O'Loughlin v O'Loughlin

CITATION : O'Loughlin v O'Loughlin [2003] NSWCA 99 HEARING DATE(S) : 14 April 2002 JUDGMENT DATE : 1 May 2003

JUDGMENT OF : Mason P at 1; Meagher JA at 2; Davies AJA at 3 DECISION : Appeal dismissed. Appellant to pay the Respondents' taxed costs on an indemnity basis

CATCHWORDS : SUCCESSION - family provision - whether provision made for widow was inadequate - what is a proper provision for widow of wealthy barrister - award should not be niggardly where widow has need and there are no competing claims of children. D LEGISLATION CITED : Family Provision Act 1982 Bosch v Perpetual Trustee Company Limited [1938] AC 463 Gregory v Hudson [1999] NSWCA 221 In re Allardice, Allardice v Allardice (1910) 29 NZLR 959 Luciano v Rosenblum [1985] 2 NSWLR 65 CASES CITED : Marshall v Carruthers (unreported court of Appeal 22 February 2002) Re Buckland, deceased [1966] VR 404 Sayer v Sayer [1999] NSWCA 340 Singer v Berghouse (1994) 181 CLR 201 Worladge v Doddridge (1957) 97 CLR 1 Christopher Justin O'Louglin (Appellant) PARTIES : Patricia Dawn O'Loughlin (First Respondent) Frank Low (Second Respondent) FILE NUMBER(S) : CA 40244 of 2002 COUNSEL : Mr B Coles, QC with him Mr J Wilson (Appellant) Mr P Hallen SC (First Respondent) Teece Hodgson & Ward (Appellant) SOLICITORS : Boyd Legal (First Respondent) Frank Low Yeung & Co (Second Respondent)

LOWER COURT Supreme Court JURISDICTION : LOWER COURT 1210 of 2001 FILE NUMBER(S) : LOWER COURT Young CJ in Eq JUDICIAL OFFICER :

• 1 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 40244/02

Thursday 1 May 2003 CHRISTOPHER JUSTIN O'LOUGHLIN V PATRICIA DAWN O'LOUGHLIN & ANOR Judgment 1 MASON P: I agree with Davies AJA. 2 MEAGHER JA: I agree with Davies AJA. 3 DAVIES AJA: This is an appeal from an order made by Young CJ in Eq in a Family Provision application brought by the respondent, the widow of the late Edward Leonard O'Loughlin. This appeal is brought on behalf of the ten children of the deceased who are the residuary beneficiaries of his estate. 4 Relevant provisions of the Family Provision Act 1982 provide 7. Provision out of estate or notional estate of deceased person

Subject to section 9, … if the Court is satisfied that the person is an eligible person, it may order that such provision be made out of the estate or notional estate, or both, of the deceased person as, in the opinion of the Court, ought, having regard to the circumstances at the time the order is made, to be made for the maintenance, education or advancement in life of the eligible person. 9. Provisions affecting Court's powers under secs 7 and 8 … (2) The Court shall not make an order under section 7 or 8 in favour of an eligible person out of the estate or notional estate of a deceased person unless it is satisfied that: (a) the provision (if any) made in favour of the eligible person by the deceased person either during the person's lifetime or out of the person's estate, … is, at the time the Court is determining whether or not to make such an order, inadequate for the proper maintenance, education and advancement in life of the eligible person. (3) In determining what provision (if any) ought to be made in favour of an eligible person out of the estate or notional estate of a deceased person, the Court may take into consideration: (a) any contribution made by the eligible person, whether of a financial nature or not and whether by way of providing services of any kind or in any other manner, being a contribution directly or indirectly to: (i) the acquisition, conservation or improvement of property of the deceased person, or (ii) the welfare of the deceased person, including a contribution as a homemaker, (b) the character and conduct of the eligible person before and after the death of the deceased person, (c) circumstances existing before and after the death of the deceased person, and (d) any other matter which it considers relevant in the circumstances. 5 In Sayer v Sayer [1999] NSWCA 340 Sheller JA described the operation of these provisions as follows: 5 At the heart of the Court's statutory authority to make any order under the 1982 Act for provision out of the estate of a deceased person is the question whether at the time of determination the provision made by the deceased person in favour of the eligible person is "inadequate for the proper maintenance, education and advancement in life of the eligible person". The words "inadequate" provision ("without adequate provision" in the Testators Family Maintenance & Guardianship of Infants Act 1916 (the 1916 Act)) and "proper maintenance, education and advancement in life" ("or advancement in life" in the 1916 Act) were authoritatively discussed and explained in the judgment of Lord Romer speaking for the Privy Council in Bosch v Perpetual Trustee Company Limited [1938] AC 463. …

6 Section 3 (1) of the 1916 Act required satisfaction of the condition that the spouse or children of a testator or any of them were left without adequate provision for their proper maintenance, education and advancement in life before it proceeded to invest the Court with authority, "at its discretion", to order that "such provision for such maintenance.... as the Court thinks fit shall be made out of the estate." The 1982 Act is arranged in a different order. Section 7 enables the Court "[s]ubject to section 9" and upon satisfaction that the applicant is an eligible person to order "such provision be made out of the estate ….. of the deceased person as, in the opinion of the Court, ought, having regard to the circumstances at the time the order is made, to be made for the maintenance, education and advancement in life of the eligible person." 7 However, s9 (2) conditions the Court's authority to make any order upon the satisfaction that the defined existing provision is "inadequate for the proper maintenance, education and advancement in life of the eligible person." Lord Romer's judgment and its emphasis on the expression "proper maintenance" still governs the approach the Court should take; see Singer v Berghouse (1994) 181 CLR 201 at 209. 6 In Singer v Berghouse (1994) 181 CLR 201 at 209-210 Mason CJ, Deane and McHugh JJ explained the provisions as follows: 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 Ltd [1938] AC 463 at 476. The determination of the first stage in the two-stage process calls for an assessment of whether the provision (if any) made was inadequate for 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 (1951) 82 CLR 645, 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. 7 Their Honours reference to Bosch v Perpetual Trustee Company Limited [1938] AC 463 is important. In that case at 476-8, Lord Romer, delivering the judgment of their Lordships, Lord Wright, Lord Romer, Sir Sidney Rowlatt and Sir George Rankin, said: The first thing to be noticed is that the powers given to the Court only arise when any of the persons mentioned is left without adequate provision for his or her proper maintenance, which word will be used in this judgment where necessary as including education and advancement. The use of the word "proper" in this connection is of considerable importance. It connotes something different from the word "adequate". A small sum may be sufficient for the "adequate" maintenance of a child, for instance, but, having regard to the child's station in life and the fortune of his father, it may be wholly insufficient for his "proper" maintenance. So, too, a sum may be quite insufficient for the "adequate" maintenance of a child and yet may be sufficient for his maintenance on a scale that is "proper" in all the circumstances. A father with a large family and a small fortune can often only afford to leave each of his children a sum insufficient for his "adequate" maintenance. Nevertheless, such sum cannot be described as not providing for his "proper" maintenance, taking into consideration "all the circumstances of the case" as the sub-section requires shall be done. In the next place, it is to be observed that, when the condition precedent to the exercise of the powers given by the sub-section is shown to be fulfilled, those powers extend to making such provision as the Court thinks fit for "such" maintenance, that is to say, for proper maintenance. The task thus imposed upon the Court is obviously one of great difficulty. … Of the cases cited their Lordships desire particularly to refer to In re Allardice, Allardice v Allardice (1910) 29 NZLR 959, a decision of the Court of Appeal of New Zealand that ultimately came before this Board. In that case Stout C.J. stated the principles to be followed by the Court in administering s. 33, sub-s 1, of the Family Protection Act, 1908. They could, he said, be summarized as follows (AT 969): (1.) That the Act is something more than a statute to extend the provisions in the Destitute Persons Act; (2.) that the Act is not a statute to empower the Court to make a new will for a testator; (3.) that the Act allows the Court to alter a testator's disposition of his property only so far as it is necessary to provide for the proper maintenance and support of wife, husband or children where adequate provision has not been made for this purpose; (4.) that in the case of a widow the Court will make more ample provision than in the case of children, if the children are physically and mentally able to maintain and support themselves. Later on he said (AT 970): " The whole circumstances have to be considered. Even in many cases where the Court comes to a decision that the will is most unjust from a moral point of view, that is not enough to make the Court alter the testator's disposition of his property. The first inquiry in every case must be what is the need of maintenance and support; and the second, what property has the testator left." 8 On the function of an appellate court, in reviewing a decision under the Act, Mason CJ, Deane and McHugh JJ said in Singer v Berghouse at 212: However, in the context of family provision cases, the principles governing the review of a decision on the jurisdictional question are not settled. In Goodman v Windeyer (1980) 144 CLR 490 at 501, Gibbs J did not decide whether an appeal from a decision on the jurisdictional question should be governed by the principles that regulate appeals from decisions made in the exercise of a discretion. Similarly, in Kearns v Ellis (unreported, NSW Court of Appeal, 5 December 1984, at pp88-9), Mahoney JA raised the issue but did not express a concluded view.

Kirby P, by contrast, has held that the principles that govern appellate review of discretionary decisions should apply. In our view, this is the correct approach. In this respect we should express our agreement with the following comments of his Honour in Golosky v Golosky (unreported NSW Court of Appeal, 5 October 1993, at pp 13-14): "Unless appellate courts show restraint in disturbing the evaluative determinations of primary decision-makers they will inevitably invite appeals to a different evaluation which, objectively speaking, may be no better than the first. Second opinions in such cases would be bought at the cost of diminishing the finality of litigation in a troublesome area and, sometimes at least, with a burden of costs upon the estate which should not be encouraged." 9 In the present case the only claim against the estate was made by the respondent, no claim being made by the deceased's children, who are adult and the residuary beneficiaries of his estate. 10 The respondent, who was 67 at the time of trial, is the deceased's third wife. They married in May 1997 after having a relationship which commenced in about 1993 and which had become a settled relationship by 1995. They had been formally married for two years and five months at the time of the deceased's death in October 1999. 11 The deceased had been a wealthy barrister, having made most of his money from property development and investments. The trial judge estimated the net cash value of the estate at $4.979 million. The deceased's will left the deceased's interest in the matrimonial home at Castlecrag together with its contents to the respondent. However, as the home was in the name of the deceased and the respondent as joint tenants, the home passed into her name on his death in any event. Apart from the home and contents, no other provision for the respondent was made by the will. The remainder of the deceased's estate passed to his residuary beneficiaries, the children of his first wife. 12 In the years prior to the deceased's death, the respondent had received benefits from the deceased in addition to the interest in the home, including approximately $150,000 in cash and a motor car valued at $85,000. 13 The trial judge considered that the respondent had assets of about $3.064 million, which included the house at Castlecrag, the motor vehicle, a unit at Point Piper valued at $620,000, which the respondent held for investment purposes, a rural property at Goulburn, having a value of about $315,000, shares worth about $386,000 and some personal effects and cash. 14 The trial judge estimated that, taking into account the annual rent from the Point Piper unit, dividends from shares and a substantial annual loss on the running of the Goulburn property, the respondent had a net income of about $26,000 a year. Although the trial judge did not say so, the evidence was that, during the deceased's lifetime, the respondent had been paid an annual salary of $36,000, increasing to over $40,000, from Emu Plains Industrial Estates Pty Limited, one of the deceased's companies, for secretarial and administrative duties. The respondent used that income and her income from her personal assets for her own expenditure. Apart from being generous in the way of gifts, the deceased paid all the costs of running the household. The deceased fully maintained the home. He also paid all the expenses associated with the travels which he and the respondent undertook. 15 The trial judge found that the respondent and the deceased lived what might be called an extravagant lifestyle. They frequently took holidays, went overseas, and did so in a luxurious manner. The trial judge found that they had expensive furnishings and crockery. They entertained a lot and did not skimp on clothing. He referred to the fact that the respondent estimated in her first affidavit that her living expenses were about $96,000 a year, including $20,000 estimated travelling expenses. 16 By the time of the trial, the respondent's average living expenses had reduced. In part this was because her income had fallen. She had lost the income she had received from Emu Plains Industrial Estates Pty Limited. In part it was because she had not been in the mood to live the lavish lifestyle that she had previously lived, although she felt that her interest in it might recover in due course of time. 17 Written submissions on behalf of the appellant put the case that, in the light of the benefits totalling $1.85 million, which was comprised of the matrimonial home, the car and gifts including cash, given to the respondent, it could not be concluded that the deceased did not provide adequately for the respondent. 18 The submissions attacked the dicta of Powell J in Luciano v Rosenblum [1985] 2 NSWLR 65, at 69-70, where his Honour said: 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 . 19 The submissions referred to the remarks of Young CJ in Eq in Marshall v Carruthers (unreported, Court of Appeal, 22 February 2002), where His Honour said: Powell J's broad general rule may not be a good guide as to what the Court will consider as the duty of a testator towards a spouse except in the case of a financially dependent spouse where there is a history of bringing up children with the deceased or in supporting the deceased while he was amassing his fortune. The broad general rule may well be inapplicable in cases of other spouses. 20 It is undoubtedly true to say that there is no such thing as a "standard widow" and that every case must be determined on its own particular circumstances. However, it has long been recognized that, arising out of the marriage relationship, a testator has a duty to provide support for his widow after his death if she has need of it and if his estate has funds so to provide. Courts give more attention to the needs of a widow than they do to the needs of the children, if the children are adult and well able to support themselves. This point was made clear by the remarks of Lord Romer in Bosch v Perpetual Trustee Company Limited which I have cited above. There are many dicta to the same effect. In Worladge v Doddridge (1957) 97 CLR 1, Williams and Fullagar JJ said at 11: It is clear that the claim of a widow, where the estate is of considerable value, and there are no competing claims of children, should not be disposed of in any niggardly manner. She is entitled to such a provision for her maintenance and support as the court or judge thinks proper and "proper" is a word which, as the Privy Council pointed out in Bosch's Case lets in all the considerations there adverted to. 21 In Gregory v Hudson [1999] NSWCA 221, Handley JA, with whom Cole AJA agreed, cited with approval the remarks of Powell J in Luciano v Rosenblum which I have mentioned. In Sayer v Sayer, Sheller JA referred to the fourth principle as stated by Stout CJ in In re Allardice, Allardice v Allardice which was referred to by Lord Romer in Bosch v Perpetual Trustee Company Limited. At paragraph 9, Sheller JA also referred to the remarks of Powell J in Luciano v Rosenblum and expressed the view that, in the case before him, the widow's claim was "paramount". These are examples of cases where judges have referred to a need on the part of a widow for maintenance and support and a moral obligation on the part of the testator to provide it. 22 Of course, in every case, the particular circumstances of the case must be taken into account. In Re Buckland, deceased [1966] VR 404, Adam J said at 411: But putting aside such criticisms, it remains clear from the judgment in Bosch's Case that in the context of this legislation "proper maintenance" denotes maintenance to be measured, not by some standard of maintenance considered appropriate to the circumstances of the dependant (although this may well be an important element in arriving at what is "proper"), but by what in all the circumstances of the particular case was proper for the testator to have provided as maintenance for his dependant. As Kitto, J, said in Worladge v Doddridge (1957) 97 CLR 1, at p. 18; [1957] ALR 691: "What is proper is to be tested by reference to the provision which is all the circumstances of the case satisfies, but does not exceed, the requirements of moral justice in regard to those particular purposes"--"those particular purposes" being provision for maintenance and support to which he had just referred. 23 In the present case, it was clear that the respondent had insufficient income to support herself even at the standard of living which she had adopted by the time of the trial. Her annual outgoings were estimated as at that time at $40,000, whereas her net income was only $26,000. That raised the question whether the respondent should be expected to live off her capital. The trial judge rejected that view. I see no error in his value judgment. 24 The major part of the respondent's assets consisted of the home at Castlecrag that had been provided by the deceased. It had been provided with the intention that she should live in it. It had become the respondent's home and she had a sentimental attachment to it. It was furnished as she desired. The garden was something of which she was proud and in which she had taken part in the planting and maintenance. That being the case, it was incumbent upon the deceased to provide a means by which the respondent could continue living in the Castlecrag home in a lifestyle that was suited to the widow of a wealthy barrister. The deceased's estate was adequate to enable that provision to be made. There was no moral duty upon the respondent to use her own assets, of which only the Point Piper unit and the shares were readily available for conversion into cash, for the purpose of paying all those expenses which, during his lifetime, the deceased used to pay. 25 I see no error of principle in the finding of the trial judge that the deceased failed to make adequate provision for the proper maintenance of his widow. 26 Turning to the question of a proper provision, the trial judge said: 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. 27 This is not a case where there was a judicial failure to give reasons. However, his Honour's remarks were not as happily expressed as he would have wished them to be had he realised that there might be an appeal from the restrained provision of $700,000 which he awarded. In paragraph 68, his Honour spoke of a buffer and also of travel and other special expenses. In paragraph 69, his Honour allowed a further sum to cover special travel and contingencies in life. 28 His Honour had in mind that the figure of $40,000, which was estimated by the respondent as her expenses for the past twelve months, did not represent her likely level of wants in the future. One has only to look at the modest sum claimed for medical expenses and to compare the expenditure in the last twelve months with the estimated annual expenses set out in the respondent's first affidavit to realise that there was a likelihood that future expenses well in excess of $40,000 per annum would be incurred. 29 I consider that his Honour recognized that the respondent would have additional expenditure and thought that her own income of $26,000 per annum should be used to satisfy that expenditure. His Honour's assessment of $574,000, which would produce an annuity of $40,000, thus gave to the respondent an income very similar to that which, during the deceased's lifetime, she had received from her own income and from the salary she had received from Emu Plains Industrial Estates Pty Limited. 30 His Honour then allowed $125,000 for special travel and contingencies in life requiring a total outlay from the estate of $700,000, an outlay which would, counsel agreed, provide an annuity, if an annuity was purchased, of approximately $50,000. 31 This assessment seems to be well within the range of the discretion open to his Honour. The amount provided will enable the respondent to live a comfortable lifestyle appropriate to her situation, albeit not as lavish as the lifestyle she lived during the deceased's lifetime. The award will leave more than $4 million in the estate for distribution amongst the deceased's children from the first marriage. His Honour's assessment appears to be fair and just. His Honour took into account all relevant circumstances, some of which I have not thought it necessary to recite in these reasons. 32 I would dismiss the appeal with costs. As the respondent was awarded indemnity costs below, I would order that her costs of the appeal also be taxed on an indemnity basis. ********** I certify that this and the preceding 11 pages are a true copy of the reason for judgment herein of the Honourable Acting Justice Davies and of the Court ………………………………. Date: Associate

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