Falkingham v Falkingham

• 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4598/00 DAVID LAWRENCE FALKINGHAM v KIM FRANCES FALKINGHAM 1980/01 DENNIS ALLAN FALKINGHAM v KIM FRANCES FALKINGHAM - ESTATE OF ELSIE BERYL FALKINGHAM JUDGMENT 1 MASTER: This is an application under the Family Provision Act 1982 in respect of the estate of the late Elsie Beryl Falkingham who died on 28 October 1999. The deceased's husband had predeceased her and she was survived by the two plaintiffs who were foster children who lived with the deceased at various times during their upbringing. The defendant is the adopted daughter of the deceased. I have ordered these matters to be heard together with the evidence in one being evidence in the other. The will of the deceased. 2 The deceased made her will on 7 March 1997 and she appointed the defendant executor of her will. Under that will she gave legacies of $20,000 each to six named charities. She also gave a legacy of $100,000 to each of the two plaintiffs in these matters. Those gifts however were subject to a provision that the legacy would abate by the amount of any gift made in the lifetime of the deceased of $10,000 or more. The deceased in 1997, after the will, gave each of the plaintiffs the sum of 100,000. There is a further legacy of $10,000 in favour of Laurette Joan Falkingham and the residue of her estate she left to her adopted daughter, the defendant, in these proceedings. The estate of the deceased. 3 The deceased left a substantial estate. Its current value has not been properly addressed in the evidence before me. The principal assets valued at the date of death in 1999 were as follows: --

7 Byora Crescent, Northbridge $1,300,000 9 Byora Crescent, Northbridge $1,000,000 Shares in Falkingham Family Pty Ltd $1,357,940 Cash $ 3,779 Loan to Falkingham Family Pty Ltd $ 293,757 Total $3,955,477 4 The debts in the estate amounted to $4,000. The plaintiffs' costs are estimated at $35,000 to $40,000 and those of the defendant at $70,000. The two properties have been transferred to the defendant as has the deceased's shareholding in the family company. As a result the family company is owned absolutely by the defendant. She, along with her accountant, are directors of the company. The legacies payable under the will of the deceased I assume have been paid out of funds passing to the defendant under the residuary bequest. History of the family. 5 The plaintiff David Falkingham was born on 25 September 1943 and his brother Dennis Allan Falkingham (known as Allan) was born on 21 October 1944. In 1955 David and his brother, Allan, were placed in foster care with the deceased and her husband. The defendant, Kim, was born on 15 December 1956 and apparently was taken into the deceased's house at some time between 1958 and 1961. She was adopted by the deceased at a time which does not appear in the evidence. She did not know she was adopted until after the commencement of these proceedings. In 1958 David ran away from the deceased's home and attempted to join the Navy. He was unsuccessful and after some difficult years in 1961 he returned to the home of the deceased and her husband. The deceased's husband arranged work for David as a clerk in the accounting department of Bowater Scott. In 1963 David moved out of the deceased's home to live on his own. 6 Allan Falkingham married Anne in 1963. In 1965 Allan and his wife moved into 9 Byora Crescent, Northbridge which was owned by the deceased and her husband. That property is next door to the Falkingham's main house at 7 Byora Crescent and was a two-bedroom cottage. In 1966 David changed his name by deed poll to David Falkingham. In 1966 David married Laurette Chapman. In November 1967 David and Laurette moved to the cottage at 9 Byora Crescent, Northbridge and lived there for some two years. In 1969 David and Laurette moved to 42 Mount Ettalong Road, Umina which was owned by the deceased and her husband and they paid rent which was less than the market value. They lived there for five years until 1973 when David and his wife separated. David moved out of the property and thereafter his wife and three children continued to live in that property for some five years rent free. 7 In 1970 Allan married Susan and in 1977 they moved to Mangrove Mountain. In 1980 Allan and Susan were divorced and Allan moved to Queensland. In 1980 David moved to Western Australia and he married Elisabeth following year. In 1982 David and his wife left Western Australia and returned to Gosford where they purchased a property at 14 Una Avenue, Charmhaven. In 1985 they transferred that to the deceased's husband who then provided $110,000 for them to purchase a property at Ourimbah. In due course the deceased and her husband sold Charmhaven and applied the proceeds to reduce the amount outstanding on the purchase of the house at Ourimbah. 8 The deceased's husband, Robert, died on 21 July 1995 and in 1997 the deceased made her will. In November of that year the payments of $100,000 were made by her to each plaintiff. The deceased died on 28 October 1999 and a grant of probate was made on 2 May 2000. The summons in each matter were filed within time. Eligibility of the plaintiffs. 9 The plaintiffs claim to be eligible persons by reason of the fact that they have both been part of the household of which the deceased was a member and dependent upon the deceased. There is no dispute in this case that they were members of the household of which the deceased was a member and it also seems fairly clear, given the young age at which they became part of that household and the care and attention extended to them as young children by the deceased that they were dependent. In addition both plaintiffs were at various times dependent upon the deceased for accommodation in at least No 9 Byora Crescent. In these circumstances I am satisfied that the plaintiffs are eligible persons. Factors warranting the making of the applications. 10 Under s 9 (1) of the Family Provision Act it is necessary that the Court shall first determine whether there are factors warranting the making of the application. This expression has been dealt with by courts on a number of occasions. In Re Fulop Deceased (1987) 8 NSWLR 679 at 681 McLelland J described that expression in the following terms: "Secondly, the subsection appears to be premised upon a distinction between 'factors which warrant the making of the application' on the one hand, and circumstances which would justify the making of an order granting the application, on the other; otherwise the subsection would be pointless. This means that in a particular case the Court might determine that there are 'factors which warrant the making of the application' within the meaning of the subsection, and yet go on to decide that the application should fail. Since the subsection applies only to certain classes of applicants, it suggests that those classes of applicants need to demonstrate some basis for their claims additional to that required of other classes. The difference between the two sets of classes of applicants, in broad terms, seems to be that the classes not affected by s 9(1) (lawful and de facto spouses and children) are as such generally regarded as natural objects of testamentary recognition by a deceased (of the Wills Probate and Administration Act 1898, s 61B), whereas the classes affected by s 9(1) (former spouses, and some time dependent grandchildren or household members) are as such not generally so regarded. This suggests that the 'factors' referred to in the subsection are factors which when added to facts which render the applicant an 'eligible person' give him or her status of a person who would be generally regarded as a natural object of testamentary recognition by a deceased. That the subsection is directed at a plaintiff's status as applicant in some such sense as this perhaps finds some support in the statutory direction to the Court, in the event that it determines the preliminary question adversely to the plaintiff, not to go on to determine the application, but 'refuse to proceed with the determination of the application.'" 11 In Churton v Christian (1988) 13 NSWLR 241, the Court approved this statement. Priestley JA at page 252, after setting out and approving the statement, added:- "To this I would add that although the classes affected by s 9(1) are not necessarily generally regarded as natural objects of testamentary recognition, in some cases members of those classes may, when the circumstances of their relationship with the deceased are set out, immediately be seen to be persons who would be regarded by most observers as, in their particular circumstances, natural objects of testamentary recognition."

12 These principles have been applied at first instance for many years. There has been in recent times further attention to this matter in the Court of Appeal in the case of Brown v Faggoter, a decision given on 13 November 1998, which is a decision of Sheller JA, Sheppard AJA and Fitzgerald AJA. Fitzgerald AJA, who gave the main judgment, seemed to suggest that an application might be warranted if the application has reasonable prospects of success. This seems to be a somewhat different and perhaps easier test than that which the Court of Appeal approved in Churton v Christian. I will consider the matter on both bases, given that there may be some flux in the state of the law in this regard.

13 In the present case there is little doubt that the deceased brought up the children as though they were her own children. There is evidence of letters and cards indicating the close connection between the deceased and the plaintiffs. In the letters the deceased regarded herself and her husband as "Mum and Dad" and showed family care and love. The deceased and her husband kept a keen interest in David's and Allan's children even after their divorces. In addition the substantial provisions made for the plaintiffs by the deceased and her husband in their lifetime is also a demonstration of the fact that they regarded them as close family members. I am satisfied on the basis of the traditional approach that there are factors warranting the making of the application. In case this is not the appropriate approach I will also now consider whether they have prospects of success. The principles applicable to the application. 14 In applications under the Family Provision Act the High Court in Singer v Berghouse (1994) 181 CLR 201 has set out the two stage approach that a Court must take. At page 209 it said the following:- "The first question is, was the provision (if any) made for the applicant 'inadequate for (his or her) proper maintenance, education and advancement in life'? The difference between 'adequate' and 'proper' and the interrelationship which exists between 'adequate provision' and 'proper maintenance' etc were explained in Bosch v Perpetual Trustee Co Limited . The determination of the first stage in the two-stage process calls for an assessment of whether the provision (if any) made was inadequate or what, in all the circumstances, was the proper level of maintenance etc appropriate for the applicant having regard, amongst other things, to the applicant's financial position, the size and nature of the deceased's estate, the totality of the relationship between the applicant and the deceased, and the relationship between the deceased and other persons who have legitimate claims upon his or her bounty. The determination of the second stage, should it arise, involves similar considerations. Indeed, in the first stage of the process, the court may need to arrive at an assessment of what is the proper level of maintenance and what is adequate provision, in which event, if it becomes necessary to embark upon the second stage of the process, that assessment will largely determine the order which should be made in favour of the applicant. In saying that, we are mindful that there may be some circumstances in which a court could refuse to make an order notwithstanding that the applicant is found to have been left without adequate provision for proper maintenance. Take, for example, a case like Ellis v Leeder where there were no assets from which an order could reasonably be made and making an order could disturb the testator's arrangements to pay creditors."

The position of David Falkingham. 15 David is 58 years of age, is married and has a number of children from his various marriages. Only three of the children are dependant upon him at the moment. For many years he has worked as a truck and coach driver. Last year he went into business on his own account using a company structure. That business is the carriage of motor vehicles by truck and trailer. The company Gosford City Car Carriers Pty Ltd is owned by David and his wife who are also the directors. It apparently operates on a subcontract basis and its accounts show that David and his wife are earning approximately $400 per week. Elisabeth works part-time in a newsagency earning $150 per week and she also receives $78 per fortnight as a parenting allowance. Their eldest son, Warren, aged 19, works as an apprenticeship and he pays $50 per week board. 16 David and his wife have their house which is worth $220,000. They have two cars, a Ford LTD and a 1989 station wagon worth in total $13,000. The household furniture is valued at $65,000 and they have cash of approximately $12,000. They have their interest in the company which they acquired for $27,500. The company currently has cash in its bank account of about $17,000 and debtors of $10,000. David has just under $4,000 worth of shares and his superannuation with AMP has a payout value of $37,314. 17 It is necessary to consider the relationship between the plaintiff, David, and the deceased. There were a number of interruptions to the relationship as a child. Effectively David was at home living with the deceased and her husband for about five years before he started to move out of home. There is no reason to disbelieve his evidence that he maintained contact for the years after he left home although often this was merely by telephone. The extent of provision made during his lifetime indicates the continuing connection between the deceased and the plaintiff. 18 I turned to consider the way in which the deceased and her husband have assisted the plaintiff during his lifetime. The parties in this case treated the assistance given by the deceased and her husband as relevant for this purpose and did not descend into the details of who provided which particular funds. 19 The various financial benefits which were received by David would appear to be the following:-

1. A rental at less than the market rate for the period of twelve months and from the date he and his first wife resided at 9 Byora Crescent. 2. Reduced rental when David occupied Umina with his wife and children for a period of five years. 3. The rent free provision of the Umina property owned by the deceased and her husband for five years from 1972 after David and his wife separated. The house was occupied by David's wife and children during these five years. 4. The provision in April 1983 of $18,000 to enable the purchase of the house at Charmhaven. 5. A loan of $110,000 to purchase the property at Ourimbah. There appears to have been the transfer of Charmhaven back to the deceased and her husband. They recouped some funds as a result of this. The loan apparently ended up being for $58,200 and I accept that the plaintiff, David, paid $20,000 in reduction of this amount. 6. The plaintiff has received the benefit of two cars given to him and his wife by the deceased. These were an LTD valued at between $25,000 and $30,000 and a Sigma valued at approximately $15,000. 7. In late 1997 the plaintiff received the sum of $100,000 from the deceased. 8. Over a period of ten years before the death the deceased's husband David received dividends from the family company of $1,300 per year. 20 The effect of this provision was to give David his home at Ourimbah which is situated on two acres and valued at about $270,000. He also has the cars which were given to him. 21 It is clear that on any analysis there has been substantial provision for the plaintiff, David, during his lifetime from the deceased and her husband. This is an important factor to be taken into account and must be weighed in the balance along with other factors including matters such as the size of the estate and the nature of the other claims upon the estate.

The position of Dennis Allan Falkingham. 22 Allan is 57 years old and is single. He has been married three times and it appears that at the moment he does not have any dependants. He works as a truck driver earning approximately $600 per week. He has rent of $170 per week, life insurance, loan repayments and MBF payments of $94 per week. The balance of his income is spent on running his car which, apart from his furniture, is his only asset. 23 I turn to the relationship between Allan, as he was called in the evidence, and the deceased. Allan was at home much longer than his brother Dennis. He moved out when he was about 18 years and thereafter had no contact with the deceased for some 18 months. He said that this was because apparently he had been a disappointment to them. He says that once he moved to Brisbane in 1992 he telephoned them about once a fortnight and he visited the deceased when she was ill in hospital just before her death. 24 Allan also received assistance from the deceased and her husband during their lifetime. 25 The benefits that Allan received were as follows:-

1. After his marriage in 1965 he had the benefit of rent free accommodation at 9 Byora Crescent for one year. 2. Thereafter he relocated to Ettalong and lived rent free for 18 months. 3. In 1977 he moved to Mangrove Mountain and occupied that property for 15 years up to 1992. He stayed there rent free although the house may have been transferred into his name at the time. 4. There were various gifts, including a car, a trip for a child, and others amounting to $23,965 which covered a period from November 1979 to March 1987. 5. When Mangrove Mountain was sold and the plaintiff, Allan, went to Brisbane he was given access to $69,000 of those sale proceeds from which he purchased a shop in Brisbane. 6. Allan had $100,000 given to him in November 1997 to purchase a house in Brisbane for $160,000. When he separated from his wife all he received from the property settlement was $25,000. This was the plaintiff's third divorce. 26 It would appear that by the provision of accommodation, mainly, rent free, Allan had accommodation from about 1964 to 1999 as a result of provision by his foster parents. 27 It is necessary to also have regard to the situation of others having a claim on the bounty of the deceased. In this case the evidence discloses only one person namely, the deceased's adopted daughter, the defendant. The situation of Kim Frances Falkingham 28 Kim Falkingham is presently aged forty-four years of age. She is single never having married and has no dependants. She was educated at Northbridge Public School and Wenona which she left when she was 16 years old. She enrolled in a secretarial course for one year and also attended a receptionist course but did not continue with that form of employment. Apart from some part-time work with children on two occasions many years ago she has not worked. She has always lived with her parents at 9 Byora Crescent, Northbridge. During their lifetime her parents provided her with pocket money and support. 29 Since the death of her mother the defendant has received repayments on account of her entitlement from the company. These are currently running at the rate of $48,000 per annum. In addition rates, insurance and land tax on the two properties are also met by the company before payment to her of the amount on account of her entitlement. There is a substantial amount of retained profits in the company which no doubt could be distributed to the defendant. The current amount of the retained profits as at 30 June 2001 is $420,073. Her outgoings in her affidavit are detailed to include the rates and other charges on the two properties which she owns. Her usual expenses seem to be $28,644. The rates, insurance and land tax for the two houses comes to a total $12,487 per annum. The company, which is now owned by the defendant, has assets being cash of about $168,828.71 and a good conservative share portfolio valued at $2,301,038.99 30 The defendant says that she was close to the deceased all her life and it is apparent that her parents were careful not to force her into employment. They were happy to have her at home and to support her. 31 Apart from the support, to which I have referred earlier, there is no evidence of other provision made by the deceased and her husband to the defendant during their lifetime apart from various overseas trips with her parents and by herself. As was the case with David and Allan she did not contribute to the estate of the deceased. The claim for provision. 32 It is necessary to see how the plaintiffs say that they have been left without adequate and proper provision for their maintenance, education and advancement in life. 33 David puts his claim for provision in three ways. First he suggests that he needs a new garage which the quotation established would cost $15,810. Second, he wishes to do some alterations to his house to provide for separate accommodation for two of his children. At the moment his boys are sharing one bedroom. This cost is estimated at $48,345. The third claim put forward is one for some funds to support him in his retirement. He submitted that he is now 58 years and he will retire aged 65 years. Thereafter he would have a lifespan of some 15 years during which he would have to provide for himself. His wife is younger and it is submitted that he has an obligation to provide for her in his retirement. On the life expectancy tables it is expected that she would be living by herself for another 16 years. 34 There was evidence in the calculations for the plaintiff, David, based upon his assumed living expenses of $500 week to maintain himself, his wife and his children. Applying the 3 percent tables and allowing for a period of deferment for 7 years (a discount rate of 0.813) results in a figure of $256,908. Upon the assumption that his wife Elisabeth had an expenditure of $350 per week and that the amount is deferred for 22 years (a discount rate of 0.522) a lump sum would be $121,626. 35 As far as Allan is concerned his situation is quite different from that of his brother. He is single without dependents and essentially has no assets. He works, earns a salary and his claim is put forward on the basis that he also needs a sum to support himself in his retirement after 65 years. 36 In this respect the same figures are used in calculations and after allowing for a period of deferment for 8 years (a discount rate of 0.787) the figure arrived at is $249,324. 37 There were a number of criticisms of these submissions both in principle and as to the factual basis on which the calculations were made. I will first deal with criticisms of David's claim. There were two discrete items being a sum for the construction of a garage at a cost of $15,810 and the addition of another bedroom to his residence at a cost of $48,345. In respect of the first item there does not seem to be any evidence as to why that amount is needed as there already is a double garage on the property. So far as the second is concerned it was pointed out in submissions that at an earlier stage when $100,000 was received, the work necessary could have been done. It seems to me that the need for this work has probably become more acute as the children have grown up and at the moment the boys are sharing one bedroom. I do see it as an appropriate claim and like all the others has to be judged in the context of the circumstances of the case. 38 The criticisms of the calculations also include criticism of the claim for an amount to support David's wife after his death. Reliance was placed by the plaintiff on Goodman v Windeyer (1980) 144 CLR 490 as authority for the proposition that an extra amount should be factored into David's legacy to take into account that he has a dependent wife and after his death her needs should be met effectively from funds in the estate. This is not what was said in the case which concerned a second wife who had a son who was dependent upon her as at the date of death of the deceased. At page 498, Gibbs J said: -- "Although the child of a claimant is not himself entitled to relief under the Act, the fact that a claimant has to support and educate a child is one of the circumstances that have a bearing on the question of what is necessary for the claimant's proper maintenance." 39 There is a legal obligation on a parent to support a child during infancy. Such a legal obligation does not arise in respect of a wife after the death of her husband. There may be obligations to support a wife flowing from the provisions of the Family Law Act and other such legislation. In my view to make the provision sought for David's wife is quite wrong in principle and would elevate David's wife to the position of an eligible person. In the facts of this case she is not such a person. 40 There were a number of criticisms of the calculations in respect of David's claim. It was correctly pointed out that the obligation to support his children will cease and the costs of supporting them are also likely to reduce. The actual evidence of living expenses in respect of David was $460 per week although the income the family earns is a little more than this. The other substantial criticism was that David has a number of cash assets being shares, some savings and the cash which is presently in his business. These total $108,615. This sum should be taken into account in a consideration of David's overall situation and whether it is appropriate to make some order. One thing that needs to be remarked is that in respect of the current savings in the business there are likely to be fluctuations in the income of the business and some capital would be necessary. 41 By way of example the defendant's submissions suggested that if the proper weekly expenses were $200 and deducted from the lump sum were the available assets of $108,615 the amount required would be $17,845 which deferred came to $14,588.80. 42 With regard to Allan it is pointed out that his expenses are likely to be higher as he does not own a home. The only evidence that he gave of his expenses was in the most general terms. He referred to the fact that he earned $600 per week and expended $264 per week for rent, life insurance, loan repayments and MBF. He said that he spent the balance of his money on running his car and on living expenses. There has been little attempt to truly estimate his expenses as a proper foundation for the calculations. If one adopted $300 per week at 3 percent with the appropriate deferment of 9 years the amount is $145,302. These calculations indicate an extraordinary variability in the relevant amount depending upon what starting point is accepted. 43 One does, however, have to look at these claims in context. One of the items of context which was put in submissions by the defendant is that the plaintiffs are only foster children. That may be so, but the extensive provision made by the deceased during her lifetime for the plaintiffs speaks more of a relationship closer to that of children of the deceased rather than foster children. The situation of the defendant does not really intrude into the question of what is the appropriate provision. She has a large house and access to a family company with over $2 million of investments. She also has a property 9 Byora Crescent, Northbridge, which is worth in excess of $1,000,000 which is not occupied. In any event any order can clearly be accommodated by the sale of 9 Byora Crescent and I will return to this aspect shortly. 44 Both plaintiffs had been well provided for by the deceased and her husband during their lifetime. They are both in the latter stages of their life and David appears to be the more successful of the two plaintiffs. He still has some years during which he could expect to work and his business seems to be reasonably profitable. He has received extensive help during the lifetime of the deceased which has to be taken into account. It also has to be observed that this help was part of his lifestyle. The estate is large and there are no competing claims which cannot be accommodated. I think it is appropriate that he have some provision for alterations to his house and some other fund to assist with his superannuation. I do not think it appropriate in the circumstances of this estate and the relationships involved that it should fund a sum sufficient to provide complete superannuation. Allan, who, for one reason or another, does not seem to have been successful to the same degree as his brother has been unable to save any capital. Such capital as he has accumulated he mostly lost through his last divorce. I also do not think that is appropriate that he should expect to receive a sum sufficient to provide complete superannuation for the same reasons. However, he should have some sum to assist in this regard. 45 In the circumstances I think the appropriate order is that David should receive a legacy of $170,000 and Allan a legacy of $150,000. 46 The estate has been distributed and accordingly it is necessary to consider whether the property 9 Byora Crescent should be designated as notional estate. 47 Section 27 of the Family Provision Act is in the following terms: "(1) On an application in relation to a deceased person, the Court shall not make an order designating property as notional estate of the deceased person unless it has considered:

(a) the importance of not interfering with reasonable expectations in relation to property;

(b) the substantial justice and merits involved in making or refusing to make the order; and

(c) any other matter which it considers relevant in the circumstances.

(2) In determining what property should be designated as notional estate of a deceased person, the Court shall have regard to:

(a) the value and nature of property the subject of any relevant prescribed transaction or distribution from the estate of the deceased person;

(b) where, in relation to any such prescribed transaction, consideration was given, the value and nature of the consideration;

(c) any changes over the time which has elapsed since any such prescribed transaction was entered into, any such distribution was made or any such consideration was given in the value of property of the same nature as the property the subject of the prescribed transaction, the distribution or the consideration, as the case may be;

(d) whether property of the same nature as the property the subject of any such prescribed transaction, any such distribution or any such consideration could, during the time which has elapsed since the prescribed transaction was entered into, the distribution was made or the consideration was given, as the case may be, have been applied so as to produce income; and

(e) any other matter which it considers relevant in the circumstances." 48 There is nothing in the evidence which would suggest that any reasonable expectations have to be considered. The property is not rented and it is surplus to the requirements of the defendant. There may be some minor adjustments to the boundary necessary to adjust the placement of the swimming pool but the property can easily be sold without disturbing the defendant's occupation of the large house which she now occupies. In the circumstances there does not seem to be any reason why the property should not be designated as notional estate. 49 Accordingly the orders I make are as follows: --

1. That the plaintiff David Lawrence Falkingham receive a legacy out of the estate of the deceased in a sum of $170,000. 2. That the plaintiff Dennis Allan Falkingham receive a legacy out of the estate of the deceased in the sum of $150,000. 3. That the plaintiffs' costs on a party and party basis and the defendant's costs on an indemnity basis be paid or retained out of the notional estate of the deceased. 4. That the property 9 Byora Crescent, Northbridge be designated as notional estate for the purposes of paying the legacies in paragraphs 1 and 2 above and the costs in paragraph 3 above. **********

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