Ernst v Mowbray [2004] NSWSC 1140 | Case summary

CATCHWORDS : SUCCESSION [316]- Family Provision- Widow- 17 year marriage- Long period of separation- Section 86 deed executed- Widow's claim fails- Executors distributing estate to themselves without notice- Consequences. LEGISLATION CITED : Family Law Act (Comm) 1975, s 86 Family Provision Act 1982, s 7 Bladwell v Davis [2004] NSWCA 170 D'Albora v D'Albora [1999] NSWSC 468; BC 9902597 Dijkhuijs v Barclay (1988) 13 NSWLR 639 Easterbrook v Young (1977) 136 CLR 308 Guardian Trust & Executors Company of New Zealand Ltd v The Public Trustee of New Zealand [1942] AC 115 CASES CITED : O'Shaughnessy v Mantle (1986) 7 NSWLR 142 Re Clissold [1970] 2 NSWLR 619 Re Faulkner [1999] 2 Qd R 49 Re Gimblett [1960] NZLR 664 Re Simpson [1950] Ch 38 Singer v Berghouse (1994) 181 CLR 201 Smith v Smith (1986) 161 CLR 217 PARTIES : Victoria Canning Ernst (P) Sharon Bernadette Mowbray and Grahame Peter Ernst (D) FILE NUMBER(S) : SC 3804/02 COUNSEL : J Wilson SC (P) P Livingstone (D) SOLICITORS : Holman Webb (P) Kerrisons The Law Firm (D)

The deed then provided that the husband, inter alia, should retain his right, title and interest in the property at 10 Mera Street Guildford to the exclusion of the wife and also otherwise indicated that the parties were to retain the property that was at that stage vested in them. 16 The plaintiff's evidence as to the circumstances of the execution of the deed cannot be completely correct as came out in cross-examination. However, there is no allegation that the deed was through any undue influence or misrepresentation. Indeed, the plaintiff initiated it because of her son. She said in evidence that the testator was disappointed because of her action and he asked her why she had done it, and she said, simply to protect her son's interest in his business and the testator said he understood that. 17 The plaintiff says that after she sold her home in 1986 the arrangements between the testator and herself continued much as before except that she stayed at his house from Monday through Wednesday, instead of he staying at her's. They exchanged birthday cards and had close relations up until the last three years of his life. For the last three years of his life his daughter, the first defendant, cared for him. 18 The details of the plaintiff's association with the testator in early affidavits were a little unclear. In her affidavit of 27 October 2004 however, paras 9 and 10 clearly state the position. The earlier arrangements which I have mentioned lasted until 1986 when the plaintiff's Guildford home was sold. After that sale she lived for about four years with her son at Kellyville and then with her daughter for about 12 months before moving to 21 Ravel Street Seven Hills North. In this period she says she stayed at the testator's home about two nights per week. She was working for her son at the time. On Thursdays she would drive to the testator's home, pick him up and drive to various suppliers to pick up orders for her son's business. On Fridays the parties went to the Flemington Markets where the testator bought fruit and vegetables and the plaintiff would sometimes stay with him on Friday nights. 19 After moving to 21 Ravel Street in April 1991, she said the testator stayed with her for a week and helped her move in and thereafter there was a routine whereby she would pick the testator up from his home on Mondays and return him on Wednesday morning. This account does seem to fit in with other evidence that the testator was returned home each Wednesday morning and in my view, despite earlier inconsistencies, I should accept it. 20 The plaintiff says that in September 1988 she advanced her son Gerald $100,000 to help him with his business. Gerald has never given evidence in these proceedings. There are no details as to whether that loan was to be repaid on demand or otherwise, or whether it was really a gift. The probabilities are that the plaintiff paid over the whole of the proceeds of the sale of her house to Gerald, who then in 1991, provided the purchase money for her home in Seven Hills. However, Gerald has at no stage indicated that he would give his mother any support at all. Indeed, there is uncontradicted evidence from the defendant's side of the record that he steadfastly refused in any way to assist his mother with the maintenance of her home, and indeed, the testator had to do that for the plaintiff notwithstanding his advanced age. 21 The hearing took place before me on 28 October 2004, Mr J R Wilson SC appearing for the plaintiff, and Mr P Livingstone of counsel for the defendants. During the hearing I suggested that one might have to notionally charge the defendants with interest on the monies they appropriated from the estate in 2001 because it would appear that there was a distribution with full knowledge of the possibility the plaintiff may make a claim, and secondly, that it may be possible to engineer a "win/win" situation if an order were made that the estate lend monies to the plaintiff in order to supplement her capital so that she could buy a home and on her death the money would be repaid to the estate so there would be no question of benefiting the plaintiff's family as opposed to the testator's family. Counsel asked for and were granted time for further written submissions to deal with those and any other matters that they thought might assist the Court, and subject to those submissions, I reserved my decision. 22 The plaintiff's basal claim is for sufficient monies so that she can sell her present home and buy another home which is on level ground. However, she is fairly particular that she would not wish to buy a property that was on top of someone else's property, or was semi-detached or attached to another property. She was also looking at 3-4 bedroom houses. She said she oil-painted and she needed a second room for that to be done, a room that would be able to accommodate her sewing and a guest room as well as her own bedroom. She reckoned that she could acquire such a property for about $429,000. There would be another $17,000 stamp duty and legal costs etc so that she would be looking for about $90,000. The claim was actually for $106,000 because of uncertainty as to the actual sale price of her present home and what deductions would need to be made for legal costs etc. This could be met by the estate lending the plaintiff $100,000. At the moment both the defendants have some of the money which they received from the estate invested and switching investment to a first mortgage in the plaintiff's new home would not inconvenience them unduly. 23 The defendants, however, do not want to do that and say that they are entitled in all the circumstances for the plaintiff's claim merely to be dismissed. 24 A key point in this case is a s 86 deed. 25 There are some matters about the deed which favour the plaintiff. The plaintiff and the testator had their attention drawn to s 31 of the Family Provision Act 1982 and yet they did nothing about obtaining a release under that section. 26 I need to deal with the testator's papers which were found by the defendants after his death. The papers had a covering note "All these papers to be destroyed if Vicki does not contest my will" there are then the testator's initials and "(This is most important) Statement signed by Vicki and myself is binding on us both and estates etc". I will deal with the testator's notes as to the circumstances in which he and the plaintiff ceased cohabitation shortly, but for the moment concentrate on the s 86 deed. The testator's papers show that he did not like the first draft of the deed because the first recital said such marriage as still subsisting. He suggested that this be changed, and indeed in the final version, in lieu of that expression, there are details of their separation and their living separately and apart. He objected to the words "Filed on behalf of the Husband" on the back sheet, and again this was changed to "Filed on behalf of the Wife". This tends to confirm that the wife was the initiating party. 27 The testator then left a note to his children, which is "X" to the affidavit of Grahame Peter Ernst of 20 July 2003, "Sharon and Grahame the money invested in the Commonwealth Mortgage Fund is the money from the sale of the house at 10 Mera Street Guildford and is protected by the document drawn up on 7 January 1988 (which was filed by Vicki) and signed by us both". 28 There is another note marked "AC" to that affidavit pinned to a copy of the s 86 deed in which the testator has written "This is a copy of a very vital document should my will be contested. The original copy was to be filed in the Family Law Court Love Dad." 29 The testator's notes show that he considered that the deed was a final division of property on the basis that each party would keep free from any attack by the other in life or death. 30 This is reinforced by annexure "Q" in the testator's handwriting which reads "Joe then asked me if Vicki could come and live at my place and I said 'No, she made everything so final with the legal document drawn up in January 1988, that said everything that was in her place was her's and everything that was in my place was mine'. This document says it is binding for all time and applies to heirs, executors and administrators." 31 However, the notes also show that on 7 December 1987 the testator's solicitor wrote to him about the will which was then in draft, but which was later admitted to probate. It drew attention to clause 5 and noted that the testator wanted other words used but suggested that the words chosen best protected the testator against claims by the plaintiff. However, the solicitor also enclosed a photostat from Mason and Handler's Probate Practice setting out ss 7 to 10 of the Family Provision Act. The only inference that can be drawn is that at that stage the testator's attention was drawn to the fact that despite the deed there was a legal claim that might be mounted by the plaintiff under the Act. 32 I considered in O'Shaughnessy v Mantle (1986) 7 NSWLR 142 the effect of the Family Law Act on an application by a divorced spouse. I there indicated that ordinarily with a divorce, especially in the light of s 81 of the Family Law Act 1982, the Court should consider there to be a complete break between the parties on divorce. However, the ex-spouse might obtain an order under limited circumstances such as where the parties have not finally settled all their property dealings at the time of the divorce, or where there is continued financial dependency after the divorce. Mr Livingstone points out that in the instant case although the testator would give the plaintiff money on occasions to repair her car etc, there was no financial dependency or any maintenance order after separation. 33 O'Shaughnessy's case was not looked on with favour by the Court of Appeal in Dijkhuijs v Barclay (1988) 13 NSWLR 639 at 651 where Kirby P said: "There is no doubt that in most cases, the achievement of a final property settlement in the Family Court would be seen by the parties, in current social circumstances, as terminating any moral claim of a former spouse to provision in the will of the other. Confronted by the news that he or she had been excluded from the will of the former spouse, the response would, in the overwhelming majority of cases be 'Our marriage was dissolved. We settled our financial affairs. We can each start a new life. That was the whole point of the Family Law proceedings'. To this extent, I agree with what Young J has written in O'Shaughnessy and in this case. However, that public policy, important though it is, must adapt itself to the new provisions of the Act, with its reforming inclusion of a specific entitlement of a former spouse to claim. That provision contemplates that there will be cases where such a claim will succeed, notwithstanding the public policy referred to by his Honour." 34 His Honour also referred to Smith v Smith (1986) 161 CLR 217, where the High Court pointed out that there was a very real difference between settling financial affairs between living persons under the Family Law Act and the preservation of a person's entitlement to make an application under a statute such as the Family Provision Act. 35 Be that as it may, the existence of the s 86 deed and the fact that it was instigated by the plaintiff, the way in which the testator's notes show that he understood it as making a clean break and the added matter that after the s 86 deed the testator only ever made provision for the plaintiff in a very summary way, are most relevant matters on this application. 36 Factors going the other way are the continued relations between the parties, their living together Monday through Wednesday morning, their shopping together on Fridays, their sexual relations and their exchange of Christmas and birthday cards etc, which shows that the emotional relationship between them was still alight, at least up to 1998. 37 There is some evidence from the plaintiff and from her granddaughter that the testator in his last weeks said that she would be provided for. The defendants dispute this, but they are in no position to contradict it because they were not present when the conversation was made. The granddaughter's evidence as to time and place was a little confused, but she was insistent that the testator said to her that her nanna would be properly provided for. 38 Experience in the present type of case shows that when elderly people make remarks of this type they do not necessarily mean them. However, I should accept the fact that the remark was made, though wondering whether it was sincerely meant. I say this because the whole of the evidence of the testator's notes etc give the flavour that he considered that the plaintiff had no call at all on his assets. 39 I should now turn to the circumstances of the separation. I have already set out the plaintiff's account. The testator's accounts in his notes are a bit different. He says that the dispute that arose on 21 December 1983 followed a series of incidents in which the plaintiff lost her temper and told the testator that it was her house and he had no right to be there and he could get out if he did not like it. On 21 December 1983, the plaintiff agreed that she would return to the testator everything that he was entitled to including the Forster land if he went back to his own home. There was talk that that should perhaps take place after Christmas so not to upset the family, but then there was a further argument and the plaintiff threw a beer can at the testator cutting the skin on his forehead. She told him then to get out of the house. His note is "My wife's behaviour was unbelievable and a vile temper. I packed as many clothes as possible in a suitcase and informed her I was going to my home and she said okay. Approximately 10.20 pm. She also agreed that I would receive anything I was entitled too, [sic] that is land at Forster. I do not know what will happen re the car". 40 In cross-examination the plaintiff did agree that she had thrown a beer can at the testator. However, she said that she threw the beer can not intending to hit the testator, but he changed his position and it in fact hit him "very little". She said there was no venom in it. 41 The testator's assets consisted mainly of monies in the Commonwealth Mortgage Fund and in bank accounts. It would seem to me, though the evidence is not completely clear, that the majority of these monies came from the sale of the Mera Street property. 42 Mr Wilson says that the s 86 deed was no bar to a claim under the Family Provision Act and that must be correct. He says that the plaintiff had been married to the testator at the time of his death for over 17 years. They lived together on a full time basis for four months and certainly thereafter had a routine which involved them being together on two nights per week. Neither took the step of having the marriage dissolved, up to the time of his illness the testator went to the plaintiff's home each week and did her gardening and the community would have expected that the testator would have made provision for his widow so that she could have sufficient money to relocate to a home more suitable to her needs. The only other claimants on the testator's bounty were the children, but each is comfortably placed and neither had been dependent on the testator for many years prior to the testator's death. 43 For the defendants, Mr Livingstone points out that the s 86 deed in all the circumstances must have been intended by the parties to provide a clean break both whilst they were living and after their decease. He points to the recital that the parties intend the deed to determine for all time all matters of maintenance and property settlement between them personally and the first operative clause "(a) This shall be binding upon them and their heirs, executors and administrators respectively". It can be seen from the testator's notes that he took those words seriously and literally. He points out that the will was made on 14 December 1987 when the final terms of the deed were still being negotiated. This, he says, accounts for the rather peculiar wording of clause 5 of the will talking about "will be provided for". 44 In the circumstances he puts that after such a short period of full time cohabitation and in the circumstances of the deed and the way the parties had maintained their properties separately ever since, the community would not expect the testator to make provision for the plaintiff out of his property on his death. 45 Mr Livingstone also says that the plaintiff owns her own home unencumbered and has substantial savings and a life policy. Although it would seem that the son is completely unwilling to assist the plaintiff with gardening, it would seem their relations are good and there is no material to suggest that the son's moral obligations to the plaintiff would mean that he would assist her with accommodation. Mr Livingstone puts that although the marriage bond was still extant, the Court should be careful not just to look at that mechanical fact, but also to the reality of the bond. He cites the decision of L W Street J in Re Clissold [1970] 2 NSWLR 619 as authority for that proposition. The defendants also point to the fact that it is clear that the parties had built of their respective estates without the aid of the other. 46 Furthermore, the plaintiff apparently decided to exit the housing market for a time in order to finance her son's business. She then found herself in a less appropriate dwelling as a result. This was her own deliberate choice. The choice was made at a time after cohabitation had finished and the testator had no obligation to make good for the plaintiff that which she had lost by giving money to her son. 47 Counsel referred to the decision of the High Court in Singer v Berghouse (1994) 181 CLR 201. It was cited because of the oft quoted words about the approach to this sort of matter in the judgment of the majority at 208-210. At 208 the Judges said: "It is clear that … the Court is required to carry out a two-stage process. The first stage calls for a determination of whether the applicant has been left without adequate provision for his or her proper maintenance, education and advancement in life. The second stage, which only arises if that determination be made in favour of the applicant, requires the Court to decide what provision ought to be made out of the deceased's estate for the applicant." 48 Dealing with the first stage, it is first of all to be noted that the plaintiff received no provision at all from the will. The second thing to be noted is that she is a widow and at least up until recently, widows were thought to have the prime claim on their husband's estate. However, that has now been said to be quite wrong by the Court of Appeal in Bladwell v Davis [2004] NSWCA 170. 49 I will, of course, as duty bound, follow a considered decision of the Court of Appeal. It may, however, one day be necessary to consider how far it is a statement of the law in view of the unanimous decision of the High Court in Easterbrook v Young (1977) 136 CLR 308, 324, that a widow's claim is paramount to that of her son's. 50 The facts in Singer v Berghouse need to be considered in connection with the instant case. There a man aged 66 and a woman aged 57 entering into a second marriage, executed a pre-nuptial agreement noting their desire that their respective assets should be held for their separate use. The testator gave his pre-marriage assets to his son and his assets acquired after the marriage to the widow for life and thereafter to the son. His will mentioned the pre-nuptial agreement. Windeyer J, then a Master, dismissed the application and this was affirmed in the Court of Appeal and the High Court. 51 All the Judges recognised that because of s 31 of the Family Provision Act the pre-nuptial agreement did not bar the claim. All of them considered that the real relevance of the agreement was to show that the parties thought its terms fair at the time they signed it and that the widow could not say that she had expectations of a more affluent life than she had led before the marriage. At 208 Mason CJ, Deane and McHugh JJ said that there will be cases in "which the existence of such an agreement will have little or no real significance by reason of either the circumstances in which the agreement was made or events occurring during the course of the marriage or relationship." They then went on to say in the case before them, "However, given the brevity of the marriage, and the significant financial contributions made by the deceased to the maintenance of both the appellant and the deceased together with the lack of any detailed evidence of either financial or non-financial contributions by the appellant, we do not believe that this is such a case." 52 I have found this a very difficult decision. For quite a while I was tending towards the view that a good practical solution to the present problem was to compel the estate to make a loan of say $100,000 to the plaintiff to be secured on the new house she would buy and to be repaid on her death. However, the parties are entitled not to a good practical solution, but to a decision according to law. 53 Looking at the first stage of the process, here we have a situation where from 1987/8 onwards the parties had set down their intentions in a deed and thereafter had made no financial commitments to one another whatsoever and had each quarantined their assets from the other. However they continued to have an emotional relationship, that situation continuing up to the testator's death. 54 Moreover, the plaintiff did not contribute in one whit to the testator's assets. This is not even a case where she made non-financial contributions except to a very minor extent such as taking the testator to the Flemington Markets to shop for fruit and vegetables on Fridays. 55 I am unable to conclude that a wise and just testator would have in the view of the average member of the community made any provision for this wife at all. 56 Accordingly, the plaintiff's claim fails. 57 Before dealing with the question of costs, I must consider the question of the appropriation by the defendants of the monies in the estate. Mr Livingstone has defended this on the basis that small estates are to be settled quickly and when no actual claim is made, estates may be distributed. 58 I cannot see any evidence where any notice was given under s 35 of the Family Provision Act of intention to distribute. Mr Livingstone says that it was up to the plaintiff to swear that there was no such notice, otherwise the Court should assume it was given. I reject this submission. The knowledge of the fact that the notice was or was not given was purely in the defendants' camp and they chose not to give any evidence of it. They knew in May 2001 that a claim was contemplated, yet notwithstanding this, distributed the estate. 59 Section 35 seems to contemplate that there are personal claims against an administrator who distributes property in an estate where the notice has not been given. Master Macready in D'Albora v D'Albora [1999] NSWSC 468; BC 9902597, considered what this liability was. The learned Master referred to the Privy Council's decision in Guardian Trust and Executors Company of New Zealand Ltd v The Public Trustee of New Zealand [1942] AC 115 where Lord Romer, giving the decision of the Board said at 127 that there were well established principles of equity, "One of those principles is that if a trustee or other person in a fiduciary capacity has received notice that a fund in his possession is, or may be, claimed by A, he will be liable to A if he deals with the fund in disregard of that notice should the claim subsequently prove to be well founded." 60 The learned Master also quoted from the judgment of Vaisey J in Re Simpson [1950] Ch 38, 42-43 where his Lordship said: "I wish it to be distinctly understood - I have said it before and I say it again, and I hope some notice will be taken of it - that where an application under the Inheritance (Family Provision) Act 1938 is either pending or impending, that is to say during the first six months after grant of representation, if it is a case in which there is any risk of such a thing happening, the executor distributes the estate at his risk. If beneficiaries come and pester him and say that they want their legacies and pressure is put on other beneficiaries to allow these anticipatory payments to be made, in my judgment it is the duty of the executor to resist any such pressure. I think it must be said that where the court has to deal with a matter under this Act the estate should be there intact. Of course, duties and debts, and that sort of thing, can be paid - there is no question about that - but no distribution to beneficiaries should be made while there is any possibility or expectation that an application under this Act will be made." 61 In Re Gimblett [1960] NZLR 664, 666, McGregor J in New Zealand said it was quite improper for administrators to distribute the estate before the expiration of the period in which claims could be made under the Act, at least without notice to the widow with full particulars of the assets. 62 In Re Faulkner [1999] 2 Qd R 49, Moynihan J in the Supreme Court of Queensland held that an executor who distributed an estate despite notice of a claim under the Family Provision Act committed a breach of trust. His Honour considered that there should be a setting aside of the distribution. 63 Dickey Family Provision After Death (Law Book Company, 1992) p 179 sets out a series of authorities for the proposition that a personal representative who distributes estate assets during a period in which an application for Family Provision can be made, may be personally liable to a successful applicant who suffers loss as a result. 64 It would seem to me that where the executors have distributed to themselves prematurely, they would ordinarily be ordered to restore the monies to the estate with interest and that for the purpose of working out the value of the estate left by the testator as at the date of the hearing that interest should be taken into account. This is because had the executors done their duty the estate monies would have been invested at interest so that the fund available for the Court to consider would have been increased by the relevant amount of interest. 65 In the present case, because the plaintiff has failed to show that inadequate provision was made for her, what I have just said is academic except as to costs. However, I wish to make it quite clear that in my view that where there has been a premature distribution of the estate the Court is not obliged to consider questions of notional estate, but would make an order that the executors personally restore the money which they have taken into the estate with interest and then make an order out of the augmented actual estate. 66 However, in the instant case because the plaintiff fails to make out her entitlement the proceedings should be dismissed. 67 In the usual way, the Court was given affidavits as to the expected costs. Although the case was originally set down for two days, it in fact concluded in two hours. One of the reasons for this was that although the plaintiff had given notice to all the defendants' witnesses to attend for cross-examination, none were in fact required. The plaintiff's affidavit estimates the plaintiff's costs at $42,000. This was doubtless based on a two day hearing. The defendants' estimate was $61,000 approximately. This is far too great for a defendant in a relatively simple Family Provision Act matter. It is a trifle hard to see where the costs were run up. The fees on hearing appear to be moderate at $18,700, but there is a bill for $38,867.90 for solicitors' costs. This is very high compared with other cases and would suggest that a lot of time was spent in dealing with matters personal to the beneficiaries rather than with the estate's defence of the claim. It would have been most unlikely that this large sum would have been allowed against the plaintiff in any event. 68 I have said on many occasions that particularly when one has a small estate (and by that I mean under $500,000) and this is a small estate, merely $218,000, costs must be capped and solicitors must ensure that they carry out their instructions with utmost efficiency if they are going to collect costs. Costs will not be allowed on an hourly basis unless it can be shown that the hours were gainfully employed. 69 In the instant case the plaintiff must bear her own costs as she has lost. Ordinarily she would be ordered to pay the defendants' costs which I would assess at somewhere about $35,000. However, in my view the conduct of the defendants in distributing the estate plus the fact that this is a claim by a widow with very little in the way of cash assets and the fact it is a matter which could have been solved by negotiation with no real loss to the defendants, it seems to me appropriate in my discretion to make no order as to costs. 70 Accordingly the order that I make is that the proceedings are dismissed with no order as to costs save that the existing orders for costs that have been made at interlocutory stages are to continue.

Ernst v Mowbray

At a glance

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Judgment (6 paragraphs)

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Cases Cited (7)

Cited By (13)