O'Loughlin v Low

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1210/01 - O'LOUGHLIN v LOW JUDGMENT 1 HIS HONOUR: This is an application under s 7 of the Family Provision Act 1982 made by the widow of the late Edward Leonard O'Loughlin. 2 The plaintiff is the third wife of the deceased, who died on 30 October 1999, aged 72. The testator made his last will on 23 January 1999. This will gave his house at Castlecrag and its contents to the plaintiff, and the residue to his ten children by his first marriage. 3 The Castlecrag home was actually held by the testator and the plaintiff as joint tenants, although the testator had paid the whole of the purchase price. There is evidence as to the value of the Castlecrag home on both sides, but, this morning, counsel informed me that they were agreed that the value was between $1.525 million and $1.75 million. I will assume its value for present purposes is somewhere in the middle, at $1.625 million. 4 In addition to the jointly held property, the executors hold $6.072 million in cash or commercial bills. The estate has a liability for tax and legal costs which total over $1 million, so that for the purposes of the current exercise, I have taken the net cash value of the estate as $4.979 million. 5 The proper way of looking at the estate for the purpose of this application requires me to consider the amounts which the plaintiff benefited from the deceased's estate over the three years before his death, just to take a convenient cut-off point. 6 That means that for certain purposes I notionally increase the value of the estate to $6.814 million, by adding in the value of the Castlecrag property plus $150 000, which is a median figure of what was given in cash, and a motor car purchased at $85 000, which I will discount to $60 000 as a present value. 7 So, with respect to an estate worth $6.814 million, the plaintiff has received nothing under the will, but about $1.835 million in benefits over the three years just before the testator's death. 8 The balance of the estate passes to the ten children. The will contained a provision that one child was to receive a little less because she had received a benefit, but the children have agreed between them that they would take the residue equally. 9 There are substantial costs which need to be considered, $130,000 on behalf of the plaintiff and $195,000 on behalf of the defendants. 10 This is the third day of the hearing. Forty eight affidavits were read, and most of the deponents of those affidavits were cross-examined. The case was set down for a fourth day, but, this morning, I was informed that counsel had agreed that the plaintiff limited her claim to a claim for income, capitalised at no more than $1 million inclusive of the costs of these proceedings, but not including the costs of any appeal, and on that basis the second defendant says that there would be no competing claims put before the Court. 11 I should note that the proceedings were carried on in a rather unusual way. The plaintiff and a solicitor were the executors, the solicitor was the first defendant. He appeared on the first day represented by senior counsel, who announced that, in view of the fact that one of the children had been added by an order I made some time ago as the second defendant, that the executor thought it appropriate to permit the second defendant to have the carriage of the proceedings, and senior counsel then withdrew. 12 This meant that the contest has been between the plaintiff, represented by Mr Hallen SC, and the second defendant, one of the deceased's ten children, represented by Mr J Wilson. 13 The plaintiff was born on 5 October 1934 and is thus now 67 years of age. She was previously married to one Edward Waters; that marriage was dissolved in 1975. She has two adult children from that marriage and those children appear to have produced some grandchildren. Those adult children are self-supporting. 14 On her own evidence the plaintiff met the testator at a cocktail party on 11 November 1993. There was an instant attachment and the parties stayed together at the Grand Hyatt Hotel in Jakarta in Indonesia from about 6 January 1994. They stayed together at various holiday resorts from time to time until they commenced living together. 15 The plaintiff says that this occurred in February 1995. This is disputed by the people I will call "the children" who say that whilst the plaintiff may have spent two or three nights some weeks living with the testator, their permanent relationship did not become continuous until considerably later, perhaps 1996. 16 I do not think that there is much to be gained by reviewing the various pieces of evidence. Some of the children were not in a good position to observe what was happening with the relationship between the plaintiff and the testator. Some of their evidence is, doubtless, influenced by what I might call gossip within the family, and other evidence is probably affected by the fact that there was a real and genuine dislike of the plaintiff by the children. 17 On the other hand, I can also discount the plaintiff's evidence to some degree, and I think the probabilities are that in 1995 she may have been living as much in her Point Piper unit as she was with the testator, but it matters very little because in due course they were a permanent de facto couple, and they married on 10 May 1997. 18 The testator had been ill for some years, but this was not known to the plaintiff when she first met him, but she did know of his precarious health before the actual marriage took place. However, she would not, in my view, have suspected at the time of the marriage that the marriage would be of such short duration as it in fact was. 19 The testator was 72 when he died. We do not have a detailed account of his life. All we know is that he practised law for many years, ending up at the bar and being appointed Queen's Counsel. It would seem his fortune was made not so much from his professional activities but from property development and investments. 20 He had been married three times. His first wife, Shirley, is the mother of his ten children. His second wife was named Deirdre and that marriage ended in divorce, and the plaintiff was the third wife. 21 It seems that apart from his ten children he had two step-children, who were notified of this application, but never became involved in it. 22 There is no doubt that the plaintiff is an eligible person within the meaning of that expression as used in the Family Provision Act. The plaintiff complains that she has been left without the provision that the testator ought, having regard to all the circumstances, have made for her. 23 I have already noted that apart from the contents of the matrimonial home, the plaintiff in fact took nothing under the will. 24 The plaintiff has given evidence as to her circumstances. Apart from the assets provided by the deceased, the plaintiff owns a property at Point Piper. Again, counsel have agreed on a range of values, and I will take $620 000 as a fair mean of those values. She also owns a rural property at Goulburn. Again, counsel have agreed on a range, and I will take the middle of the range of $315,000. 25 This latter property was provided from the divorce settlement from Mr Waters, who also provided $10,000 worth of stock and $10,000 in cash. 26 This cash and other funds of the plaintiff's own were put into the purchase of a property which was sold in 1978 and the proceeds used to buy the Point Piper property, subject to a third party's interest, together with some shares. The third party's interest was later purchased with $150,000 which was received from the deceased, so that the plaintiff now owns that property outright and unencumbered. 27 Thus, including the assets which were inherited from the deceased, the plaintiff has assets of about $3.064 million. That, of course, includes the former matrimonial home at Castlecrag. 28 It can thus be seen that the only thing that the plaintiff really lacks is cash. That, presumably, is why Mr Hallen this morning indicated that the claim was limited to an income claim. 29 Turning to the plaintiff's income, it would seem that the current gross rent from Point Piper is $21,702 per annum, and income from shares is $17,525, giving $39,227, which on my rough calculation is about $730 per week. If one reduces that by approximately one third for tax, one gets a figure of somewhere between $450 and $500 a week, and a figure of about $26,000 a year. 30 The plaintiff, while she was living with the deceased and while the deceased had his health, lived what might be called on extravagant lifestyle. They frequently took holidays, went overseas, and when they did go overseas they did not go steerage and they did not stay at one star hotels. 31 The deceased purchased valuable gifts for the plaintiff. They had expensive furnishings and crockery. They entertained a lot and they did not skimp on clothing. She estimates, in her affidavit, that her living expenses were about $96,000 a year, including $20,000 a year estimated travelling expenses. 32 Since the deceased's death, the plaintiff says that she has not been in the mood to live the lavish life that she previously lived, but that she may recover from that feeling in due course of time. She estimates, and I am rather put in an awkward position by having such an unsatisfactory method of calculating her current living expenses, her average living expenses for the year 2001 as about $40,000. 33 That $40,000 does not include any amount for travelling. It does, however, include $3,000 for clothing and $2,000 for entertaining and $10,000 for groceries. 34 Before the marriage, the plaintiff was working as a paralegal with the firm of solicitors in which the first defendant was a principal. She says that she had a secure position with that firm and she was earning $20,000 a year. 35 Mr Hallen SC in his submissions said that I must take into account that she gave up that secure position and that income to look after the deceased, and that it is now irrecoverable. 36 I am not particularly impressed with that submission, although I take the fact into account, because one would have thought that at about this time the plaintiff, in any event, would be thinking of retiring, and the benefits that she received by way of income by being employed as a notional secretary of one of the deceased's companies, returned her two and a half or three times per year what she was earning as a paralegal. 37 There was a considerable amount of evidence as to just what type of wife the plaintiff was for the testator. There appears to be little challenge that she was very affectionate to him and made him happy, and that she did attend to his needs, particularly his needs for care when he became sicker and sicker in his final years. 38 The main things said against the plaintiff were that her influence on the testator, which the children say was deliberate, was to alienate the testator from the children, and even to boast that she was spending their inheritance as fast as she could while the testator was still alive. 39 There is a subsidiary allegation that she was not a very good cook, but I will put that to one side as not being very helpful to the decision I have to make. 40 The plaintiff, on the other hand, resisted that suggestion and said that she did as much as she could to keep the testator and his children within the loop, but the relationships before she met the testator were already so bad that she found this difficult. 41 I really find it impossible myself to make a decision on this fact. Both sides say that I should accept their series of witnesses as witnesses of truth, but it was virtually impossible for me to determine who was telling the truth because each set of witnesses appeared to be people who were honestly giving their version of what they thought happened, and each set of witnesses was to a greater or lesser extent influenced by their own subjective feelings and what they had told themselves must have happened. 42 Almost inevitably, the introduction of a new wife into a family, and a fortiori, to a family that is not particularly close, will have divisive effects, and I am sure that that happened in this marriage. Whether the fault, if there be a fault, was that of the plaintiff or the children, or mixed, or the testator, or what, cannot be determined and I do not really consider is a matter that I should determine where I cannot be satisfied on the evidence. 43 It remains clear that with that factor apart, the plaintiff was a person who made the deceased happy and who cared for him. 44 Mr Hallen SC however, went a little further and said that I must focus on section 9(3) of the Act and look at the provision of services by the plaintiff to the conservation of the testator's property and his welfare, and the contribution as a homemaker. 45 So far as contribution to the conservation or improvement of his property, in my view Mr Wilson's submissions are correct that the plaintiff is exaggerating her effective contribution. She knew what was happening because of her employment in the testator's solicitor's office or her friendship with the testator, but I think it is overstating the matter to say that she was actually involved in the conservation or improvement. 46 Certainly the plaintiff appears to have put together a lot of records for the deceased's accountant, so that the problem that had been caused by the testator not filing income tax returns for many years could be disposed of, but I think that is a very minimal matter in the case. 47 I have also considered the factor of the plaintiff's contribution to the welfare of the deceased. However, it was not the sort of contribution one expects in the average case under this Act, if there ever be such a thing as an average case, of a woman who marries the deceased in his twenties or early thirties and then does those 101 things that a wife does for a husband, including bringing up the children and sharing all the ups and downs. 48 Rather, her contribution to the welfare of the testator was to keep him happy in his declining years and to attend to his medical needs. But it is a factor that I, of course, take into account. 49 There is a question as to jurisdiction. Mr Wilson, for the children, says that there is only one simple question I have to ask myself, and that is, is it reasonable that the plaintiff should resort to her capital resources to maintain herself? 50 I have been given figures which suggest that the life expectancy of an Australian female of the plaintiff's age is 18.25 years. That is a useful figure, but it is not the be all and end all of the matter, because one has got to take a lot more into account than a statistician's estimate of the average lifespan. 51 However, I have been told that it has been agreed between the accountants on both sides, and is recorded in the document Exhibit PX13, that to buy an annuity from a company conducting a superannuation fund which will cease on the death of the plaintiff, it would cost $287,000 to produce an income of $20,000, $574,000 to produce $40,000, and $861,000 to produce $60,000 a year. 52 In each case that would be the sum that would pass to the plaintiff after all income tax attributable to the income had been discharged. 53 Mr Wilson acknowledges that the plaintiff's expenses are $40,000 a year and her income at the moment is $26,000 a year. However, he puts that if Goulburn were sold and realised for $315,000 and the proceeds invested at 3 per cent, the plaintiff's income needs would be met. 54 I should consider the Goulburn property in a little detail. The property is a wool producing property. The plaintiff has submitted income tax returns which show that in the last few years the property has made an income loss of a considerable figure; for instance, in the last year it was $15,877. 55 However, when one looks at the creative way in which the income tax return has been prepared, there are reductions for accommodation and convention expenses and the like which one may have thought the Income Tax Commissioner has been generous to the plaintiff in not querying. 56 So when one looks realistically at the income it is about line ball with the true expenses. 57 There is very weak evidence that the market for rural properties in the Goulburn area is depressed at the moment, but the plaintiff says that the property gives her pleasure, it is near to where her son has a property, she has held the property as a result of her first marriage, it was a gift from her first husband's parents, for many years, and I do not consider that it would be reasonable to compel the plaintiff to sell. 58 Once one makes that decision, one can see that there is, even on the $40,000 estimate of the plaintiff's expenses, a shortfall in income. That would seem to me, in an estate of $6 million, to show that the deceased has not made proper provision for the maintenance of his wife. 59 Mr Hallen SC in his usual thorough way, referred me to a number of authorities, including my own decision in Gregory v Hudson (No 2) (18 September 1997, unreported), the reasoning of which was affirmed by the Court of Appeal in [1999] NSWCA 221. 60 He also referred me to my decision in Annason v Phillips (4 March 1988, unreported) where I dealt with the difference of approach there is when the Court is dealing with a large estate, without competing claimants, as opposed to a relatively small estate. See also Re Buckland [1966] VR 404. 61 He also relied on what Wilson J said in White v Barron (1980) 144 CLR 431 at 447. However, it seems to me, that the learned judge there was talking in respect of what might be called the average 20th century widow, rather than a lady who was of independent means before she married the deceased, and where the marriage was of a short duration in fact. 62 Mr Hallen SC said it was extremely important to take into account the lifestyle that the plaintiff was living with the testator, and that that factor was a significant one in Gregory v Hudson (No 2). 63 I agree that it is a factor that one takes into account, but again, there is a vast difference between a Cinderella type marriage where a wealthy testator takes a young girl out of poverty and lives with her for fifty years in a lavish lifestyle, as opposed to an independent woman with her own estate and her own income, who lives with an elderly sick testator for a short time. However, it is a factor that I take into account. 64 The fact that one must make these adjustments was emphasised by the Court of Appeal recently in Marshall v Carruthers [2002] NSWCA 47. This judgment actually echoes what M H McLelland J said in Aroney v Aroney (26 July, 1988 unreported): "In Luciano v Rosenblum (1985) 2 NSWLR 65 at 69, Powell J observed 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. This provides useful guidance, although it must be remembered that the three elements identified by his Honour are not necessarily mutually independent, and it may be in some circumstances that the style of living to which a widow may be said to have been accustomed during the lifetime of the parties, may be lower than the standard of living which is her proper due after the death of her husband." 65 Thus the lifestyle factor is relevant, as is clear from Re Buckland (supra) but the precise influence it will have on the result of the litigation will vary from case to case. 66 Putting it altogether, what provision should the testator have made for this lady? What, in other words, is the provision that the community would think a person in the position of the testator should have made for his widow? 67 The case comes down to one of what income provision should be made and how that income should be capitalised. If the expenses are $40,000 a year, and that is the best guide that I have, and if $574,000 would produce that income each and every year, CPI indexed, it seems to me that that is a good starting point. 68 Mr Wilson would discount that by the $26,000 per year the plaintiff is earning from her own income, but I think in an estate of this magnitude, one can give that as a buffer, and also to take account of the travel and other special expenses. 69 In addition, I think there should be a capital sum for the plaintiff for special travel to enjoy herself and to cover the contingencies in life to be expected with a lady 67 years of age. I think $125,000 is a fair sum for that. 70 Accordingly, rounding up the figures, in addition to the provision made for her by the will of the testator, I order that the plaintiff receive a legacy of $700,000.

[At this point, Mr Hallen SC tendered a Calderbank letter] 71 In view of the Calderbank letter, I order that the plaintiff receive her costs on the indemnity basis on and after 30 November 2000 and order that the defendants' costs, again on the indemnity basis, be paid out of the estate. 72 I order that the exhibits be handed out on the basis that they will be returned to the Court if an appeal is lodged. 73 The two probate suits associated with these proceedings should stand over to the Probate Judge's list on 8 April 2002.

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