MATTER : Inheritance (Family and Dependants Provision) Act 1972

MARGARET ANN HOLDMAN as Executrix of the Estate of RITA MAY ANDERSON

Testator's family maintenance - Inadequate provision made for proper advancement in life of daughter - Small estate

Inheritance (Family and Dependants Provision) Act 1972, s 6

Order made making additional provisions out of the estate for the plaintiff

Boykett v Boykett, unreported; SCt of WA (Murray J); Library No 970735; 22 December 1997

Caine v Butler [1999] WASC 276

Coates v National Trustees Executors & Agency Co Ltd [1956] HCA 23; (1956) 95 CLR 494

Cooper v Dungan (1976) 50 ALJR 539

Dobra v Brennan [1999] WASC 98

Draper v Nixon [1999] NSWSC 629

Hughes v National Trustees Executors & Agency Co of Australasia Ltd [1979] HCA 2; (1979) 143 CLR 134

Kitson v Franks [2001] WASCA 134

Randell v Randell [1999] WASCA 146

Re Allardice, Allardice v Allardice [1910] 29 NZLR 959

Re Allen (Dec), Allen v Manchester [1922] NZLR 218

Robinson v Sorgiovani & Ors [1999] WASC 53

White v Barron [1980] HCA 14; (1980) 144 CLR 431

1 PULLIN J: The plaintiff is one of three daughters of Rita May Anderson who died on 20 March 1999. Probate of the will of the deceased was granted on 11 October 1999.

2 The deceased's husband predeceased her. The three daughters of the deceased are Mrs Margaret Ann Holdman, who is the executrix of the will, Mrs Pamela May Wilkinson and the plaintiff, Mrs Lorraine Kay Riches,

3 Mrs Riches complains that the will of the deceased did not provide for her proper advancement in life and that further provision ought to be made for her out of the estate of the deceased. Mrs Holdman denies that this is so and, in any event, says that Mrs Riches was guilty of conduct which disentitles her to the benefit of an order. Mrs Anderson's will, which was made on 22 January 1998, contained the following provisions:

(b) To Margaret Ann Holdman and to Mrs Holdman's daughters Sonia Louise Holdman and Fiona Maree Holdman her piano.

(d) To Mrs Riches and Mrs Wilkinson all moneys held by her, including but not limited to those funds standing to the credit of her bank accounts with the Commonwealth Bank Kalamunda and the National Bank Kalamunda after payment of all her funeral and other expenses.

4 The statement of assets and liabilities of Mrs Anderson as at the date of her death are agreed and are set out below:

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5 The bequests of the piano to Mrs Holdman and her two daughters, Sonia and Fiona, and the steam engine valued at $1,000 to Mr Squire, are not to be disturbed because the plaintiff does not make any claim in respect of them.

6 From the moneys held by the deceased as at the date of her death, funeral and other expenses have been paid, leaving a total of $16,500. This means that Mrs Riches and Mrs Wilkinson have each been left $8,250 under the provisions of the will. Mrs Wilkinson makes no claim in these proceedings, and it is not suggested by any of the parties that greater provision should have been made for her or for any of the other beneficiaries. I will therefore proceed on the basis that proper provision was made for her in the will.

7 As can be seen from the list of assets, the only asset of significance was the real estate at 66 Carmel Road. This is the property which was left to Mrs Holdman.

8 The first question to be considered by a court on an application of this kind is, whether the disposition of the estate by the deceased was not such as to make adequate provision for the proper maintenance, support, education or advancement in life of the claimant. This is a question which is to be determined at the date of death of the deceased. If that question is answered in the affirmative, the Court must then exercise its discretion to make such provision as it thinks fit, taking into account the relevant facts as they exist at the time of making the order; Bondelmonte v Blanckensee [1989] WAR 305 at 307 and Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201.

9 In making an assessment about whether the provision made was inadequate for the proper maintenance, support or advancement in life of the applicant, regard must be had 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 her bounty.

10 The determination of the second stage, should it arise, involves similar considerations.

11 The first question raises a question of fact, notwithstanding that it involves the exercise of value judgments. The evaluative character of the decision stems from the fact that the Court must determine whether the applicant has been left without "adequate" provision for his or her "proper" maintenance, support or advancement in life. Singer v Berghouse (supra) at 209 - 210 per Mason CJ, Deane and McHugh JJ.

12 What is "proper" must be determined in the light of all the circumstances of the case. The amount to be provided is not to be measured solely by the need of maintenance, support or advancement. It would be so if the Court were concerned merely with adequacy, but the Court has to consider what is proper maintenance, support or advancement, and therefore the property left by the testator has to be taken into consideration. Bosch v Perpetual Trustee Co Ltd [1938] AC 463.

13 To achieve what is seen to be the legislative intention and to bring some certainty into an application of the Inheritance (Family and Dependants Provisions) Act 1972, the courts have developed principles and standards which have been applied in determining applications under the legislation. One such principle or standard is the provision a just and wise testator would have thought it his or her moral duty to make in the interests of the claimant had he or she been fully aware of all the relevant circumstances. Permanent Trustee Co Ltd v Fraser (1995) 36 NSWLR 24 per Sheller JA at 46.

14 Proper respect must be paid to the right of testamentary disposition, which is the fundamental premise upon which the provisions of the Act are based. The premise requires that the Court, out of respect for the continuing right of testamentary disposition, should limit its disturbance of the testator's will to that which is necessary to achieve the purposes of the Act, and not more. Pontifical Society for the Propagation of the Faith v Scales [1962] HCA 19; (1962) 107 CLR 9 at 19. In Bosch v Perpetual Trustee Co Ltd (supra) at 477 - 8, it was stated that even where a 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 or her property. The first inquiry in every case must be what is the need of the applicant for maintenance, support, education or advancement in life, and the second is as to the property which is left.

15 A court must be very careful not to substitute notions of the morality of the applicant (for example, in the sense of disqualifying personal conduct) for the purposes of the Act. Permanent Trustee Co Ltd v Fraser (supra) per Kirby P, page 29. The purpose of the jurisdiction is not the correction of the hurt feelings or sense of wrong of the competing claimants upon the estate of the testator.

16 In this case there was a period of estrangement between Mrs Riches and the deceased. A period of estrangement can affect a claim under the Act. However, estrangement will not necessarily bring to an end a duty to make provision for an eligible person. When there is an estrangement, the application of the Act requires that it should be appraised and its causes considered. McColl v McComish & Anor, unreported; SCt of WA; 16 June 1995 per Master Adams and Wentworth v Wentworth, unreported; SCT of NSW; 14 June 1991 at 125 per Bryson J.

17 The plaintiff's claim is put on the basis that adequate provision was not made for her proper advancement in life. The word "advancement" can have a narrow and technical meaning or the wider meaning of "benefit". See Clay v Clay [1999] WASCA 8; (1999) 20 WAR 427 at 461 - 462. In the Act, "advancement" is a word of wide import. McCosker v McCosker [1957] HCA 82; (1957) 97 CLR 566 at 575. And see Kleinig v Neale (No 2) [1981] 2 NSWLR 532 and In the Estate of Puckridge (1978) 20 SASR 72 at 76 for examples of the provision of lump sums to eligible persons by way of advancement in life.

18 The deceased and her husband were married in 1941. They lived first at Karragullen, and then in 1946 or 1947 the Carmel property was purchased and the family home was constructed. Mrs Holdman was born on 11 August 1942, Mrs Wilkinson on 1 February 1947 and Mrs Riches on 6 February 1952. The three daughters lived at home until they married. Mrs Holdman married and moved into her own home in 1964. Mrs Riches was the last to leave home. She married in 1972.

19 Mrs Riches lived with her husband in Perth for about two years, during which time she saw her parents about two or three times weekly. She then moved to York with her husband and saw less of her parents, but they would see each other monthly. Mr and Mrs Riches had three children. Their youngest son David was 15 years old at the time of this hearing. He is at school and still dependent on his parents.

20 In 1985 Mrs Riches and her husband moved back to Perth and purchased a house in Lesmurdie. She then saw more of her parents because they lived nearby. She estimates that she saw her parents three times a week.

21 In 1988, the deceased had a heart attack and a stroke. She was hospitalised for seven to 10 days. From then on, Mrs Riches became the domestic for her parents. She did their cleaning, laundry and ironing. The deceased had kept the house in a poor state. There was very little furniture. Mrs Riches bought new curtains for three rooms, a new mattress for the bed and also had several pieces of furniture, including two lounge suites, a wardrobe, two chests of drawers and a fridge, moved into her parents' house to make it more comfortable. She attended at the house twice a week for two and a half to three hours, and she would put her youngest child into day care while she was cleaning. The other daughters also provided some items of furniture.

22 In 1989, Mrs Riches returned to work as a registered nurse on a part-time basis at Mount Henry Hospital, working three days a week. She then commenced working at Valencia Nursing Home in Bickley, where she worked three shifts a week, that is, 20 hours or 40 hours per fortnight.

23 This continued until the deceased had a second heart attack in 1992 and a stroke 48 hours later as a result of the heart attack.

24 After this, Mrs Riches' role now extended to bathing and dressing her mother, organising her finances, shopping, cooking and all household duties. She also had to run her own home and look after her husband and three children. She was limited in the amount of hours she could work as a registered nurse because of her busy program looking after her family and her mother. Mrs Riches also had to balance out her parents' psychological needs, because, as Mrs Riches said, they were not at the time "getting on well".

25 Then on 27 August 1994, Mrs Riches' father died. Following that, the deceased shifted in with Mrs Riches for a number of weeks. She then returned home, and Mrs Riches continued to look after her at home. Her stroke had caused left lateral neglect, which meant that she often forgot activities involving her left side. This meant that she sometimes left taps running and the gas on. Mrs Riches went to her house about three times a day to perform the household duties and to deliver meals she had cooked and to feed the family pets. This continued until August 1996.

26 Mrs Holdman and Mrs Wilkinson agree that Mrs Riches did a very good job of looking after their parents in the eight-year period between 1988 and 1996.

27 Then, on 7 August 1996, an incident occurred which, in relating it, seems a minor upset but which caused a major rift in relations between Mrs Riches and her mother. Mrs Riches went to her mother's house. Mrs Holdman was present. I accept Mrs Riches' evidence that Mrs Holdman reported to Mrs Riches that the deceased had made statements to her (Mrs Holdman), accusing Mrs Riches of keeping the deceased as a prisoner and "blackmailing" her. Mrs Riches was surprised by this. Mrs Riches says, "I turned to my mother for support," and says her mother "refused to support me". So Mrs Riches left the house.

28 After that, Mrs Riches saw the deceased only on two other occasions. One was a few days after 7 August 1996; the other was in September 1997, when there was some attempt made at a reconciliation, which failed. September 1997 was the last time that Mrs Riches saw her mother alive.

29 After 7 August 1996, Mrs Holdman and Mrs Wilkinson arranged for a housekeeper and Mrs Holdman and Mrs Wilkinson did the laundry, shopping and household finances. The deceased lived with Mrs Holdman. The deceased made it plain that she did not want to see Mrs Riches again.

30 There was also another family upset which prompted ill-feeling between Mrs Riches and Mrs Holdman, the details of which are unclear to me. It does not matter what the foundation for that breakdown in relations might be. All that is important is that this disagreement partly explains why Mrs Riches did not try to see her mother again after September 1997. This is because the deceased eventually began living with Mrs Holdman, and the ill-feeling which existed between the sisters would have made it difficult for Mrs Riches to visit her mother. Added to this is the fact that the deceased did not wish to see Mrs Riches, and made no effort to contact her.

31 A wise and just testator making a will on 20 March 1999, would have had to take account of the situation of her three daughters. Adequate provision was made for Mrs Wilkinson in the will.

32 I will now set out the financial position of Mrs Holdman and Mrs Riches as at the date of the death of their mother.

33 On 20 March 1999, Mrs Riches was 47 years old. She had been married since 1972. Her husband was an electrical contractor. There was no evidence that the marriage was unsuccessful as at March 1999. The Riches had in their care, their son David, who was then about 12 or 13 and still at school.

34 Mr and Mrs Riches had, up until 1997, conducted an electrical contracting business. They had worked in York before 1985, when they shifted down to Lesmurdie. In 1997, Mr and Mrs Riches sold their business of Powerline Construction to Cowell Electric Supply Co Ltd ("Cowell") for $370,000. This covered the goodwill, vehicles, plant, equipment and stock in trade of the business. Of the purchase price, $200,000 was to be paid on the settlement date in 1997. That sum was paid. There was to be an allotment of 4,000 shares in the purchaser, the shares having an agreed value of $20,000. A further payment of $100,000 was due on 1 December 1997. That sum was paid. There were then two further payments of $20,000 and $30,000 due (the first before March 1999 and the other after that date), if certain net profit objectives were achieved. Those payments were not made. On 3 August 1998, Mr and Mrs Riches entered into a service agreement with Cowell, whereby he was to provide management services in exchange for a payment of $88,000 per annum.

35 I should briefly mention some events which occurred after March 1999. Cowell went into liquidation in December 2000. The Riches are creditors. Their proof of debt is for about $70,000, made up of moneys due under the sale agreement, plus some other later debts. There is no certainty about what dividend might be paid. There was no evidence that in March 1999 there was anything to suggest that Cowell would go into liquidation.

36 The payments made by Cowell did not put the Riches into funds because in 1989 the Riches had experienced financial problems with their business. This left them with a debt of nearly $2,000,000 which they had been repaying "bit by bit". The money they received from the sale of the business to Cowell mostly went to repaying the Australian Taxation Office and other minor creditors. As at 20 March 1999, the Riches still carried a debt to the bank of over $400,000.

37 The asset position of Mr and Mrs Riches was the subject of some contention at the trial. The assets as described and the liabilities as described in the first column of the table which follows, are not in dispute. I will set out beside each of the assets, the values contended for by the parties. This will reveal where there is a dispute between the parties. I will resolve those disputes below.

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Description of an Asset Value Contended Value Contended for

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38 There were two other assets which the defendants said should be listed. In 2001, the Riches owned some sheep which were kept at a property at Redhill which they leased. There is no evidence that these sheep were owned by the Riches as at 20 March 1999. The couple did engage in some primary production activities in 1999, as their tax returns reveal. However, this does not allow me to find that they owned 500, or any, sheep in 1999. It was also suggested by the defendants that there was some life insurance which should have been included in the list of assets as at 20 March 1999, but there was no evidence to that effect. There was evidence that there was either life insurance or superannuation in existence in July 2000, but none that this existed as at 20 March 1999.

39 The values of the assets shown in the "Plaintiff's" column above were values testified to by Mr and Mrs Riches. No objection was made to the admissibility of this evidence. Counsel for the defendants suggested that the value of Lot 16 Kelvin Road should be increased by $50,000 because it was sold this year for $400,000 and that I should therefore find that the value of Lot 16 was halfway between that figure and the value placed on the property by the Riches as at 20 March 1999. It would not be correct for me to make such a finding. Similarly, counsel for the defendants submitted that Lot 15 Kelvin Road should be increased from the value of $200,000 placed on the property by the Riches, to $250,000. He submitted that be so because in July 2000, the Riches proposed a value of $300,000 on the property in an application form for bank finance and because the property had been put on the market at $280,000 some time after 20 March 1999. In fact, when the property was put on the market at that price, it did not sell. In my view, there is no basis for finding that Lot 15 Kelvin Road was worth $250,000 on 20 March 1999.

40 I find the values put on the other assets (save for the Cowell debt) were as stated by the Riches. The result is that I find that the Riches had joint net assets of $168,000 on 20 March 1999. This total is arrived at by taking the $98,000 shown above and adding the Cowell debt of $50,000 due under the contract of sale and $20,000 for the value of the shares in Cowell. There was no evidence to suggest that in March 1999, Cowell was thought likely to go into liquidation.

41 The income position of Mr and Mrs Riches in March of 1999 was as follows. Mrs Riches had worked as a nurse in the year ending 30 June 1999 at the Valencia Nursing Home. She had earned a gross salary of $17,776. Her income tax return reveals that she also returned a $5,552 loss from primary production activities, returned $10,199 from the partnership activities with her husband, and unspecified net capital gains of $2,500. After allowing for some prior year losses, her taxable income was $8,430. Mr Riches, in that financial year ending 30 June 1999, earned $9,602 from Cowell by way of wages and, along with primary production losses and capital gains and non-primary production, his total taxable income for the year was $9,979. So the family taxable income for that year was $18,409.

42 Between them, Mr and Mrs Holdman's assets on 20 March 1999 were:

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43 Mr and Mrs Holdman were married in 1964. As at 20 March 1999, they had no dependent children.

44 Mr Holdman went into partnership with Mrs Holdman's father in 1964. This business continued until 1974, when it was sold. Mr Holdman then went to work on oil rigs and has been involved in that work ever since. Mrs Holdman has worked in the past as a receptionist at the Perth Dental Hospital. As at 20 March 1999, they lived in rented accommodation. Mr Holdman owned a second-hand motor vehicle worth approximately $20,000 and a boat worth approximately $22,000. They are being purchased under a finance arrangement which consumes $1,700 per month.

45 Mrs Holdman had no employment and no income. Her husband was earning fortnightly income of $US2,400 in 1999.

46 The defendants allege that Mrs Riches was guilty of conduct which disentitles her to any order. The alleged disentitling conduct is the fact that (apart from two occasions) Mrs Riches did not have any contact with the deceased in the period between 7 August 1996 and the death of the deceased on 20 March 1999.

47 In my opinion, this lack of contact is not disentitling conduct when viewed in context. It is clear that there was an unfortunate falling out between Mrs Riches and her mother on 7 August 1996. There was tension between Mrs Riches and Mrs Holdman. Mrs Riches denies that there was any justification for the allegations made about her on 7 August 1996, and no attempt was made by the defendants to prove that there was any. The explanation for this rift seems to be that there was a personality clash between Mrs Riches and her mother. The deceased was not a meticulous housekeeper. On the other hand, Mrs Riches was (according to Mrs Wilkinson) "very, very fastidious".

48 The fact that Mrs Riches did not see her mother (apart from two occasions) for two and a half years before she died, is mitigated by the following circumstances. In the first place, as I have mentioned, Mrs Holdman took over the care of the deceased and eventually the deceased shifted in with her. The tension between the two sisters complicated the differences which had arisen between Mrs Riches and her mother. This would have made it difficult for Mrs Riches to see her mother. Secondly, the deceased informed Mrs Holdman that she did not want to see Mrs Riches. Even if Mrs Riches had attempted to see the deceased, it is likely that she would have been rebuffed. I accept that there was no justification for the deceased's reported complaints about Mrs Riches. Thirdly, Mrs Riches would have been justified in feeling hurt by the comments made by her mother, as reported by Mrs Holdman, on 7 August 1996. For eight years, Mrs Riches had dedicated much of her time to the deceased and cared for her and her father. Mrs Riches' fastidious style may have aggravated the deceased, but neither Mrs Holdman nor Mrs Wilkinson criticised Mrs Riches for the way that she did care for their mother and father. Indeed, they praised her for the work she did.

49 For those reasons, I consider that the period of estrangement between the deceased and Mrs Riches is not conduct which in any way disentitles Mrs Riches to an order of the Court if it should otherwise be appropriate.

Was the Bequest in the Will for Mrs Riches Adequate Provision from the Estate for the Advancement of Life of Mrs Riches?

50 Both Mrs Riches and Mrs Holdman had been through difficult financial times. The financial crisis in the Holdmans' life had led to an arrangement under Part X of the Bankruptcy Act in 1991. The Riches also had had a financial crisis. Theirs was in 1989, which left them with a debt of nearly $2,000,000. They did not avail themselves of protection under the Bankruptcy Act, and they worked to pay this debt off. By March 1999, they had recovered to the point where their joint net assets had built up to the figure of $168,000, but they still carried a large debt which had to be serviced.

51 The combined income of the Riches was less than that of the Holdmans, although their lower level of income is partly explained by the interest payments which had to be met on borrowings. Those borrowings, of course, enabled the Riches to build up an asset base. Their finances were organised in a way which enabled them to claim expenses, such as interest, as a tax deduction. Mr Holdman, on the other hand, earned his income as an employee, and this meant that he had limited scope for reducing his income by setting off expenses against it.

52 The Holdmans had not built up any asset base. Although Mr Holdman had been working for some years on oil rigs and earning a good salary, they were renting their house and their borrowings were directed to the purchase of a motor vehicle and a boat. In my view, the situation of the two are somewhat comparable, although the Riches were in the preferable position because their expenditure was going into the servicing of debts matched by assets, which assets were likely to appreciate, whereas the Holdmans' borrowings were in relation to depreciating assets. In tabular and summary form, their situation was as follows.

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53 So the Holdmans were better off in income terms but worse off in asset terms, whereas the Riches were better off in asset terms and worse off in income terms.

54 Both the Riches and the Holdmans had a need for advancement in life. Mrs Holdman was in her fifties and Mrs Riches in her late forties. Both had a limited asset base because they had each had a financial setback around 1990. In my opinion, the bequest in favour of Mrs Riches was not adequate provision for the proper advancement in life of Mrs Riches.

The Exercise of Discretion to Make Further Provision for Mrs Riches

55 The exercise of the discretion requires the Court to take into account the circumstances as they exist at the time the order is made.

56 Since March 1999, Mrs Holdman's position has not much changed, although she has commenced in business in a delicatessen in Dunsborough. It is as yet too early to predict whether this business will succeed. Mrs Holdman says that she anticipates that her husband may not be able to work "for much longer". He is still earning at the rate of $US2,400 per fortnight. With the change in exchange rates since March 1999, this is now close to $120,000 per annum.

57 Since the death of the deceased, things have changed for Mrs Riches. In March of 2001, Mr and Mrs Riches separated. As a result, they sold their house property at Lot 16 Kelvin Road, Orange Grove for $400,000. Mrs Riches shifted into a portable unit which was established on Lot 15 Kelvin Road, and Mr Riches shifted into other accommodation on that property. The couple have purchased a 40-acre property at Serpentine for $310,000, which Mr Riches is to occupy as his home and from which he will operate as an electrical consultant or contractor. Mrs Riches has remained at the Orange Grove property because this is close to where she works as a nurse. Her son David lives with her while he completes his schooling. The couple have not divorced and have decided not to do so until David completes his schooling. They remain bound up in their partnership arrangements.

58 The asset position of the Riches has improved since 1999. I find that it is now as follows.

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Cowell debt and shares (no value because of the liquidation) -

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59 The fact that the net asset position has improved is largely due to the sale of Lot 16 Kelvin Road at $400,000, which was an increase in value of $100,000 since 20 March 1999. This increase in assets was diminished by the loss of value of the Cowell debt and shares.

60 Mrs Riches is still able to work as a nurse and earns nearly $22,000 per annum by way of salary, but she has some concern about her health. This is not a major consideration to be put in the balance, because at the moment her disorders are not manifesting themselves in a way which will prevent Mrs Riches from working, but if not managed correctly, they could interfere with Mrs Riches' ability to work. A report from Dr Caddy says that if her illnesses progress "in a conservative fashion, she could have an entirely normal prognosis". Her medical disorders are relevant, but I do not give them great weight in the exercise of my discretion. Mrs Riches is also likely to have a distribution from the partnership, but income tax returns to 30 June 2001 were not available at the time of the hearing.

61 In summary, Mrs Riches' asset position has improved since 1999. Her health has, on the other hand, declined and her matrimonial circumstances are poorer. If Mr and Mrs Riches stay separated and carry through their intention to divorce, then Mrs Riches will be in need of additional funds for her advancement in life. On the other hand, Mrs Holdman is in much greater financial need of advancement in life.

62 In my opinion, the residue of the estate, after the unchallenged bequests are completed, should be divided so that after the bequests of the piano and the steam engine have been made, the balance of the assets in the estate should be disposed of and the proceeds divided so that Mrs Wilkinson receives $8,250 and of the remainder Mrs Riches receives 25 per cent and Mrs Holdman receives 75 per cent. I direct that the plaintiff prepare a minute to reflect these reasons for decision. The plaintiff and the defendant should confer, and if they cannot reach agreement concerning the terms of the minute, I will hear further submissions.