Kelly v Kelly

Supreme Court of NSW|2006-05-02|Before: Mr J, Macready J

CITATION : Kelly v Kelly [2006] NSWSC 371 This decision has been amended. Please see the end of the judgment for a list of the amendments.

JUDGMENT OF : Associate Justice Macready at 1

CATCHWORDS : Famiily Provision. Application under the Family Provision Act 1982 by a widow who had divorced the deceased a week before he died. Estate passed to young children. Order for plaintiff to retain the estate.

COUNSEL : Mr J. Wilson SC for plaintiff Mr J. Trebeck for defendant

SOLICITORS : Barkus Edwards Doolan for plaintiff Garden & Montgomerie for defendant

1 - THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3866/05 - SUSAN PATRICIA KELLY v EDNA ALICE ANN KELLY - ESTATE OF THE LATE PAUL ALLAN KELLY

1 HIS HONOUR: This is an application under the Family Provision Act in respect of the estate of the late Paul Allan Kelly who died on 25 April 2004 aged forty years. At the time of his death he was a divorced man. He was survived by his two children from his marriage to Susan Patricia Kelly, namely, Kimberley Shea Kelly and Mikaela Ashleigh Kelly. The deceased was survived also by the plaintiff, his former wife Susan Patricia Kelly, and his mother, Edna Alice Ann Kelly, the defendant in these proceedings.

2 The deceased made his last will on 14 July 1996. He left his estate to the plaintiff but as a result of s 15A of the Wills, Probate & Administration Act that bequest failed because it is negatived under the Act as a result of the dissolution of his marriage which occurred a week before he died.

3 Under the default provisions of the will the estate passes to his two children, Kimberley and Mikaela, aged nine years and six years respectively.

4 At the date of his death the deceased had the property at 96 Spring Creek Road, Young then valued at $520,000, a Toyota Hilux utility valued at $5,000 and a Nissan Patrol utility valued at $4,500.

5 The deceased also had liabilities to the Commonwealth Bank of $103,000, his Bankcard of $2342, his solicitor, Carmody Crampton, of $495, and the Central Slopes Credit Union of $5128.

6 Fortunately his borrowing from the Commonwealth bank was insured and there was a payment of $88,123 to Comminsure, which was applied to reduce the debt.

7 Other liabilities have been incurred since the date of death and the current position is the most recent valuation of the house and land shows it having a value of $450,000. The land has an area of some seventeen acres and there is evidence to suggest that a small part of it can be sold off for $30,000 to $40,000.

8 The sale of that land, however, would have some difficulties as it is too small to allow the erection of a building on it and, accordingly, it would only have an attraction to a nearby owner or someone who wanted to keep a few stock on it.

9 There is a car in the estate worth $2,500 which has now been sold, that amount of cash being held by the solicitor. The debts of the estate are $27,988.29.

10 Costs have been incurred on both sides. The plaintiff's costs are estimated at $46,819 and those of the defendant at $20,804. The total of those and the debts is $95,611.

11 The deceased, Paul Kelly, was born on 26 March 1964. He grew up in due course and became a station hand which was his occupation at the time he died. The plaintiff, Susan Kelly, was born on 30 October 1964. After leaving school in 1980 she attended a secretarial course at the Young TAFE. In 1983 the deceased purchased the seventeen acres at Spring Creek for some $21,000.

12 Meanwhile, the plaintiff had a good work history working as a clerical assistant with a firm of solicitors and as a receptionist and clerk and further as a secretary between 1981 and 2004.

13 The plaintiff and the deceased in May 1989 purchased the property at 47 Bennelong Street, Young for $63,000. To do this they borrowed $50,000 from the ANZ Bank and it was purchased in joint names. The balance of the purchase price was contributed to by them from their joint savings.

14 They commenced living together in 1989 in September, and married on 5 May 1990. In 1996 the plaintiff and the deceased borrowed $150,000 from the Commonwealth Bank to build a home on the Spring Creek Road land. The cost of that house was about $125,000. The land, of course, was still in the name of the deceased.

15 The deceased made his will on 14 July 1996. His eldest child, Kimberley, was born on 13 May 1997 and the second child, Mikaela, was born on 24 March 1999.

16 In 1997 the property at Bennelong Street was sold for $72,500 and some of the money after discharge of the ANZ Bank mortgage was used to repay the Commonwealth bank loan.

17 The marriage in later years was not particularly happy and I will come back to those matters later.

18 It was on 30 December 2002 the plaintiff and the deceased separated and the plaintiff moved into a rented house at Barwang Street, Young. On 8 September 2003 the plaintiff obtained an apprehended violence order against the deceased, and the deceased was arrested for breaching that on 24 November 2003.

19 The parties were divorced and the decree absolute was made on 18 April 2004. A week later, on 25 April 2004, the deceased died in tragic circumstances. Unfortunately the deceased took his own life when he was at his mother's home at a time when the children, although not immediately present, were in the home.

20 In May 2004 the plaintiff and the children moved back to the Spring Creek property. A number of amounts were received from various funds. In September 2004 the plaintiff received $1045 being some superannuation. In October she received a further amount of $56,474.60 as superannuation. In November there was a payment from the AMP superannuation entitlement in favour of the children for $49,000. This was held by the plaintiff on their behalf and expended for their benefit and the amount is now $34,400. As I have mentioned, a substantial payment was made by the insurer of the mortgage loan.

21 In December 2004 letters of administration were granted to the defendant. At that time the plaintiff gave up work and on 22 March 2005 she gave birth to her third daughter, Isabella Olivia Shea-Mowatt. The plaintiff was not living with the father of the child and there is no further attachment between them. She now receives child support for the child of $50 a week from the father.

22 The summons was filed within time on 7 July 2005.

23 In a case where there has been a divorce it is necessary for the plaintiff to establish factors warranting under s 9(1) of the Family Provision Act. In the present case the plaintiff is the former wife who has not received a property settlement.

24 The question of factors warranting in respect of former spouses has been dealt with in a number of cases. In Dijkhuijs (formerly Coney) v Barclay (1988) 13 NSWLR 639, a number of the judges dealt with this matter. Kirby P had the following to say: "Fifthly, the respondent, picking up one of the themes of Mr Landa's comments, urged that s 9(1) of the Act was to be read in the light of the policy of the law to promote the finality of settlements of property disputes by orders made in the Family Court. Where such orders had been made, an order under the Act in the case of a former spouse should be exceptional. Only if this approach were adopted would the policy of the Family Law Act (Cth) be fully achieved. That policy is that parties whose marriage has been dissolved and in respect of whom orders have been made disposing of their matrimonial property, could go their separate ways. Save for the rare and exceptional cases provided under the Family Law Act (Cth) , such parties should henceforth face no financial obligations from one to the other. This public policy was referred to by Young J in O'Shaughnessy (at 149). It was also stressed by his Honour in the present case. There is no doubt that in most cases, the achievement of a final property settlement in the Family Court would be seen by the parties, in current social circumstances, as terminating any moral claim of a former spouse to provision in the will of the other. Confronted by the news that he or she had been excluded from the will of the former spouse the response would, in the overwhelming majority of cases, be: 'Our marriage was dissolved. We settled our financial affairs. We can each start a new life. That was the whole point of the Family Court proceedings.' To this extent, I agree with what Young J has written in O'Shaughnessy and in this case." 25 Mahoney J said the following: "That which the court 'shall first determine' is whether 'there are factors which warrant the making of the application'. That phrase may be contrasted with the references otherwise made to the determination of, for example, 'what provision (if any) ought to be made in favour of an eligible person...'. On the face of s 9(1) there is a distinction between 'factors which warrant the making of the application' and factors which warrant the making of an order. That distinction accords with the principle which, in my opinion, is inherent in the legislation, viz, that, special cases apart, an order is to be made only if the deceased has made default in the performance of a duty which he owed to the particular plaintiff. I do not think that this case requires a final analysis of the basis of applications under the Act : it will be sufficient to refer to this matter in general terms. But the Act authorises the Court to 'order that such provision be made out of the estate or notional estate, of both, of the deceased person as, in the opinion of the Court, ought, having regard to the circumstances at the time the order is made, to be made for the maintenance, education or advancement in life of the eligible person' (s 7). That does not mean that, if the plaintiff establishes a financial need within the section and if on taking into account the considerations referred to in s 9(2) )the discretionary considerations) there be nothing to the contrary, an order must be made. The statute assumes that the deceased, in what he has done during his life and by his will, has failed to discharge a duty which he owed to the plaintiff (the moral duty). Thus, a plaintiff may be a former spouse who, on dissolution of the marriage, received what on any view she was entitled to have and there may have been no further relationship between them so that none of the factors in s 9(3)(a) to s 9(3)(c), are of relevance. But, at the deceased's death, she may have a financial need. In such circumstances, the fact that the plaintiff has established that she was a former spouse and has a financial need would not, as such, entitle her to an order. It would be necessary for her to establish that, in some way or because of circumstances within s 9(3)(d), the deceased had a duty to her which involved that he should have provided for her financial need. This will be so a fortiori where the basis for the eligibility of the plaintiff is alleged to be within par (d) of the definition of 'eligible person'". 26 Importantly, it can be seen that the question of need is a separate matter and factors warranting are something different from that.

27 In another case, Churton v Christian (1988) 13 NSWLR 241, his Honour Priestley JA said the following, in respect of this type of application: "Mrs Christian is a member of a class in respect of whom warranting factors may often be more difficult to find. It is common experience that divorce sometimes brings to an end all links between previously married people. In such cases, warranting factors might well be expected usually to be absent, although this need not be universally so. On the other hand, divorced persons may remain on close terms, sometimes little different from those on which they lived when married. In every case it is necessary to examine the actual relationship between the two people concerned, as far as possible without preconceptions based only on the fact of divorce." 28 In his comments he illustrated a situation which sometimes applies after there has been a divorce and a property settlement, namely, that the parties still continue to have a close association.

29 In recent times there has been further attention to this matter in the Court of Appeal in the case of Brown v Faggoter [1998] NSWSC 563, a decision on 13 November 1998 which is a decision of Sheller JA, Shepherd and Fitzgerald AJJA. The main judgment was given by Fitzgerald AJA, who seemed to suggest that an application might be warranted if the application had reasonable prospects of success. This seems to be a somewhat different and perhaps easier test than what was referred to in the other cases of the Court of Appeal to which I have referred. I will consider the matter on both bases, given that there may be some flux in the state of the law in this regard.

30 Given the absence of any property settlement and the terms of the will of the deceased, there are clearly factors warranting. The real gravamen of the matter is what proper provision ought to be made for the plaintiff.

31 The plaintiff is an eligible person being the former wife of the deceased. In applications under the Family Provision Act, the High Court in Singer v Berghouse (1994) 181 CLR 201 has set out the two-stage approach that a Court must take. At page 209 it said the following: "The first question is, was the provision (if any) made for the applicant inadequate for (his or her) proper maintenance, education and advancement in life? The difference between 'adequate' and 'proper' and the interrelationship which exists between 'adequate provision' and 'proper maintenance' etc were explained in Bosch v Perpetual Trustee Co Limited . The determination of the first stage in the two-stage process calls for an assessment of whether the provision (if any) made was inadequate or what, in all the circumstances, was the proper level of maintenance etc appropriate for the applicant having regard, amongst other things, to the applicant's financial position, the size and nature of the deceased's estate, the totality of the relationship between the applicant and the deceased, and the relationship between the deceased and other persons who have legitimate claims upon his or her bounty. The determination of the second stage, should it arise, involves similar considerations. Indeed, in the first stage of the process, the court may need to arrive at an assessment of what is the proper level of maintenance and what is adequate provision, in which event, if it becomes necessary to embark upon the second stage of the process, that assessment will largely determine the order which should be made in favour of the applicant. In saying that, we are mindful that there may be some circumstances in which a court could refuse to make an order notwithstanding that the applicant is found to have been left without adequate provision for proper maintenance. Take, for example, a case like Ellis v Leeder where there we no assets from which an order could reasonably be made and making an order could disturb the testator's arrangements to pay creditors". The plaintiff's situation in life

32 The plaintiff is forty-one years of age and she lives in the property at Spring Creek Road, Young with her two children from her marriage to the deceased, and with her youngest child Isabella, who is thirteen months old.

33 The plaintiff does not work. She receives a sole parent benefit and family tax package which total $483 per week. She earns interest of about $50 per week from an investment with the Commonwealth Bank. The father of Isabella pays child support of $50 per week. All these funds are used for her expenses but now she also has an additional $130 per week for a car loan which is not fully covered by her income. Thus in respect of this recent purchase her income does not exceed her expenses.

34 The plaintiff's assets are as follows: the recently purchased Holden Commodore station wagon worth $35,000; furniture and household effects $5,000; Commonwealth Bank account $100; St George Bank $600; term deposit Commonwealth Bank $50,060, giving a total of $90,760.

35 She has a number of liabilities which total $40, 331. These include a loan from her mother who financed her move and a personal loan from the bank for the Commodore car and a Visa card. I have already mentioned there is a fund now of $34,400 held in trust for the children. As can be seen from the listing of assets above, the plaintiff still has $50,000 from the other two superannuation funds. It has not substantially decreased over the last year or so and so one can assume she can meet her expenses, apart from the expenses for the car.

36 It is necessary, of course, to look at the contributions to the estate of the deceased. It is plain that the plaintiff contributed to the first house through repayment of the mortgage and contributions to the cash obtained for the purchase price. This came from the savings which the deceased and the plaintiff had made in the early years of their marriage. She also contributed to the mortgage over Spring Creek Road, although at times she was obviously off work when she was having children, but she did work for a substantial part of the marriage.

37 The plaintiff has given some evidence of the type of homemaker and parenting contributions which she carried out. It seems she did a substantial amount of what would ordinarily be described as homemaker contributions, although the deceased would regularly mow the lawns, which was probably somewhat of an onerous task on a seventeen acre block. Once the children arrived the plaintiff seems to have carried out the whole burden of managing what were the ordinary day to day tasks relating to the children, including taking them to school and social events. Naturally that has continued.

38 It is, of course, necessary to look at the relationship between the plaintiff and the deceased to understand the nature of the relationship. Unfortunately the deceased was prone to fits of temper throughout the period of the marriage and, according to the evidence of the plaintiff, would often vent that and occasionally at the plaintiff. The first injuries occurred to the plaintiff on New Year's Eve 1997 when the deceased assaulted her and grabbed her by the throat and pushed her against the wall.

39 There seem to have been more frequent occurrences of this behaviour on the part of the deceased after this time. There was an occasion in April 2002 when the plaintiff was assaulted in bed when she was attacked by the deceased, who grabbed her and started shaking her with his hands around her throat. That assault continued for some two and a half hours. She had extensive bruising, although she did not discuss the matter with other people.

40 Later that year in December a similar event occurred with threats to kill her. Once again there was violence done to the plaintiff.

41 As a result of this she moved out and went into a rented home. Unfortunately the violence continued against her, even though she moved out of home, and there were a number of assaults which eventually led to apprehended violence orders, to which I have referred.

42 The final incident which led to that related to access for the deceased and his difficulties in returning the children on time.

43 At a time shortly prior to the deceased's death there had been negotiations for a property settlement but no agreement was consummated.

44 It is, of course, necessary to consider the situation in light of others having a claim on the bounty of the deceased. In this case it is the two children who are aged nine years and six years. The children were greatly upset about the death of their father and it has obviously affected them for some time after his death. Fortunately the carry-over from that does not seem to be continuing. Mikaela has a need for reading glasses and she has some learning difficulties which, hopefully, will be addressed by an occupational therapist.

45 Apart from that the children are apparently in good health and there is a trust fund held on their behalf of $34,400 and they have their interest at present in the estate.

46 The plaintiff seeks to retain the house in place of the bequest that is made in the will in favour of the children or, alternatively, she would like to buy a comparable home in town for about $350,000.

47 The defendant has put on evidence both from herself and her solicitor of searches for sale prices for properties which would encompass four bedrooms in town in a range of $240,000 to $280,000. Some of those are brick but some are older style homes, some are weatherboard and others are of other types of construction. Some of them would look reasonably desirable.

48 Based on this evidence the defendant suggests that an appropriate amount to award the plaintiff would be $275,000 in order to enable her to purchase such a property. The costs of purchase of that order are about $10,000 and any house would thus have to be less than $265,000.

49 There is a whole number of factors to be considered in looking at this question of what is appropriate. Apart from the purchase price of the Spring Creek Road land which the deceased contributed, the plaintiff herself made a substantial contribution to the purchase of the assets in the estate and I should not lose sight of this fact. She is also going to be responsible for maintaining and bringing the children up for the next ten to fifteen years. They are responsibilities she has and there is nothing to suggest she would not be a good mother and live up to those responsibilities.

50 Another factor to consider is that this was a marriage of some fourteen years' duration. Although not long it was through the difficult years of child upbringing and has to be taken into account. The fact the marriage ended was unfortunate but it certainly was not the fault of the plaintiff, at least on the evidence before me.

51 Probably in one sense if one looks at a widow in her situation there is probably not enough in the estate to allow for the recognition of her claim.

52 The matters put forward by the defendant in respect of housing can probably be described as adequate but probably not really comparable to the property which the deceased and the plaintiff had been used to using up to the date of separation.

53 There is comparable evidence from a valuer that to buy a home in Young of the same quality would be in the order of $350,000. Even if such a home was bought, after allowing for the debts and so on, sale costs, purchase costs, the amount left over for the purchase would only be in the order of some $336,000. This would not buy a home for $350,000 and if there was a legacy of $275,000 there is not a substantial amount left over for the children.

54 The children already have a fund of $34,400 and that primarily could be used for meeting their school needs and to the extent that they will be able to continue at private schools.

55 The question of the practicality of the plaintiff retaining the property is a matter that has been discussed before me. She has in cash $50,000 which would in fact cover the debts in the estate and the defendant's costs. She still needs to cover her own costs, which are fairly substantial.

56 The plaintiff gave some evidence of wanting to borrow $150,000 but she has not made any application to a bank to see if she could do that, nor has she applied to obtain work again. The plaintiff's work history suggests she would probably be able to obtain appropriate work without any great difficulty, whether it be part time or full time. She has experience which is no doubt needed in that area.

57 The problem is, of course, she does not know how much she will have to earn, how much she will have to work, the cost of child minding and what are the amount of the repayments. Apart from the $50,000 which clearly will pay the debts in the estate and will cover the defendant's debts, there is an opportunity of perhaps realising some $30,000 to $40,000 from the sale of part of the land. One would not imagine such a sale would be easily obtained but it does give her some opportunity for limiting what would be any necessary borrowings basically to meet her costs.

58 Given her work history what she would need to borrow is substantially less than $150,000 that she is talking about and I would have thought she would be in a position to be able to meet her repayment of a small loan to retain the property.

59 The other factors to consider also are the fact that the family is well settled in the home, the children are happy there and it provides stability for their future. They have been there now for some years. Obviously in the future if things become too pressing for the plaintiff she can sell it and make alternative arrangements.

60 The question then is the requirement of the children to which I have referred. I do not think that it is necessary to provide some extra amount for the children; after all, the children are her responsibility to maintain. She will have to look after them over the coming years.

61 In my view the plaintiff should receive the whole of the estate. Accordingly, the orders that I make are: (1) In lieu of the bequest in the will for the children of the deceased the plaintiff is to receive the whole of the estate. (2) The plaintiff to pay the defendant's costs on an indemnity basis. (3) The exhibits can be returned.

05/05/2006 - File number amended - Paragraph(s) Not applicable

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