McIntosh v Blatch

• 1- IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1680/ 99 DOREEN McINTOSH v WALTER BLATCH (ESTATE OF CHARLES JOSEPH O'KANE) JUDGMENT 1 MASTER: This is an application under the Family Provision Act 1982 in respect of the estate of late Charles Joseph O'Kane who died on 19 July 1998 aged 65 years. The deceased was survived by the plaintiff who was the de facto partner of the deceased from 1979 until the date of death. The deceased had never married and had no children. The deceased's will 2 The deceased made his last will on 17 July 1998 under which he appointed the defendant, a personal friend, as the executor and trustee. The deceased gave the plaintiff a legacy of $50,000. He made a number of specific bequests under his will. To Mr and Mrs English, local friends, a property 9 Abelia Street, Tahmoor. To other friends, the defendant and Mrs Blatch, he gave a property at 231 Menangle Street, Picton. He gave a number of small legacies to various friends amounting to $13,000 and he gave the residue of his estate to his brother, John O'Kane. The nature of the estate 3 The various assets in the estate and their present values are as follows:- 231 Menangle Street, Picton $245,000 Accrued rental on Picton 12,000 9 Abelia Street, Tahmoor 235,000 Accrued rental on Tahmoor 4,200 Northern Building Society Account 125,000 Illawarra Mutual Building Society 60,361 Subaru motor vehicle 8,000 Cameras and lenses 1,588 Total $691,149 4 From this estate are to be paid the legacies of $63,000, the defendant's costs of $33,000 and the plaintiff's costs of $43,298. The total of these liabilities $139,298. 5 Both houses have been transferred to the beneficiaries and the Northern Building Society account has also been transferred to the residuary beneficiary John O'Kane. He resides in Queensland and like the beneficiaries who received the properties, he has given an undertaking not to disburse such property or proceeds pending the hearing of this matter. The transfers were made before a claim against the estate was made. That claim to which I will refer later has depleted the remaining estate. In addition the Subaru car and the cameras and lenses have been distributed. 6 I will deal with a little of the background history and chronology. The plaintiff was born on 23 January 1927 and the deceased on 13 February 1933. The plaintiff married Charles McIntosh in 1962 and they purchased a property in Menangle Street, Picton in August 1967. The plaintiff's husband died in April 1971 and she continued to live in the property at Menangle Street, Picton where she still resides. After the death of her husband she started to take in boarders in order to make ends meet. The deceased was one of these boarders and he came to board in the house in September 1978. 7 About March 1979 the plaintiff and the deceased commenced a de facto relationship with them both continuing to live in the plaintiff's house in Menangle Street. In September 1981 the plaintiff made a will in which she benefited the deceased's brother, John O'Kane. In 1989 she made a will in favour of the deceased. In June 1996 the plaintiff retired and received a benefit of $51,000 in superannuation. 8 On 22 June 1998 a summons was issued against the deceased and later served on him. The summons dealt with matters that caused the deceased great concern and was proceedings to obtain an apprehended violence order against him. A week before 17 July 1998 the plaintiff and the deceased discussed their wills. On 14 July 1998 the deceased transferred the sum of $12,000 from his investment account to an account of the plaintiff. On 16 July 1998 he prepaid his and the plaintiff's funeral expenses. The plaintiff's will and the deceased's will were made on 17 July 1998. On 19 July 1998 the deceased committed suicide and the plaintiff found he had hanged himself in her backyard that morning. This was the day before the summons for the apprehended violence order was returnable before the Local Court at Liverpool. The evidence discloses that the deceased made it abundantly plain that the charges against him were untrue. They also caused him considerable distress in the weeks leading up to his death. 9 On 21 July 1998 the plaintiff transferred $9,000 from the deceased's IMB account to her own account. Shortly before his death the deceased had made her a signatory to that account. 10 On 23 October 1998 probate was granted to the defendant. On 7 November 1998 the plaintiff informed the defendant that she proposed to bring a claim for further provision against the estate. In that month the deceased's personalty was transmitted to the beneficiaries and in December 1998 the executor transferred the two items of real estate to himself and the other beneficiaries. In that month the deposit with the National Mutual was also transferred to the residuary beneficiary. 11 The summons was filed on 15 March 1999 and various undertakings were given not to distribute the assets in June 1999. In May 2000 an action for damages by the complainant in the criminal matter was commenced against the estate in the District Court. After obtaining advice from the Court pursuant to s 63 the defendant settled the action in the sum of $100,000 plus agreed costs of $48,422 which were paid from assets in the estate. The assets which I have set out above in the estate of the deceased are ones remaining after the payment of this liability. 12 In applications under the Family Provision Act, the High Court in Singer v Berghouse (1994) 181 CLR 201 set out the two-stage process the 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 were no assets from which an order could reasonably be made and making an order could disturb the testator's arrangements to pay creditors." Plaintiff's situation 13 The plaintiff is single, she is aged 75 years with no dependents. Her income currently consists of a pension of $208 per week and interest of $36.90 per week. This is a total of $244.90. She estimates her expenses at $312.10 leaving her with a shortfall of $67.02 per week. 14 She owns her property at 188 Menangle Street, Picton which is worth some $300,000. She has a Toyota car worth $12,000. Her house contents and monies in her Illawarra Building Society account amount to some $38,000. She has, of course, incurred the costs of these proceedings. Generally she is in reasonable health for her age although she does have arthritis in one hip. Her life expectancy is 12.5 years. 15 It is necessary to have regard to the nature of the relationship between the plaintiff and the deceased. As I have indicated it extended over a period of about 19 years and was a de facto relationship. That of course does not paint the whole picture of the relationship and it is necessary to appreciate that the parties commenced their relationship later in life. They each had their own separate financial arrangements and indeed they had accumulated their own financial interests before they met. They had no children to support and each party worked during the relationship. From time to time the deceased would go away to work on various construction projects. He had a number of different occupations during the period of the relationship. When he was a construction worker he would sometimes be away for example at Alice Springs or Ayers Rock for about three years. On these occasions he would frequently return, perhaps every five weeks, and spend time with the plaintiff. 16 The evidence does not suggest that the plaintiff contributed to the estate of the deceased. 17 It is clear on the evidence, and the plaintiff agrees, that out of the funds that she received when she retired she in fact gave some $21,000 to the deceased. The precise nature of these arrangements was not made clear in the evidence. The plaintiff maintained that they were in fact loans and it was the provision of these funds which led to the plaintiff being repaid the amounts shortly before and shortly after the date of death. I thought the plaintiff's explanation in respect of these matters was not full and frank and I am not satisfied that there was not some other purpose. Even if the plaintiff can be said to have received an amount after the date of death which was not her money then I think this can be taken into account in deciding what orders are appropriate. So far as there are any payments beforehand they must be either repayments by the deceased or gifts by the deceased and thus must belong to the plaintiff. 18 It is necessary to consider the position of others who have a claim on the deceased's bounty. In this case it is the other beneficiaries in the estate. Mr and Mrs Blatch 19 Mr and Mrs Blatch have a house valued at about $450,000. They have bank accounts of some $28,000 and presently hold the rental that has accrued on the property at Menangle Street, Picton which was transferred to them pursuant to the bequest. They have two cars worth about $11,500. In addition Mr Blatch, the executor, has a rental property at 38 Mason Street, Thirlmere estimated at some $250,000. Mr Blatch has a pension from superannuation of $470 per week and is employed as a part time teachers' assistant earning $208 per week. The Thirmere property produces income of $160 per week. Mrs Blatch apparently has a full time position in which she earns some $370 per week as a teachers' assistant. Clearly Mr and Mrs Blatch have a satisfactory asset base and appropriate income. The evidence shows that they were friends of the deceased and would see them on a monthly basis. They made no contribution to the estate of the deceased. Mr and Mrs English 20 Mr and Mrs English are friends of the deceased. Mr English knew the deceased from his work at the Picton local school. At present Mrs English has income as a shop assistant of $354 per week. Her husband is a truck driver earning $500 to $600 per week and they are just managing to cover their expenses. They own a property at 47 Thirlmere Way, Tahmoor worth between $220,000 and $230,000. This is subject to a mortgage of between $45,000 and $48,000. They own two cars having a total value of about $25,000. They have two children who are still at home aged 16 years and 17 years. They are at school in Years 11 and 12. One of them will probably go to university. They have two other children who are not dependent upon them. They themselves did not contribute to the deceased's estate and their connection to the deceased was simply as friends. The Legatees 21 There were a number of small legacies of $2,000 to $3,000 which are given to named beneficiaries. There is no evidence as to their position but in the scheme of things this is not important.

Mr O'Kane 22 I turn to the situation of Kevin John O'Kane. Mr O'Kane is married, he is 62 years of age with two adult children. He is unemployed having formerly been employed by Ansett Airlines. At the moment only his wife is working on a part time basis some 20 hours a week. She has income of $370 per week and they receive rent of $60 per week. This is a total of $434. Their expenses are $879 leaving a shortfall of $444 per week. 23 Mr O'Kane and his wife live at Townsville and have a home valued at $235,000. They also have a rented property worth $110,000, two vehicles worth $18,000 and about $15,000 in cash. There is superannuation of some $80,000. This totals $458,741. Their debts amount to $106,443. It is likely that the entitlement of Mr O'Kane under the will, after allowance for costs and the plaintiff's present legacy, will be $46,063. If there had not been these proceedings, he would have received about $122,361. 24 There is no information as to the relationship between the deceased and his brother nor any information to suggest that he contributed to his estate. He was not cross examined and I do not know if he will be able to obtain further employment. Given his age this may be unlikely. Appropriate Provision 25 It is necessary to consider how the plaintiff says she has been left without adequate and proper provision for her maintenance, education and advancement in life. The plaintiff put forward a number of matters which concern her house. She had a quote to fix up the bathroom and laundry area at the back of the house. The quotation for this work amounts to $47,193. At present she has to go outside to get to the bathroom. There is no doubt that about 18 months ago the plaintiff did some work such as retiling the bathroom and putting a concrete floor in the laundry. This work helped in part to save the premises from further deterioration. Having heard the plaintiff and seen what the place was like before those repairs I think that probably her request is quite reasonable. Clearly she wishes to remain in the house. It is about 120 years old and the back is falling into disrepair. She has lived there all her married life and for the time she was with the deceased. There is thus no reason why she should move out. She also wishes to install air conditioning at a cost of some $2,000 to $3,000 and she needs to pay a little over $1,000 for the repair of a fence. 26 In addition the plaintiff puts forward her income shortfall of $67 per week. If one uses the 3 percent tables and a life expectancy of 13 years, the amount capitalised to make good this shortfall, is $35,542. Obviously to meet the actual precise amount needed by the plaintiff the sum would be a bit less than this figure. 27 The plaintiff acknowledges that at some stage in the future she may have to go into a nursing home or other accommodation. One would have thought that her present house would give her an adequate capital background to enable such a transition to occur. Apart from this the plaintiff points to the fact that she only has $38,000 to cover contingencies apart from the sum of $50,000 which she is entitled to receive under the will of the deceased. In all she asks for a legacy out of the estate of $300,000. Discussion of the principles 28 Widow's claims are frequently the subject of applications in this Court. The Court of Appeal in Goloski v Goloski (unreported 5 October 1993) has referred to formulations of this standard to be expected in respect of a widow in terms which refer to the decision of Powell J in Luciano v Rosenblum (1985) 2 NSWLR 65 and Elliott v Elliott, which was approved by the Court of Appeal on 24 April 1986. There his Honour said:- "Where the marriage of a deceased and his widow has been long and harmonious, where the widow has loyally supported her husband and assisted him to build up and maintain his estate, the duty which a deceased owes to his widow can be no less than to the extent to which his assets permit him to achieve that result; first to ensure that his widow be secure in her home for the rest of her life and that if either the need arises or the whim strikes her she have the capacity to change her home; secondly that she have available to her an income sufficient to enable her to live in a reasonable degree of comfort and free from any financial worry; and, third, that she have available to her a fund to which she might have resort in order to provide herself with such modest luxuries as she might choose and which would provide her with a hedge against any unforeseen contingency or disaster that life might bring". Recently in Marshall v Carruthers [2002] NSWCA 47 the Court of Appeal has qualified these remarks so far as they apply to the situation of a de facto widow. In that case Hodgson J said:- "The Master found that Ms Carruthers had a strong claim and I agree with that finding. However, the strength of a claim of a surviving partner does, in my opinion, vary with circumstances. Although the Family Provision Act does, in some respects, equate de facto spouses with de jure spouses, this does not, in my opinion, make the existence or otherwise of a marriage irrelevant. In my opinion, a formal and binding commitment to mutual support through good times and bad, other factors being equal, adds strength to a legitimate claim. In my opinion also, the strength of a claim can be affected by the length of a relationship and contributions to the relationship. One factor which may be particularly important in a claim by a woman is that a woman may have, to the detriment of her own financial prospects, taken a major role in raising the children of herself and the deceased. The Master referred to the following statement of principle which appears in Luciano v Rosenblum 2 NSWLR 65 at 69 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. I do not think it is to be assumed that this statement is to apply in all cases, particularly where factors such as those I have mentioned are absent. In my opinion, it is not clear that this statement would apply to applications by widowers. The difference in attitude that the Court may take to applications by widowers is due in part, I think, to economic disadvantages which women still face. One important aspect of this is the economic disadvantage occasioned by the greater responsibility which women often take in looking after children. That factor is of course absent here." 29 Clearly there is some differentiation between de jure and de facto widows given the comments of His Honour. It has always been necessary to look at the various factors surrounding the relationship in order to make a decision as to what is the appropriate provision. The length of the relationship is always important and here, of course, we have a period of a relationship of some 19 years. The nature and quality of the relationship is also important and I addressed these matters when discussing the nature of the relationship earlier in these reasons. All these factors have to be taken into account. 30 One other matter which needs to be discussed is the circumstances surrounding the making of the will. The plaintiff maintained that she had no idea that the deceased was about to commit suicide and I am quite prepared to accept that evidence. In hindsight the deceased's actions clearly pointed to a decision probably to end his life. In the days before they made new wills the deceased effectively offered the plaintiff the whole of his estate and let her choose what she wanted. When the discussions got to talking about figures the deceased offered her $100,000. She replied, "No, $50,000 would be sufficient otherwise it would interfere with the pension". The plaintiff said that the reason that she did this was that she did not want the deceased to be worrying about her. She was trying to get him to stop being concerned so much with what was going to happen. She had seen the deceased lose a substantial amount of weight and become extremely anxious in the weeks beforehand. There was no suggestion that there was any agreement that she would take this sum and not dispute the will. Accordingly, I think that whatever did happen on that occasion is not relevant to the task which I have to now address. That task is to determine what is the proper provision to be made having regard to the circumstances at the time of this hearing. In my view an appropriate order is that the plaintiff's legacy be increased to the sum $125,000. Notional Estate and burden of the provision 31 Because of the distribution of the estate it is necessary to consider whether properties should be designated as notional estate. The relevant properties are, of course, the two houses and also the deposit that has been transferred to the residuary beneficiary. Before deciding whether to designate that property as notional estate the court has to consider a number of matters under s 27 of the Act which is as follows:- "(1) On an application in relation to a deceased person, the Court shall not make an order designating property as notional estate of the deceased person unless it has considered:

(a) the importance of not interfering with reasonable expectations in relation to property;

(b) the substantial justice and merits involved in making or refusing to make the order; and

(c) any other matter which it considers relevant in the circumstances.

(2) In determining what property should be designated as notional estate of a deceased person, the Court shall have regard to:

(a) the value and nature of property the subject of any relevant prescribed transaction or distribution from the estate of the deceased person;

(b) where, in relation to any such prescribed transaction, consideration was given, the value and nature of the consideration;

(c) any changes over the time which has elapsed since any such prescribed transaction was entered into, any such distribution was made or any such consideration was given in the value of property of the same nature as the property the subject of the prescribed transaction, the distribution or the consideration, as the case may be;

(d) whether property of the same nature as the property the subject of any such prescribed transaction, any such distribution or any such consideration could, during the time which has elapsed since the prescribed transaction was entered into, the distribution was made or the consideration was given, as the case may be, have been applied so as to produce income; and

(e) any other matter which it considers relevant in the circumstances." 32 So far as the importance of not interfering with the reasonable expectations is concerned, it is perfectly plain that the Executor knew of the intention of the plaintiff to bring these proceedings before the properties were transferred. At least in respect of him there can thus be no relevant expectation. So far as the other beneficiaries are concerned, no evidence has been led to suggest that there was some expectation upon which they relied. 33 So far as the substantial justice and merits involved in making or refusing to make the order this is one which has to be considered along with the question of where the burden of the order should fall. I have previously set out the financial situation of the beneficiaries and it seems to me that the situation of the defendant's brother is extremely precarious. He has debts which are quite substantial when one has regard to the extent of his assets and without some relief in respect of these he will be in dire straits. He will no doubt have to sell some property particularly if he does not obtain employment. In the circumstances I really do not see that he should bear the burden of any increased provision for the plaintiff. 34 So far as Mr and Mrs English are concerned they have a situation which is not anywhere near like that of Mr and Mrs Blatch and accordingly I would have thought that the extent to which they should bear the burden should be somewhat less than it is borne by the property which goes to Mr and Mrs Blatch. 35 The plaintiff suggested that the Blatch's land should be designated first and thereafter the English's property. I think this is probably not appropriate and it seems to me that both should bear some burden from their bequests. There are no other matters that I think need to be considered under s 27. Orders 36 Accordingly, the orders that I make are as follows:- 1. I order that in lieu of the provision of a legacy of $50,000 that the plaintiff receive a legacy of $125,000. 2. Interest on the legacy is to run at the rate provided for under the Wills Probate & Administration Act from a time from three months after the date of this decision. 3. I designate as notional estate the properties 231 Menangle Street, Picton and 9 Abelia Street, Tahmoor. 4. I order that the costs of the plaintiff on a party and party basis and the defendant on an indemnity basis be paid or retained out of the notional estate of the deceased. 5. I direct that the burden of $75,000 of the legacy in paragraph 1 hereof and the costs payable under order 4 shall be borne as to two thirds thereof out of 231 Menangle Street, Picton and as to one third out of 9 Abelia Street, Tahmoor. 6. I reserve liberty to apply. ******

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