Finlay v Pereg

Preliminary issue - Representation of the Estate

1. In the Will, Lily appointed John as executor. Probate of the Will was granted to John on 28 June 2019.
2. As will be obvious, because John is the plaintiff, he cannot represent the Estate in these proceedings. With a view to keeping costs to a minimum, and in accordance with suggestions made by Hallen J sitting as the Family Provision List Judge, Moshe and Edna assumed the role, for all practical purposes, of representing the Estate, in particular to enable a mediation to occur.
3. By the time of the hearing, it was common ground that it would be necessary for the Court formally to appoint representatives for the Estate. In due course as part of the working out of these reasons, the Court will make an order under the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) Part 7, r 7.6(1) for Moshe and Edna to represent the Estate.
4. It is not necessary to record the somewhat complicated interlocutory history of these proceedings, including the late joinder of the third to seventh defendants. However, all parties recognise that, because Moshe and Edna support John's claim, their appointment as representatives of the Estate is subject to the entitlement of the third to seventh defendants to be heard. This is because the Sarusi defendants opposed John's claim. In the course of his submissions, Guy also reserved the Sarusi defendants' position as to Moshe and Edna's entitlement to costs as representatives of the Estate. He wished to be able to submit at an appropriate time that not everything they had done could be characterised as having been done in their de facto (and soon to be de jure) capacity as representatives of the Estate.

Preliminary issue - Notice of the proceedings to Gilad

1. During the entire course of these proceedings, Gilad has been in police custody in Mendoza, Argentina.
2. The evidence before the Court established that consular inquiries had revealed that Gilad's lawyer in Argentina was Mr Maximiliano Legrand. The following correspondence then ensued: 1. On 21 May 2020, John's solicitor sent two emails to Mr Legrand. The second of these attached, purportedly by way of service, the summons, notice of eligible persons and various affidavits that had been served on behalf of John. 2. Shortly after his emails, John's solicitor received this reply from Mr Legrand (spelling as in original): "Dear Solicitor Morris: In fact I represent Gilad Sarussi. I will study de files attached and send you a response. Greetins." 1. Notwithstanding that reply, Mr Morris heard nothing further from Mr Legrand. 2. On 12 June 2020, Mr Morris' office emailed a six page letter to Mr Legrand setting out the history of the proceedings in detail and enclosing various forms of orders. That letter concluded: "Also if your client has any special circumstances that you would like the representative parties to put before the Court for consideration in respect of his share of the gift or in relation to the proposed orders, you may do so by sending to us your information, comments or an affidavit, or, if that is not possible, any other document that you wish the Judge to consider. If you wish us to put information to the Court but require further time please also urgently advise." 1. There was also in evidence an outlook.com receipt confirming that the letter and attachments referred to in the preceding sub-paragraph had been delivered to Mr Legrand's email address. Accordingly, the Court finds that the letter was delivered to Mr Legrand. 2. On 21 October 2020, Mr Morris emailed to Mr Legrand, purportedly by way of service on Gilad, a sealed copy of the amended summons in these proceedings. The original summons had only joined Moshe. The amended summons, filed on 21 October 2020, added Edna, the Sarusi defendants and Gilad as defendants to the proceedings. 3. On 3 February 2021, Mr Morris emailed the various defendants, including Mr Legrand, informing them that he would be asking the Court to fix a hearing date for the proceedings. 4. On 19 March 2021, Hallen J fixed the proceedings for hearing before me on 22 November 2021 with an estimate of one day plus. 5. Other than the response referred to in [13(2)], Mr Legrand has not replied to the communications sent to him.
3. By reason of the matters set out in the preceding paragraph, the Court finds: 1. Mr Legrand was, at all relevant times, Gilad's lawyer in Argentina; 2. Mr Legrand received various emails and attachments sent to him as referred to in the preceding paragraph; 3. By reason of the fact that Mr Legrand was Gilad's lawyer, Mr Legrand brought that correspondence and the fact of these proceedings to Gilad's attention; 4. For whatever reason, Gilad has chosen not to take part in the proceedings.
4. By reason of these findings and unopposed by any other parties, in the working out of these reasons the Court will make an order under UCPR Part 10, r 10.14(3) that the summons and other documents referred to in the email from Mr Morris' office to Mr Legrand of 21 May 2020 will be taken to have been served on Gilad on that date, and that the amended summons will be taken to have been served on Gilad on 21 October 2020.
5. There was no appearance for Gilad at the hearing. Although there was no evidence that Mr Legrand had been informed of the hearing date, given the matters referred to in [12] to [14] and the fact that there was also evidence before the Court (to which I will make further reference below) that Gilad has now been found guilty and sentenced to life imprisonment for the murder of Pyrhia and Lily, the Court was satisfied that it was appropriate to proceed in Gilad's absence. No party represented before the Court suggested otherwise.

Preliminary issue - The forfeiture rule

1. The forfeiture rule is a rule of public policy to the effect that a person who is otherwise a beneficiary under a will is prevented from inheriting from the deceased if they have unlawfully killed the deceased: see, for example, Helton v Allen (1940) 63 CLR 691. The Court received, without objection, a copy of an article from the Times of Israel dated 4 November 2021 which included: "The jury in Argentina on Wednesday convicted an Israeli man for murdering his mother and aunt in the South American country over two years ago. The court handed Gil Pereg, 40, a life sentence for the killings, requiring him to serve at least 35 years in prison."
2. On the basis of that evidence, the Court is satisfied on the balance of probabilities that Gilad unlawfully killed both Pyrhia and Lily. No party contended for any other result. It was common ground that Pyrhia had died before Lily. There was then also no dispute that the forfeiture rule operated to prevent Gilad from taking the share to which he would otherwise be entitled because he had killed Lily (the testatrix) and, if a further and alternative basis was required, because he had killed Pyrhia, by reason of whose death the substitutionary gift to him came into operation.
3. There was no dispute that Gilad's share should go to the Sarusi defendants and that, assuming a family provision order would ultimately made, the most convenient way of effecting that result would be through an order made under either s 66(1)(l) or s 66(2) of the Act. Given the decision to which the Court has come, that is what will happen.
4. Even if the forfeiture rule did not apply for want of proof of Gilad's guilt, in the circumstances set out in [12] to [16] above and where the Court has determined to make additional provision for John, the Court would still make an order under the Act to ensure that the Sarusi defendants received what would otherwise have been Gilad's share of the Estate.

Preliminary issue - A settlement "agreement"?

1. The parties' outline of submissions provided in advance of the hearing focussed on an agreement that was said to have been reached in April 2020 between John, Moshe and Edna, that in lieu of his one quarter share of the Estate, John would receive a lump sum of $780,000 from which he would bear his own costs. There were other terms of that agreement which it is unnecessary to record.
2. The tenor of the parties' outline of submissions was that the Court should exercise its discretion so as to give effect to that agreement. Moshe and Edna submitted that they consented to the making of orders accordingly. However, the Sarusi defendants have never agreed to the terms agreed between the other parties. The "agreement" between John, Moshe and Edna is irrelevant and the hearing was conducted on the basis that while Moshe and Edna supported John's claim, the onus was on John to make out that claim in the face of the opposition of the Sarusi defendants.

John and Lily

1. John was born in 1953 and was 68 years old at the time of hearing. Lily was born in 1964 and was 54 years old when she died in January 2019.
2. John and Lily met through an internet dating service in Coffs Harbour in 2009. Lily was divorced and had no children. John was also single and had no children. Originally from New Zealand, he was living in the Unit and was working as a territory manager for a seed supplier. His territory included Armidale, where Lily was a Senior Lecturer at the University of New England. She lived in her own home in Invergowrie on the outskirts of Armidale. It was a semi-rural 4.5 acre block.
3. Within 6 months of their first meeting, Lily asked John to move into her home. John lived there from 2009 until Lily's death in 2019. They had a close and loving relationship.
4. While John made some contribution to household expenses, most living expenses were paid by Lily. They kept their finances separate. Each had their own bank account and John was not a co-signatory on Lily's account. Living with Lily meant that John was able to rent out the Unit and use that income to pay down his mortgage over the Unit and meet the other outgoings of the Unit. Lily also gave John $100,000 to reduce his mortgage.
5. In 2013, John and Lily decided that John would retire in order to devote himself full time to supporting Lily. He became the principal homemaker. She worked long hours and travelled frequently both in Australia and overseas, consulting, teaching and attending conferences. They travelled together, using her commitments as an opportunity to see Australia and the world.
6. Also in 2013, on 5 August, John and Lily made mirror wills by which, with irrelevant minor variations, each left their estate to the other. If Lily did not survive John by thirty days, then his estate would go to his two sisters in New Zealand. The Will, made on that day, provided: "4. MY EXECUTORS shall hold the whole of my Estate upon trust to: 4.1 forgive all debts due to me as at the date of death; 4.2 attend to payment of any outstanding balance on any mortgage over John's principal place of residence; 4.3 divide the rest and residue of my Estate equally between such of John, Moshe, Edna and my sister PYRCHIA [sic] SARUSI as survive me but if any of them should die before me leaving children then those children shall take equally the share of my Estate to which their parent would otherwise have been entitled."

John's current circumstances - Generally

1. As I have already noted, at the date of this judgment John is 68 years old. He had his prostate removed six years ago due to prostate cancer and requires a blood test every six months, but he is cancer free. Other than needing glasses and some dental work, there was no evidence that John has any adverse health issues.
2. According to the Australian Bureau of Statistics Life Tables (2021 ed), his current life expectancy is 17.9 years. In his submissions, Guy referred to medical research concerning the possibility of decreased life expectancy for men with prostate cancer (see further [55(4)] below). However, in the absence of expert medical evidence addressing John's circumstances in particular, the Court declines to find anything other than that John has a life expectancy of 17.9 years. The generalised evidence referred to by Guy does not enable the Court to be satisfied on the balance of probabilities of the extent of any reduction in life expectancy in the specific case of John.

John's current circumstances - Assets and liabilities

1. John's assets total $956,512, comprising: 1. The Unit: $780,000 2. Cash at bank : $8,980 3. Superannuation: $167,532
2. John's liabilities (excluding the costs of these proceedings) are: 1. NAB offset mortgage: $9,914 2. NAB credit card: $9,752
3. In relation to the value of the Unit, the Court has accepted the figure sworn to by John in his updating affidavit affirmed on 21 October 2021. In his closing written submissions, Guy included a printout from realestate.com.au dated 12 December 2021 which recorded a "high confidence" valuation of the Unit of $1.06 million. The printout was not tendered in evidence, John was not cross-examined on the current value of the Unit and the case was not conducted by anyone on the basis of there being a dispute about the value of the Unit. I therefore will disregard the printout included by Guy in his closing written submissions. In any event, the current value of the Unit is irrelevant where it was accepted by all parties that Lily had fulfilled whatever testamentary obligation she may have had to John in relation to ensuring that he had secure, unencumbered accommodation.
4. The various figures and estimates which John gave in his affidavit evidence concerning his income and expenditure were overtaken at the hearing by the provision of his NAB statements and home loan account. The bank statements cover the period from 7 November 2019 to 21 September 2021. John operates only one bank account and it cannot be doubted that the statements for that account give the most accurate indication of his day to day finances.
5. John currently has two sources of income: a pension, with Australian and New Zealand components, and his superannuation. Because he worked for a period of time in New Zealand, under treaty arrangements between Australia and New Zealand if John is entitled to an Australian Centrelink pension, then he is also entitled to a pension from New Zealand. However, the contributions from the two sources are calculated so as to be no greater than if John were receiving only an Australian Centrelink pension.
6. Insofar as John's income is concerned, the most recent complete month for which the Court had bank statements is August 2021. His income for that month was $2,612, comprising: 1. $1,181 from Centrelink; 2. $755 from the New Zealand Ministry of Social Development; and 3. $676 from John's superannuation fund.
7. For the purposes of these proceedings, the Court finds John's annual income to be $31,344 ($2,612 x 12).
8. The same bank statements enable the Court to determine what it is satisfied is a reliable figure for John's monthly expenditure. As I have noted, the period of the bank statements is 7 November 2019 to 21 September 2021. I will treat the opening and closing months as whole months, so that for the purposes of the Court's findings, they will be taken to represent 23 months. John's total debits for that period are $111,043. This gives an average monthly expenditure of $4,828 ($111,043/23) or $57,935 per annum. I have not overlooked that these figures include the transactions set out in [41] below, but I have included them because they are examples of contingencies that could arise from time to time that should be taken into account in determining provision for John.
9. On the basis of these calculations, it is apparent that John's monthly expenses exceed his income by $2,215. That is consistent with two other matters. First, John told the Court that after the balance of his mortgage over the Unit had been paid out in accordance with Lily's will (a payment of $36,809.60), John had to redraw $9,000 against the mortgage to meet his ongoing expenses. Second, examination of his bank statements discloses that, with one exception, the closing balance is always lower than the opening balance. The one exception is the statement for the period from 1 January 2020 to 30 June 2020, where the opening and closing balances are almost the same. This result was apparently achieved by John drawing down $7,000 from his superannuation account.
10. In drawing to attention that John's monthly expenses exceed his income, the Court means no criticism of John. Having reviewed those statements the Court is well satisfied that his expenses are ordinary, day to day living expenses that might be incurred by a retired, single man living a modestly comfortable lifestyle. There is nothing in John's expenditure that might be described as extravagant or unusual.
11. In his analysis of John's bank statements, Guy did identify four transactions as potentially "extraordinary" or "abnormal", all of which John was able to explain and which the Court finds to be unremarkable: 1. $7,000 which John paid to the Estate to purchase Lily's Nissan Patrol motor vehicle (this was, in effect, to pay out the Sarusi defendants' quarter share of the car, because John was entitled to one quarter and Moshe and Edna gave him their quarter shares in the car); 2. $8,533 for the purchase of a Mazda BT50 motor vehicle (this was the balance to purchase the car after John applied the funds which he received on selling the Nissan Patrol); 3. $5,000 to replace an air conditioner at the Unit; and 4. $4,343 to pay off a larger than usual credit card debt he incurred as a result of a holiday in Queensland.
12. The Court accepts John's evidence that his current lifestyle is commensurate with that he enjoyed with Lily, with the exception that he travelled overseas with her at least twice a year. John's evidence was that he wished to be in a position to make an annual visit to his family in New Zealand.
13. The material before the Court demonstrated that while Australian pensions are subject to an assets test, New Zealand pensions are not. It also showed that the pension eligibility arrangements between Australia and New Zealand were that if someone in Australia becomes ineligible to receive an Australian pension, for example by reason of the assets test, then they will lose whatever right they had to the part of that pension being provided by New Zealand.
14. At the outset of the hearing, the Court was informed by Mr Armfield that there was no dispute that when John finally receives his distribution from the Estate (even assuming no additional provision is ordered), he would become ineligible by reason of the assets test to an Australian pension and would therefore lose the New Zealand component of his pension, leaving him only with the income he draws from his superannuation account. Whatever may have been the case at the start of the hearing, that proposition was disputed by the Sarusi defendants in their final submissions. The Court intends no criticism of any party in recording this turn of events.
15. However, the dispute, such as it was, really turns on what assumption is made about how much John will receive from the Estate. Because the Unit is John's home, its value is excluded from the calculation of John's assets in relation to his pension entitlement as a homeowner. The uncontradicted evidence was that John would be eligible for a full homeowner pension (currently approximately $25,155 per year) if his assets were less than $270,500. If his assets exceeded that sum, the amount of any part pension would reduce, reducing down to zero if his assets were greater than $593,000.
16. John's current net assets are $134,346 (see [31], [32] and [51(1)]: superannuation and cash at bank less his credit card, mortgage and differential between indemnity and ordinary costs). Guy's submissions included calculations about John's potential pension amounts which the Court infers were derived from the Services Australia website or similar. An extract from the Services Australia website was in evidence in relation to asset limits for pension eligibility and the Court takes judicial notice of online pension calculators.
17. Guy accepted in his calculations attached to his submissions that John's pension would be significantly reduced upon receiving provision from the Estate, although on the figures in evidence it does not appear that in the absence of further provision he would have received enough to take his assets over $593,000. Guy's calculation, which the Court accepts, is that after receiving his share of the Estate, John's pension income would reduce to an annual part pension of $5,148 ($429 monthly). This would increase as John's assets were reduced (according to Guy, by $3,900 for every $50,000 reduction in assets).
18. The precision of the foregoing figures is not important for present purposes. However, they do make the point which Guy's submissions acknowledged, that receipt of his provision from the Estate will reduce John's income significantly even if the Court does not increase the amount of provision. Adopting Guy's figure of an annual part pension of $5,148, the Court finds in the first instance that John's annual income would fall from $31,344 (see [37]) to $13,260 ($5,148 + $8,112 (annual superannuation income: see [36(3)]). On no view would this be sufficient to meet his current annual expenses of $57,935 (see [38]), which would then mean he would have to have recourse to capital.

The Estate and the parties' legal expenses

1. The largest items in the Estate are the proceeds of Lily's superannuation death benefit ($839,276) and the proceeds of sale of her home at Invergowrie ($481,939). The Estate has been converted into cash and is currently $1,491,491. The only outstanding expense to the Estate is the costs of these proceedings.
2. As I have already noted, John has received $36,809.60 from the Estate which, in accordance with Lily's intention, was used to pay out his mortgage over the Unit. There have also been $40,000 interim distributions to each of John (he applied this towards his legal fees in these proceedings), Moshe and Edna. For the purposes of considering the amount of the Estate in the context of these proceedings, it is convenient to add back in the interim distributions. This gives the residuary value of the Estate to be $1,611,491. It follows that, but for these proceedings, each of John, Moshe, Edna and the Sarusi defendants would receive $402,873 (for the avoidance of doubt, $100,718 to each of the four Sarusi defendants).
3. Turning to the parties' costs of these proceedings, including the two day hearing (I take no account, because there was no evidence about it, of what should be a small additional amount of costs incurred because John, Moshe and Edna's replies had to be prepared in writing) these are: 1. John's costs on the ordinary basis are $75,000 ($97,500 on the indemnity basis); 2. Moshe and Edna's costs are $144,000 on the indemnity basis; and 3. Guy informed the Court that the Sarusi defendants' legal costs for the period for which they were legally represented were $11,700, with costs of sealing affidavits in Israel of $261. The Court finds the Sarusi defendants' costs to be $9,621 on the ordinary basis (80% of $11,700 plus the disbursement of $261).
4. After allowances made for the parties' legal expenses as set out in the preceding paragraph, the net distributable residuary estate is $1,382,870, with each quarter share being $345,718 (for the avoidance of doubt, $86,429 to each of the Sarusi defendants).

The submissions for John, Moshe and Edna

1. The submissions for John can be summarised as: 1. Provision for John's proper maintenance would ensure that he is secure in his home, with income sufficient for the lifestyle he was accustomed to and for contingencies: Bosch v Perpetual Trustee Co Ltd [1938] AC 463. John and Lily were together for a decade until her tragic death, and John's uncontradicted evidence was that he stopped working to support Lily's career. 2. The provision made for John in the Will is not adequate for his proper maintenance. Under the Will, John would receive $402,872 after discharge of his mortgage. Upon receipt of that sum, John would lose his entitlement to the age pension. John's bank statements show that his average monthly expenditure is $4,827. His life expectancy is 17.9 years. He therefore requires approximately $1,036,840 to cover his expenditure over the rest of his life (17.9 x 12 x $4,827). John's net assets are $134,346 (see [46]). This analysis warrants provision from the Estate of $902,494, but John remains willing to adhere to the amount agreed with Moshe and Edna of $780,000 inclusive of his costs. 3. There is no evidence that the other beneficiaries have competing financial needs, so the Court can infer they have sufficient income and resources to meet their needs: Tobin v Ezekiel (2012) 83 NSWLR 757; [2012] NSWCA 285. 4. The Sarusi defendants have a lesser moral claim because they are substitutionary rather than primary beneficiaries of the Will: Nicholas v Nicholas [2013] NSWSC 697 (Nicholas) at [193] and [247] per Hallen J. 5. The provision for John should be borne out of residue, as none of the other beneficiaries have put their financial circumstances in issue.
2. In chief, Moshe and Edna joined in and adopted the submissions made on behalf of John.

The submissions for the Sarusi defendants

1. The Sarusi defendants submitted that John had no needs warranting further provision. In summary: 1. John's unencumbered ownership of the Unit was made possible largely due to direct and indirect benefits from Lily to John. The direct benefits were the gift to John during her lifetime of $100,000 and the provision in the Will of $36,809.60 to discharge John's mortgage. The indirect benefit was that he lived with Lily at her Invergowrie home largely at her expense, which enabled him to rent out the Unit and meet his mortgage and other expenses from that rental income. 2. The Court should use the AFSA Retirement Standard, which provides that annual income of $45,239 ($3,770 per month) is needed for a comfortable retirement, reducing to $42,846 in the case of an 85 year old. (The Court notes this standard includes an annual domestic flight and an international flight every seven years.) 3. Excluding "large one-time" expenses, such as buying a car and an air conditioner, John's average monthly expenditure from November 2019 to February 2021 was $3,888. From March to August 2021 his average monthly expenditure was $5,730. This suggested he had inflated his expenditure from when the matter was fixed for hearing. At most, the Court should allow $4,100 in monthly expenditure for John. 4. John's life expectancy is 10 to 17 years, given by a life expectancy of 17 years from ABS data and discounting for John's cancer (from which he has now recovered) based on a British Medical Journal article which used data up to 2010: P D Baade et al, "Estimating the Change in Life Expectancy After a Diagnosis of Cancer Among the Australian Population" (2015) 5(4) BMJ Open (online). 5. With his current superannuation (which is with a strongly performing fund), the provision in the Will, and a full age pension once his assets have been reduced below the threshold of $270,500 (which would be after approximately four years without further provision), John would have sufficient income to sustain a comfortable retirement in accordance with the AFSA Standard for at least 15 years. This is without taking into account a part age pension. The submissions attached a series of detailed calculations to demonstrate that John "will generate enough income annually, that together with his full age pension will allow him to live basically forever without ever running out of cash or the need to get loans against" the Unit, and leaving his heirs the Unit and up to $300,000 in cash. 6. John would not lose the age pension entirely after receiving the provision in the Will; he would receive a part pension of $5,148 per year. This would increase by $3,900 per year for every reduction of $50,000 in John's assets. 7. John could and should return to paid employment, since he was working before Lily's death as their homemaker. 8. Despite John's evidence to the contrary, Guy submitted that John "will eventually figure out that his already fantastic financial circumstances (of him being a millionaire) and social life [family and friends] will be even better in New Zealand". There was therefore a "high probability" John will decide to move back to New Zealand. In New Zealand, John would immediately become eligible for a full age pension, even if he decided to return to work. 9. Any substantial extra provision should be held in trust only to be applied for John's benefit if his own funds ran out and with any remaining balance to be repaid to the beneficiaries of the Estate upon John's death.

The submissions in reply for Moshe and Edna

1. It was submitted for the first and second defendants in reply to the Sarusi defendants: 1. The lifestyle enjoyed by John with Lily would be consistent with expenditure higher than the upper end of the AFSA Standard of $3,770 per month. The Court should accept that John's future expenditure will be in the range of $3,800 to $4,200 per month. 2. The material advanced by the Sarusi defendants suggested John's life expectancy is between 12 and 19 years. However, there was little evidence to support the lower end of this range, so the Court should find John's life expectancy to be "around 18 or 19 years". 3. Moshe and Edna took issue with Guy's calculations. They presented these scenarios: 1. Assuming the lower range of $3,800 monthly expenditure and an 18 year life expectancy, and allowing a 5% return on funds, provision of $457,588 would be required after taking into account John's current asset position and allowing $50,000 for contingencies. 2. Assuming the higher range of $4,200 monthly expenditure and an 18 year life expectancy, and allowing a 5% return on funds, provision of $536,168 would be required after taking into account John's current asset position and allowing $50,000 for contingencies. 3. Assuming the higher range of $4,200 monthly expenditure and an 18 year life expectancy, and allowing a 3% return on funds, provision of $645,083 would be required after taking into account John's current asset position and allowing $50,000 for contingencies. 1. These scenarios demonstrated that even without the litigation costs, the residuary amount provided for in the Will for John of $402,872 (see [50]) plus paying out the mortgage over the Unit ($36,809) was not proper or adequate provision. 2. Based on these scenarios, and what was submitted to be Lily's evident desire both in life and by the Will to ensure John had an unencumbered property and be able to enjoy a comfortable lifestyle without needing to work, John should receive provision of $600,000 (in addition to costs and the sum already paid to eliminate the mortgage over the Unit).

The submissions in reply for John

1. It was submitted for John in reply to the Sarusi defendants, Moshe and Edna: 1. John's rental income from the Unit was his income and not provision from Lily. Nor should it be treated as indirect provision from Lily. Although it was facilitated by John living with Lily, John was supporting and contributing to Lily's welfare and the acquisition and conservation of the Estate by being the homemaker and maintaining the Invergowrie house and acreage. In deciding to take on that role, he had given up employment which earned him approximately $89,000 annually. That income foregone was considerably greater than the income he derived from the Unit. 2. John's "large one-time" expenses such as the new car and an air conditioner should not be excluded from his living expenses, because those types of expenses are required periodically. 3. The Sarusi defendants had arbitrarily selected the AFSA standard. Moshe and Edna had taken an arbitrary range between the AFSA standard and a monthly expenditure figure of $4,200, and discounted away actual expenses incurred by John. Applications such as this must look to the plaintiff's proven circumstances. The bank statements showed John expended on average $4,826 monthly, on what the Court should find were ordinary expenses for a man of his age wishing to live comfortably. Contrary to the Sarusi defendants' submission, there was no basis to find John had inflated his expenses from March to August 2021. John would lose his pension on receipt of provision. On this basis, a life expectancy for John of 19 years and monthly expenditure of $4,826, John would require capital of $1,100,328 to meet his actual expenditure. Discounting based on a 3% or 5% return should be rejected given the very low current rates of return on investment. When all of these matters were taken into account, John's claim for provision of $780,000 inclusive of costs could be amply justified by reference to his actual circumstances and not some arbitrary standard. 4. John could not put all of the funds he receives under the Will into his superannuation account, as the Sarusi defendants' calculations assumed, because of caps and restrictions on contributions in the drawdown phase. 5. John is 68 and has not been in paid work for many years, because he gave up his employment to support Lily. It is not reasonable for the Sarusi defendants to suggest that he should attempt to re-enter the workforce. 6. There is no basis in the evidence for submitting that there was any prospect John will return to New Zealand. His evidence that he lives at the Unit, and proposes to continue to do so, should be accepted. 7. There was no basis to put funds in trust for John. He was entitled to be master of his own destiny and not subject to the discretion of a trustee or conditions as to how he could spend his own assets.

The Sarusi defendants' further reply

1. By their further reply, the Sarusi defendants joined issue again on the critical issues dividing the parties. Matters that were not simply repetitions of points already made were, in summary: 1. Lily did indirectly contribute to paying off the mortgage on the Unit and enhancing John's assets because for half of their relationship John was working while renting the Unit, and so received a salary while living at Lily's expense. 2. The Court should find John's life expectancy to be around 14 years. 3. Expenses such as buying a car or an air conditioner were unusual one off expenses that should be excluded in calculating John's monthly expenses. The Court should accept that John did inflate his living expenses: from November 2019 to February 2021 he averaged $3,888 monthly and from March 2021 until August 2021 it was $5,730 monthly. He also paid his Council rates for a full year ($2,480.50 on 31 August 2021) rather than quarterly during that period. Accordingly the Court should find his future monthly expenses would be in a range between the AFSA standard of $3,770 up to $4,000. 4. It was incorrect to say that John would lose his pension completely on receipt of provision. I have dealt with Guy's analysis on this point in [48] above. 5. Even if not able to be invested into his superannuation, John could invest a large amount of his provision in a managed investment fund, many of which are currently returning 7% to 8% annually. The Court should find he would receive an annual return on his invested funds between 8% and 10%. 6. The most critical analysis to demonstrate the adequacy of the provision in the Will concluded Guy's submissions. This was a table that demonstrated that assuming John started with $490,000 in capital (his superannuation and the provision from the Estate after legal expenses), and assuming annual expenses of $50,000 per year, John's increasing entitlement to a pension as his capital reduced would allow him to meet those expenses for 17 years even without any other income from invested funds or the like.

Consideration - Pensions and family provision applications

1. Because so much attention was focussed on John's pension entitlements, especially in Guy's arguments as is demonstrated by [47] and 58, I will deal first with the question of the relevance of a plaintiff's current and future pension entitlements, a point not really explored by any party as a point of principle. Although he did not put it this way in terms, I understood Guy to be deploying his pension based analysis of John's circumstances both to demonstrate that the existing provision was adequate and, if the Court was minded to order additional provision, to minimise that amount.
2. Given the breadth of matters which the Court is entitled to take into account under the Act in considering an application for a family provision order, there will be cases where a plaintiff's pension entitlements may be relevant. This may be particularly the case in small estates with several eligible claimants on the testator's bounty. However, in my respectful view, a wise and just testator, in making adequate provision for a beneficiary, will not be expected to take into account to what age or other means tested pension the beneficiary may be entitled in the future. This reflects, at least indirectly, an important public policy consideration underlying the operation of the Act: the community's expectation that the moral obligation of a testator includes, where it can be done having regard to the size of the estate and the circumstances of the beneficiaries, making provision that is adequate from the estate - that is to say, without recourse to the state. This might be summarised as an expectation that testators should look after their own to the extent they can, rather than the community having to do so through the mechanism of the aged pension. Such an approach gives effect to one of the purposes of the Act set out in its preamble (emphasis added): "An Act…to ensure that adequate provision is made for the members of the family of a deceased person…from the estate of the deceased person…". In the language of Bryson J (as his Honour then was) (see [62] and [63] below), this is the incidental protection the Act gives to the public purse.
3. While my researches have not discovered any binding appellate consideration of these matters, they have been considered by judges of great experience in this Division at first instance. The starting point is the judgment of Young J, as his Honour then was, in Parker v Public Trustee (Supreme Court (NSW), Young J, 31 May 1988, unrep) (Parker) where his Honour said (at 7-8): "Another question that arises for consideration is how far one can take into account the benefits under the Social Services Act which the plaintiff may continue to receive if she has a capital provision rather than an income provision. At the moment the widow receives an age pension of $116 per week. If she was earning $260 per week then her pension would be reduced, it would seem, to something like $21 per week. If she had a capital sum of under $83,250 it would appear that she would still receive the whole $116 per week. This aspect of the case has caused me considerable problems. In my view the attitude that the Court takes in this area of the law to this problem under the authorities appears to be as follows: 1. The object of the Act is to compel persons to make provision for their dependants and not throw the maintenance of dependants upon the public purse. See e.g. Lieberman v Morris (1944) 69 CLR 69. 2. It is no answer to a claim that a deceased failed to make proper provision for his dependant that the dependant is entitled to a pension under the Social Security Act. Re Hunter (1940) GLR 100, 101. 3. When making provision a wise and just testator usually makes his will without regard to any means-tested pension that a beneficiary may be able to receive. Shah v Perpetual Trustee Co (1981) 7 Fam LR 97, 100 and Dickie v Dickie an unreported decision of Master Gressier handed down on 21 February 1986 at p 9. 4. A wise and just testator however when formulating his bequests does take into account the income that the various beneficiaries would be receiving under superannuation or other pensions. Re Lawford (1954) NZLR 1142, 1145. 5. A testator has no duty to organise his affairs so that his beneficiaries receive the maximum benefit from his estate so long as he makes adequate provision for them. 6. It would be contrary to the policy of the Act for the Court to so make an order that there was thrown on to the public pursue the support of a dependent to the advantage of a "wealthy" beneficiary. See e.g. in the Family Law area Re F (1982) 8 Fam LR 29. 7. Where the estate is small and especially while there are a series of claimants on the testator's bounty it may well be proper for the testator when making his will and the Court when framing its order to preserve a pension entitlement. See again the analogous cases in the Family Law area Re Brady (1978) FLC 90-513 and Re Kauiers (1986) 11 Fam LR 41."
4. In Foster v Lisle [2003] NSWSC 1243, then as Chief Judge in Equity, his Honour said: "55 Indeed, the probabilities are that even if she could find work she would not receive as much net income as she is currently receiving on supporting parent's benefit. This raises the question as to how far this Court can take into consideration Social Service benefits being paid to a plaintiff. 56 I considered this matter generally in Parker v The Public Trustee 31 May 1988, as yet unreported, and it has been followed in this Division on a number of occasions over the last 13 years. I there laid down seven basal provisions and I will repeat numbers 1, 2, 4 and 7, the only ones which seem to be relevant to the present case: "1. The object of the Act is to compel persons to make provision for their dependants and not throw the maintenance of the dependants upon the public purse; see Lieberman v Morris (1944) 69 CLR 69. 2. It is no answer to a claim that a deceased failed to make proper provision for his dependant and that the dependant is entitled to a pension under the Social Security Act Re Hunter [1940] GLR 100, 101. 4. A wise and just testator however when formulating his bequests does take into account the income that the various beneficiaries would be receiving under superannuation or other pensions Re Lawford [1954] NZLR 1142, 1145. 7. Where the estate is small and especially where there are a series of claimants on the testator's bounty it may well be proper for the testator when making his will and the Court when framing its order to preserve a pension entitlement." 57 In proposition 7 I gave the analogy of what happens in the Family Court and instanced that Court's decision in Re Kauiers (1986) 11 Fam LR 41. 58 When following this decision in Whitmont v Lloyd 31 July 1995, unreported, Bryson J said: "The protection of public funds from claims by indigent persons is not a purpose of family provision legislation but they are incidentally protected by the legislation, which was not enacted solely for the protection of private interests and serves public policy ... . In my opinion, the availability of Age Pensions and other social benefits is a circumstance which should be regarded, and particularly in small estates it may be appropriate to leave an applicant wholly or partly dependent on them or to mould the provision made so that their availability is preserved in whole or in part. The acceptance of benefits for which statute law provides is in every way legitimate, involving no social stigma and incurs no disapproval from the Court. It is not the Court's task to be vigilant to throw burdens off public funds and onto private estates." I respectfully agree. 59 The present case is not one where there is any question of the wealthy throwing a burden onto the public purse, a matter which has been of concern in some of the cases which I have considered."
5. Then in Gunawardena v Kanagaratnam Sri Kantha [2007] NSWSC 151, his Honour said: "57 The question as to how far, if at all, courts should take into account benefits that may flow to applicants and beneficiaries by way of pensions and other public benefits given to the poor is one which has not yet been finally settled. In Parker v Public Trustee, 31 May 1988, unreported, I indicated that, generally speaking, the object of the legislation is to compel persons to make provision for their dependants and not throw the maintenance of the dependants upon the public purse, though a testator has no duty to organise his or her affairs so that the beneficiaries receive the maximum benefit from his estate so long as he or she makes adequate provision for them. 58 In Whitmont v Lloyd, Bryson J, 31 July 1995, unreported, p 14, his Honour said: "The protection of public funds from claims by indigent persons is not a purpose of family provision legislation but they are incidentally protected by the legislation, which was not enacted solely for the protection of private interests and serves public policy. … In my opinion, the availability of Aged Pensions and other social benefits is a circumstance which should be regarded, and particularly in small estates it may be appropriate to leave an applicant wholly or partly dependent on them or to mould the provision made so that their availability is preserved in whole or in part." This was approved by Sheller JA in the Court of Appeal in King v Foster, 7 December 1995, unreported. 59 In Ridge v Public Trustee [2006] NSWSC 400, the plaintiff was a person with mild to moderate intellectual disability who was being cared for by the Protective Commissioner. The estate was a small one. If the whole of the capital of the estate was spent to maintain the plaintiff the capital would run out in a relatively short time. The testator made a substantial gift of income to the plaintiff and Windeyer J held that that was sufficient. He dismissed the plaintiff's application brought under the aegis of the Protective Commissioner for a capital sum. 60 Mr Bradford submitted in the instant case that "The better and perhaps prevailing view seems to be that the court may take social service benefits into consideration, at least in cases where, as in this one, the estate is relatively small." He cited Foster v Lisle [2003] NSWSC 1243, especially 55-60 and Ridge v Public Trustee [2006] NSWSC 400. I think that submission is probably correct. 61 I should also refer to the decision of Macready AsJ in Chan v Tsui [2005] NSWSC 82, where, at paras 59 and following, his Honour considered the relevant authorities and came to the conclusion that there were cases where it was appropriate to take into account a pension entitlement when considering whether to make an order under the Act."
6. In my respectful view, the application of these considerations to this case may be stated as follows. The analysis begins by acknowledging that this is not a small estate and the Court can consider both the threshold question under s 59(1)(c) of the Act and, if enlivened, any order under s 59(2) of the Act without regard to the interests of any of the other beneficiaries of the Estate.
7. There are then two points at which a beneficiary's pension entitlements may be relevant. The first is in determining whether the provision made in the will for a beneficiary is adequate for the proper maintenance of the beneficiary. If they are in receipt of pension income, that will be relevant. However, the effect of the provision on that existing income will also be relevant. What the Court will not then usually take into account is how that effect can be ameliorated by attempting to make findings about any future pension entitlement.
8. The second point, if it is reached, is in determining what provision the Court should make for the maintenance of the beneficiary. At that point, the Court also should not usually attempt to make findings about what pension entitlement may become available to the beneficiary (as opposed to preserving an existing entitlement, especially in a small estate). At both points this is because an object of the Act is to encourage testators to make adequate provision from the estate.
9. Bearing in mind the first four points made by Young J in Parker, it follows in this case, that where the undoubted effect of the gift will be to reduce John's income significantly, the adequacy of the gift is to be considered taking that consequence into consideration. If the wise and just testator is hypothesised as taking into account what pension income the beneficiary is receiving, the testator should also be hypothesised as understanding the effect of the proposed gift on that income. The moral obligation of a testator such as Lily was to make a provision from the Estate that was adequate to avoid the consequences of John's substantial loss of income from a gift by providing a gift of capital from the Estate that would meet John's needs without reference to any future potential pension entitlement.
10. There is a further practical consideration which supports this approach. It is a regrettable commonplace that this jurisdiction is beset by the problem of parties incurring substantial legal costs well out of proportion to the amounts in issue. One way the Court has sought to deal with this is by permitting a level of informality of proof of various matters as set out in Practice Note SC Eq 7.
11. While, sensibly if I may respectfully say so, objection was not taken to Guy's extensive financial calculations (which came in his written submissions and were not put to any witness), there was much in them that one would normally expect to be the subject of expert financial planning or accounting evidence. It would be an unfortunate development in terms of both costs and Court time if issues of adequacy and propriety were regularly to become the subject of expert financial evidence either to demonstrate that a bequest was adequate because, managed in a certain way, the beneficiary would be well taken care of including because of potential future pension entitlements, or that the amount of any Court ordered provision could be limited by a similar analysis, including taking into account potential future pension entitlements. This is not to say that such evidence will never have a place in this jurisdiction, but it should be the exception and not the rule.

Consideration - Generally

1. The starting point is that the Court accepts the submission advanced for John, Moshe and Edna that, without suggesting there is a general rule, this is an example of a case (still often referred to in the gendered language of a "widow's claim") where Lily's moral duty to John was to ensure he had a secure home, sufficient income to live out his days in a reasonable degree of comfort having regard to the life they had led together and free from financial worry, with something in addition for luxuries and contingencies: for a convenient summary of the law which I respectfully adopt and apply, see Steinmetz v Shannon (2019) 99 NSWLR 687; [2019] NSWCA 114 at [98]-[109] per Brereton JA, with White JA and Simpson AJA generally agreeing at [37] and [151].
2. This is because Lily and John clearly enjoyed a close and loving relationship for ten years, with no suggestion that it would not have continued that way until the natural death of one of them, but for the tragic circumstances of Lily's untimely death. By mutual agreement, John gave up remunerative employment to become Lily's fulltime homemaker, companion and support person to enable her to conduct a very successful international academic career. The Court does not accept that conclusion is in any way derogated from because the relationship was "only" ten years, or because Lily's assets were largely accumulated without John's direct or indirect assistance (financial or otherwise). For the period of their relationship, and especially after he stopped work, the Court finds John contributed to the maintenance and enhancement of the Estate.
3. If what is set out in [70] was Lily's moral obligation, the conclusions recorded in [31] to [48] above demonstrate, and the Court finds, that proper and adequate provision for John's maintenance and advancement in life was not made in the Will. This is because, as is recorded in [48] above, while John's need for secure accommodation was met, such provision as he will receive will leave him with a significant shortfall in income and insufficient capital to meet his reasonable needs for his life expectancy of 17.9 years.
4. Turning to what would be proper and adequate provision, the Court: 1. Rejects, for the reasons advanced by John (see [57(1)]), that Lily is to be taken to have indirectly contributed to John's unencumbered ownership of the Unit in the way submitted by Guy (see [55(1)]); 2. Rejects reliance on the AFSA Standard because, as was submitted for John, what is a reasonable lifestyle and income for John is to be determined by the evidence of his relationship with Lily and his proven personal circumstances; and 3. Rejects, for the reasons advanced by John (see [57(5)]), that he should be expected to return to employment.
5. As I have already observed, proper and adequate provision for John's accommodation was made by the Will providing for the mortgage over the Unit to be paid out. That part of the Will will be unaffected by any other provision for John the Court will order. The issue for determination is what is adequate provision to ensure John has sufficient income to live out his days in a reasonable degree of comfort having regard to the life he and Lily had led together and free from financial worry, with something for luxuries and contingencies. For the reasons set out in [64] to [69] above, the Court will make that determination without reference to any age pension to which John may be entitled.
6. As is set out in [30] above, the Court finds John has a life expectancy of 17.9 years.
7. As is set out in [38] above, the Court accepts that John's annual expenditure to maintain a comfortable lifestyle commensurate to that he enjoyed with Lily is $57,935 (which I shall round down for ease of calculation to $57,900). In accepting that figure, the Court: 1. Declines to find that John artificially inflated his expenditure in the period from March to August 2021 for the purposes of this litigation. While Guy's calculation of the different averages (see [55(3)] above) may be accepted as correct, Guy's hypothesis was not put to John in cross-examination. Without that having been done, and a much more detailed examination of the particular expenses incurred in that period having been presented both to the Court and to John (other than the reference to the payment of a year's council rates), it is not open to the Court to make a finding of the seriousness invited by Guy. I have two other reservations about Guy's calculations in support of this submission. First, to arrive at the lower average figure for the period November 2019 to February 2021, Guy has excluded the three items he contended were "abnormal" that were incurred during that period (see [41] above). However, for the higher average period of March 2021 to August 2021, he has not excluded the "abnormal" holiday expense of $4,343 that was paid during that period in May 2021. Second, even if some months of higher average expenditure occurred after the matter was fixed for hearing, that correlation is not evidence of causation. Notwithstanding Guy's analysis, I remain of the view that taking John's expenditure for the 23 months for which there is evidence as a whole (including the "one off" items for the reasons I have given) is the fairest way to assess John's reasonable income requirement. 1. For the reasons given in [41], declines to exclude the items referred to in that paragraph from the calculation of John's required annual income. However, the inclusion of items such as those is why the Court also concludes that the annual expenditure figure of $57,900 sufficiently allows for luxuries and contingencies. 2. Accepts Mr Armfield's submission (see [57(3)] above) that there is no basis in the current economic climate - and in the absence of specific expert evidence on the point - to assume any particular interest rate for the purposes of any discounting exercise. This means that the Court accepts that consideration of an adequate and proper capital sum should not take account of the value of money over time.
8. It follows from the foregoing that John will require $1,036,410 (17.9 x $57,900). His current assets (excluding the Unit) are $134,436 (see [46]), leaving a balance required of $901,974. The hearing was conducted on the basis that John submitted he should receive $780,000 inclusive of his costs ($95,000 on the indemnity basis, such that John would "walk away" with $685,000). For this reason, it would not be appropriate for the Court, if otherwise satisfied that further provision should be ordered, to order an amount greater than was sought on behalf of John. The Court accepts Mr Armfield's submission that given the calculation at the start of this paragraph, an award of residuary provision to John of $780,000 inclusive of his costs, would clearly be proper and adequate provision for John in substitution of the residuary gift to him under the Will.
9. The Court is fortified in that conclusion because such an award represents additional provision of approximately $360,000 in circumstances where none of the other beneficiaries has put their circumstances in issue. This figure is $780,000 less $75,000 (John's ordinary costs: see [51(1)]) less $345,718 (what John would receive without further provision and after legal expenses: see 52]). The other beneficiaries' residuary entitlement will be as provided under the Will so that the additional provision is borne by them rateably, but with the variation that the Sarusi defendants will take what would have been Pyrhia's share, thereby excluding Gilad.
10. In not considering the competing entitlement of the Sarusi defendants as beneficiaries, I add for the avoidance of doubt that the dispositive reason is that they have not put their personal circumstances in issue. I do not accept Mr Armfield's submission (see [53(4)]) that they have a lesser moral claim because they are substitutionary beneficiaries.
11. The passage in Nicholas relied on by Mr Armfield itself quotes Dixon CJ's reference in Pontifical Society for Propagation of Faith v Scales (1962) 107 CLR 9 at 19; [1962] HCA 19 to the Court giving consideration to "what the testator regarded as superior claims or preferable dispositions." While the submission that substitutionary beneficiaries somehow have a lesser moral claim has an initial attraction, in my respectful view whether, in the eyes of the testator, their claim is inferior to or less preferable than the claim of the primary beneficiary is a matter for evidence and is not to be inferred from the mere fact that, as is the case here, they take in lieu of their deceased parent.
12. In some cases, the Court may conclude that a substitutionary gift is a piece of boilerplate legal drafting to which the testator has given no thought. In other cases, the testator might regard the gift over as an important way of honouring their relationship with the primary beneficiary where that beneficiary has predeceased the testator. A third possibility may be that the testator has had a close relationship with the primary beneficiary and their children and would not regard the gift over as anything other than a necessary alternative and not something inferior.
13. Guy's unchallenged evidence was that he had a close relationship with Lily, who helped him most recently with his research work and his MA thesis. He also gave unchallenged evidence that Lily had said on many occasions that because she had no children of her own, she looked to her nephews (the children of Pyrhia, Moshe and Edna) as her own children, continuing the line of her own parents (the grandparents of her nephews). Based on this evidence, the Court finds that the substitutionary gift falls into the third category identified in the preceding paragraph. For this reason, the Court rejects the submission that the Sarusi defendants' claim is to be discounted to some extent because they are substitutionary beneficiaries.
14. As a final cross-check in support of the Court's conclusion, it is helpful to assume John's reasonable monthly expenditure to be $4,100 ($49,200 annually). This is the highest figure which Guy at one point advanced (see [55(3)] above) and is within the range posited by Moshe and Edna. Taking that figure, John would require $880,680 ($49,200 x 17.9 years). Deducting his current net assets of $134,436 leaves him requiring an amount of $746,244, which is still higher than the effective figure of $685,000 (see [77] above) which will be the result of the residuary provision the Court has determined in the exercise of its discretion that John should receive.
15. Subject to any further submissions from the parties, the result which the Court has reached can be achieved by a family provision order that cl 4.3 of the Will be deleted and replaced with: "4.3 divide the rest and residue of my Estate by paying $780,000 to John upon condition that he makes no claim for his costs from my Estate in Supreme Court proceedings 2019/383024, and then as to the balance: One-third to Moshe; One-third to Edna; One-twelfth to each of Guy, Lior, Vered and Yaron."

Conclusion

1. The parties will be given an opportunity to bring in consent short minutes to give effect to these reasons, in particular [10], [15], [19] and [84] above, and if possible as to costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 28 January 2022