HEARING DATES: 28 February, 1 and 31 March 2022

Succession - Family provision - Criteria for determining application - Treatment of particular applicants - Surviving spouse or partner - Ample estate - Elderly widow given further provision to secure her in the marital home and to supplement a fund to ensure that she has a sufficient income and a buffer to meet contingencies.

Testators Family Maintenance Act 1912 (Tas), s 3.

Judgment Number: [2022] TASSC 25

EFTERPI KARIMALIS v MARIA KAPODISTRIAS AND DAMIAN FRANCIS EGAN IN THEIR CAPACITY AS EXECUTORS OF THE ESTATE OF THE LATE THEODOROS KARIMALIS

1 Efterpi Karimalis, being the 72 year old widow of the late Theodoros Karimalis (who died 26 September 2020 aged 77 years), has applied for further provision out of his estate.

2 The primary facts are not in controversy. It is the analysis of them and their application in accordance with legal principle which gives rise to the dispute.

3 The estate is comprised of almost entirely of real estate having a value, at the date of the death of the testator, of about $3.6m. The assets included the marital home at Shepherd Street Sandy Bay in Tasmania, which at the date of death had a value of about $1.2m and a value as at January of this year of about $1.5m.

4 The couple were married on 10 June 2009, being the applicant's 60th birthday. The testator was then aged 66 years. The couple had been co-habiting for about the previous four years. It was the second marriage for both. The applicant has two adult children and the testator has one adult daughter, being the first respondent.

5 The applicant met the testator in Greece in 2005. At the request of the testator she moved to Tasmania in 2006 in contemplation of marriage and immediately commenced co-habitation with him in the Shepherd Street home, where she has lived ever since.

6 The applicant had owned two houses in Greece. One which she had inherited from her parents and the other which she had acquired following the separation from her first husband. In the late 1990s she gave the houses, which were unencumbered, to her two daughters, leaving her with no assets of substance. She wanted to have in her name a house in Tasmania and in 2009 the testator purchased, in her name, a house at Coolabah Road Sandy Bay. The house has two levels, each set up for independent living and has been tenanted**,** rather than occupied by the applicant or the testator. At the time of the death of the testator it had a value of about $900,000 and was producing a net return, after outgoings and tax, of about $26,000 per annum.

7 The applicant was and continues to be the recipient of a Greek pension of about $4,000 per annum.

8 In 2018 the applicant borrowed from one daughter the sum of $200,000, secured by a mortgage over the Coolabah Road property. She paid the money to her other daughter in exchange for that daughter agreeing that she would receive no inheritance from her mother's estate. The loan attracts interest at the rate of 2% above the ANZ variable home mortgage rate from time to time, with the interest accruing to be paid upon the sale of property unless upon sale a replacement property is purchased. In any event the principal and interest becomes payable upon the death of the applicant. The property has a current value of about $1.15m. The net result is that if the property is sold in the near future and converted into cash the net proceeds, after the payment of the money secured by the mortgage and sale expenses and capital gains tax, will be about $750,000 to $800,000.

9 It appears that the testator regarded the inter vivos gift of the Coolabah Road property to the applicant as substantially extinguishing his testamentary obligations to his wife. In his will, made 14 February 2012, he appointed the respondents as his executors and trustees and he recorded that he did not make further provision (other than a small allowance) for his wife as he considered that the income derived from the Coolabah Road investment property would allow her to maintain her standard of living. The only provision for the applicant made in the will was to create a fund to be administered by the trustees under which the applicant would receive the rental income from one of three housing flats (not divided by stratum titles) located at Shirley Boulevard, Lenah Valley. The income produced at the date of death of the testator from the allocated housing flat was about $10,000 per annum and during 2021 the gross rental income was about $13,000 per annum. The will provides for the trustees, in their discretion, to use the capital value of the housing flat to create an income stream sufficient to maintain "a proper standard of living" for the applicant. The three flats, which are all on the one title, had a value at the date of death of the testator of about $800,000 and a value as of January this year of about $950,000. The result is that if the trustees decide, in their discretion, to sell the block of three flats at Shirley Boulevard about one third of the capital created, namely about $300,000, could be used to supplement the applicant's income. As indicated earlier in these reasons, the other capital resource of the applicant, being the Coolabah Road property, could be converted into a cash investment of about $750,000 to $800,000 and would be available to the applicant to provide a cash stream producing a total fund having a capital value of about $1.1m. The balance of the estate was left to the testator's natural daughter, being the first respondent.

10 The applicant has no assets of substance other than the Coolabah Road property. She wants to remain in the former marital home in Shepherd Street Sandy Bay and to have a fund, independent of income derived from her Coolabah Road property, which is sufficient to maintain her reasonable living expenses and enable annual return trips to Greece to visit her family. The bequest in the will is insufficient to accommodate this and hence she has brought this application for further provision from the estate. In particular the applicant wants a fee simple title for the Shepherd Street property and $1.4m from the estate. If she gets this the deceased's daughter, being the primary intended beneficiary, will only receive a little over one third of the estate likely to be comprised mostly of a commercial property at Augusta Road Lenah Valley. That property had a value at the date of death of the testator of about $1.1m and a value as at November last year of about $1.2m.

11 The jurisdiction of the Court to make an order for further provision is contained in the Testators Family Maintenance Act 1912, s 3, which relevantly provides in subs (1) and (2):

"Claims for maintenance against estate of deceased person

(1) If a person dies, whether testate or intestate, and in terms of his will or as a result of his intestacy any person by whom or on whose behalf application for provision out of his estate may be made under this Act is left without adequate provision for his proper maintenance and support thereafter, the Court or a judge may, in its or his discretion, on application made by or on behalf of the last-mentioned person, order that such provision as the Court or judge, having regard to all the circumstances of the case, thinks proper shall be made out of the estate of the deceased person for all or any of the persons by whom or on whose behalf such an application may be made, and may make such other order in the matter, including an order as to costs, as the Court or judge thinks fit.

(2) In addition to, and without prejudice to, any other powers conferred on the Court or a judge by subsection (1) of this section, the Court or judge may order that the provision to be made out of the estate of the deceased person shall consist of -

(a) the payment to the applicant of a lump sum;

(b) a life interest or any lesser interest in any dwelling-house belonging to that estate;

(c) a life interest or any lesser interest in a dwelling-house that the Court or judge may order to be purchased for occupation by the applicant -

and may, in any case, order that that provision shall be made upon and subject to such terms and conditions, if any, as the Court or judge may think desirable in the circumstances of the case."

12 I set out some matters which inform as to the application of the provision in the present case:

• The spouse of a deceased is eligible to bring an application for provision: The Act s 3A.
• To come within the operation of the provision an applicant must establish, as a matter of fact, that she has been "left without adequate provision for (her) proper maintenance and support": The Act, s 3(1).
• The question of whether the applicant is within the operation of the provision (ie: is an eligible person who has been left without adequate provision for her proper maintenance and support) is answered as at the date of death of the testator: Coates v National Trustees Executors and Agency Co Ltd [1956] HCA 23; (1956) 95 CLR 494.
• The matter is to be considered from the perspective of a wise and just testator: Bosch v Perpetual Trustee Co [1938] AC 463 at 478-479.
• The testator is assumed to have been aware of all of the relevant circumstances of those having a claim on the bounty, including reasonably foreseeable eventualities existing at the date of death: Litchfield v Smith [2010] VSC 466 at [26].
• In making the appraisal the Court is to connect the general, but value laden language, of the provision to prevailing community standards: Vigolo v Bostin [2005] HCA 11, 221 CLR 191.
• The appraisal generally requires consideration to be given to the applicant's financial position, the size and nature of the deceased's estate and 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 her bounty: Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201 at 210.
• A spouse, if assets permit, should be left secure in the matrimonial home with sufficient funds to continue to live in the style to which she is accustomed and with a buffer to meet contingencies: Gargano v Coves [2018] NSWSC 985 at [160].
• All relevant circumstances should be considered: Singer at 210.
• If an eligible person or beneficiary has contributed to the building up of the estate of the deceased, this will also be relevant: Hughes v National Trustees, Executors and Agency Company of Australasia Limited [1979] HCA 2; (1979) 143 CLR 134 at 147.
• The word "proper" in the provision is of considerable importance. It means proper in all the circumstances of the case. Those circumstances will include the standard of living enjoyed by the applicant and those having competing claims, the need for assistance and the extent of the testator's ability to meet the claims: McCosker v McCosker [1957] HCA 82; (1957) 97 CLR 566 at 571-572.
• The word "adequate" is concerned with the quantum of the provision which should be made so that the provision is proper: Bosch at [476].
• The word "maintenance" may imply mere continuity of a pre-existing state of affairs or provision over and above mere sufficiency and the word "support" may imply provision beyond bare need: Vigolo at [115].
• If the jurisdictional question of fact, namely whether the applicant has been "left without adequate provision for ... proper maintenance and support" is answered in the affirmative, "the Court or a judge may in its or his (or her) discretion" order provision or further provision: The Act s 3(1).
• The legislation is not designed to allow the Court or a judge to rewrite a will without restraint so as to impose the judge's own view of how the testamentary power should have been exercised: Pontifical Society for the Propagation of the Faith v Scales [1962] HCA 19; (1962) 107 CLR 9 at 19.
• Regard may be had to the deceased person's reasons for making the dispositions made in the will: The Act, s 8A.
• The way in which the discretion, if it arises, is to be exercised will be influenced by the same factors taken into account in coming to the conclusion that the applicant has been left without adequate provision for her proper maintenance and support: Singer at [210].
• Where provision, or further provision, is to be made, regard may be had to the funds of the estate as they stand at the time of the order, rather than the judge being confined to the position at the date of death: White v Barron [1980] HCA 14; (1980) 144 CLR 431 at 437.

The applicant's financial position and circumstances

13 As recited earlier in these reasons, the applicant's only asset of substance was and is the property at Coolabah Road gifted to her by the testator during his lifetime and which property is subject to a mortgage securing a payment obligation of a little over $200,000. The applicant has no superannuation, no motor vehicle (as she does not drive) and, at the date of death of the testator, she had about $40,000 in the bank ($15,000 in her name and $25,000 in a joint account with her daughter). Most of this cash reserve has since been spent on legal fees and disbursements associated with the present litigation.

14 The applicant has not held employment since moving to Australia. She had left school at aged 13 years and had worked in a factory and in fish and chip shops. She was working in the hospitality industry prior to her move to Australia, but had ceased that work as she found it difficult because of her age, heart surgery which she had undertaken and problems with her knees. At the date of death of the testator she was aged 71 years. In the circumstances I conclude that she has no realistic prospect of ever returning to paid employment.

15 The applicant wishes to live out her days in the Shepherd Street home and then, if necessary, in an aged care facility in Tasmania. This is despite the fact that one of her daughters lives in Greece and the other daughter is about to relocate from Tasmania back to Greece. The applicant intends when visiting Greece for several months each year to live rent free in the home which she had inherited from her parents but which she had gifted to one of her daughters. Should the applicant decide to permanently leave Australia I infer that she would intend to live in the daughter's house as that arrangement would seem to be fair and appropriate having regard to the applicant's advancing years and the fact that the house was a gift to her daughter. The applicant presented no evidence to the contrary.

16 At the time of death the deceased estate was worth about $3.6m comprised almost entirely of real estate which he had acquired over the years. The real estate included the home of the testator and applicant having a value of about $1.2m. The testator was aged about 63 years at the time of the commencement of his relationship with the applicant and there is no suggestion by the applicant that she directly or indirectly contributed to the acquisition, maintenance (other than undertaking home duties in the marital home) or improvement of any of the testator's assets.

The relationship between the applicant and the testator

17 The couple were in a relationship for about 14 years, about 11 of which had been spent as a married couple. For each it was their second marriage. Despite ups and downs (usually arguments over money) the couple remained supportive of each other throughout.

The relationship between the testator and his only daughter, being the primary beneficiary, and her circumstances

18 At the time of the death of the testator his daughter was aged 54 years. There is no evidence that the relationship was other than that of the usual father daughter loving relationship.

19 The testator owned a half share in a residential investment property with the other half share owned by his daughter and her husband. Title searches undertaken on behalf of the applicant show that the daughter owns a house with her husband at Churchill Avenue Sandy Bay, which house is subject to a mortgage. The daughter has an interest in three other parcels of real estate in Tasmania, one of which is subject to a mortgage. This is all of the information available on the daughter's financial affairs as she elected not to provide her own evidence on the subject. The result is that the Court is entitled to infer that she has no special claim arising other than by virtue of the relationship of father and daughter and that she has adequate resources of her own independently of the estate. See Anderson v Teboneras [1990] VicRp 47; [1990] VR 527 at 535. I make the inference.

The jurisdictional question of fact - Was the applicant left without adequate provision for her proper maintenance and support?

20 The estate was large enough to make the applicant secure in the marital home and to provide an appropriate income stream for her. The primary beneficiary under the testator's will, being his adult daughter, has no special claim on the estate as I have inferred that she has sufficient financial resources independently of the bequests to her.

21 The respondents say that provided that they as trustees supplement the income from the estate bequest to the applicant to bring it to about $25,000 per annum this amount, when combined with the rental income from Coolabah Road and the Greek pension, will produce an after tax income of about $50,000 per annum. They say that the applicant could take up residence in one of the two self contained living areas at the house at Coolabah Road.

22 The provision made in the will leaves the applicant out of her long term home. It leaves a substantial part of the small income stream to be provided out of the estate to the discretion of the trustees. Even taking into account the income derived from the Coolabah Road property and the Greek pension the applicant would be left in impoverished circumstances and so left to make financial choices regarding what food she purchases, how much electricity she consumes on heating, how much she spends on medical needs and personal hygiene items and how often she ventures out, bearing in mind that she is dependant on public transport as she does not drive. The applicant has no realistic prospect of improving her financial position through paid employment.

23 Having regard to the size of the estate and the fact that the testator and the applicant were married and the lack of any competing claim which deserves priority, I am persuaded that, not withstanding the applicant's financial resources existing independently of the estate, that she has been left without adequate provision for her proper maintenance and support.

Should the applicant have further provision and if so, what further provision?

24 Having concluded that the applicant has been left without adequate provision for her proper maintenance and support and having regard to the size of the estate I conclude that the applicant should have a favourable exercise of the discretion to make further provision.

25 The further provision should include making the applicant secure in the marital home. The respondents say that a life interest is sufficient to provide the necessary security and the applicant, if she wishes, could derive a rental income from the home during periods when she is in Greece. The applicant says that she should have the home in fee simple so that she is not beholden to the trustees in any way.

26 Taking into account that the home was acquired before the commencement of the relationship and that the relationship was for 14 years, rather than for many decades, I have come to the conclusion that, provided that the applicant has sufficient funds to maintain the home, all that is necessary is the provision of a life interest. A life interest only gives due weight to the importance of the testator's basic right to exercise freedom of testamentary disposition in that it simply defers, rather than extinguishes, the bequest of the property to the testator's daughter.

27 This brings me to the question of whether the applicant's cash stream should be supplemented by further provision out of the estate.

28 The applicant could sell the Coolabah Road property and invest the capital fund derived therefrom of about $750,000 to $800,000 so that she could progressively draw down on the capital.

29 The applicant suggests that an annual after tax income of about $69,000 is required for her to pay the rates, insurance and maintenance on the home, to pay for health insurance and to return premium economy to Greece on an annual basis. I consider such frequent trips back to Greece to be appropriate as soon the applicant will have no family left in Australia.

30 Included in the calculation is about $50,000 per annum for living expenses. This is derived from the applicant's account of her current living expenses being about $44,000 per annum plus an amount of $5,200 for a "weekly allowance". However, the living expenses set out by the applicant already included an allowance for clothing, entertainment, gifts and other miscellaneous items totalling $230 per week or about $12,000 per year. I consider that the additional amount claimed for an allowance is double counting. Further the amount claimed by the applicant for her weekly groceries is currently about $200 per week whereas in an affidavit filed by her about a year earlier she said that the amount being spent per week on groceries was about $130. The difference is accounted for, at least in part, by the fact that the applicant is now accommodating, free of board and food contributions, her 22 year old granddaughter. Taking these matters into account I consider that an annual income of a little over $60,000 net is appropriate to satisfy the applicant's expenditure prediction. To achieve this a before tax income of about $70,000 to $75,000 is required.

31 The respondents submitted that the claimed future expenses are overstated and could be trimmed, for example by the applicant travelling to Greece economy class rather than premium economy class. In my opinion having regard to the size of the estate, the applicant should have an income which comfortably satisfies her predicted future needs rather than a tight budget with the stress and anxiety that such might bring.

32 Actuarial tables as to life expectancy and the lump sum required to provide a particular income depending upon investment return rates provide some guidance but some items of expenditure, such as annual trips to Greece and money spent on entertainment will diminish with the applicant's advancing years. Inflation rates and income returns on investments are not possible to predict over the long term with accuracy. The capital provided should be sufficient to give the applicant a buffer against adverse contingencies and to have sufficient funds to permit the applicant to take the aged care accommodation of her choice if and when the need or desire for such accommodation arises.

33 Taking guidance from the actuarial tables provided, taking into account that the just and wise testator generally would not be expected to act on purely arithmetical calculation in settling an appropriate provision and taking into account that although ultimately the applicant, if she lives to a very old age, would have the buffer of an Australian aged pension entitlement, I consider that the applicant should have a total capital fund of a little over $1m. She has $750,000 to $800,000 in the Coolabah Road property and so the amount to be paid by the estate will be $300,000.

34 There will be an order giving the applicant a flexible life interest in the home at Shepherd Street Sandy Bay such that the home might be rented, a substitute home might be purchased or sale proceeds invested to produce an income payable to the applicant. There will also be an order giving to the applicant a capital amount out of the estate of $300,000 in substitution for the income stream provided for in the will. The result is that the applicant will be secure in the marital home with a capital fund (including the value of Coolabah Road) of about $1.1m.

35 The Act, s 9(3) provides that the provision made operates and takes effect as a codicil. The form of the orders made should reflect this. Further the Act s 9(2) provides that a direction must be made that a certified copy of the orders be made upon the probate of the will and so if the grant of probate has not already been brought in to Court there will need to be an order that it be brought in for the purpose. Finally, the orders should dispose of any costs questions arising from the litigation.

36 The parties should attempt to agree appropriate orders conformable with my determination and, if agreement cannot be reached, a party or the parties may submit their draft orders and request a relisting.