Krakowszky v Kennedy

Supreme Court of NSW|2007-08-03|Before: Macready J

CITATION : Krakowszky v Kennedy [2007] NSWSC 842

JUDGMENT OF : Associate Justice Macready

CATCHWORDS : Family Provision. Application by widow for further provision. Order for a legacy for a home to be purchased. No matter of principle.

PARTIES : Consorcia Krakowszky v Adriana Clara Kennedy (Estate of Tibor Krakowszky)

COUNSEL : Mr M Gorrick for plaintiff Mr A Scotting for defendants

SOLICITORS : Eddy Neumann Lawyers for plaintiff Teece Hodgson & Ward for defendants

1 - THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2921/06 - CONSORCIA KRAKOWSZKY v ADRIANA CLARA KENNEDY - ESTATE OF THE LATE TIBOR KRAKOWSZKY & ANOR

JUDGMENT 1 HIS HONOUR: This is an application under the Family Provision Act in respect of the estate of the late Tibor Krakowszky, who died on 8 June 2005 aged 71 years. The deceased was survived by his two children from his first marriage and they are the defendants. The plaintiff is the widow of the deceased and was his third wife. His first wife has been given notice of the proceedings and makes no claim. His marriage to his second wide, with whom he had no children, appears to have been short and was a marriage of convenience. There is no knowledge of her whereabouts and I am satisfied it is impractical for her to be served. The will of the deceased 2 The deceased made his last will on 6 April 2005 and left a third of his estate to each of the plaintiff and the two defendants. The two defendants were appointed the executors. Assets in the estate 3 The only asset in the estate is the deceased's home at 848 Elizabeth Street, Zetland. The valuation of that was subject to a number of competing appraisals. The plaintiff's appraisal was from $370,000-$390,000 and the defendants' from $450,000-$500,000. The mid point of these appraisals was $427,500. For what it is worth just before the death of the deceased an agency agreement was signed by the deceased which showed an estimated selling price of $450,000 to $500,000. This perhaps adds weight to the fact it is more likely to be closer to the higher range than the mid range. 4 The deceased had a number of liabilities at the date of his death and the present debts in the estate, assuming an order is made, will be as follows:

Debts $ 10,484.29 Administrative costs $ 6,901.42 Defendants' costs $ 35,000. Plaintiff's costs $ 56,293.51 Total $108,679 22.

5 Working on a mid point of $427,500 the net estate is $318,820 78. Family history 6 The deceased was born in 1934 and the plaintiff herself was born in 1951 in the Philippines. The deceased married on 12 August, 1961. His daughter, the defendant, was born in 1962. In that year the deceased and his wife and daughter left Colombia where they had been and came to Australia to make a new life. In 1965 the deceased's parents bought a home which the deceased later occupied in Zetland. 7 The second defendant, the son of the deceased, was born in 1967. It was in 1983 that the deceased and his first wife separated. In 1984 he inherited the Zetland house from his mother's estate. It was in 1991 that the plaintiff and the deceased met while the plaintiff was in Australia. They married in that year and in 1992 they commenced their married life together in the Zetland home after the plaintiff came back from the Philippines with appropriate visas. 8 From 1995 onwards the deceased had a number of deteriorations in his health. He had a heart attack in mid-1996. In March 1998 he had a bypass operation and he was thereafter in hospital upon numerous occasions. He was in hospital on 11 September 2001 for five days, in November of that year for four days, in October for a day, in 2003 he was in hospital during February for seven days and in August for 26 days, in 2004 he was in hospital for ten days in January, and in September for 15 days. On all of these occasions and following them he returned home where he was looked after by the plaintiff. 9 The deceased started to become more housebound after the year 2000. There was a purported will in March 2003 which left his estate to the plaintiff. The real deterioration in the deceased's condition seems to have been after 2003. He became incontinent, had to have various devices for incontinence and there was a recommendation that there be high-level residential respite for the deceased. He was so unwell that at this time he eventually gave up control of the parties accounts into which both pensions were paid so that the plaintiff could start to manage the finances for both of them. In September 2004 he was admitted to the Camelot nursing home at Maroubra and the plaintiff arranged for various payments of medical and medication expenses. 10 In December 2004 the plaintiff travelled to the Philippines to see her mother. This was with the permission of the defendant and their joint funds were used for this visit. 11 On 29 January 2005 the deceased made a testamentary document giving 20% of his estate to the plaintiff, 60% to the first defendant and her children and 20% to the second defendant. 12 On 8 February 2005 the plaintiff returned to Australia from the Philippines. In March there was a proposal for the deceased to sell the residence at the suggestion of the plaintiff and then to move to Queensland where there would be, according to the plaintiff, a better position for him. She sought to have a power of attorney executed by the deceased on 7 March 2005 but the solicitor who attended on him for the purpose of signing the power of attorney came to the conclusion that he was being pressured to execute the document and she did not let him sign the document. What happened thereafter was that the deceased himself signed a sales inspection report on 11 March 2005. The first defendant, at the end of March, contacted Mr Noonan, solicitor, asking him to check the will which had been made and Mr Noonan attended on the deceased for the purposes of taking instructions. 13 At the beginning of April there was an argument about an incident when he plaintiff came to the hospital and found that the deceased was taken home. She called the police and that provoked some difficulties. The deceased told her after that incident that she was no longer his wife and told her not to come. That was the last time the plaintiff visited and she was naturally quite upset about that. Thereafter in April the deceased gave Mr Noonan instructions for a divorce and suggested to Mr Noonan that they had not been living together since 2003. Having regard to the evidence of the care, including the various assessments, it seems that this was quite wrong. 14 The deceased made his last will on 6 April 2005, as I have already indicated. On 26 May the deceased was transferred to another nursing home nearer the first defendant and he died on 6 June 2005. Probate was granted and the proceedings were commenced within time. The plaintiff is an eligible person, being the widow of the deceased.

15 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 from arrangements to pay creditors". The plaintiff's situation in life

16 The plaintiff is a single woman aged 56 with no dependants. She receives the widow's pension of $424.30 per fortnight and cannot manage on that amount. She has been borrowing from family and friends in order to survive and has debts now of $6,000-$7,000. She has absolutely no assets, a situation that has not changed since she first met the deceased. She still lives in the deceased's house, which house is in a bad state of repair. The roof leaks, apparently not having been repaired since some of the hail storms in Sydney, it is damp and there is mould in the house. The toilet does not flush and recently the hot water system had to be repaired by a relative of the plaintiff at more expense. The deceased unfortunately was a hoarder and the house is crammed full of boxes and packed with artefacts and boxes. In fact, it is so packed full of these things that a wheelchair could not have been wheeled through the house to take care of the deceased. 17 I turn to the plaintiff's relationship with the deceased. As I have mentioned they were married in May 1991 and the plaintiff had to go back to the Philippines to get her visa processed. That was the why time was occupied before the parties could resume cohabitation in Australia in May 1992. When the plaintiff came back to Australia the deceased helped her to get a pension and at his request she did not work. The pension was paid into a bank account along with the deceased's pension and the deceased controlled those funds for many years. He would give her a small amount each week for spending money. 18 In the earlier years up until, say, about 2003 he could care for himself and he could drive a car, which eventually he stopped when the car broke down. Once he could no longer go to the bank or leave the house the deceased gave the plaintiff instructions as to how to deal with the finances. The marked decline in the deceased's health is well evident in an aged care assessment which was made in February 2004. The deceased had to be lifted out of bed in the morning, he needed assistance with showering, he had to be washed and dressed and all these things, of course, were attended to by the plaintiff. Of course she always did the household chores which she had always done, namely, washing, cooking and cleaning and then, of course, after this period, in 2003 she had to attend to other things for his personal care when he became incontinent. 19 As I have mentioned, there was a period when the plaintiff went overseas for a short time from December 2004 to February 2005 to visit her mother. As I have said that was with the permission of the deceased and was paid for from their funds. 20 I have already referred to the fact that there was this falling out that occurred over a dispute about whether or not the property would be sold. It was an unfortunate dispute. It may be the plaintiff genuinely thought there would be some benefit to the deceased in selling the property but plainly the deceased took offence at this and reacted against the plaintiff. However, that was only shortly before the death of the deceased. 21 The plaintiff did not contribute to the estate of the deceased but contributed obviously to the living expenses by contributions from the pension. 22 It is also necessary to consider the position in life of others having a claim on the bounty of the deceased. In this case it is the children of the deceased. 23 I will deal firstly with the situation in life of Adriana Kennedy. She is divorced, aged 53, with two children who are 10 and eight years of age and are dependent upon her with whom they live. She has a house worth $600,000, bank accounts and shares of $8,500, superannuation of $20,000 and a car worth $10,000. She has a mortgage of $149,000 and credit card and other debts of some $12,000. Her income from her employment as an administrative manager gives her an income of some $2,607 81 per month. All of this is consumed in her expenses. She is responsible for educating her children in the future and her ex-husband has stopped supporting her in this endeavour. The relationship between the deceased's children and the deceased 24 It is clear that after his marriage to the plaintiff the contact with his older children was probably less than it had been before, however, the contact continued and it is plain that there was a proper and good relationship between the deceased and his two children, including such grandchildren that the deceased had. 25 The evidence makes it clear that the deceased took steps throughout his marriage to attend family functions which were often at his ex-wife's home and to keep the relationship with his children and grandchildren. He would meet with them approximately once a month. As is pointed out in the defendants' submissions, there is some conflict in the evidence between the length of time the respective parties spent with the deceased. Both defendants only had limited opportunity to observe the others and the plaintiff's contact with the deceased and it is not unnatural that there was not a lot of contact between the plaintiff and the defendants. I am satisfied that both the defendants had a good relationship with the deceased. In the circumstances of the case the deceased had to be cared for by the plaintiff during the marriage. Situation in life of David Krakowszky 26 David is 39 years of age, married with two very young children. He is employed as an architect in a new job earning $90,000 per annum gross and his wife does not work. They have to take in boarders in order to meet their expenses. They live in a house worth $700,000. They have two investment properties with a total value of $620,000, shares of $6.500, a motor vehicle worth $3,500 and superannuation of some $45,000. This is a total of $1,374,000. Their mortgages, particularly on the investment properties, in all total $880,600 and they have credit card debts of $2,000. This leaves them with assets of $492,396. As I have said, there was a good relationship between David and his father. He made no contributions to the property and the same applies to his sister. Discussion 27 It is necessary to see how the plaintiff says she has been left without adequate and proper provision for her maintenance, education and advancement in life. She wishes to move to Queensland where she has some relatives, a cousin and aunty. She wants to obtain a small house there, either that or a small villa. She would need, if she obtained the house she wanted, to expend some $5,550 in costs in such a purchase. She has no furniture and could expect to spend some $13,000 on furniture to furnish the house. She put forward a range of two to three bedroom houses or villas in the range of $230,000-$350,000. Some of the houses in that range are new houses and new units. 28 The defendants tendered some other types of available accommodation. For instance, there are what are described as retirement villages which are nice, single level properties in the range of $155,000 $275,000. There was a town house, for instance, which was put to the deceased, of $234,000, a single level one, 2 minutes from the local shopping centre and a bus stop. These are the sort of things which the plaintiff would wish to have because she can only travel by public transport. 29 It would seem from the consideration of all the evidence, therefore, that for a total sum of something in the order of $250,000 she could obtain an appropriate house and meet the costs of such a project. The question is, of course, whether it is appropriate that that amount of provision should be made for her. Recently the Court of Appeal in Bladwell v Davis & Anor[2004] NSWCA 170 talked again about the principles to be applied in respect of widows' applications. Bryson J has summarised the principles and, particularly, the question of whether there is primacy which should be accorded to the claim of a widow. At paras 12-19 he said the following: "12 There have been many statements in judicial decisions, including decisions in the Court of Appeal, generally to the effect that primacy of some kind is accorded to claims of widows for proper maintenance and advancement in life, including continuance of housing arrangements which they enjoyed during the lifetimes of their late husbands. These statements are not altogether uniform in expression, and should be understood as made in each case in relation to the facts under consideration; and those facts vary widely and in truth are unique to each particular case. "Widow takes all" is not a rule which has been or could be established by judicial decisions: the Court cannot resign the functions which it has under s 7 of the Family Provision Act 1982 in favour of rules of thumb. A rule which was once followed which practically prevented ordering provision for an adult son who was fit to work has been abandoned. 13 Observations on the claims of widows were made by Powell J in Luciano v. Rosenblum [1985] 2 NSWLR 65 at 69-70 in these terms: 'It seems to me that, as a broad general rule, and in the absence of special circumstances, the duty of a testator to his widow is, to the extent to which his assets permit him to do so, to ensure that she is secure in her home, to ensure that she has an income sufficient to permit her to live in the style to which she is accustomed, and to provide her with a fund to enable her to meet any unforeseen contingencies.' These observations were not made in the context of a competing claim or proved need by another eligible person, and were introduced by a guarded reference to a general rule and the absence of special circumstances. However they are frequently, almost universally cited in applications where provisions for widows are under consideration. 14 In Golosky v. Golosky NSWCA 5 October 1993 (unreported) the widow, second wife of the testator, was the applicant and the sons of the first marriage, the will beneficiaries whose interests were affected, were well off and did not assert financial need. The majority (Kirby P, Cripps JA concurring) ordered further provision for the widow, and Kirby P referred to Luciano v. Rosenblum briefly for comparison, but also said: 'Matters such as these rule out an inflexible rule that every spouse or every widow is entitled, as of right and in every case, to look to a testator to provide accommodation for life. Such inflexible rules used to exist in this area, as for example the previous rule that an "able bodied son" was disentitled to a claim under the predecessor to the Act for that reason alone. That rule has now been abandoned in this State. See [ Hunter v Hunter and Ors (1987) 8 NSWLR 573 (CA) 575f], 580f; cf Anderson v Teboneras and Anor [1990] VR 527. So should inflexible rules about spousal provision.' 15 In Hertzberg v. Hertzberg [2003] NSWCA 311 provision ordered by Acting Master Berecry for a widow, second wife of the testator, out of a large estate was confirmed by the Court of Appeal. There was no competing claim or circumstance of need of any will beneficiary. McColl JA said at [35] in the context of the claim of a widow for the matrimonial home (which in this case the claimant owns): 'His Honour's judgment recognised the community expectation that a testator should make provision for a widow to ensure that she can lead an independent and dignified life. That prospect is diminished when the widow does not have the benefit of the fee simple, but rather, a right of occupation of her home with a provision for expenses associated with that right being left in the hands of the executors. In this case the situation was exacerbated where, regrettably, the previously affectionate relationship between the appellants and the respondent had, as Acting Master Berecry found, completely broken down following the execution of the deed. Thus the situation in which the deceased may well have contemplated he had left the respondent appeared to have altered.'

The statement in the first sentence of this passage should be understood in its context of a claim in a very large estate where there was no competing claim based on need. 16 n Sayer v. Sayer [1999] NSWCA 340 at [34] Sheller JA (with whom Davies AJA concurred) accorded primacy to the claim of a widow (of a second marriage) over the claim of a granddaughter who was an eligible person "in the circumstances and in accordance with prevailing community standards." This does not in my opinion express any general principle of paramountcy. 17 In Cropley v Cropley [2002] NSWSC 349 at 56 Barrett J said: 'When it comes to claims by adult children, it can be said at once that, if there is a competing claim by the widow and all claims cannot be fully accommodated, the widow's claim should be afforded precedence in the sense that a demonstrated requirement for the allocation of resources in aid of the widow must be satisfied before any similarly demonstrated requirement for the allocation of resources in aid of an adult child. That a widow's claim to maintenance out of the estate of her deceased husband is a claim which is "paramount" and "of a high order" is borne out by the judgments of Sheller JA in Sayer v Sayer [1999] NSWCA 340 (Davies AJA concurring) and Blackmore v Allen [2000] NSWCA 162 (Priestley JA and Foster AJA concurring). In the former case, Sheller JA described the relativities between the claims of the widow and those of an adult grandchild applicant (Francesca) as follows: "In my opinion, the question is whether [the grandchild] has satisfied the Court that there is, in the circumstances and in accordance with prevailing community standards ( Permanent Trustee v Fraser (1995) 36 NSWLR 24 at 46), sufficient in the estate to provide for the widow's proper maintenance and advancement in life and yet leave some amount out of which provision can be made for her."

This was accepted as an accurate statement of the law by Palmer J in Latimore v Latimore (2003) NSWSC 364 at [59]. At [57] Barrett J proceeded to approach the applications according to the two stage approach described in Singer v Berghouse (1994) 181 CLR 201. 18 In my respectful view there is an inconsistency between an approach, in the context of competing claims, to the claims of widows as paramount, and the application to the facts and circumstance of each case of s.7 and the approach established by Singer v Berghouse . Preconceptions and predispositions are likely to be the source of inadequate consideration of the process required by the Family Provision Act 1982 . 19 In the application of the test in s 7, and of the exposition thereof in Singer v. Berghouse by Mason CJ, Deane and McHugh JJ at 409-411 it would be an error to accord to widows generally primacy over all other applicants regardless of circumstances and regardless of performance of the stages of consideration described in Singer v. Berghouse , in full and with reference to the instant facts. Defeat of the opponents' claims does not necessarily follow from a demonstration, which the claimant can make, that all her needs with respect to income, home renovation, and provision for contingencies cannot be met if any provision is made for the opponents; indeed she could well demonstrate that even if the provisions of the will took effect without any modification, the provision for her is not adequate. That is not a demonstration that no claim by an eligible person can succeed; the claims and circumstances of the opponents also have to be weighed, and they too have their needs and merits."

30 Interestingly Ipp J adopted this in para 1 of his judgment and also said as follows: "I agree with Bryson JA, for the reasons his Honour has stated, that 'it would be an error to accord to widows generally primacy over all other applicants regardless of circumstances and regardless of performance of the stages of consideration described in Singer v Berghouse (1994) 181 CLR 201…'

I would add, however, that where competing factors are more or less otherwise in equilibrium, the fact that one party is the elderly widow of the testator, is permanently unable to increase her income, and is never likely to be better off financially, while the other parties are materially younger and have the capacity to earn more or otherwise improve their financial position in the future, will ordinarily result in the needs of the widow being given primacy. That is simply because, in such circumstances, the widow will have no hope of improving herself economically, whereas that would not be the position of the others. In that event, the need of the widow would be greater than that of the others."

32 Here in this case there was a marriage of 14 years. They had no children of their own to look after. The deceased was, on the evidence, a difficult and somewhat demanding person to live with. There was a need for extensive care and assistance at the end of his life. 33 Adriana has important and serious responsibilities in respect of her children which she has to bear herself. She seems to have been abandoned by her former husband in the necessary financial input in the children's education. Fortunately she has a good job. David is also at a stage where his expenses will increase in due course as his children get older, however, he will no doubt be able to increase his income as he gets experience in his profession and progresses in that profession. 34 The plaintiff's primary need is for accommodation. A sum of $250,000 will get her a modest town house which will enable her to be close to her only relatives in Australia. 35 In my view, having regard to the extensive care which she gave to the deceased in somewhat difficult circumstances over a marriage that did go for some 14 years I think it is appropriate that some provision being made for her. This is also the case where the claims of the competing people, namely, the two children, are ones which have to be taken into account. 36 For this reason I do not think it is appropriate that the plaintiff receive the whole estate of the deceased. The estate of the deceased is one which may, in fact, have little more value than would appear on taking a mid-point approach which we have to do in these cases because of the added burden of costs of valuations caused to parties in the case of small estates. 37 In the circumstances it seems to me it is appropriate that the following orders should be made and I make these orders:

In lieu of the provision in the will of the deceased in favour of the plaintiff she receive a legacy of $250,000. 2. The defendants are to receive the residue of the estate equally between them. 3. Interest is to run on the legacy if not paid within four months on and from that date at the rate provided for by the Wills Probate and Administration Act 1898. 4. The plaintiff's costs on the ordinary basis and the defendants on the indemnity basis to be paid or retained out of the estate of the deceased. 5. I reserve liberty to apply. 6. The exhibits are to be returned. 7. I reserve the question of the amount of the plaintiff's costs so that there can be an application for capping of costs. 8. I direct the defendants serve their evidence by 7 August 2007 and the plaintiff to reply by 10 August 2007 with evidence. Copies of the affidavits to be lodged with my Associate, not filed.

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Cases Cited (8)