Poletti v Jones

Judgment

1. BASTEN JA: When parents separate it is not unknown for children of the marriage, including adult children, to take sides in their parents' dispute. In the present case, John Ubaldo Poletti (Mr Poletti Snr), separated from his wife Teresa in 1988-89. The two daughters of the marriage, Doriana Jones and Patrizia Becker (and the eldest son, Claudio Poletti) had no contact with their father after the settlement of family law proceedings in August 1991. Mr Poletti Snr had ongoing contact with his two sons Mauro and Marco Poletti, and relied in his final years, both in a personal and a business sense, on the elder son, Mauro.
2. On 15 June 2010 Mr Poletti Snr made his last will, pursuant to which 85% of his estate was left to Mauro and 15% to Marco. The daughters (and Claudio) were deliberately excluded, because they had intervened in the family law proceedings in support of their mother and had had no contact with their father thereafter. They were, in his view, financially able to support themselves. Mr Poletti Snr (the testator) died on 15 May 2012.

The proceedings

1. On 17 July 2012 probate was granted to Mauro, the executor named in the will. Two months later, Ms Jones and Ms Becker (the plaintiffs below and respondents on the appeal) brought proceedings in the Equity Division seeking orders for provision from the estate, pursuant to s 59 of the Succession Act 2006 (NSW).
2. On 4 June 2014 the trial judge, Slattery J, ordered that provision should be made in favour of each daughter in an amount of $450,000, together with forgiveness of minor debts owed by each to the estate. [1] Mauro Poletti (the appellant) brought an appeal from those orders, seeking to have the orders for provision set aside and the proceedings brought by the respondents dismissed.
3. Mr Marco Poletti was not joined in the proceedings below (of which he had formal notice), nor was he named as a party in the notice of appeal. The orders of the trial judge provided that the amounts payable to each of the respondents should be provided "out of the estate of the deceased", with costs also to be paid to each party "out of the estate". (The respondents received their costs to be taxed on the ordinary basis, the appellant's costs were to be assessed on the indemnity basis.)
4. Shortly prior to the hearing of the appeal, Mr Marco Poletti filed a motion seeking to be joined as a party to the appeal. An order was made permitting him to be joined and to provide written submissions after the hearing, limited to the question of apportionment of the amounts payable to the respondents, in the event that the appeal was unsuccessful. Leave was reserved to the appellant to object to the application for joinder, in the event that the appeal was dismissed. (If the appeal were upheld and the orders for provision set aside, no question of apportionment would arise.)
5. At the hearing of the appeal the Court joined Marco Poletti and gave him leave to file written submissions relating to the manner in which any order for provision would be met from the estate, on the assumption that the appellant was not entirely successful. The appellant was given leave to raise such objection to the joinder of Marco Poletti as he deemed appropriate. The appellant was also invited to file an affidavit setting out the most up-to-date available statement of the assets of the estate and the expenses incurred.
6. On 5 February 2015 Mr Marco Poletti swore an affidavit explaining why he had not become a party to the proceedings before the trial judge and had not taken any steps with respect to joinder on the appeal until less than two weeks before it was due to be heard. None of that material matters, given the limited nature of the joinder permitted by the Court.
7. Despite those limits, counsel appearing for Mr Marco Poletti filed written submissions which exceeded the limit permitted by the rules with respect to the principal submissions of a party to an appeal. The submissions were repetitive and dealt with issues going well beyond the grant of leave. Submissions were also filed on behalf of the appellant. Apart from taking the point the Mr Marco Poletti had every opportunity to attend and participate in the hearing below, no objection was taken to him making submissions in accordance with the limited grant of leave. Nor did the appellant take issue with the proposition that, in making orders for provision from the estate, the trial judge failed to identify "the manner in which the provision is to be provided and the part or parts of the estate out of which it is to be provided," as required by s 65(1)(c) of the Succession Act. He agreed that such an order should in any event be made.
8. The appellant did not, however, agree with the form of the order proposed by Mr Marco Poletti, namely that his (Marco's) 15% share of the residual estate should be calculated and paid before payment to the respondents and before reduction of the estate for the costs of the proceedings. The appellant pointed out that, in substance, Marco Poletti was seeking to obtain a variation of the payments due under the will without having sought an order for provision.
9. After the hearing, the respondents filed an affidavit sworn by their solicitor, Ms Suttor, accepting in part only the up-dated details of the estate provided by the appellant as executor. Unnecessarily, the appellant objected to the respondents' affidavit which, helpfully, had indicated agreement with the figures for the money held on deposit by the estate and the gross value of the estate, being a little over $3.2 million. Both the affidavits of Mauro Poletti and Peter Baltins, solicitor, each dated 25 February 2015, relating to the value of the estate and costs should be accepted as read, as should Ms Suttor's affidavit of 6 March 2015, in response.

Issues on appeal

1. To justify an order for provision in relation to an estate, the court must be affirmatively satisfied that "adequate provision for the proper maintenance, education or advancement in life [of the applicant] has not been made by the will of the deceased person". [2] In such circumstances, the court is empowered to order such provision out of the estate as the court "thinks ought to be made" for the identified purposes. [3]
2. The Succession Act identifies numerous matters to which the court "may have regard" in determining whether to make a family provision order and "the nature" of any such order. [4] The matters to be considered are not exclusive and the court may consider any matter which it considers "relevant", including matters which arose after the death of the deceased. As explained in Andrew v Andrew [5] the Act gives little indication as to how the various matters are to be taken into account.
3. The relevant issues in the present case were succinctly identified by the trial judge by reference to the submissions of the defendant, the current appellant, in the following passage: "[22] The defendant disputes their claim. He argues that no provision should be made for his sisters out of the estate as: sufficient provision was made for them during their lifetime; they exhibit no pressing financial need; and their estrangement from their father in the final 21 years of his life should disqualify them from making any claim. [23] Mauro also argues he is the effective source of the assets in the deceased's estate. He contends that it was only as a result of his personal intervention that his father maintained financial solvency during the 1990s. Mauro submits the deceased felt morally obliged to repay him for that extensive financial support, as was reflected in his appointment as Executor and the gift to him of 85 per cent of the estate."
4. These issues engaged both particular disputes as to primary facts and with respect to the evaluative judgments to be made by the trial judge, for example with respect to the needs of the daughters and the effect of their "estrangement" from their father. The disputes as to primary facts related primarily to Mauro Poletti's role and the extent to which he had, as a matter of charity, provided for the testator in his final years. Thus, there was a dispute as to the value of his father's contribution to Mauro's business and also as to the extent to which Mauro benefited personally from his father's contribution to the business.

Legal Principles

1. The power of the Court to make a family provision order is found in s 59 of the Succession Act which, so far as relevant, reads: 59 When family provision order may be made (1) The Court may, on application [by an eligible person], make a family provision order in relation to the estate of a deceased person, if the Court is satisfied that: (a) the person in whose favour the order is to be made is an eligible person, and … (c) at the time when the Court is considering the application, adequate provision for the proper maintenance, education or advancement in life of the person in whose favour the order is to be made has not been made by the will of the deceased person …. (2) The Court may make such order for provision out of the estate of the deceased person as the Court thinks ought to be made for the maintenance, education or advancement in life of the eligible person, having regard to the facts known to the Court at the time the order is made.
2. Section 60 identifies three issues to be determined by the court and provides categories of factors or "matters" which may be considered. The issues are: (i) whether the applicant is an eligible person; (ii) whether a family provision order should be made, and (iii) the nature of any such order. There is no doubt that the applicants (the present respondents) were children of the deceased and therefore eligible persons. The evaluative exercise therefore focused upon the matters dealt with in s 60(1)(b), namely "whether to make a family provision order and the nature of any such order."
3. Under earlier forms of this legislation, the test set out in s 59(1)(c) was described as a "jurisdictional" question, meaning that satisfaction of the court in that regard was a precondition to the making of any order. There were (and remain) circumstances in which it may be appropriate to deal with that question before considering any other issue which might arise if an order were to be made.
4. In Andrew v Andrew, I suggested that the changes in the structure of the legislative provisions resulting from the enactment of ss 59 and 60 of the Succession Act meant that a two stage process was no longer required. [6] That was not to say that there might not be circumstances in which such an approach was the preferable way to proceed. My only point was that the legislation no longer dictated such an approach in circumstances where a rigid demarcation of issues along those lines would be artificial, a point made by Callinan and Heydon JJ in Vigolo v Bostin, [7] a case under different legislation: "We do not therefore think that the questions which the Court has to answer in assessing a claim under the Act necessarily always divide neatly into two. Adequacy of the provision that has been made is not to be decided in a vacuum, or by looking simply to the question whether the applicant has enough upon which to survive or live comfortably. Adequacy or otherwise will depend upon all of the relevant circumstances …. The age, capacities, means, and competing claims, of all of the potential beneficiaries must be taken into account and weighed with all of the other relevant factors."
5. The trial judge in Vigolo (McLure J) had resolved the case at the "first stage", rejecting the application. The application had been brought by one of five siblings excluded from the father's will, which divided the estate between the other four offspring. The trial judge found that the applicant had assets valued at more than $2 million. That fact suggested he had adequate provision for his advancement in life absent any provision from his father's will. Nevertheless, the question could not be determined without regard to the net value of the estate ($1.9 million) and the respective circumstances of the four siblings amongst whom the estate was divided under the will (the net assets of all four amounted to less than $1 million).
6. In the present case the appellant submitted that a failure to address separately the precondition in s 59(1)(c) was apt to distort the application of the power conferred on the court, because it would lead too readily to a conclusion that some provision should be made. In other words, the court should ask first whether the testator acted appropriately in excluding the respondents from any share in his estate, before asking what kind of provision might have been appropriate.
7. Accepting that there will be cases in which that approach should be adopted, this is not such a case. The bare comparison of net worth of each individual in the present case reveals the opposite of the same exercise in Vigolo, with one qualification. Thus, in the present case, the beneficiary was an able-bodied son with few family responsibilities and actively involved in what appeared to be a successful business who gave no details of any need. Of the daughters, the judge found that Ms Jones had net assets of $180,000 and a household income which, at the time of trial, did not significantly exceed the household income expenditure. If one took into account the full value of jointly owned assets, her net assets were $360,000 and if one were to add to that figure, per partner's solely owned assets, the amount would be doubled (largely because of his superannuation entitlements). Ms Becker had net assets of some $500,000, but an annual expenditure close to her annual income. (Her husband had died in 1999.)
8. The qualification in undertaking this exercise results from Mauro Poletti not having provided details to the Court of his financial circumstances. One may infer that he had no need for provision from the estate and, on the comparative basis, he was significantly better off than his sisters. [8] Subject to questions of quantification of any order, this case turned upon two competing considerations. One involved the relationship between the deceased and his daughters, which was appropriately characterised, in neutral terms, as one of estrangement since 1991. That circumstance, according to the appellant, disentitled them from any favourable exercise of the Court's power. In the other scale, but to the same effect, the appellant pointed to very substantial financial and other support given by him to his father during his father's later years. The appellant set out to put a figure on the financial aspect of that support, namely $3 million. It may therefore be seen that this was not a case in which the precondition to the making of an order would, on any view, be determinative of the outcome.
9. There is no doubt that the relationship between an applicant and the deceased person will be an important consideration. [9] It is also beyond doubt that the nature and extent of any moral obligations or responsibilities owed by the testator to any applicant or beneficiary of his estate, will also be important considerations. [10] Further, any contribution, financial or other, by an applicant or beneficiary to the conservation and improvement of the estate and to the welfare of the deceased must also be taken into account, to the extent that adequate consideration was not received by the contributor during the testator's lifetime. [11]
10. So far as the relationships of the parties are concerned, the Act specifically provides for consideration of "the character and conduct of the applicant" and "the conduct of any other person". [12] Although the latter reference does not in terms include the conduct and character of the deceased, that must be a relevant factor in assessing the relationship of the deceased and any other person.
11. In addressing the issues, it is convenient to consider the following matters: (a) the relationship between the applicants and the deceased; (b) the financial contributions of the appellant to his father's estate and wellbeing, and (c) the benefits obtained by the appellant from his contributions to the father's affairs. These last two considerations will be addressed together, before turning to the evaluative judgment to be assessed by the trial judge.

Factual considerations: relationship of applicants and deceased

1. The respondents were born one year apart and were in their early 50s when their father died. The fact that there was no contact for 21 years before he died was not in dispute: rather, the parties sought to attribute blame for that situation. Counsel for the appellant cross-examined Ms Becker to establish that she was bitter with the settlement of 1991 and said to her father at the signing of the document, "you will never see your grandchildren again". [13] She denied saying that but when asked whether at that time or at some time before the signing of the document she had decided that she was not going to continue to have a relationship with her father she replied: "No, I didn't actually think of it that way. Glenn [her husband] was still working for the [family] company. I didn't know at that stage that I wasn't going to be seeing Dad ever again."
2. The trial judge accepted that evidence, finding that neither daughter "anticipated that it would be their final interaction with" their father. He formed the view that the parties "temporarily retreated from the emotional turmoil of the previous three years" and that what began as a temporary situation "slowly crystallised into a more permanent form over the years as estrangement and became the default position, from which neither the plaintiffs nor the deceased departed." [14]
3. The appellant challenged that finding, stating that the trial judge erred in failing to accept the contrary proposition put to Ms Becker in the passage referred to above.
4. Ms Becker conceded several times in the course of her cross-examination that she felt anger towards her father at the time of the family law settlement, but she did not concede that she made any firm decision that he should have no contact with her or her children in the future. It was also clear that she treated her brother Mauro as being an adversary at that time and as influencing her father. She maintained contact over the years with her other brothers, Marco and Claudio. [15]
5. Ms Becker had a clearer view of her relationship with her parents than her sister. She said that, although her parents had "quite a tumultuous relationship" [16] until the Family Court proceedings, she had "a good working relationship" with her father. [17] Ms Becker held a firm view as to the role of Mauro, whom she considered responsible for the drawn out nature of the Family Court proceedings. [18] However she and her husband maintained social relations with Mauro after the settlement of the family law litigation until her husband was sacked from the family business in February 1992. [19]
6. The critical findings of the trial judge with respect to the relationship between the respondents and their father were as follows: [20] "The plaintiffs were estranged from the deceased. But that estrangement continued partly because of the conduct of the deceased himself and that of the defendant, Mauro. The Court's findings show that neither plaintiffs thought that the estrangement would be permanent at the time of the Family Court settlement but that the deceased, assisted by Mauro, launched legal proceedings which were calculated to and had the effect of alienating the plaintiffs further. Combined with the sacking of Patrizia's husband Glenn, Mauro's growing control over Ubaldo's life and his own hostility to the plaintiffs, I accept that any attempts of reconciliation would reasonably … have been perceived by the plaintiffs as likely to be fruitless. They are not absolved of responsibility for the estrangement and they clearly regret it, but they are certainly not the author of the estrangement and the Court will assess them on this basis. The estrangement …does not prevent these plaintiffs from obtaining an order under the Act. But the estrangement exists and must be taken into account. I have reduced what I would otherwise have given these two plaintiffs by reason of the estrangement."
7. The appellant complained that the trial judge made no finding that "the plaintiffs made no attempt in the relevant period to contact or communicate with the deceased". [21] That was so, but it was an undisputed fact: the premise of the judge's reasoning was that there was no such contact.
8. The appellant further complained about the finding that the plaintiffs could reasonably have perceived that any attempt at reconciliation on their part would have been fruitless. He sought a finding that, on the contrary, any attempt at reconciliation "may have been fruitful".
9. At the end of Mr Mauro Poletti's cross-examination, the following exchange took place between the witness and the trial judge: [22] "Q. Mr Poletti, I may have missed it in your affidavit, but I am just interested did you and your father ever have any discussions about whether he wanted to see his daughters? A. In his declining years he would make reference to the fact that he wished he'd been able to see his daughters. That's all. Q. He said that to you? A. Yes, me and Marco, yes. Q. Did you communicate that to your sisters? A. No, I do not speak to my sisters at all. Q. But you had information that your father had given to you that he regretted not seeing his daughters? A. He didn't say he regretted it. Q. What did he say? A. He said he would have liked to have seen his grand children. Q. Did you communicate that information to anyone? A. No, it was me and Marco present. Marco as a constant contact with the other side of the family so to speak."
10. Marco Poletti was not a party to the proceedings. His brother Mauro, in his role as executor, filed an affidavit sworn by Marco on 28 March 2014. The purpose of the affidavit was to put before the Court brief details of his financial circumstances "as a competing claimant on the estate." He was employed by Mauro's company as an administrator. He was not required to give oral evidence at the trial.
11. Further criticisms of the trial judge's reasoning set out in the grounds of appeal included the absence of a finding (and taking into account) that (i) the respondents made "no effort to encourage or advise their children (the deceased's grandchildren) to have contact" with him; (ii) the breach of "filial obligation" in failing to make contact when the deceased was in poor health and he was suffering dementia, and (iii) their non-attendance at his funeral "was motivated by an attitude that they did not wish to have anything to do with the deceased." [23] There was evidence supportive of these matters, as the judge recognized.
12. How much weight was to be given to such evidence was unclear, Mr Mauro Poletti had a view as to his own entitlement, which accorded with the terms of his father's will. He gave evidence on a number of occasions that his father had said to him, in and after 2002, that whatever was the father's was going to be Mauro's. [24] With respect to his sisters' claim, Mauro agreed that, in his view, they should "get nothing" out of his father's estate saying, "they punished him for 21 years. Why should they get anything?" [25]
13. The challenge to the failure of the trial judge to make precise findings with respect to the causes of the estrangement did not sit well in the appellant's case. The following exchange took place in the course of submissions between Dr Birch (counsel for Mauro Poletti) and the trial judge: [26] "BIRCH: … We say your Honour doesn't have to necessarily resolve the question as to whose fault it was that an estrangement existed for 21 years. … HIS HONOUR: You're pushing an open door on that, Dr Birch. I think one can accept the estrangement as a background fact or platform from which you've then go to work. … BIRCH: Yes. And in a case like this, short of trying to retry an old family law case and investigate long periods of family history, it would be an impractical exercise."
14. A second difficulty facing the appellant was that, although no one could know precisely what was in the testator's mind, the trial judge heard the evidence of both daughters and was able to draw inferences as to their attitudes and conduct. There was no sound basis for rejecting his findings in that regard. Ultimately, the respondents succeeded on the exact point which the appellant said should be the focus of their claims, namely their proven needs.

Factual challenge: contribution of Mauro Poletti

1. The positive competing claim made by Mauro on his father's estate requires a brief account of the father's business in building construction, more details of which are set out in the judgment below. Mr Poletti Snr ran his business through a group of companies with a holding company, Murralin Holdings Pty Ltd. Several members of the family, including the eldest son Claudio, worked in the business. Mauro Poletti described himself as becoming "my father's right hand man" in about 1987. [27] The group ran into financial trouble in about 1989, when a developer for which the Poletti companies were undertaking construction work was unable to pay its debts. The Poletti companies sought to raise money from the State Bank of New South Wales to purchase the property under development. The funds were forthcoming, but the Bank required personal guarantees from Mr Poletti Snr, Claudio and Mauro and a mortgage over the family home at Murralin Lane, Sylvania, of which Mr Poletti Snr was the registered owner. By 1997 the business had collapsed and the companies placed in the hands of receivers.
2. In 1997, Mauro Poletti incorporated two companies, one of which became Poletti Corporation Pty Ltd. [28] When the old Poletti companies were wound up, Mauro Poletti's new companies took over between 120 and 130 employees from the primary employer amongst the old companies. [29]
3. Mauro Poletti arranged for his companies to pay an amount of $500,000 to release the Sylvania property from the mortgage to the State Bank. [30] One of his companies also paid $80,000 to discharge a mortgage over a Potts Point apartment, which ultimately formed part of the deceased's estate, and $50,000 in final discharge of Mr Poletti Snr's obligations under the Family Court settlement. Those three payments, totalling $630,000, in effect preserved the two main assets in the deceased's estate, being the two properties.
4. Mauro Poletti also claimed to have made contributions of approximately $3.8 million to his father or to meet his father's obligations, over a 15 year period from 1998 to 2012. [31] Of these expenses, the largest, totalling a little over $1.5 million was described as "consultancy fees", ostensibly payable to Mr Poletti Snr for his continued work with the construction companies. The second largest item, a little over $1.1 million, involved payments to an entity known as "Sylvan Thoroughbred Stud Syndicate" ("STSS") through which his father trained horses. It appears that a further amount of $111,000 (noted as "horse expenses") might be added, giving a total of approximately $1.25 million on this account. A third major sum, of approximately $200,000, was provided for private care expenses incurred by the deceased and paid by Mauro's construction company. The payments comprising this last amount were incurred in the last three years of his life (2010-2012) and were described by the trial judge as "essentially charitable in nature". [32]
5. The slide in the business affairs of Mr Poletti Snr's companies preceded the Family Court proceedings, which in turn put further financial pressure on Mr Poletti Snr. Referring to the family law proceedings, Mr Mauro Poletti said in evidence, defending his intervention in the family law proceedings: [33] "What was happening was … a deterioration of the group of companies. What was also happening was taking out of the process of running the companies its principal person, being my father, having to attend the court and do all these duties in defending the case. I wrote a letter … saying I thought this is just wasting the company away. And if they are going to waste it away, they are wasting away the contribution that I've made to building up the company since becoming a director in 1984. I did not want that to occur, so I intervened to protect my contribution to the companies at that stage."
6. In 1993, a little under two years after the family law property settlement, the deceased underwent heart surgery, following which his involvement in the business declined. [34] An administrator was appointed to the family companies in February 1997, following which Mauro set up two new companies to re-establish the family business. From January 2001, Mauro's business operated through one company, Poletti Corporation. The vast bulk of the payments made to the deceased between 1997 and 2012 came from the new companies.
7. The trial judge made a careful assessment of the nature of these payments according to the categories into which they fell and the time period within which they were made. In the course of that assessment, the trial judge made two findings which were the subject of challenge on the appeal. The first was that in setting up the new business in 1997, Mauro Poletti used the unsold goodwill from his father's business. The judge noted Mauro's denial, but found that "there must have been some degree of external recognition by the market place that Ubaldo Poletti's construction pedigree was one of the underlying assets of Mauro's new ventures." [35] Accepting that significant consultancy fees were paid by Poletti Corporation to Mr Poletti Snr for consultancy work between 1998 and 2006, the judge also found that Mr Poletti Snr made a valuable contribution to the ongoing business.
8. The effect of those two findings was that a portion of the payments made from the companies associated with Mauro were not charitable donations, but reflected the value of Mr Poletti Snr to the ongoing business. The judge concluded: [36] "The better view of all of this evidence is that Mauro was neither his father's patron nor a source of charity for Ubaldo after March 1997 and until about 2006. But rather Ubaldo was someone who was very useful to the continuation of Mauro's businesses. I do not accept Mauro's contention that the value of Mauro's [sic Ubaldo's?] estate was obliterated in 1997. Although in his mid 60s Ubaldo, who was plainly a driven man, still had something to contribute. Mauro saw that value in his father and Mauro used Ubaldo's services to advance Mauro's wealth, whilst caring for his father's interests as well."
9. With respect to the finding as to use of the goodwill (quantified at $1.7 million in the accounts of the old companies), the appellant disputed that he had used "unsold goodwill of the failed businesses of the Poletti Group", asserting "the fact" that he had used in his new ventures "his knowledge, reputation and family name which he was entitled to exploit without any payment to others". [37]
10. This was a criticism without substance. The point of the judge's analysis was not that Mauro Poletti had obtained valuable goodwill without payment (which was a matter for the creditors of the old companies), but that his new businesses owed their success in part to, as he put it, the "family name", and thus indirectly to the achievements of his father. The criticism of Mauro Poletti implicit in the judge's findings was directed to his failure to acknowledge that whatever moral duty he had to support his father was in part attributable to the fact that he had learned his business at his father's right hand and owed something of his success to his father's name and reputation. As the trial judge said: [38] "Mauro admired his father and valued his expertise. I do not accept that Mauro did not find very useful Ubaldo's expertise, which had built up a business for well over 30 years from the early 1960s to the early 1990s."
11. Apart from the question of the goodwill of the business the alternative view, which was at least implicit in the appellant's complaint, was that his father provided no services to Mauro's companies or, if he did, they were worth less than the amount claimed. If that were the case, it was likely that the consultancy fees were claimed as a tax deduction. Thus by making charitable payments through Mauro's companies the companies (and hence his wealth) would have obtained a benefit but, on that view, one obtained on a false basis.
12. A second basis of the challenge was that his (Mauro's) "primary motive … in making all of the relevant payments was to provide assistance to his father rather than to obtain a benefit for himself". [39] The trial judge accepted that the payments made during the last six years of the testator's life "could more readily be characterised as unqualified acts of charity" and totalled about $624,000. [40] However, that fell well short of the amount Mauro claimed.
13. The final approach adopted by the trial judge was reflected in his assessment by reference to financial years: [41] "Rather, the realistic overall approach in my view is to treat the payments from FY07 to FY12 as wholly of a charitable nature for Ubaldo, and those up to FY06 as a mixture of the charitable and pure business expenses. Without the full accounts for Poletti Corp accurately assessing the mix is impossible. But given that Mauro claimed tax deductions for all the pre FY07 expenditure in my view the purely charitable element of these smaller payments must be a fairly low proportion of the overall FY98 to FY06 expenditure. The major payments, such as the $500,000 payment to the State Bank are excluded from this assessment."
14. The judge dealt separately and further with three items, namely the tax benefits to Poletti Corporation, the STSS horse training payments and the use of goodwill. The first and third of these matters have already been noted. With respect to the second, the trial judge found that approximately $1.2 million, or a third of the overall payments, were made to the deceased's horse training business. The difficulty in assessing the character of these payments was that the horse training business left no visible assets, and no accounts were provided to indicate whether there was any return on the investment, other than tax deductibility to Poletti Corporation. The assessment made by the trial judge was as follows: [42] "Mauro stated in evidence that the horse enterprise cost approximately $400,000 per year to run but that its only income was 'from a little bit of prize money'. But whether or not that is right is unclear. And I do not just accept Mauro's word for it in the absence of proof from its financial statements. The STSS horse business appears on Mauro's evidence less of a business and more a hobby. But I do not accept that a man as financially streetwise as Mauro would endure losses of this order without deriving some other tax or personal benefit for himself."
15. This assessment was open to the trial judge, before whom Mauro Poletti gave evidence. His assessment of Mauro Poletti's character is not readily challengeable on appeal. It is not inherently implausible. Nor was there documentary evidence or other objective material which contradicted it. The challenge to this aspect of the judge's findings must be rejected.

Other wills

1. There was a further matter considered by the trial judge, namely the fact that, between 1998 and 2010, Mr Poletti Snr had made seven wills. The first two, dated July and August 1998, left his estate entirely to Mauro. By a third will dated April 2006, he provided that if Mauro pre-deceased him, leaving no children, the estate was to be shared equally by the four remaining offspring, which included the respondents. Thus as late as 2006, the testator acknowledged their claims on his bounty. By a fourth will made in February 2007, the testator excluded Mauro entirely and provided that his estate was to be divided between the other four offspring in equal shares. That change appears to have resulted from a sudden lack of trust in Mauro, whom he then believed had stolen his title deeds. [43]
2. It seems likely that Mr Poletti senior was a somewhat impetuous person. The solicitor who prepared the will of February 2007 noted that Mauro was removed as a beneficiary because Mr Poletti senior feared he had stolen certificates of title and other items from a safe at his property at Potts Point. The second will signed in November 2007 was apparently the result of concerns that he may have signed an additional will since the February will, which did not reflect his true intentions. The solicitor noted that he had met Mr Poletti Snr again on 10 September 2008 and stated: "Ubaldo wished to give the entire estate to his son [Mauro] because he believed that Mauro was his only child by blood and that his other children being his two daughters … and his son [Claudio] were born as a result of out of marriage affairs conducted by his wife. As such, he decided not to leave them anything and he also believes he provided sufficiently for them during their lives."
3. The result was the (sixth) will of September 2008. There was no statement accompanying this will giving reasons for excluding the other children.
4. In 2009 Mr Poletti senior signed a seventh will dividing his estate equally between his sons Marco and Mauro.
5. The final will prepared by Mr Poletti senior was executed on 15 June 2010. It was accompanied by a statement, prepared and witnessed by this then solicitor, in which he set out advice he had been given with respect to the possibility of a family provision order under the Succession Act. He then provided reasons why he had excluded his former wife, his son Claudio, and his daughters Patrizia and Doriana from any share in his estate. In respect of both Claudio and his daughters, he noted that he had had no contact with them for over 20 years and had not seen any of their children during that period. With respect to Claudio, he noted his employment and the amount of his salary package and expressed the view that he was financially able to support himself.
6. A number of aspects of the statement are revealing. First, in dealing with his former wife, he noted that the separation and property settlement was "very bitter and took a number of years". He noted that both his daughters and his son Marco had intervened in the family law proceedings but stated in respect of Marco that "I felt that he was led by his sisters to do so." With respect to his daughters' intervention in the family law proceedings, he stated: "There was a huge financial drain of the family assets, as a result of the delay and increased costs that this caused."
7. He did not refer to the fact that Mauro had been the first to intervene in the proceedings.
8. The statement also noted that the husbands of both his daughters had been employed by the family company and that both were "assisted with gifts and loans and helped to buy properties and establish themselves."
9. He did not, however, note that Patrizia Becker's husband, Glenn Becker, had been dismissed shortly after the settlement, nor did he note that the property settlement had required that each of the daughters repay loans received from the family companies. The amounts involved were small: in the case of Patrizia, the required payments were $2.50 per week, [44] in the case of Ms Jones, the amount was $12 per week. A final payment was due when each turned 55. [45]
10. In October 1997 Mr Poletti senior instituted proceedings in the Family Court for payment of the arrears which were accepted to be $3,060 (Ms Jones) and $682.50 (Ms Becker). An affidavit in support of the summons was sworn by Mauro Poletti.
11. The trial judge expressed some bemusement as to what caused Mr Poletti senior to take such a step. [46] He described it as a "destructive course." The judge also concluded that launching the legal proceedings was "calculated to and had the effect of alienating the plaintiffs further." [47] None of these matters was noted in the statement accompanying the last will.
12. Finally, it is noteworthy that, in contrast to his information with respect to Claudio, the testator evinced no knowledge of the financial circumstances of his daughters, whom he believed to be adequately provided for.

Evaluative assessment

1. In the final analysis, this case involved a claim by two daughters who had identifiable, but moderate needs, which were unrecognised in the testator's will, but whose entitlements to consideration were compromised by their absence of contact with the deceased over the last 21 years of his life. The competing claim of their brother, who obtained the bulk of the estate, was not founded upon any competing need, but on financial contributions which preserved the real estate, which constituted the bulk of the estate, and who looked after the deceased, both financially and in other ways, during his declining years.
2. In the final assessment, the trial judge was justified in finding that the daughters were in need. No challenge has been raised to his assessment of their circumstances. [48] Although no assessment was undertaken in similar terms with respect to Marco Poletti, and the evidence of his need was somewhat cursorily stated in his affidavit, it may be thought that, in a general sense, his needs and the needs of his sisters were roughly comparable.
3. There was no reason to doubt that, when Mr Poletti Snr made his final will, he was fully conscious of the power of a court to make family provision orders in favour of those of his children who were excluded from the will. However, his own conduct over the last five or six years of his life demonstrated a degree of wilfulness, reflected in the changes made from time to time to his testamentary dispositions. The statement prepared by him with his final will appeared to place responsibility for the estrangement from his daughters' affections entirely in their hands, which was not the case. Further, although he expressed a belief as to their ability to support themselves, there was no indication that he had any actual knowledge of their circumstances.
4. In these circumstances, the trial judge was justified in making family provision orders in favour of the daughters.
5. The amount of any order required a balancing of incommensurable elements.
6. On one view, the result, which accorded the daughters similar treatment to that accorded to Marco under the will may appear to ignore the two decades of estrangement, for which responsibility was to be apportioned between the father and the daughters. That comparison is not, however, entirely apt, because the Court was not required to make any independent assessment of Marco's competing claim.
7. On any view, the assessment was generous to the respondents. However, in circumstances where a judge must evaluate competing factors of the kinds identified above, this Court should not intervene, absent identifiable error, unless the result is manifestly unreasonable, in the sense of being outside a reasonable range. Subject to one further consideration, that cannot be said of the orders in the present case.
8. The trial judge had before him estimates of the value of the house in Sylvania, then unsold ($2.2m) and the value of the other assets and the likely costs to be incurred, including the legal expenses of the trial.
9. On the figures before him, the trial judge anticipated a net estate after costs of $2.32 million. An allowance of $450,000 to each of the respondents would have constituted a share of 19.4% of the net estate in favour of each. Mauro and Marco's shares would have been diminished by 38.8%, leaving Marco with only 9.2% of the estate and Mauro's share as 52%. This diminution of Marco's share is troubling. It is not apparent that the trial judge was conscious of the effect of his orders in this regard.
10. In fact the Sylvania property is now revealed to be worth $3.03 million. The disproportion between the shares of the respondents and that of Marco Poletti is reduced by the sale of the principal property for some $830,000 more than anticipated when valued for the trial. The net value of the estate subject to the appeal costs, as revealed in the appellant's affidavit of 25 February 2015, was $2,768,431. Using a round figure of $2.6 million as the net estate after appeal costs, an allowance of 15% in favour of the respondents would give each $390,000, being the same interest as Marco Poletti. The appellant's share would be 55% of the estate.
11. The basis for a calculation which protects Marco Poletti's share as equal in to that of his sisters depends on two considerations. The first is that as a competing claimant on the estate, he had financial needs of a similar order to those of his sisters. The second is that, unlike his sisters, there had been no period of estrangement where he had taken sides within the family against his father. Those considerations warrant a variation of the orders of the trial judge to the extent suggested, namely by allowing each respondent a 15% share of the net estate.
12. It is true that the trial judge did not specify whether the payment to each of the respondents was to come out of the estate prior to the apportionment between the two beneficiaries or was to be met proportionately from the interests of the beneficiaries, but either approach would have achieved the same result arithmetically. The issue disappears entirely with the alternative orders proposed.

Costs

1. After making the orders for provision, the trial judge further ordered that the plaintiffs' costs of the proceedings, assessed on the ordinary basis, should be paid out of the estate and that the costs of the defendant (Mauro Poletti) should be assessed on an indemnity basis and paid out of the estate. There is no cause to interfere with those orders.
2. As to the costs of the appeal, to the extent that the appellant sought to challenge the orders for provision, acting as executor, he was also acting in the interests of himself and Marco Poletti, as the two identified beneficiaries. Mr Marco Poletti cannot complain about the costs of the appeal coming out of the estate. No party has been entirely successful, although the respondents retain the bulk of their provision and the beneficiaries have achieved marginal improvements in their positions. As executor, the appellant did not act unreasonably in pursuing the appeal, for the purposes of the Uniform Civil Procedure Rules 2005 (NSW), r 42.25.
3. Each of the parties, including Marco Poletti, should have his or her costs of the appeal assessed on an indemnity basis and paid from the estate. With respect to Marco Poletti, those costs will be limited to the costs of his motion and intervention by way of written submissions following the appeal. His counsel's fees with respect to the hearing of the appeal should be assessed as those of an intervener and not as a full party. The costs of the written submissions following the hearing should be allowed only so far as they relate to the issue of apportionment which was the subject of the Court's joinder order.
4. EMMETT JA: This appeal is concerned with a family provision order made under Ch 3 of the Succession Act 2006 (NSW) (the Succession Act). The appellant, Mr Mauro Poletti, is the executor of the will of his late father, Ubaldo Poletti, who died on 10 May 2012. Ubaldo Poletti's will (the Will) was made on 15 June 2010 and probate of the Will was granted to Mauro on 17 July 2012. By the Will, Ubaldo left his estate, valued at approximately $3,000,000, to Mauro, as to 85 per cent, and to another son, Marco, as to 15 per cent. He made no provision for his other three children, Claudio, Doriana and Patrizia.
5. Doriana and Patrizia made a joint application for a family provision order under Ch 3 of the Succession Act. Mauro defended the application, both in his capacity as executor and in his capacity as principal beneficiary under the Will. On 5 June 2014, a judge of the Equity Division made a family provision order that there be provided out of the estate of Ubaldo the sum of $450,000 to each of Doriana and Patrizia. His Honour also ordered that their respective debts to the estate be extinguished.
6. Ubaldo was born in Italy in 1931. He married his wife, Teresa, in December 1954. They emigrated to Australia in the following year. Claudio was born in 1956, Mauro in 1958, Patrizia in 1960, Doriana in 1961 and Marco in 1962. They were the only surviving children of Ubaldo and Teresa.
7. In 1989, acrimonious family law proceedings were commenced. In November 1989, Mauro intervened in his parents' Family Court proceedings. Mauro's intervention provoked a response from other family members and, in March 1990, Patrizia, Doriana and Marco also intervened in the proceedings. Thus, four of the five Poletti children were enmeshed in the family's legal conflict. Doriana and Patrizia supported Teresa. Mauro supported Ubaldo. Marco's allegiance was generally to his father. Claudio played no part in the litigation.
8. The Family Court proceedings were settled in August 1991, by which time relations between the two daughters and their father had collapsed. The signing of a deed of settlement in that month was the last contact that either Doriana or Patrizia had with their father. They remained estranged until his death in 2012. Neither of them attended his funeral.
9. Two broad grounds were advanced by Mauro as to why no provision should have been made for Doriana and Patrizia out of the estate of Ubaldo. The first was their estrangement from their father. The second was the financial support given by Mauro to his father during the period after the settlement of the Family Court proceedings. Mauro also submitted that sufficient provision had been made for Doriana and Patrizia during their lifetime, and that they exhibit no pressing financial need.
10. The primary judge concluded that the issue in the case was really one of characterisation of the conduct of the parties and understanding the nature of the estrangement between the daughters and their father. His Honour found that, while Doriana and Patrizia were estranged from Ubaldo, the estrangement continued partly because of the conduct of Ubaldo himself and the conduct of Mauro. His Honour did not consider that they should be absolved from responsibility for the estrangement, but concluded that they were not the authors of the estrangement. While his Honour did not consider that the estrangement would prevent the daughters from obtaining a family provision order, the existence of the estrangement must be taken into account in calculating the extent of their provision. Accordingly, his Honour reduced what he would otherwise have given them by reason of the estrangement.
11. The primary judge inferred that Ubaldo owed a significant moral debt to Mauro, particularly for Mauro's support in the last six years of his life and for Mauro's efforts in preserving Ubaldo's family home from being sold by the State Bank and in securing a property in Potts Point for Ubaldo. However, his Honour did not consider that the extent of that moral debt was anything like the $3,000,000 of expenditure that Mauro identified as having been paid by him for the benefit of his father over the period after the Family Court settlement.
12. The primary judge found that both Doriana and Patrizia had demonstrable needs that were quite similar: they both had mortgages on their homes to secure borrowings, they both faced financial risks in the future, and they were both near retirement and had limited financial options. His Honour considered that they both had a real need of capital to guard them against life's vicissitudes. His Honour found that adequate provision had not been made in the Will for either of the daughters, and concluded that each should receive a legacy of $450,000 from the estate and have their debts to the estate extinguished.
13. Several days before the date fixed for the hearing of the appeal, Marco applied for leave to intervene. The basis for his application was that the effect of the orders made by the primary judge was to deprive him of a significant part of the benefit conferred on him by the Will. That raised questions of the extent to which Marco had stood by, rather than intervening in the trial. The Court reserved the question of Marco's involvement pending determination of the question of whether or not the Court should interfere with the orders made by the primary judge.
14. I have had the advantage of reading in draft form the proposed reasons of Basten JA. I agree with his Honour that the appropriate result is that each of Doriana, Patrizia and Marco should receive the same share of their father's estate and that the provision for Doriana and Patrizia should be made out of the share given to Mauro by the Will. I agree with the orders proposed by Basten JA, including the orders for costs, for the reasons proposed by his Honour.
15. LEEMING JA: I agree with Basten JA.

Endnotes

1. Doriana Mary Jones v Mauro Poletti [2014] NSWSC 715.
2. Succession Act, s 59(1)(c); see below at [16].
3. Section 59(2).
4. Section 60(1)(b).
5. [2012] NSWCA 308; 81 NSWLR 656.
6. Andrew at [29].
7. [2005] HCA 11; 221 CLR 191 at [122].
8. Sammut v Kleemann [2012] NSWSC 1030 at [135]-[139] (Hallen As J).
9. See s 60(2)(a).
10. See s 60(2)(b).
11. See s 60(2)(h).
12. See s 60(2)(m) and (n).
13. Tcpt, 31/03/14, p 94.
14. Judgment at [122]-[123].
15. Tcpt, p 51.
16. Tcpt, p 80(24).
17. Tcpt, p 81(10)-(20).
18. Tcpt, pp 83-84.
19. Tcpt, pp 86, 88.
20. Judgment at [155].
21. Appeal ground 2(b).
22. Tcpt, p 182.
23. Notice of appeal, grounds 2(e), (f), (h).
24. Tcpt, 01/04/14, p 161.
25. Tcpt, pp 148-149.
26. Tcpt, pp 196-197.
27. Affidavit, 17 May 2013, par 23.
28. Judgment at [54].
29. Tcpt, p 156.
30. Judgment at [75].
31. Judgment at [77].
32. Judgment at [84].
33. Tcpt, pp 143-144.
34. Affidavit, Mauro Poletti, 17 May 2013, par 83.
35. Judgment at [97].
36. Judgment at [100].
37. Notice of appeal, ground 3(d).
38. Judgment at [99].
39. Notice of appeal, ground 3(c).
40. Judgment at [83].
41. Judgment at [90].
42. Judgment at [94].
43. Tcpt, p 162(45).
44. Judgment at [125].
45. Affidavit, 19 September 2012, p 8.
46. Judgment at [61].
47. Judgment at [155].
48. See judgment at [133]-[138] (Ms Jones) and [139]-[145] (Ms Becker).

Amendments 06 May 2015 - Amending spelling of appellant Mauro Giuseppe Poletti on coversheet DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 May 2015