Harris v Harris

Judgment

1. BASTEN JA: On 15 October 2015 the testator (Hubert Estes Harris) died, leaving his estate to his widow, the respondent. On 14 October 2016 the appellant, Andrew Harris, the son of the testator, made a claim for provision under the Succession Act 2006 (NSW), Ch 3. On 1 May 2018 Ward CJ in Eq dismissed the claim for provision, ordering the parties to pay their own costs. [1]
2. The primary judge was not persuaded that inadequate provision had been made by the testator for the proper maintenance, education and advancement in life of the appellant. She stated that, had she been persuaded that the threshold criterion had been satisfied, she would have made provision by way of a very small legacy, in the order of $15,000, to enable the appellant to discharge his current loan obligations. [2]
3. The notice of appeal was not accompanied by an affidavit providing a basis from which to conclude that there was an amount in excess of $100,000 in issue, failing which the appellant required leave to appeal pursuant to s 101(2)(r) of the Supreme Court Act 1970 (NSW). Given the assessment by the primary judge of any likely provision, it was patently necessary to address that issue, or to file a summons seeking leave to appeal.
4. The appeal, even if competent, would be dismissed with costs. However, it is unfortunate that the matter did not first come before the Court by way of an application for leave to appeal. That course would have allowed the Court to determine whether the matter should be dealt with by way of leave only before the costs of a full appeal were incurred. It would also have allowed this Court to impose a costs-capping order pursuant to s 60 of the Civil Procedure Act 2005 (NSW) and the Uniform Civil Procedure Rules 2005 (NSW), r 42.4, to avoid the incurring of costs disproportionate to the importance and complexity of the subject matter in dispute. Disproportionate costs have already been incurred.
5. The primary judge noted that the appellant's estimated recoverable costs were $109,000, although his counsel said that that amount should be reduced to about $80,000 because the estimated two day hearing was concluded in one day. [3] (The possibility that assessed costs for one day in the Equity Division, involving a solicitor and junior counsel could involve $29,000 defies credibility, but was not commented upon by the primary judge.) The respondent's solicitor gave a lower estimate of her costs, being $63,000, subject to reduction for the loss of one day of the anticipated hearing. The combined estimated assessable costs appear to have been in the order of $130,000 at trial.
6. The estate of the testator was valued at a little under $8,000. However, the available assets from which to make provision were said to total some $600,000, being almost entirely what is described in the statute as "notional estate".
7. It is not necessary for present purposes to determine whether the property alleged to be notional estate was in fact capable of designation as no such order was made, nor should it have been made. The nature of the property is nevertheless significant. There were two primary items; the first was a joint leasehold interest in a villa in a retirement village, which had been purchased with the proceeds of sale of the family home, which had also been held in joint names. (This would not have constituted any part of a notional estate if full valuable consideration had been given, presumably for the original purchase of the family home. [4] ) The second item of potential notional estate was the sum held in a superannuation fund of the testator which had been transferred to the respondent as the reversionary beneficiary.
8. Assuming, favourably to the appellant, that the potential notional estate was valued at $600,000, the costs incurred at trial exceeded 20% of the total value of the notional estate and were almost ten times the amount the primary judge would have awarded, had she been minded to make any award by way of provision from the estate.
9. In determining whether an order should be made for provision, the Court is required to consider the respective claims on the testator's estate by persons having what the community would regard as a claim on the testator for their maintenance, education or advancement in life. [5] The Court is entitled to have regard (and almost universally does have regard) to "the nature and extent of any obligations or responsibilities owed by the deceased person to the applicant, to any other person in respect of whom an application has been made for a family provision order or to any beneficiary of the deceased person's estate". [6]
10. The appellant suffered from mental health problems, which may have been partly the result of drug addiction in earlier days, and relied on a disability support pension. The applicant is now 43 years of age and may well never have regular gainful employment. It did not follow that he was entitled to provision from his father's estate.
11. His case was that the respondent was comfortably provided for in her old age and provision could be made for him without significantly diminishing her welfare. That was not the view reached by the primary judge. The primary judge found, unsurprisingly, that the ability of the respondent to live off her income would be significantly affected should her capital be reduced by, say, $100,000, as proposed by the appellant. [7] In addition, the respondent gave evidence of further likely medical expenses. All of these factors were properly taken into account by the primary judge, who said that the respondent was "at risk of being unable to afford nursing home accommodation should that become necessary in due course." [8] The appellant criticised that finding as mere speculation.
12. There were other significant factors. In submissions on behalf of the appellant, frequent reference was made to the "cash" element in the potential notional estate and the respondent's "other cash", a term used to describe all assets other than the leasehold interest in the retirement villa. However, these assets were not "cash", but were invested by the relevant superannuation funds so that both the capital value and the available income streams fluctuated on a daily basis. The characterisation of the assets as cash and the precise calculations sought to be undertaken by the appellant were simply inappropriate.
13. The challenges to the findings of the primary judge and the consequent evaluative judgments were without substance. However, in my view the appellant's claim foundered on a far more basic principle. Although the relevant legislative provisions refer only to "obligations or responsibilities" owed by the deceased and to family and others, as noted by Allsop P in Andrew v Andrew: [9] "[12] Accepted and acceptable social and community values permeate or underpin many, if not most, of the individual factors in s 60(2) and are embedded in the words of s 59, in particular 'proper' and 'ought'. … As Gleeson CJ said in Vigolo [10] , the language of the statute is 'general but value-laden', operating in connection with 'community standards' that will see it given 'practical meaning', that is, to the people and community who and which the law serves."
14. It is commonplace for spouses to have mutual wills. Further, in circumstances where they are parents and expect to make decisions jointly with respect to provision for their children or dependants, while both are alive, so they commonly expect that the survivor will continue to make such decisions after one of them dies.
15. This was clearly such a case. At no stage during the last decade did the appellant son approach his father or step-mother for financial assistance. Indeed, his counsel accepted he had not relied on his father for financial assistance since he turned 18 years. Why should he demand such support from his father's estate, whilst his step-mother remained alive? The judge was correct to refuse to make an order for the provision because the manner in which the testator provided for his widow (survivorship of joint assets and designation as the residuary beneficiary of a superannuation fund) was in conformity with community expectations.
16. This was not a case in which it was contended that there had been a material change in the appellant's circumstances since either the will was made (in 2013) or the testator died (in 2015). It was not a case where the testator had been ignorant of some significant aspect of the appellant's circumstances. It was not a case where the son, having been in receipt of assistance during his father's lifetime found the assistance cut off on his death. There had been no promise of continued assistance. The son is still able to call on the widow for financial assistance if he thought circumstances had arisen in which his father might have provided help.
17. As the primary judge acknowledged, some relief could be given to help the appellant; however, that fact did not mean that there was justification for judicial interference with the testamentary disposition. The judgment that, given the competing claim of the widow, there was no obligation on the testator to make provision for his adult son was unimpeachable.
18. That the surviving wife has had to expend a significant proportion of a modest estate, and one almost entirely comprised of notional estate, in defending these proceedings suggests that the beneficial provisions relating to family provision can operate unfairly. It is clear that a costs order in her favour will not allow her to recoup her legal expenses. The Court's willingness to entertain comparatively expensive litigation of this sort may well have encouraged the pursuit of such claims. Consideration should be given in such cases to orders capping the costs of both parties at an early stage of the proceedings.
19. Further, the applicant son failed to attend a mandatory settlement conference. There should be procedural sanctions which apply in such cases where adverse costs orders have no practical deterrent effect.
20. Leave to appeal should be required with respect to any claim disposing of an application for family provision where the trial judge has not identified a reasonably arguable claim in excess of $100,000, whatever the claimant's nominal aspirations.
21. The Court should make the following orders: 1. To the extent necessary, grant the appellant leave to appeal. 2. Dismiss the appeal. 3. Order the appellant to pay the respondent's costs in this Court.
22. MACFARLAN JA: I have had the advantage of reading Basten JA's judgment in draft. I agree with his Honour's reasons and proposed orders. I add the following observations.
23. The appellant's counsel submitted that the primary judge made two factual errors which vitiated her conclusions.
24. First, the appellant contended that her Honour misunderstood the relationship between his income and expenses, and that this was a significant factor that led to her Honour refusing to make orders in his favour. Relevantly, her Honour found that the appellant "is currently able to manage, albeit in a modest fashion on a disability support pension with at least some expectation of support from his mother" (Judgment [110]). This finding was supported by the appellant's affidavit of 2 November 2017 at [111], which indicated that his monthly expenses equated to the amount of his disability pension, even after allowing for repayment, which might not have to be made, of $200 per month of loans from his mother. Her Honour did not however find that the appellant finds it easy to cope. Clearly he does not but, bearing in mind that the appellant has received some support from his mother in the past and could reasonably expect some further support in the future, I do not consider that her Honour's findings were in error.
25. Secondly, the appellant contended that her Honour's conclusions concerning the respondent's financial needs were erroneous.
26. Her Honour relevantly found that, in addition to her entitlement to continue to live in her present residence in a retirement village, the respondent had funds which produced an income that "only just covers her essential expenditure at the present time" (Judgment [111]). Understandably, her Honour took the view that any substantial diminution in these funds, whether as a result of payment of costs of the court proceedings or payment of a provision to the appellant, would have a significant adverse effect on the respondent's financial circumstances.
27. So far as the respondent's entitlement to reside in the retirement village was concerned, her Honour proceeded upon the basis, well justified by the evidence, that the respondent would reasonably wish to remain there, unless her health required her to seek nursing home accommodation. Her Honour considered that "to impose a charge on her leasehold interest (as is sought by way of deferred provision) would place [the respondent] at risk of being unable to afford nursing home accommodation should that become necessary in due course" (Judgment at [111]). It was entirely proper for that risk to be taken into account and for her Honour to assume, in the absence of evidence to the contrary, that the cost of nursing home accommodation might well be no less than the value of the respondent's interest in the retirement village.
28. I do not accept the appellant's submission that the respondent bore an onus to establish the cost of nursing home accommodation, if that became necessary to be obtained. On the contrary, the appellant bore the onus of establishing the circumstances that made it appropriate that an order for provision be made in his favour. If he wanted to contend that there was a real prospect that the respondent would not in the future need her retirement village entitlement but would only need cheaper accommodation in a nursing home then it was for him to establish that. The cases upon which he relied (Milillo v Konnecke [2009] NSWCA 109; (2009) 2 ASTLR 235 at [68]-[70]; Nudd v Mannix [2009] NSWCA 327 at [19]-[22]; and, Smith v Johnson [2015] NSWCA 297; [2015] 14 ASTLR 175 at [87]-[88]) did not support his contention as they were cases in which the Court said that claimants for provision, who were not therefore in the position of the present respondent, needed to call evidence of the likely cost of their future accommodation if they contended that that was relevant to their claims.
29. For these reasons, both the appellant's contentions should be rejected.
30. SIMPSON AJA: I have read in draft the judgments of Basten JA and Macfarlan JA, and I agree with the orders therein proposed.
31. My concurrence should not be taken as unqualified assent to the observations of Basten JA in [14]-[16]. To the extent that some general principle might be extracted from those paragraphs (to the effect that a protracted period during which an adult child does not seek financial support or assistance from a parent or is not given financial support or assistance by the parent) might disentitle that adult child from a claim under Chapter 3 of the Succession Act 2006 (NSW), I disagree.
32. There may be many reasons why an adult child does not seek, or is not given, financial assistance or support from a parent. One possibility is that such assistance and support is not necessary for the child's proper maintenance, education and advancement in life. But that is not the only possible reason, and whether the absence of support and assistance during years of adulthood operates as an adverse factor in the determination of a claim will depend upon the circumstances of each case.
33. The relevant question, in my opinion, is not whether the child has sought or been given such support and assistance; it is what the need of the adult child is shown to be. Against that have to be balanced the competing claims of the beneficiaries of the estate, in this case the respondent widow.
34. Nor do I accept as a general proposition that the common practice of spouses making mutual wills, with a view to the surviving spouse making provision for adult children, has the same force where the surviving spouse is not a parent but a step-parent. There can be no guarantee that the surviving spouse will feel the same obligation to step-children as a parent could be expected to have. In this case there was no evidence of any competing claims on the respondent's ultimate estate, but it is unlikely that she will feel any such obligation to the appellant. Nor is it to be expected that she would favourably respond to any call for assistance made by the respondent during her lifetime.
35. Notwithstanding those areas of difference, I agree that the appeal should be dismissed. While the estate (taking into account the potential notional estate) was not insignificant, the manner in which the assets were tied up was not readily conducive to distribution between the competing interests of the appellant and the respondent.
36. The appellant's claim was not fanciful. He suffers from a psychiatric illness, and is dependent upon social security for income. He has virtually no assets.
37. The primary judge undertook the exercise of balancing the claims of the appellant and the respondent and concluded that acceding to the appellant's claim would cause undue hardship to the respondent. There is no error in that conclusion, based as it was on the particular facts of this case.
38. I therefore agree that the appeal should be dismissed.