Milillo v Konnecke; Borazio v Konnecke

CASES CITED : Singer v Berghouse (1994) 181 CLR 201

4734/07: Rosaria Milillo (P) Angela Konnecke (D1) PARTIES : Vittoria Borazio (D2) 3428/08: Gina Silvana Borazio (P) Angela Konnecke (D1) Vittoria Borazio (D2)

4734/07: J Merkel (P) COUNSEL : D M Flaherty (D) 3428/08: J Pentelow (P) D M Flaherty (D)

4734/07: Angelo John Margiotta (P) SOLICITORS : John R De Mattia & Co (D) 3428/08: Bell Lawyers (P) John R De Mattia & Co (D)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4734/07 - MILILLO v KONNECKE 3428/08 - BORAZIO v KONNECKE JUDGMENT 1 HIS HONOUR: I am hearing together two claims each made under the Family Provision Act 1982 in respect of the estate of the late Luigi Borazio who died on 14 February 2007. 2 Probate of Mr Borazio's last will, which he made and published on 17 October 2004 was granted to the defendants on 10 August 2007. 3 The will is fairly simple. The testator left his home to his widow for life or until remarriage, she paying all outgoings, she was given the chattels in that house outright: the balance of the estate was given to his four daughters equally. Whether the widow was technically devised a defeasible life estate or had merely a right of residence is immaterial in this present case. 4 The testator had been married three times. The first marriage was to Marlene de Vere who is the mother of each of his four daughters. These daughters are all still living, namely Angela Konnecke, the first defendant now aged 47, Vittoria Borazio, the second defendant, now aged 45, Luisa Sweeney now aged 43 and Gina Borazio now aged 42. 5 For ease of reference and not intending any disrespect, I will refer to the members of the families by their first names. 6 There are two applications made under the Family Provision Act 1982. The first, filed on 27 September 2007 was by Rosa, the testator's widow. The second, was by his youngest daughter, Gina filed on 25 June 2008. 7 The testator and Marlene separated in 1980 and divorced in 1981. The testator then married Carmel McKenzie in 1985. They were divorced in 1988. The testator then started living in with Rosa: they married on 30 June 2002. 8 Rosa is now aged 58. She was born in Binetto Italy. She had been previously married and has children by her previous marriage, daughters Laura, now aged 35, Carmela, 36 and a son, Gino, 41. 9 The estate was presented for probate purposes as consisting of $478,000. This was made up as follows:

Former matrimonial home at Blacktown $400,000 Interest in family trust 64,000 Cash in safe (being proceeds of sale of IAG shares) 10,000 Utility vehicle 1,000 Chattels in house 3,000 10 In addition, there was joint property which passed to the widow by survivorship of $20,283. 11 The executors have partially distributed the estate by paying the cash to the widow and also giving her the chattels in the house. Vittoria was given the utility. 12 There thus remains the house and the interest in the trust. The trust holds the family holiday home at Callala Beach. 13 Rosa currently lives in the house which has four bedrooms and a granny flat at the back of the home. The granny flat is currently let and Rosa receives $130 per week rent for it. 14 Rosa is in ill health. She had a mastectomy in 1993 and was diagnosed with secondary bone cancer in 2002. The prognosis is that her life expectancy is rated as a 25% chance of surviving a further two years. 15 Rosa is currently on a pension. This is particularly important to her because of the secondary benefits, particularly the concessional medical care that is available to her as a pensioner. 16 Rosa says that the current house is unsuitable. Apart from the house being too big, she particularly complains about the stairs at the entrance which she finds difficulty in mounting. 17 Originally Rosa suggested that she would like to buy a house in Kings Langley and all her affidavit said was "I have been in formed that the cost of suitable accommodation would be in the vicinity of $400,000". She also wanted a "fund of money to meet any unexpected costs that may arise in the future." 18 Rosa's final statement of assets (she has no liabilities) disclosed that she had $250,000 in liquid assets in a bank or in her superannuation plus a car worth $35,000 and shares worth $8,534. That is a total of $293,534. 19 Rosa's income is the pension of $264.28 plus the $130 rent from the granny flat. The latter sum is mainly used to pay the expenses related to the house. 20 Gina is currently unemployed. She has not had gainful employment since August 2005. Her problems are mainly, though not exclusively, psychological, in particular, she has a an obsessive compulsive disorder and suffers from depression. 21 The obsessive compulsive disorder prevents Gina from having a good night's sleep. She has an irrational fear of being contaminated by her environment. She thinks that she is likely to catch some terrible disease by associating with people. She has a particular thorough method of showering, but just thinking about the amount of effort needed to shower makes her hyperventilate and feel that she is going to faint. 22 Gina says that she cannot use another person's bathroom without ensuring that it is thoroughly disinfected. 23 Because of this condition, Gina says she lives a hermit like existence: she feels safer in her own home. 24 What medical evidence there is suggests that Gina's condition is unlikely to improve. 25 Gina has no dependants. She owns her own house at St Clair worth $370,000 subject to a mortgage for $188,276. Apart from the house and its contents, she has a motor vehicle worth $5,000 and about $5,000 in the bank. She has debts, other than the mortgage, of $20,000 mostly to relatives. She receives a weekly disability support pension of $279.34. Her net asset position is $312,438. 26 Gina says she has weekly expenses of $376 in addition to what she has to pay off her mortgage. 27 Gina realises that she will need to sell her house in order to pay off her debts and reduce her outgoings. She has in mind purchasing a small villa or town house. 28 Based on prices in mid 2008, Gina has calculated that she could sell her house for about $370,000 which would leave her with a net $165,000. (I have taken the middle point of her range of estimates). 29 Gina says that an ensuite bathroom is essential because of her condition. She also says that, because her sister Angela who lives at Erskine Park is her carer, she needs to live close to Erskine Park. She has made enquiries in the Erskine Park/St Clair area and has found that prices for houses/ town houses range between $264,000 and $350,000, but none she has seen has ensuite facilities. 30 Gina thus says that she has a need of about $180,000 in order to downsize her accommodation. 31 The executors presented evidence that houses could be rented in the Blacktown area for $350 per week. 32 Rosa's proceedings were originally listed for hearing on 2 July 2008 as an expedited matter. However, as noted above, Gina only filed her application on 25 June 2008. However, Gina acknowledged in an affidavit that she knew on 20 December 2007 that Rosa had made her application. 33 Gina filed a motion to delay the hearing of Rosa's application and to have her own heard together with it. The order that the proceedings be heard together was made by Palmer J on 25 June 2008. 34 On 2 July 2008, both matters came into the running list for hearing. Associate Justice McLaughlin noted that Gina's application was not in sufficient state of readiness to proceed. He ordered that Gina pay the costs of each party on that day as well as the costs thrown away by reason of the matters not proceeding on that day on a party and party basis. 35 Gina has suggested before me that that cost order should be vacated or else it be taken into account when considering the quantum of her award. 36 The usual evidence of costs was provided by the solicitors for Rosa and the executors. Rosa's solicitor estimated $27,639, the executors' solicitor $51,000 plus a further $4,500 for the costs of obtaining probate. 37 The matters were then listed before me as expedited matters and came on for hearing before me on 25 August 2008. Ms Jane Merkel of counsel appeared for Rosa, Ms Janet Pentelow appeared for Gina and Mr Dennis Flaherty appeared for the executors. 38 The hearing proceeded on that day with commendable celerity. A number of affidavits were read and Rosa, Gina, Angela and Vittoria were cross-examined. Both written and oral addresses were then considered. 39 At about 3pm on that day, the hearing concluded. I then remarked that I would consider my decision. However, I said that my then present thinking was that one of three possible orders could be made and that it may be that the parties might profit by discussion, scenarios 1 and 2 which might lead to a possible settlement. 40 The three possibilities were as follows: 1. On condition that Rosa vacates the estate's house by 31 October, 2008, empower the executors to mortgage that property for $150,000. From this sum, order Rosa receive a legacy of $100,000 plus costs of $28,000. Order that Gina may live in the granny flat at a rent of $X for 5 years. No other order as to costs. 2. Order that the executors sell the house. Each of the testator's daughters to have the first right to purchase the house on the basis that there is a deposit of $128,000 and the balance not to be paid until demanded by the executors. Rosa to receive a legacy of $100,000 plus $28,000 costs. Gina's application to be dismissed save that she was to be given the right to reside in the granny flat at $X per week. No order for Gina's costs, save that the order of 2 July to be expunged. The proceeds of sale, less Rosa's benefaction and costs would be used first to pay the executors' costs and then to be split amongst the four daughters equally.

3. Both sets of proceedings be dismissed. 41 I then said that I would be willing to receive further written submissions by 15 September. 42 However, the principal reason for the delay was to see if the parties could sort out some scheme similar to propositions 1 or 2 which might meet the parties' requirements. 43 This was a vain hope. Underlying the proceedings is a serious gap in relations between the children of the testator's first marriage and his third wife. 44 The only result of the delay was that Rosa filed a notice of motion, returnable this morning seeking to put a small amount of further evidence before the court. Essentially this was to the effect that she had discovered a residence which, if she had a legacy of $100,000 she could purchase together with her own funds and to plead for the court not make an order that would only give her income as the effect on her pension entitlements would be too severe. 45 There was no consent to the order sought in this motion. Mr Flaherty truly said that the material could and should have been presented at the trial. However, I allowed the extra evidence as clearly no prejudice was caused by it, reserving the question of costs. 46 I should remark here that the court does expect plaintiffs in proceedings under the Family Provision Act to put on all material necessary for the judge to assess the situation in affidavits available at the hearing. This includes full and complete details of the plaintiff's assets and liabilities, what he or she says are his or her needs and, if those needs include substitute housing, details of searches for that accommodation and the price range. Estate agent's listings are acceptable, but there must be some concrete details. Likewise if there are possible complications with pensions, those should be put to the court and revealed to the other parties by affidavit before the hearing. If this is not done and the court finds that it was necessary, the court may in future, discount the order for costs by up to 25%. 47 The parties not being able to work out their future for themselves, I need to make a decision according to principle. 48 As with many cases under this Act involving tensions between the children of the first marriage and a subsequent spouse, there was considerable evidence as to whether each party's opponent really was a caring person towards the testator. 49 I do not consider that it is necessary to consider these allegations in any depth. I am sure that both sides feel keenly about what they have said. However, the bottom line is that a person has a duty to provide for a widow or widower and with a small estate and the basic need of the widow being accommodation, conduct short of gross conduct disentitling (and there is none of that alleged) is of little significance. 50 However, three aspects of the parties' past are significant. 51 The first is that when the testator and Marlene separated, they agreed that Marlene would not make the claims against the testator that she might be entitled to make on the basis that the Blacktown house would be devised to her four daughters. The testator kept that promise, at least, subject to his widow's right of personal residence. 52 The second is that the testator and Rosa made a pact that each would keep their own property separate. The testator's had the better house, so the parties lived in that house. Rosa sold her house and was able to give most of the proceeds to help her children by her earlier marriage. 53 On 17 October 2004, the same day as he made his last will, the testator signed the following document which I assume was addressed to Angela and Vittoria: "TO MY EXECUTORS AND DAUGHTERS

I have not left any provision in my will for Rosaria Milillo who I married in 2002, of any asset, but have left her a life estate in our home at … . This is because Rosaria sold her house prior to us marrying and she kept the proceeds from the sale for herself together with her other assets.

In addition to the life estate in (address of house), it is my wish that you will allow Rosaria Milillo to stay at our holiday house at … Calalla beach when she wants to.

It is also my wish that our home at … Blacktown always remain in our family and if it must be sold that either one of you buy the others out so that our home always remains in our family." 54 The Calalla Beach home is an asset of the family trust which was purchased solely with the testator's funds. This is the evidence of his daughters which I accept and is more reliable than Rosa's speculations. 55 There is further evidence of the pact respecting property in a will that Rosa had made on 17 March, 2004. The final paragraph of this latter will reads: "IN MAKING THE PROVISIONS OF THIS MY WILL I have given full consideration to the claims on me of my Husband Luigi BORAZIO, however, I have made no provision for him because we have retained separate assets during our lifetime and I have no expectation of receiving any benefit under the Will made by him." 56 Vittoria gave evidence, which I accept that, in 1992, the testator said to her: "Rosa and I are going to live together. Since both of us own our homes and acquired them before we met, we had a discussion about which home we would live in. My home is larger and more comfortable and has easier access to the Blacktown shops so we chose to live in my home. We agreed to keep whatever assets we owned separate. Rosa agreed to this before moving in with me. We did this because when your mother and I settled our divorce, concessions were made by your mother to leave assets with me that would one day benefit you and your sisters, Rosa has agreed to this. If she did not agree I would not live with her." 57 Rosa says that she did make such an agreement, but she now realizes that she cannot live in a reasonable lifestyle without reliance on some of the testator's assets. 58 Rosa said in her affidavit of 6 June 2008: "In answer to observations by all three deponents that the deceased insisted that his home should be bequeathed to his children I acknowledge that I did not contest those statements during his lifetime. I felt that there would be no point in arguing about his wish." 59 Thirdly, both plaintiffs have, in the past decade made large capital gifts. 60 Rosa has made large gifts to her children. She sold her house to her son it would seem for $340,000 though she says $250,000 and gave a substantial part of the price to her daughters. Most of the proceeds were spent as "gifts". The evidence suggests that she was only able to do this because of her agreement that she would live in the testator's house and that they would keep their assets separate. 61 Gina paid out $196,000 to a confidence man she met over the internet. The "relationship" with this man lasted between August 2006 and February 2008. Gina considers that this amount is irrecoverable as it would cost about $50,000 in legal costs to pursue it, which she does not have. 62 Angela, Vittoria and Luisa have all given evidence. None of them put forward any special needs. 63 The applications are very difficult to resolve. I will commence with Rosa's application as ordinarily a man should consider his widow's needs before anything else. 64 One always commences with reference to the decision of the High Court in Singer v Berghouse (1994) 181 CLR 201 at 209-210 that resolution of these applications involves a two stage process, first, a consideration of whether the provision made for the applicant was inadequate for her proper maintenance etc, the second, if the first is answered affirmatively, what provision should have been so made by the testator. 65 If there were anything that could be called "an ordinary case" one would say, with authority, that in this 21st century, in an ordinary case, it is insufficient for a man to leave his widow with a life estate only in the matrimonial home. At the very least he must make provision for the executors to sell the home and, as the widow ages, provide suitable substitute accommodation. 66 However, the present is far from the ordinary case. The case against the testator considering that a capital order for the widow would not be proper provision is strong. 67 First, the widow only has a short life expectancy. Any capital gift would in the absence of some undertaking by the widow or the involvement of some mortgage arrangement most probably work to the benefit Rosa's children. 68 This would be a problem even in the ordinary case. However, in the present case, the testator would have realised that to so provide would be to act contrary to the agreement he made with Marlene (an agreement for value to the testator) and also contrary to the prenuptial agreement with Rosa which she has already implemented to the benefit of herself and her children. 69 If one were just being generous with another's money, it would have been nice to give the widow $100,000 so that she could buy another unit. However, I have no power to so act on that basis. 70 I endeavoured to put up two possible orders which would have provided Rosa with $100,000, give Gina somewhere of her own to live and keep the house in the family as the testator wished. 71 Obviously the daughters consider that keeping the house is not feasible. Gina does not wish to buy it and I infer the same is also the case with her sisters. 72 Further, without full investigation, I should not infer that a mortgage arrangement is viable. Assuming that a mortgage would be available, there is the question as to whether there would be sufficient funds to pay it out. 73 My rough calculation when making the suggestion was that $150,000 at 10% would mean $15,000 a year interest and 52 weeks at a rent of $350 a week would produce $17,500 a year, so that the scheme was possible. 74 The house would be sold at the appropriate time to repay the capital. 75 However, the fact that no party has explored the matter would make me dubious about it. 76 It is also significant, that despite my hints throughout the proceedings that a sticking point was the probable increased benefit that would flow to Rosa's children to the detriment of the testator's children, no proposal was ever put up by Rosa's counsel that Rosa would make a covenant or will to see that that did not occur. 77 I bear in the forefront of my mind that there was never any release of rights under s 31 of the Family Provision Act and that I must judge the question as to whether Rosa was left with adequate provision as at today's date and that what may have been in the prenuptial agreement and what monies Rosa has given away are not as important as her present state of financial affairs. 78 However, those matters have a fair amount of significance, as does the fact that her own children who have benefited so much from her over the past decade have not given evidence to say that they are unable or unwilling to assist their mother with at least a loan of $100,000 for a few years. 79 Although this is very much a borderline case, I consider that in the light of all I have said, I am unable to conclude that in all the circumstances the testator did not make adequate provision for Rosa. 80 This view, however, is predicated on the assumption that the will's provision for Rosa can be implemented. 81 I have a concern that the executors' costs are said to be $55,000 and that they might consider themselves justified in selling the house to discharge that debt. If they were to attempt to do that, then the provision in the will would be inadequate. 82 Accordingly, my view is that if I have an undertaking to the court by the executors or other secure promise that they will not seek to sell the house without Rosa's consent while Rosa is still alive then I should dismiss Rosa's application. However, in the circumstances, I would not make any order for costs against her. 83 If the executors are unwilling to satisfy me about not selling the house, then I would consider that Rosa has surmounted the first stage of the two stage test in Singer v Berghouse. 84 I would then need to consider what is the proper provision that the testator should have made for Rosa. 85 In my view, the provision should be for Rosa's proper accommodation. 86 This can be secured if Rosa were to have $100,000 towards buying the home that is referred to in her most recent affidavit. 87 This can be done by a legacy of $100,000. The downside here is that that sum would pass out of the estate forever and probably, eventually benefit Rosa's children. 88 I have considered whether it would be more appropriate to direct the estate to loan Rosa $100,00 interest free not to be repaid until her death. However, as the executors can see off Rosa by not demanding that the house be sold to pay their costs at a price of raising $55,000, I have decided against such a course. 89 Because the executors will need to consider whether or not they are willing to make the secured promise, I will not make a formal order today, but stand the matter over for short minutes to be brought in. I suggest 21 October 2008 at 9.30am, but , if some other day is more convenient to counsel, a substitute date can be arranged. 90 I should make it clear that, as far as I am concerned, there is no reason why the parties cannot agree between now and 21 October that the proper order is that Rosa vacate the house and be given an interest free loan as noted earlier. 91 I now turn to Gina's application. 92 May I first of all say that I am intrigued by the inter family reaction. Angela receives some money from the Commonwealth as Gina's carer and Gina clearly appreciates what Angela does for her. Vittoria has lent Gina substantial monies, unsecured with no great chance of immediate repayment. One would thus think that relationships were good. The three sisters have no apparent needs for money though extra money is always welcome. Yet the three sisters oppose Gina's application. 93 It may be that this is because Gina is seeking about half the residue. 94 On the basis that Rosa's claim stands dismissed, the state of play is that no cash will be available in the estate until Rosa dies or vacates the house. 95 I consider that Rosa's claim, as the claim of a widow is stronger than Gina's claim. 96 Thus, on this basis there is no ready cash available for Gina at this time. However, assuming current property prices hold, in say, three years' time, there will be $320,000 to distribute. That is $400,000 less $80,000 costs of probate, these proceedings and costs of sale. 97 Gina's share will be $80,000. 98 The first stage of Singer v Berghouse requires me to ask whether this is adequate provision for Gina? 99 This is complicated by the fact that, because of the prior right of the widow, there are no monies available for three years. 100 If Rosa, by the secondary order proposed or by settlement, vacates the house for $100,000 then the estate would seem to be (on the assumption that the property market does not collapse) worth about $220,000. That is $400,000 less $100,000 less $80,000 costs of probate, these proceedings and costs of sale. 101 One quarter share of $220,000 is $55,000. 102 Again, the first stage of Singer v Berghouse requires me to ask whether this is adequate provision for Gina? 103 This is an awkward question. Gina lost $196,000 by falling for the blandishments of a confidence man. Had she not done so, she would have had enough to have the $180,000 to buy a villa home. 104 I do not know of any precedent as to how one takes into consideration the fact that a plaintiff has lost a large sum of money through fraud, even if her own gullibility was a principal factor. 105 My view is that one does not treat the loss in the same way as a claimant under the Act who deliberately denudes her assets so as to seek more from the testator. 106 Another problem is that the evidence that Gina needs $180,000 is a little sparse. She has given details of a large number of properties of which she has become aware from estate agents' advertisements, but has not seen any which have an ensuite. Furthermore, the prices of the various houses Gina has listed vary in price by up to $100,000. 107 It would be easier for me if I could merely adjourn Gina's application until after the death of the widow so that we could then possibly have a more accurate idea of what monies were available and also have some more definite figures on the cost of substitute accommodation for Gina. 108 However I do not have that material. 109 I consider that the answer to the first stage question for Gina is that the testator did not make adequate provision for her. 110 I must then go to the second stage. 111 There are problems here because the testator's estate is not large enough to cater for everyone. I do not consider that the case of Gina is so strong that she should receive the bulk of what is left over after the widow's portion. 112 Doing the best I can, I believe that the proper order as a matter of principle is that the residue be split into five shares, Gina receive two shares and each of her sisters one share. 113 On my calculations, if there is $320,000 to be divided, Gina would receive $128,000 and each of her sisters $64,000. If there was $220,000, Gina would receive $88,000 and each of her sisters $44,000. 114 The factor I have not taken into account is the effect of the order for costs that McLaughlin AsJ made against Gina. I do not have sufficient material to set aside his Honour's order. The appropriate way to do this would be by way of appeal. 115 No material has been placed before me as to how much money is involved. Without facts, there is no way that I can do anything save take into account that Gina's resources will be less because of what she might have to pay under that order. 116 Gina is entitled to some costs. However, I have not received an estimate, so that I will have to wait until the short minute stage before considering whether her costs should be capped. Probably those costs should be set off against the order made by McLaughlin As J. 117 Accordingly I merely publish these reasons and stand both sets of proceedings over to 21 October 2008 before me at 9.30am for the consideration of short minutes.

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