, if the Court is of the opinion that the disposition of the deceased's estate effected by his will, or the law relating to intestacy, or the combination of his will and that law, is not such as to make adequate provision from his estate for the proper maintenance, support, education or advancement in life of any of the persons mentioned in section 7 as being persons by whom or on whose behalf application may be made under this Act, the Court may, at its discretion, on application made by or on behalf of any such person, order that such provision as the Court thinks fit is made out of the estate of the deceased for that purpose.

12 Section 7 of the Inheritance Act sets out the persons by whom, or on whose behalf, an application can be made for provision out of the estate of any deceased person. At the time of the deceased's death the section provided for five categories of applicant including (i) a child of the deceased, and (ii) a living grandchild of the deceased whose parent (the child of the deceased) had predeceased the deceased. Alexander is within (ii) above.

13 As the learned Master, with respect, correctly explained, the Court is required to undertake a two-stage process for claims under s 6 of the Inheritance Act. This is well established: Bondelmonte v Blanckensee [1989] WAR 305, 307 (Malcolm CJ); Vigolo v Bostin [2005] HCA 11; (2005) 221 CLR 191, 212 - 213 [56] (Gummow and Hayne JJ); Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201, 208 - 209 (Mason CJ, Deane and McHugh JJ).

14 The first stage involves assessing whether under the Will the applicant has been left without adequate provision for his or her proper maintenance, support, education or advancement in life. The assessment is made as at the date of death of the deceased. The first stage has been described as the 'jurisdictional question': Vigolo v Bostin (212 - 213) [56] (Gummow and Hayne JJ); Singer v Berghouse (208 - 209) (Mason CJ, Deane and McHugh JJ).

15 The learned Master held that this case was as clear a case as could be imagined and that the Will of the deceased did not adequately provide for Alexander by the gift of $50,000. His Honour explained that at the date of the death, Alexander was 9 years of age. He was living with his father, Mr Christopher Hewson, whose only income is a disability pension. Alexander had limited means from shares he had inherited from his mother, Dianne. Alexander and his father were living in Housing Commission accommodation which they shared with, and which was in the name of his grandmother, Mr Christopher Hewson's mother. Alexander attended a private Catholic primary school. His father was unable to pay the school fees. But Alexander remained at the school due to the generosity of the school administration: Hewson v Chappell [2012] WASC 86 [8] - [10].

16 There was no challenge to the Master's conclusion in relation to the first stage. The conclusion was correct.

17 The second stage requires the Court to decide what provision ought to be made out of the deceased's estate for the applicant. That decision is made based on the relevant facts as they exist at the time of making the order: Kitson v Franks [2010] WASCA 134 [6]; Dun v Dun [1957] HCA 91; (1957) 99 CLR 325, 331 (Dixon CJ, Kitto and Taylor JJ). It is the Master's approach and conclusions at the second stage which are the subject of this appeal.

18 In assessing the provision which should be made for Alexander, the Master divided his consideration of the amount to award into sub-categories: (i) housing ($700,000) and associated transaction costs ($50,000); (ii) education ($75,000); (iii) living expenses ($150,000); (iv) an allowance for the costs of the Public Trustee in administering the trust fund on behalf of Alexander and rounding of the amount awarded ($25,000). More is said about each of these categories below.

19 The Master therefore concluded that Alexander should be entitled to an award of $1 million from the estate in place of the award of $50,000 in the Will and Codicil.

20 The grounds of appeal are prolix and overlapping. Ground 2 expressly overlaps with ground 1. Ground 3 encompasses both grounds 1 and 2. They can be broadly summarised as follows:

21 Ground 1: The learned Master erred because he failed to comply with the requirement of s 6(1) of the Inheritance Act to recognise or to consider adequately the interests of all those with a legitimate claim on the bounty of the deceased against the deceased's obligation to make 'adequate' and 'proper' provision for Alexander.

22 Ground 2: The learned Master erred in law because his Honour, in making provision, (i) merely gave effect to the desires of Alexander's father; (ii) granted relief beyond the minimum provision required by the Act; and (iii) ground 1 is repeated.

23 Ground 3: The learned Master erred in law in failing to give reasons, or adequate reasons, to explain why the exercise of his discretion required the award to Alexander of $1 million as comprised of the amounts he awarded for housing, education, living expenses and expenses of the Public Trustee.

24 The essence of each of the grounds of appeal is a complaint about the exercise of the learned Master's discretion in making provision for Alexander. The grounds generally allege implied errors. Express errors are alleged in particulars of ground 2 concerning the evidence relied upon for the amount awarded under each of the sub-categories identified by the learned Master, namely (i) housing (ii) education (iii) living expenses; and (iv) an allowance for the costs of the Public Trustee.

25 Given the overlapping nature of the grounds of appeal, it is convenient to explain the exercise of discretion under s 6(1) of the Inheritance Act and then to consider the particular errors alleged concerning each of the sub-categories. This consideration is sufficient to resolve the appeal.

The exercise of discretion under s 6(1) of the Inheritance Act

26 Section 6(1) of the Inheritance Act confers a wide discretion on a primary decision maker. At the first stage, the decision is based upon 'the opinion' of the Court as to whether provision is 'adequate' for the broad enumerated purposes of 'proper' maintenance, support, education or advancement in life. The words 'adequate' and 'proper' are 'always relative'. Although the question remains one of fact, there are no fixed standards in the assessment of the facts, and 'the court is left to form opinions upon the basis of its own general knowledge and experience of current social conditions and standards': Singer v Berghouse (211) (Mason CJ, Deane and McHugh JJ citing Goodman v Windeyer [1980] HCA 31; (1980) 144 CLR 490, 502 (Gibbs J)); Devereaux-Warnes v Hall (No 3) [2007] WASCA 235 [68] (Buss JA).

27 If the Court is of the opinion that provision is inadequate then the provision by the Court is expressed to be at the Court's 'discretion' to provide an amount 'as the Court thinks fit'. It is this latter exercise of discretion, at this second stage, which is in issue in this appeal.

28 The principles of law which regulate the circumstances in which an appellate court may review the exercise of a judicial discretion apply to an appeal from a decision on the discretionary judgment made at the second stage: Devereaux-Warnes v Hall (No 3) [90] (Buss JA, and the authorities cited).

29 In Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194, 204 - 205 [19], [21], Gleeson CJ, Gaudron and Hayne JJ explained that:

'Discretion' is a notion that 'signifies a number of different legal concepts'. In general terms, it refers to a decision-making process in which 'no one [consideration] and no combination of [considerations] is necessarily determinative of the result'. Rather, the decision-maker is allowed some latitude as to the choice of the decision to be made. The latitude may be considerable as, for example, where the relevant considerations are confined only by the subject-matter and object of the legislation which confers the discretion. On the other hand, it may be quite narrow where, for example, the decision-maker is required to make a particular decision if he or she forms a particular opinion or value judgment.

...

Because a decision-maker charged with the making of a discretionary decision has some latitude as to the decision to be made, the correctness of the decision can only be challenged by showing error in the decision-making process. (footnotes omitted)

... unless the relevant statute directs otherwise, it is only if there is error in that process that a discretionary decision can be set aside by an appellate tribunal. The errors that might be made in the decision-making process were identified, in relation to judicial discretions, in House v The King in these terms:

'If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so' [21]. (footnotes omitted)

31 Although there is a very broad discretion for the Court at the second stage to make an award 'as it thinks fit' that award must still be based upon the evidence. There was no submission that judicial notice could be taken of any fact. The submission by senior counsel for Alexander on the appeal that the Court can exercise discretion to make an award without any evidential basis must be rejected. The discretion must be exercised only upon evidence before the Court or, less commonly, upon facts about which the Court can take judicial notice.

32 As explained below, this appeal must be allowed on the basis that in three of the four sub-categories in which provision was made by the learned Master, the evidence cannot support the conclusions reached. No ground of appeal or cross-appeal challenged the conclusion of the learned Master in relation to the final sub-category: the costs of the Public Trustee.

33 As to the three main sub-categories, the learned Master, either expressly or impliedly, erred by mistaking the relevant facts in his conclusions on each of these matters. As we explain in the conclusion to these reasons the errors were undoubtedly caused by the manner in which the trial was run and the choice of the parties to lead very little evidence on crucial matters.

The evidence and provision by the Master in each sub-category (i) Housing

34 It was common ground on the appeal that it was appropriate that Alexander obtain permanent accommodation and that provision should be made for him to purchase a house. However, as explained below, there was little evidence led at trial which provided direct assistance in determining the provision which was adequate for housing for Alexander's proper maintenance, support, education or advancement in life.

35 Only two matters were relevant. The first was expert valuation evidence from valuers at Hegney Property Advisers (GB 166 - 189). The learned Master relied upon that report in reaching his conclusion that the amount to be awarded for Alexander's housing costs was $700,000 plus $50,000 for transaction costs (including stamp duty) and the cost of relocation. The Master reached his conclusion based upon a broad assessment of the ranges in the report where he said that the lowest range was for Beechboro (between $470,000 and $560,000) and the most expensive suburb was Dianella (between $750,000 and $850,000). In fact, the lowest range was for Kiara (between $400,000 and $500,000).

36 The requirements contained in the instructions upon which that valuation was based were numerous (GB 178). Some of those requirements were (i) the property be modern in style, no more than 15 years old with minimal maintenance; (ii) to have three bedrooms and a study or four bedrooms (one can be used as a study); (iii) the property be in a 'neat' street with no 'obvious' rental properties or Homeswest properties; (iv) have at least two living areas; (v) the property be close to a school bus route serving Trinity College; (vi) be in the following suburbs: Morley; Embleton; Dianella; Noranda; Bayswater; Kiara; Eden Hill; Beechboro.

37 The valuer from Hegney Property Advisers gave evidence that he tried to adhere as closely as possible to his instructions (trial ts 60). There are serious problems with the instructions upon which the valuation was based. These problems render the conclusions of Hegney Property Advisers of little value.

38 The first problem is that there was no evidence, nor could there have been evidence, that only properties in a 'neat' street with no 'obvious' rental properties or Homeswest properties would be adequate housing for Alexander's proper maintenance, support, or advancement in life. Alexander had been living in a Homeswest property with his father. In cross-examination, his father conceded that it was not necessary to live in a street where there were no Homeswest properties (trial ts 54).

39 The second problem with the assumptions upon which the report from Hegney Property Advisers was based was the assumption that Alexander would attend Trinity College. The report explained that 'the properties listed in this report all have some relatively easy access to a bus stop which would more than likely require a transfer to reach the desired destination' (GB 167). The valuer gave evidence that 'all of those properties, are within close proximity to a bus route that could involve a transfer of some sort to Trinity' (trial ts 60). The difficulty with this assumption is that Alexander's application to Trinity College had been rejected. As the learned Master explained at [17], Alexander's application to Trinity College to start in year 8 had been rejected; there was no evidence why it had been rejected, or whether it could possibly be the subject of reconsideration.

40 A third problem with the assumptions upon which the report was based was the assumed need for three bedrooms and a study or four bedrooms. There was evidence at trial from Mr Christopher Hewson that he and Alexander lived with Christopher's mother, Alexander's grandmother, at a Homeswest property. Christopher and his mother were joint tenants of the property and Christopher is the carer for his mother (trial ts 29 - 30). There was also evidence that Alexander had 'very strong anger' directed at his grandmother (GB 7). Also, Christopher said that his mother's health had deteriorated. Christopher said that he was uncertain of what Homeswest would expect him to do if his mother were to pass away (trial ts 53). The learned Master found that 'the property will be occupied by [Alexander] and his father [Christopher] and perhaps (although not necessarily) by his grandmother' ([16]).

41 Even assuming that it was necessary for Alexander's proper maintenance, support, or advancement in life for provision to be made for his grandmother to be accommodated in his house, there was no evidence, nor any submission made, concerning why it would not be adequate for each of these persons to have one bedroom each and for Alexander to engage in his studies at a desk in his bedroom. No reason is apparent. Alexander's father's evidence was that a three bedroom house was comfortable for them (trial ts 47).

42 For these three reasons, the report was of little direct value for an assessment of the provision which was adequate for housing for Alexander's proper maintenance, support, or advancement in life. It could not provide the evidentiary support for a conclusion that $700,000 was appropriate provision. Discretion must be re-exercised in this respect.

43 There was a second matter of evidence which was indirectly relevant to the proper provision for housing for Alexander. No submission was made to the learned Master about this evidence but it provides some indirect guidance for the proper provision to be made for the housing for Alexander. This second matter is the provision made by the testator for the housing of Ben and Matthew, who were Dianne's children from a partner prior to her marriage to Alexander's father, Mr Christopher Hewson. The properties which were left in the deceased's Will to Ben and Matthew were valued at $300,000 each.

44 At the time of the death of the testator, Ben and Matthew were aged 25 and 26 years old respectively. Alexander was only 8. But the circumstances of Ben and Matthew do permit some comparison with Alexander. There was evidence that they had been abandoned at the ages of 15 and 16 when their mother, Dianne, died. At that time they went to live with Mr Christopher Hewson and Alexander. They had no support from their father. They also had problems with drugs. The testator was aware of all of these matters (trial ts 50 - 51).

45 The evidence is extremely sparse from which a conclusion could be reached about the appropriate value for a property which (as is common ground) provision should be made for Alexander to purchase. The value should reflect that which is adequate for the proper maintenance, support, education or advancement in life of Alexander. It is likely that the property in which Alexander will need to live with his father, and possibly grandmother, will need to be of greater value than $300,000. The range for the suburb of Kiara ($400,000 - $500,000) also affords a limited basis for comparison as the lowest range provided by Hegney Property Advisers albeit on the basis of instructions which considerably exceeded what would be adequate for Alexander.

46 There was also evidence from Alexander's father, admitted without objection, of a report including median house prices of properties for sale in Morley ($532,500), Embleton ($450,000), and Bayswater ($703,750). Mr Christopher Hewson said that 'the medium [sic] price for a home in each suburb [is] considerably more than the type of home I am looking at' (GB 76, 109, 111).

47 The best value of a property which would make adequate provision for Alexander, based on the limited evidence from trial, is $350,000.

48 The Master's award of transaction costs (including stamp duty) and relocation costs was $50,000 on a purchase of $700,000. Again, the almost complete lack of evidence and submissions on this point at trial is lamentable. Assessable stamp duty on a purchase of $350,000 is $10,375 (see s 26, s 147E and Sch 2 Div 2 of the Duties Act 2008 (WA)). But, for a first home buyer, there is no stamp duty payable (see s 26, s 143(1) and Sch 2 Div 2 of the Duties Act). There was no evidence, nor submissions, concerning whether the Public Trustee would be assessed for stamp duty based on the purchase of a property for which Alexander would be the beneficiary. Nor was there any evidence of the costs of relocation.

49 Overall, a re-exercise of discretion to make provision for housing for Alexander should be provision of $350,000.

50 It was also common ground on the appeal that provision should be made for Alexander's schooling in the exercise of discretion under s 6(1). The alleged errors related to the exercise of that discretion by the learned Master.

51 The evidence at trial was that Alexander was at a private Catholic primary school. Alexander had repeatedly expressed a desire to attend Guildford Grammar School (GB 7). His father said that this was because Alexander had attended dancing classes for five years on Friday evenings with boys from Guildford Grammar School (trial ts 55). In his first affidavit, Alexander's father said that he hoped that Alexander would be able to attend that school (GB 7). But, in his oral evidence, Alexander's father suggested that Guildford Grammar School may not be the best option for Alexander (trial ts 55). In his second affidavit Alexander's father exhibited a schedule of fees for the cost of his son to attend Trinity College covering years 7 - 12. The fees were just under $10,000 per year.

52 The learned Master relied upon the Trinity College schedule and concluded that, with an increase in the fees over the period that Alexander attends high school, an amount of $75,000 should be allowed for education expenses.

53 The difficulty with the exercise of the Master's discretion is that it was based upon the fees for Trinity College. As we have explained, Trinity College was a school for which Alexander's application had been refused. The discretion must be re-exercised.

54 The evidence of Alexander's father was that Alexander was well settled in the inner north/east suburbs of Perth. Mr Christopher Hewson said that he had looked for private schools in the area. He said that the following were relatively nearby and their academic scores from a website were as follows (GB 72 - 73):

55 Mr Hewson also said that although Guildford Grammar School had the best academic record he valued Trinity College as a Catholic School (GB 73). Since Alexander had been refused admission to Trinity College the appropriate focus is upon the other schools, but particularly Kingsway and Chisholm as Catholic schools which were the basis for his father's preference of school ahead of Trinity College. As the learned Master observed at [19], Mr Hewson is a practising Catholic and it is not unreasonable to expect he would wish his son, if at all possible, to attend a private Catholic school. Kingsway is also a school close to where Alexander is currently living and his father had made enquires about Alexander's attendance (trial ts 46).

56 In written submissions the appellants submitted that there was some unfairness in the Master failing to take into account a reference by an expert witness to boarding. This submission must be rejected. Although there was some evidence in cross-examination from a psychiatrist, Dr Milnes, that Alexander might benefit from being a boarder at school during the week, Dr Milnes said that she had not spoken with his father about this matter (trial ts 76). There was no other suggestion that Alexander should attend school as a boarder. There was no evidence of boarding costs of all the schools. There was no suggestion by Alexander's father that Alexander should board. Alexander's father's assumption was that Alexander would not board.

57 Mr Hewson's evidence was that the average fees, at 2010 schedules, for each of these schools per annum was as follows (GB 95, 97):

Kingsway Christian College $4,813 - $5,925 (years 7 - 12)

Chisholm Catholic College $3,270 - $4,050 (years 7 - 12)

58 Mr Hewson applied an annual increase of 7% to each of these amounts based on evidence of past annual increases in fees. He reached conclusions of the following amounts for education from years 7 - 12 (GB 75):

Chisholm Catholic College $33,702 - $39,782 with books and materials

59 Mr Peter Chappell's evidence was that the cumulated cost of Kingsway was $33,700 (GB 56). The basis for this calculation is hard to discern; it may have conflated the costs of Kingsway with Chisholm. It also appears that Mr Peter Chappell did not include the cost of books and materials.

60 The school's schedules also show that there are some discounts of 4% or 5% for early payment of fees (eg GB 95, 98) and fee concessions to parents with low incomes (GB 95).

61 There was no evidence at trial concerning whether Alexander had been admitted to Kingsway or Chisholm or both. A reasonable exercise of discretion would be to assess as an adequate provision for the education of Alexander the midpoint of the costs of the two Colleges, including books and materials but without discounts, which is $50,279.

62 Once again, it was common ground on the appeal that some provision needed to be made for living expenses (appeal ts 8). But the appellants submitted that there was no evidence to support the provision of $150,000 which the learned Master awarded.

63 The learned Master observed at [21] that Alexander is an active sportsman and that his sport requires the provision of equipment and payment of club membership fees. He also noted the need for the usual necessities of life - food, clothing and transport; outgoings on any property acquired; and the cost of extracurricular school activities. The Master observed that these are difficult to assess particularly when Alexander's father will be living with Alexander and could be expected to make a contribution to the everyday cost of living and to the maintenance of his son.

64 There was some evidence of living expenses. Reports were produced of the costs of Alexander's sporting activities at $4,075 per year for 8 years, a total of $32,600. Evidence concerning the annual increases in these costs was excluded. There was also evidence of annual health insurance for Alexander of $1,695.75 which, over a period of 10 years would amount to at least $16,957. Again, evidence concerning the annual increases in these costs was excluded.

65 Apart from this evidence of approximately $50,000 of living expenses there was no evidence of the cost of food, household expenses, maintenance and general upkeep for Alexander.

66 The evidence at trial supports only the award of $50,000 in living costs. However, this amount, which relates only to sporting activities and health insurance, is obviously grossly inadequate. The only proper course is to remit this matter back to the Master for assessment of living costs in accordance with these reasons and with the opportunity of hearing and considering further evidence. But as we explain in the conclusion, we expect that the parties should be able to reach some agreed position which will save all those involved the delay, cost, inconvenience and prejudice of a further hearing.

67 The final sub-category relied upon by the learned Master was the costs of the Public Trustee to administer the trust fund on behalf of Alexander. The learned Master awarded a sum in this category of $25,000 ([23]).

68 There was no challenge to this aspect of the exercise of the learned Master's discretion on appeal. It was common ground that provision of an amount in this category was required for the adequate provision for Alexander's proper maintenance, support, education or advancement in life.

69 Senior counsel for Alexander on the appeal submitted that this award was too low. He referred to the evidence from Mr Christopher Hewson, based upon a report from the Public Trustee concerning total estimated trust fees based on a trust fund of $1 million, 'including property purchase fees, MER [Management Expense Ratio] fee and tax fees are $64,146 for the life of the trust' (GB 76 - 77).

70 There are several reasons why this submission should not be accepted. First, and fundamentally, there was no cross-appeal brought in relation to the $25,000 component of the learned Master's award for Public Trustee fees. Secondly, the reference to fees of $64,146 was based upon assumptions which were not supported by either the evidence or the findings of the learned Master. They included a trust fund involving $1 million with $600,000 to be invested and $400,000 to be used for the purchase of a property. A fee of $23,969 was payable to external fund managers for investment of $600,000 (GB 121). The amount was clearly, and properly, adjusted by the learned Master. Thirdly, there were no oral submissions made at trial concerning the quantum of the Public Trustee's fees.

71 In each of the sub-categories of (i) housing, (ii) education, and (iii) living expenses, the Master's conclusions cannot be supported by the evidence before him. Our conclusion is that based on the evidence the provision in each of those sub-categories which is adequate for the proper maintenance, support, education or advancement in life of Alexander is (i) $350,000, (ii) $50,279, and (iii) reference back for reconsideration in light of these reasons. The award of the learned Master for the final sub-category, (iv) costs of the Public Trustee, of $25,000 was not challenged and should be upheld.

72 A provision of $425,279 (the sum of (i), (ii) and (iv)) plus a reasonable amount for living expenses would come from an estate valued at the time of death of $4,877,376.90. It is an award which is more than the provision from the estate for Alexander's adult half-brothers of $50,000 and a $300,000 property each. But Alexander's needs are greater.

73 Such provision for Alexander would also be a reasonable exercise of discretion when compared with the value of the residuary estate to which the two appellants, the testator's living children, would be entitled. At the date of trial the value of the residuary estate without any provision for Alexander was $3,844,116.43 (less administration and legal costs). This residuary estate excludes (i) the value of the properties given to Ben and Matthew; (ii) the value of the property given to the widow of Warren (the testator's son who predeceased the testator); (iii) the $50,000 gift to each of the nine other grandchildren.

74 A combined provision to the appellants of $3,844,116.43 (less administration and legal costs) less $425,279 and less a reasonable amount for Alexander's living expenses would also comfortably and adequately provide for the appellants. The first appellant (Peter) is an employed firefighter and has assets around $625,000 and his family are beneficiaries of the Chappell Family Trust with assets of around $110,000. The second appellant (Jennifer) is an employed nurse and has assets of around $329,000.

75 The conclusion above is that there was no evidence, or insufficient evidence, to support the provision made by the learned Master in each of the sub-categories challenged on appeal. The effect of this is that it is not necessary to deal with the appeal grounds which asserted implied error or, to the extent not already covered, the ground alleging error in relation to absence of adequate reasons for the conclusions reached.

76 It suffices to say that a central submission in relation to the allegation of implied error in the first ground of appeal is, at least, questionable. The submission was that in exercising discretion at the second stage of the inquiry, the Court must take into account that a relationship of grandparent and grandchild is a more remote relationship from the relationship of parent and child. There is nothing in the words of s 6(1) which suggests this requirement. Nor should any such presumption exist. It is common experience that some parents have close relationships with their children and some have more distant relationships. The same is true of grandparents and grandchildren. It is the actual, not presumed, remoteness of relationships which is relevant as a factor in assessing whether provision is adequate. Nor can any such presumption arise from the separate treatment of children and grandchildren in s 7 for the purposes of standing to bring a claim. Section 7 is expressly concerned only with persons entitled to claim. It does not rank their respective positions.

77 Some time after the delivery of the learned Master's reasons the parties made submissions concerning the appropriate orders. One disputed order concerned the award of interest upon the provision made for Alexander. Counsel for Alexander at trial submitted that interest should run from the date of the order. Counsel for the appellants submitted that interest should only accrue from a date 12 months after the reasons for decision.

78 No rate of interest was provided in the Will. Counsel for Alexander relied upon s 143A of the Administration Act 1903 (WA). That section provides as follows:

Interest payable on legacies shall be computed after the rate of 5% per annum unless any other rate of interest is directed by the will or under a judgment or order of a Court directing an account of legacies in which event the rate of interest shall be computed according to such will or as directed under or pursuant to such judgment or order.

79 The assumption of the parties before the Master, and on this appeal, was that s 143A of the Administration Act 1903 is the relevant provision under which interest is paid when provision is made under the Inheritance Act s 6(1), and that 5% was the appropriate rate. That assumption assumes that the s 6(1) provision made by the Court is a 'legacy' for the purposes of s 143A. It is not necessary to consider the accuracy of that assumption.

80 The Master held that interest, at a rate of 5%, should accrue from 9 months after the terms of the order were pronounced, which is 12 months after the reasons for decision were given. That date is 19 March 2013.

81 Alexander cross-appeals from the decision of the learned Master to defer the date for the accrual of interest. His single ground of appeal asserts that the Master erred in deferring the accrual of interest until 19 March 2013 because the Master failed to consider:

(a) the presumption that interest is payable from the date of death where the legacy in a will is in favour of an infant and the will contains a term such as cl 11.2 of the Will; and

(b) that, irrespective of Alexander's claim, the executor (Peter: the first named appellant) ought to have been taking steps to realise the real property assets of the estate.

82 The first particular of the ground of cross-appeal is misconceived. The 'presumption' that interest is payable upon a legacy in favour of an infant from the date of death is not a presumption at all. It is a rule of construction of testamentary instruments: Pacella v Sherborne (No 2) [2010] WASC 186 [45] (Blaxell J). The 'exception' in favour of an infant is simply another principle of construction to assist in ascertaining the objectively manifested intention from the testamentary instrument. That principle of construction is that interest is payable from the date of death where a parent or person in the place of a parent gives a legacy to an infant, unless the will provides otherwise for the maintenance of the child: Murdocca v Murdocca (No 2) [2002] NSWSC 505 [22]; Re Richards (1869) LR 8 Eq 119; Re Raine [1929] 1 Ch 716.

83 For the same reason, cl 11.2 of the deceased's Will is a matter that might be relevant to the award of interest, if at all, as a matter of construction of the testator's intentions. That clause provides that in the administration of the estate his executor may, in the exercise of the executor's discretion:

prior to the absolute vesting of any share or interest in my estate in a beneficiary entitled (whether immediately or contingently) under this Will, apply for the maintenance, education, advancement or benefit of that beneficiary (including that already conferred) the whole or any part of the capital and/or income of that share or interest ...

84 The reason why issues of construction of the Will and Codicil are not directly relevant is because the provision made for Alexander was not made under the Will. Apart from the $50,000 bequest, Alexander's entitlement to a legacy does not derive from construction of the Will, nor could any entitlement to interest arise from the Will. Rather, provision is made for him under the Inheritance Act. It is only at the date of the Court order under that provision that an applicant has any entitlement to provision ordered. This is because the provision is ordered as a matter of the exercise of the statutory discretion which takes into account all the facts up to the date of making that order. Any entitlement to, and accrual of, interest can only arise from that date, at the earliest.

85 The issue on the cross-appeal is therefore whether the order of the Master that interest should not accrue until 19 March 2013 should be varied to allow interest to accrue from the date of Alexander's entitlement, when the Master's order was made. Alexander submits that it should because the executor ought to have been taking steps to realise the real property assets of the estate prior to the time of the learned Master's order.

86 In Murdocca v Murdocca (No 2), Campbell J said:

At least part of the justification for allowing a lower rate of interest to be paid on legacies than is paid under Schedule J, is that it is recognised that executors often need time to get estate assets in, then are limited in the return they can get on estate assets held pending payment of a legacy. This state of affairs affects both when executors are liable to pay interest on legacies, and the rate of such interest. The 'executor's year' where, unless there is a contrary provision in the will, interest on many but not all legacies starts to run only at the expiration of one year from the date of death of the testator, limits the circumstances where executors are liable to pay interest at all [22].

87 The starting point is that the 'executor's year' is a principle which is concerned with a delay in accrual of interest from the time of death to allow an executor time to realise estate assets. There is no reason why the same principle should apply to interest payable on a provision under s 6(1) of the Inheritance Act, especially in circumstances where the relevant assets could be realised pending the resolution of the claim.

88 In this case, there was nearly three years from the date of the testator's death to the date of delivery of the learned Master's reasons. The Master observed that although there was no evidence of steps taken by the executor to realise the real estate assets of the deceased, 'one can assume that the executors would respect their obligations as executors of the will of the deceased. There just wasn't the cash available, even to satisfy the $50,000, so some steps had to be taken to liquidate certain properties' (trial ts 109).

89 The submission by counsel for Alexander before the learned Master focused on the time the executor had had to realise the assets. Counsel submitted that interest should run from the date of the order 'since the executor has been appointed, he has had ample time to realise the property of the estate' (trial ts 107 - 108). The ground of appeal reflected this submission.

90 Before the learned Master, counsel for the cross-respondents submitted that, in effect, a further year should be allowed before interest began to accrue, because in addition to nearly three years which had already expired since the date of death, the executor needed further time to realise the real estate assets which were not subject to particular legacies. Counsel said:

it was reasonable for the executor to await the outcome of the trial decision before deciding what was the most appropriate property to sell, depending on how much needed to be realised, because there are FBT [Fringe Benefit Tax] implications, depending on which one is sold and which one is not. Accordingly we say it wasn't unreasonable at all not to have taken any steps (trial ts 113 - 114).

91 This submission was not repeated on this appeal. There was no submission made concerning which of the properties might attract Fringe Benefits Tax or how that might occur. There was no submission made that the properties which were not the subject of specific legacies might, for some reason, be retained and not sold. There was no suggestion that a delay of four years was necessary for the executor to realise the estate assets other than the properties which were the subject of particular legacies.

92 Instead, the respondents to the cross-appeal submitted that the Master's decision cannot be challenged on appeal on the basis that the executor ought to have been taking steps to realise the real estate assets because this was not a submission which was made before the Master and it could possibly have been met by calling evidence: Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491, 497 (Mason CJ, Wilson, Brennan and Dawson JJ).

93 This submission is incorrect. As explained above, the submission that the executor ought to have taken steps to realise the real estate assets was squarely made before the learned Master at the hearing concerning the orders. The same submission had been made during the trial (trial ts 107 - 108).

94 Further, at the start of trial, counsel for the cross-respondents conceded that the properties would have to be realised because 'that is inevitable just to satisfy the further obligations under the estate to the grandchildren' (trial ts 16; see also trial ts 82).

95 The parties to the cross-appeal proceeded on the assumption that the effect of any order by this Court varying the amount of provision awarded by the Master would operate in place of the order of the Master, and from that date. Interest should accrue the sum for which provision is made from the date of the orders made by the learned Master, 19 June 2012.

97 At the outset of this appeal, Newnes JA observed that the trial of these proceedings was almost 'an evidence-free zone' (ts 2). A significant part of the difficulty in this case faced by the learned Master was caused by the paucity of evidence led at trial by the parties. This is not an isolated occurrence in cases of this type: see, for example Lawrence v Lawrence [2004] WASC 90; Devenish v Devenish [2011] WASC 129. Although it might be understandable that parties in these cases wish to keep legal costs to a minimum, particularly where an estate is not large, it is important that legal advisers pay close attention to the matters upon which evidence is needed even if the evidence adduced is not extensive. In this appeal, the problems caused by a lack of evidence on crucial matters has also caused the lamentable result in relation to living costs.

98 In each of the sub-categories of (i) housing, (ii) education, (iii) living expenses, the Master's conclusions cannot be supported by the evidence before him. A re-exercise of discretion in each of those sub-categories leads to provision of amounts of (i) housing: $350,000, (ii) education: $50,279, and (iii) living expenses: reference back for reconsideration in light of these reasons. The award of the learned Master for the final sub-category, (iv) costs of the Public Trustee, of $25,000 was not challenged and should remain undisturbed.

99 The conclusion that this matter should be sent back for reconsideration of the provision in relation to sub-category (iii) is unfortunate. Evidence in this category is commonly led in these cases. An example of this type of evidence even appeared in the appeal books in this appeal, although it was included erroneously because the proposed evidence had been excluded. Mr Christopher Hewson annexed to his affidavit evidence a document entitled 'AMP Australian Child Costs in 2007'. This was in support of Mr Christopher Hewson's proposed evidence of the costs of raising a child from the age of 10 until completion of university. There was a late objection to this proposed evidence on the ground of relevance because the proposed evidence was based on the costs of a two child family and assumed schooling at government schools. This late objection by the appellants was upheld.

100 Senior counsel for the appellants effectively submitted that all measures should be taken to avoid any further hearing in this matter: ts 47. That sentiment is wholeheartedly endorsed. This matter has already consumed considerable time and expense and the associated delay has caused prejudice to all of the parties. We expect that it will be possible for the parties to reach agreement upon the provision which ought to be made in relation to sub-category (iii), living expenses.

(Family and Dependants Provision) Act 1972

CHAPPELL -v- ALEXANDER ROBERT HEWSON by his next friend CHRISTOPHER ROBERT HEWSON [2013] WASCA 15 (4 February 2013)

At a glance

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Judgment (152 paragraphs)

CHAPPELL -v- ALEXANDER ROBERT HEWSON by his next friend CHRISTOPHER ROBERT HEWSON [2013] WASCA 15 (4 February 2013)

Legislation Cited (1)

Cases Cited (6)