Salmon v Osmond

1. His Honour also set out, at [8], the revised value of those properties according to valuation evidence adduced by the appellants. However, his Honour, at [75], rejected that valuation evidence and proceeded on the basis that the value of the properties was their probate value.
2. Another property, Flamingo, which is owned by Michael and which comprises two lots, one of 200 acres and one of 43 acres, also forms part of the property upon which the farming enterprise is conducted. Both lots were purchased in 1987. Michael's residence is located on the 43 acre lot. That lot was originally registered in Esmae's name. On Esmae's suggestion, Michael moved a dilapidated house located on Olivers onto the 43 acres and converted it into an attractive family home. Esmae transferred the 43 acre lot to Michael sometime after the death of the deceased. Flamingo was valued at $940,000 to $950,000 at the time that the other properties were valued for probate purposes: judgment at [57].
3. Swansea and Flanagans are adjacent and are the principal properties upon which the farming enterprise was, and continues to be, carried on. The family home of the deceased and Esmae is located on Swansea, where they lived from the time of their marriage in 1950. Olivers is located to the north of Swansea and Flanagans. Mundowy, Ganmurra and Flamingo are all riverine lots fronting the Murrumbidgee River. Ganmurra is located some distance west of Swansea.
4. The deceased's other assets comprised bank deposits, shares, farming equipment and livestock totalling approximately $170,000. Some shares have been sold at a price significantly below their probate value and the farm equipment is said to have no value. Estate costs and legal expenses, at the time of the hearing before his Honour, amounted to approximately $189,000 (estate costs $23,000 and legal fees $166,000), of which legal fees in the sum of approximately $87,000 remained outstanding at that time.

Terms of the will

1. Under the terms of the deceased's will, Esmae, Michael and Luke each received devises of real estate. Swansea and Ganmurra were devised to Esmae. Michael received Flanagans and Olivers together with the livestock and farm machinery. Mundowy was devised to Luke. In addition, the deceased left bequests of $10,000 to each of Donna and Jan and forgave a debt of $14,000 said to be owed by Kerryn. In cl 11 of the will, the deceased gave the following explanation for favouring Michael in the testamentary gifts he made: "I DECLARE that if my Will shows a preference for my Son the said MICHAEL AUGUSTINE SALMON then that is in consideration of him continuing to assist me in my farming operations for many years, often for very little reward, and in general allowing me to amass the assets which I have during my lifetime AND I FURTHER DECLARE that further assistance has been given by myself and my Wife the said ESMAE FRANCES SALMON to our other children AND THAT they have benefited as close to equal as possible in monetary value in the distribution of assets owned by me during my lifetime."
2. Initially, Kerryn and Donna sought orders that Ganmurrra and Olivers be devised to them. If orders were made in their favour, they offered to give undertakings not to make any application for provision out of Esmae's estate. They also proposed that any provision made for them be subject to a life estate in Ganmurrra in favour of Esmae and the grant of a licence to Michael to farm Olivers until Esmae's death.

Circumstances of the beneficiaries and claimants

1. The primary judge described the individual circumstances of the beneficiaries and claimants in his judgment at [29]-[77]. The following is drawn from those paragraphs.

(a) Michael's circumstances

1. Michael was 48 years of age at the time of his father's death and 50 as at the date of the primary judgment. As was the case with his siblings, he grew up on the farm. He was educated to the age of 16, leaving school in 1978 having attained his School Certificate. He worked for a short time as an apprentice jeweller, but returned to assist the deceased plant the 1979 crop. He has lived and worked on the farm ever since. He obtained a TAFE Farming Technology Certificate and a Wool Classing Certificate in 1979 and 1980 respectively. Michael married in 1999 and he and his wife, Tarna, have two children, who were aged eight and 11 at the time of the hearing before his Honour. Their son suffers from epilepsy. Since his marriage, Michael has carried on his share of the farming enterprise in partnership with his wife.
2. The deceased purchased Flamingo in 1987 for $144,146.81 and registered the 200 acre lot in Michael's name and the 43 acre lot in Esmae's name. Michael contributed $5,000 to the purchase price. Initially, the balance of the purchase price was recorded as a loan owed by Michael to the deceased. In the financial year ending 30 June 2006, the deceased's accounts recorded that the loan had been forgiven.
3. Michael was never paid a wage for working on the farm. He received room and board and his fuel was paid for on the farm account. He was also given occasional allocations of stock or grain. However, Michael undertook off-farm work, such as house moving, driving and labouring jobs, to earn additional income. In 1998, he established a business known as Wagga Wagga Ditch Witch Hire. That business ceased operation in 2011, as it was no longer viable. Since his marriage, it appears that Michael and his wife received a share of the profits of the farming enterprise.
4. The farming income has varied from year to year and at times was not sufficient to support two households. This was particularly so during the long drought between 2001 and 2010. Conditions in 2011 and 2012 were also poor due to low rainfall and a mouse plague. Paradoxically, flooding in 2012 caused damage to the farming properties, particularly the fencing, which Michael spent considerable time repairing. Michael has done less off-farm work since his father's death, as he says he has been too busy looking after the farm, including his mother's farming business.
5. On Michael's evidence, the deceased effectively retired from farming in about 1990, although he continued to be actively engaged advising Michael on the running of the farm. His Honour noted, at [48], that this evidence was supported by Esmae in her affidavit, but that she was more equivocal in her cross-examination. His Honour considered that it was unlikely that the deceased actually retired in 1990, but did less on the farm as he grew older. Michael has continued to farm the property since his father's death.
6. Michael's assets are the property Flamingo, including the 43 acre house block, livestock owned jointly with his wife, machinery and cars. The machinery and vehicles are old, and except for a 1996 Toyota Prado and a 1992 SS Commodore, are mostly in the order of 25-35 years old. He and his wife have no superannuation.
7. There are two mortgages secured over Flamingo in respect of which a total sum of approximately $43,000 is owing. Michael also has a $10,000 overdraft.
8. His Honour stated that it was not easy to get a clear picture of the value of Michaels' assets and liabilities. However, he made the following findings in relation to Michael's circumstances.
9. His Honour accepted, at [65], that apart from the year 2008 (when additional income was earned from the sale of a water licence), the farm income was not sufficient to support the deceased and Esmae as well as Michael's family. His Honour also found that Michael did not earn a substantial income from the farm while his father was alive. His Honour considered in those circumstances, that "Michael was left with little alternative but to find other sources of income". Importantly, his Honour found that Michael's motivation in doing so "was to enable the farm to continue, particularly during a period of extended drought". His Honour found that Michael had made "an essential contribution to the continued operation of the farm over an extended period of time" and that this had been recognised by the deceased in his will.
10. Secondly, his Honour accepted Michael's evidence as to the reason for the cessation of the Ditch Witch Hire business and also accepted that it would become more difficult for Michael to obtain alternative employment as he got older and that he would have to devote most of his attention to running the farm. His Honour, at [66], found that in those circumstances, Michael's "capacity both to run the farm and earn other income is limited".
11. Michael gave evidence that he would not be able to keep the farm running without Ganmurra and Olivers. The respondents mounted a considerable challenge to Michael's evidence that he needed all of the properties to operate the farm successfully. His Honour did not fully accept the basis upon which this challenge was made. His Honour found, at [70], that the farm was a marginal operation. His Honour also accepted, at [71], that the farm was operated as an integrated whole and that it was not possible on the simple arithmetical approach taken by the respondents to determine the impact on the farming operation if two of the properties were sold. His Honour observed that a "reduction of 25 percent in the size of what appears to be a marginal farm could be critical to its continued viability".
12. His Honour, at [71]-[72], referred to Michael's evidence as to the movement of cattle between the properties undertaken as part of the farming operations. Michael had explained in his evidence the need to balance running cattle on pasture and growing feed to hand feed the cattle in poor seasons. In good years, approximately one fifth to a quarter of the farm was used for growing feed. In bad years, that portion increased to one third. His Honour considered that if Michael did not have access to Olivers and Ganmurra his capacity to grow feed for cattle on other properties would be reduced, causing overall cattle numbers on those properties to decrease. His Honour also referred, at [73], to the complications caused by droughts and floods, particularly as the three riverine properties were flood prone.

(b) Esmae's circumstances

1. Esmae was 87 years old at the time of the hearing before his Honour. She had been married to the deceased for 61 years. His Honour described her as being "frail" and in declining health. She has lived on Swansea since her marriage to the deceased and is presently assisted by her daughter Sue, who lives with her, as well as by Michael and his wife. She had been totally dependent upon the farm for income until she sold her cattle to Michael and transferred her 43 acres to him. As at the date of hearing, Esmae had received the proceeds of a life insurance policy on the deceased's life in the sum of $72,000. Esmae had also applied for, but, at the time of trial, had not been granted, a pension. If granted, the pension would be her only source of income.

(c) Kerryn's circumstances

1. Kerryn, like her siblings, grew up on the farm. It had been her wish to stay on the farm and help her father, but he considered that that was inappropriate and he found her a job in a pharmacy in Wagga Wagga. She was married to her first husband for approximately four years, during which time she stayed in contact with her father. Subsequently, she had a relationship with Hugh Long of some 28 years and has two children with him. The relationship broke down in 2009 and Kerryn and Mr Long formally separated in 2012.
2. Although Kerryn lived away from Wagga from about the time she commenced her relationship with Mr Long, she maintained contact with her parents, visiting two to three times a year. During those visits, she always assisted around the farm. There were occasions when her parents visited and stayed with her and her family.
3. Kerryn has always worked, including, at one time, in her own business. She currently works in a supermarket, approximately 70 hours per week, six days a week, and has a gross income of approximately $76,400. In some years, Kerryn has received a slightly higher gross income by cashing in long service leave or holiday leave or working for part of her four weeks annual leave.
4. Kerryn and Mr Long purchased a home unit in 2009 for $435,000. It was after the purchase that Mr Long indicated that he wished to terminate the relationship. Nonetheless, they moved into the unit and continued to live there. At the time of the hearing before the primary judge, Kerryn was anticipating a property settlement with Mr Long on the basis of a verbal agreement with him that involved an equal split of their assets. Kerryn stated in a later affidavit that Mr Long had given some indication he would no longer agree to that proposal.
5. At the time of the hearing, the unit was worth approximately $450,000. The outstanding mortgage was approximately $199,000. The weekly mortgage payment was $800, which Kerryn and Mr Long bore equally. In addition to her interest in the unit, Kerryn had superannuation in the sum of $62,500. Mr Long had a superannuation entitlement in the sum of $138,000. Kerryn gave evidence of monthly expenses of $4,700, including mortgage payments.

Issues on the appeal

1. By their amended notice of appeal, the appellants seek orders that the provision made in favour of Kerryn be set aside or, alternatively, that provision in an amount less than the sum of $200,000 ordered by his Honour be made. The appellants raised 19 grounds of appeal, many in the alternative and many with subclauses. During the course of the hearing of the appeal, grounds 10, 16 and 17 were not pressed.
2. The multiplicity of the grounds and sub-grounds does not readily facilitate the articulation of the issues on the appeal. However, by reference to the written and oral submissions, I understand that the appellants contend that his Honour erred in the following respects.
3. First, the primary judge failed to have sufficient regard to the deceased's testamentary wishes, expressly stated in cl 11 of the will.
4. Secondly, the primary judge erred in making provision for Kerryn (or making provision other than by way of a modest sum), in circumstances where Esmae and Michael had significant claims to provision out of the estate, which the deceased had recognised by the terms of his will.
5. Thirdly, his Honour failed to make clear factual findings in circumstances where it was necessary that he do so in order to determine what, if any, provision ought to be made for Kerryn.
6. Fourthly, even if Kerryn had discharged the onus of demonstrating that inadequate provision had been made for her, the provision made by his Honour was disproportionately high, having regard to Michael's rightful claims on the deceased's bounty.
7. Fifthly, his Honour erred in determining that an appropriate provision for Kerryn required ensuring that she had her own home.
8. Sixthly, his Honour erred in basing his calculations relating to Kerryn's mortgage on an interest rate of 6.5 per cent when she was paying interest at a rate of 5.29 to 5.3 per cent.
9. Seventhly, his Honour erred in finding that Esmae had in fact transferred Swansea to Michael, but even if the property had been or was to be transferred, his Honour's orders failed to take into account how provision was to be made for Esmae's needs.
10. Finally, his Honour erred in deciding that an offer of compromise made by the appellants to Donna on two occasions was not a genuine offer of compromise.

Issues on the notice of contention

1. By their notice of contention, Donna and Kerryn contended that his Honour ought to have found: (1) First, that the deceased had attempted to sell Ganmurra in 2010; (2) Secondly, that Michael was able to earn off-farm income.

Statutory provisions

1. The primary judge, at [78] ff, referred to the relevant statutory provisions and legal principles he was required to apply.
2. No challenge was made to the statutory provisions his Honour considered relevant. Those provisions are as follows. The Succession Act, s 59 provides that the court may make a family provision order out of the estate of a deceased person in favour of an eligible person. Kerryn is an eligible person: s 57(c). Section 60 provides the matters to which the court may have regard in determining whether a person is an eligible person and whether a family provision order should be made. The provisions of s 60 relevant in this case were subs (2) paras (a), (b), (c), (d), (g), (i), (j), (m) and (n), which provide: "(a) any family or other relationship between the applicant and the deceased person, including the nature and duration of the relationship, (b) the nature and extent of any obligations or responsibilities owed by the deceased person to the applicant, to any other person in respect of whom an application has been made for a family provision order or to any beneficiary of the deceased person's estate, (c) the nature and extent of the deceased person's estate (including any property that is, or could be, designated as notional estate of the deceased person) and of any liabilities or charges to which the estate is subject, as in existence when the application is being considered, (d) the financial resources (including earning capacity) and financial needs, both present and future, of the applicant, of any other person in respect of whom an application has been made for a family provision order or of any beneficiary of the deceased person's estate, … (g) the age of the applicant when the application is being considered, … (i) any provision made for the applicant by the deceased person, either during the deceased person's lifetime or made from the deceased person's estate, (j) any evidence of the testamentary intentions of the deceased person, including evidence of statements made by the deceased person, … (m) the character and conduct of the applicant before and after the date of the death of the deceased person, (n) the conduct of any other person before and after the date of the death of the deceased person … ..."

Legal principles

1. The Succession Act is the successor legislation to the Family Provision Act 1982 (NSW). In Singer v Berghouse [1994] HCA 40; 181 CLR 201 the majority, at 208, considered that the former Act involved the court engaging in a two-stage decision-making process, as follows: "It is clear that, under these provisions, the court is required to carry out a two-stage process. The first stage calls for a determination of whether the applicant has been left without adequate provision for his or her proper maintenance, education and advancement in life. The second stage, which only arises if that determination be made in favour of the applicant, requires the court to decide what provision ought to be made out of the deceased's estate for the applicant. The first stage has been described as the 'jurisdictional question' ..."
2. As to the first stage, their Honours stated, at 209-210: "... 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."
3. The second stage of the determination, should it arise, required the court to determine what provision, if any, should be made for the applicant. Their Honours, at 210, noted that this determination raised similar considerations as arose at the first stage: "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] HCA 44; 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." (emphasis added)
4. As the bolded portion of this passage indicates, although their Honours considered that the legislation called for a two-stage process of determination, there would be cases in which a clear line could not be drawn between the two stages of the determination.
5. Their Honours also observed, at 211, that the words 'adequate' and 'proper' in the legislation were "relative" and that the court's task was to "to form opinions upon the basis of its own general knowledge and experience of current social conditions and standards": see Goodman v Windeyer [1980] HCA 31; 144 CLR 490 per Gibbs J at 502. This statement was approved by Gummow and Hayne JJ in Vigolo v Bostin [2005] HCA 11; 221 CLR 191.
6. In Vigolo v Bostin, Callinan and Heydon JJ also expressed caution as to the strict application of a two-stage decision-making process. As their Honours observed, at [122]: "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." (emphasis added)
7. Both this Court, see Keep v Bourke [2012] NSWCA 64, and courts at first instance, of which the present case is an example, have continued to endorse the two-stage approach to claims under the Succession Act. However, in Andrew v Andrew [2012] NSWCA 308; 81 NSWLR 656, Basten JA observed, at, inter alia, [41], that the language of the Succession Act was not consistent with the two-stage enquiry that was a feature of prior legislation. His Honour also observed, at [28], that the factors identified in s 60(2) provide a more focused direction to the Court as to relevant matters to which regard may be had and involved a broader range of factors than was previously the case. Allsop P (as his Honour then was), accepted, at [6], that the language of the Succession Act, s 59, was "subtly different from the previous legislation", but also observed that whether the court's task under s 59 could still be described as involving a two-stage process "may be an analytical question of little consequence". Barrett JA considered, at [94], that the two-stage approach ought to be adhered to. See also the decision in Phillips v James [2014] NSWCA 4.
8. Thus, whilst there remains some uncertainty as to whether the legislation requires a two-stage approach, it is settled that the determination under the legislation on either approach, involves an evaluative judgment. This judgment requires a consideration, amongst other things, of the claimant's relationship with the deceased and with other persons who have legitimate claims upon the deceased's bounty: see Singer v Berghouse at 210, 211; White v Barron [1980] HCA 14; 144 CLR 431 at 434-5; 443; 448-9.
9. The primary judge noted that there was a doubt whether s 59 was to be applied as a two-stage process, but noted that the parties had agreed that it was appropriate for him to adopt that approach, such that he was required to first determine whether adequate provision had been made for the applicant and, secondly, if not, whether an order should be made and if so what order.
10. His Honour, at [81], restated the principles he had stated in Oldereid v Chan [2013] NSWSC 434, as follows: "55 First, there are no special rules that apply to adult children: McCosker v McCosker (1957) 97 CLR 566; Kleinig v Neal (No 2) [1981] NSWLR 532; for discussion see Goldsmith v Goldsmith [2012] NSWSC 1486 at [96] per Hallen J. The considerations that determine whether an order should be made in favour of an adult child may well be different from those applying to one who has not reached adulthood. But if that is so it is because the factors which are relevant to the determination of whether and, if so, what order should be made will change in significance as the child develops and the relationship between parent and child alters with the passage of time. 56 Second, the purpose of an order is not to achieve a fair distribution of the deceased's assets: Gorton v Parks (1989) 17 NSWLR 1 at 6 per Bryson J; Cooper v Dungan (1976) 50 ALJR 539 at 542 per Stephen J. The purpose of an order is to make adequate provision for the applicant's proper maintenance, education or advancement in life where the deceased has failed to do so. 57 Third, 'adequate' and 'proper' are relative terms. As Gibbs J said in Goodman v Windeyer (1980) 144 CLR 490 at 502: '[T]he words 'adequate' and 'proper' are always relative. There are no fixed standards, and the court is left to form opinions upon the basis of its own general knowledge and experience of current social conditions and standards.'"
11. His Honour added: "Similarly, in Vigolo v Bostin … at 228, Callinan and Heydon JJ said: [T]he use of the word 'proper' ... implies something beyond mere dollars and cents. Its use, it seems to us, invites consideration of all the relevant surrounding circumstances and would entitle a court to have regard to a promise of a kind which was made here ... The use of the word 'proper' means that attention may be given, in deciding whether adequate provision has been made, to such matters as what used to be called the 'station in life' of the parties and the expectations to which that has given rise, in other words, reciprocal claims and duties based upon how the parties lived and might reasonably expect to have lived in the future."
12. No issue was taken with his Honour's consideration of the relevant legal principles (although the parties have relied on additional authorities in support of their submissions). The challenge to his Honour's orders was, essentially, in his application of the principles to the circumstances relevant to his adjudication.

Trial judge's reasons

1. In determining whether provision should be made, his Honour made the following critical factual findings.
2. First, in relation to Esmae and Michael: (1) It was clearly appropriate for the deceased to put Esmae in the position where she could continue to live in the family home for as long as she wished and to have sufficient resources to enable her to do so. (2) It was also clearly appropriate for the deceased to leave Esmae with sufficient assets so that, if it became necessary for her to leave the family home, she would have the resources to find appropriate alternative accommodation and to support herself in that accommodation. (See Luciano v Rosenblum (1985) 2 NSWLR 65.) (3) Although it may have been reasonable for Esmae to seek to secure her future by transferring Swansea to Michael in the expectation that he will look after her, that was not relevant to the adequacy of the provision made by the deceased for her. Rather, it was relevant to Michael's position. (4) Michael had devoted a large part of his life to the farm, often for little reward, and had provided invaluable assistance to his parents and to the deceased in particular. (5) Michael's future livelihood depended heavily on the farm income, although the farming operation was not very profitable and indeed at times was marginal. (6) A reduction in the size of the farm would exacerbate its marginal profitability. (7) Although Michael and his family could live off the proceeds of the properties if sold, that would be inconsistent with the deceased's intentions.
3. Secondly, in relation to Donna, his Honour, at [89], recognised: (1) There were strong competing claims on the deceased's bounty. (2) Having regard to Donna's financial circumstances, he was not satisfied that she had been left without adequate provision for her proper maintenance and advancement in life.
4. Thirdly, as to Kerryn: (1) Kerryn, like Donna, had a good relationship with the deceased and had assisted on the farm when she was young. (2) Kerryn, now split from her partner, had few assets of her own and faced a difficult future. (3) If Kerryn and Mr Long agreed to an equal division of property, Kerryn would have total assets of $225,000. (4) If she purchased Mr Long's interest in the unit she would have to pay him $125,555. (5) If Kerryn borrowed to purchase Mr Long's share in the unit at an interest rate of 6.5 per cent over 13 years (that is, until age 70), her weekly mortgage payments would be $716 per week. (6) Unless some provision was made for Kerryn, there seemed little prospect that she would be able to buy the unit where she lives. (7) In those circumstances, the provision made for her in the deceased's will was inadequate.
5. Having made that determination, his Honour, at [91], turned to the question as to what provision, if any, would be appropriate to be made for Kerryn. His Honour determined that the appropriate provision: "… would be a sufficient sum of money to enable her to buy out [Mr Long's] interest in the unit and to reduce the mortgage to a level where she could expect to repay it by the time she reaches the age of 65."
6. His Honour reasoned that that would leave her in a position where, on retirement, she would own a unit, have a modest amount of superannuation and any pension to which she might be entitled. In order to achieve that, his Honour considered that appropriate provision would be a sum of $200,000. The mathematical calculation underlying that assessment was that provision of a sum of $200,000 would leave Kerryn with a mortgage of approximately $124,000. His Honour assumed an interest rate of 6.5 per cent and continuing weekly mortgage repayments of $400 per week. On those assumptions, the mortgage would be repaid in full in eight years.
7. His Honour determined that that provision should come out of Michael's share of the estate. His Honour acknowledged, at [92], that that might mean Michael would have to sell one of the properties and that that may undermine the farm's viability. His Honour considered, however, that it was not obvious that Michael could not raise the funds necessary to pay Kerryn the sum of $200,000 without selling one of the properties. His Honour also stated that it was not obvious that the farm would be unviable if one of the properties was sold. In this regard, his Honour considered it relevant that, under the terms of the deceased's will, had Esmae predeceased the deceased, Ganmurrra would have been left to Kerryn and Luke.
8. His Honour added that in any event, the deceased's desire to preserve the farm for Michael's benefit and Michael's concern that the farm would not be viable unless it consisted of all the properties, was not determinative. In his Honour's view, the effect of the order he proposed gave Michael reasonable prospects of remaining on the farm in the long term. He considered that even if that turned out not to be the case, he would still have adequate assets upon which to live.

Consideration of issues raised by the notice of appeal

First and second issues: failure to pay sufficient regard to the deceased's testamentary wishes and to the competing claims of the beneficiaries, including Michael

1. The appellants submitted that the primary judge's "foremost error" was a failure to pay appropriate regard to the deceased's own judgment as to how the demands on his bounty were to be satisfied. The appellants submitted that the effect of the deceased's testamentary dispositions was to divide the properties which comprised the principal farming operations, namely, Swansea, Ganmurrra, Flanagans and Olivers, between Esmae and Michael. They submitted that it was obvious that it was the deceased's intention to keep the farm as an integrated economic unit, managed and run by Michael, both for his own benefit and for the benefit of Esmae, who was dependent upon the farming enterprise for her living. The appellants submitted that it had not been demonstrated that the deceased, in giving precedence to Michael over the claims of his other children, had failed in his testamentary duty.
2. The appellants further submitted that it was apparent from the terms of the will that the testator had given careful consideration to the needs of his widow, as well as the proper provision that ought to be made for Michael. They contended that the testator's intention was to reward Michael for his past efforts and to fulfil his expectations of succeeding to the farm whilst at the same time ensuring that Esmae's needs would be attended to by Michael. It was submitted that the deceased had sought to achieve this by leaving the substantial portion of the farm to Michael so that it would continue to operate as an integrated farming operation. The appellants contended that his Honour ought to have given preference to the deceased's wishes and had erred in holding that that the deceased's wishes, coupled with Michael's concern as to the farm's viability if divided up, was not "determinative".
3. Courts have long accepted that a deceased's statements explaining the reasons for a particular testamentary disposition are admissible as evidence of the deceased's motive or knowledge and accordingly are a relevant consideration in the Court's determination under s 59: Hughes v National Trustees, Executors and Agency Company of Australasia Limited [1979] HCA 2; 143 CLR 134 at 149-153 per Gibbs J (with whom Mason and Aickin JJ agreed).
4. The relevance of a testator's wishes was also considered by Dixon CJ in Pontifical Society for the Propagation of the Faith v Scales [1962] HCA 19; 107 CLR 9. His Honour had first observed, at 19, that the words "adequate" and "proper" in the statutory provision were "always … relative", having regard to a claimant's age and situation generally. As his Honour explained: "What is 'adequate' must be relative not only to [the claimant's] needs but to [the claimant's] own capacity and resources for meeting them. There is then a relation to be considered between these matters on the one hand, and on the other, the nature, extent and character of the estate and the other demands upon it, and also what the testator regarded as superior claims or preferable dispositions."
5. His Honour then commented upon the consideration that was to be given to the testator's wishes: "All authorities agree that it was never meant that the Court should re-write the will of a testator. Nor was it ever intended that the freedom of testamentary disposition should be so encroached upon that a testator's decisions expressed in his will have only a prima facie effect, the real dispositive power being vested in the Court."
6. Although these comments were directed to the actual testamentary dispositions made by the deceased in that case, it follows that a testator's explanation of why he made those decisions must be given appropriate weight. The weight that is given will depend, inter alia, upon whether it is apparent from the evidence that the testator's wishes and testamentary intentions are soundly based and not, for example, attributable to irascibility, mere dislike, or based on lack of information, or wrong information. On the evidence and as was apparent from his Honour's findings, the deceased's reasons for preferring Michael in his will were well based and the Court should pay appropriate regard to them.
7. The same notion, that it is not the court's function to rewrite the will, is found in Hughes, at 146, per Gibbs J: "It has long been established that in exercising the power given by a section such as s 91, the court is not entitled to re-write the will of a testator in accordance with its own ideas of fairness or justice. According to the classical statement in Bosch v Perpetual Trustee Co: '… in every case the court must place itself in the position of the testator and consider what he ought to have done in all the circumstances of the case, treating the testator for that purpose as a wise and just, rather than a fond and foolish, husband or father.'"
8. Gibbs J further observed, at 147-148, that in such a case: "There are no rigid rules; the question whether adequate provision has been made for the proper maintenance and support of the [claimant] must depend on all the circumstances - that is, on all the facts that existed at the date of the death of the testator, whether the testator knew of them or not, and all the eventualities that might at that date reasonably have been foreseen by a testator who knew the facts."
9. Although Hughes was concerned with a claim by an adult son, the same observations apply to any claimant, including an adult daughter (although the positions of a dependent widow and of infant children are treated with special regard). In short, the court must have regard to the relevant circumstances, including the matters to which s 60 directs attention, so as to determine whether the claimant was left without adequate provision for that person's proper maintenance and support.
10. In my opinion, there is merit in the argument advanced by the appellants in support of the first issue. Although his Honour was required to determine whether Kerryn was left without adequate provision and, if so, what provision to make for her, he was required to make that determination with due regard to the wishes of the testator and to the circumstances of the other beneficiaries under the will.
11. I agree with his Honour that the deceased's wishes are not determinative. Whilst a court determining whether an eligible person has been left without adequate provision for support and maintenance is required to have regard to the testator's wishes, it is not bound by those wishes if it otherwise determines that a claimant has been left without adequate provision and support and that provision ought to be made.
12. Nevertheless, I am of the opinion that the provision ordered by his Honour altered the disposition of the estate to such an extent that the deceased's wish that, of his children, Michael be the principal beneficiary, was not given appropriate weight. It will be convenient to consider the consequences that flow from this finding further below, in conjunction with the second and fourth issues.
13. The second issue was advanced in various ways. First, the appellants contended that Kerryn had not discharged the onus she bore as a claimant of demonstrating that adequate provision had not been made for her. The appellants submitted that that onus had to be discharged having regard to the testator's obligations to all other claimants, but particularly his obligations to Esmae and Michael and that, by not doing so, he had failed to make adequate provision for her: see Re Hardgraves [1955] QSR 601; 29 ALJ 734 at 608 per Stanley J.
14. Secondly, the appellants pointed out that in undertaking the first stage of the two stage process described above, at [54]-[55], it was necessary to consider whether adequate provision had been made by reference to the rightful claims of others, including those for whom provision had been made under the will. The appellants submitted that although his Honour had engaged in a two-stage process, he had failed to include this consideration in the first jurisdictional stage, with the result that, having determined that Kerryn had been left without adequate provision for support, his Honour was inevitably led to the conclusion that the testator's wishes, as expressed in the terms of his will, could not be accommodated. On this argument, his Honour was thereby erroneously driven to a result whereby some lesser provision was required to be made for Michael than the deceased had provided for under the terms of his will.
15. The effect of these submissions was that, as provision could only be made for Kerryn if the farm was broken up, it was not open for the primary judge to find that inadequate provision had been made for her, or, at the most, that some modest provision only ought to have been ordered. The appellants explained this submission as follows: "At the first stage, his Honour would have to think about whether there was inadequate provision for Kerryn, having regard to the likely effect of doing more for her than had been done. For example, [using a figure of $50,000 by way of example], if his Honour reached a view that giving her $50,000 would not imperil the farm, then his Honour could say, well, the testator was in a position to fulfil his duties to the widow and to Michael. I find that this $50,000 can be accommodated without imperilling that. I look at the circumstances of Kerryn, I see she has need that the testator has not made provision for and it was his duty to do something for her and I think that he should have given her [that minimum sum]."
16. The appellants then submitted that having made that determination, the court could, by reference to the factors in s 60, vary such an amount either up or down. The appellants' primary submission, however, was that his Honour's finding that the estate could afford to pay was in error.
17. Finally, the appellants contended that his Honour had failed to give adequate reasons both for finding the jurisdictional question in Kerryn's favour and in ordering provision for her in the sum of $200,000. In this regard, the appellants contrasted that part of his Honour's judgment in which he dealt with Donna's claim with his consideration of Kerryn's claim.
18. His Honour commenced his consideration of the question whether further provision should be made for Donna and Kerryn with the statement, at [83]: "It is clear from what I have said that this is a case where both [Esmae] and Michael have strong competing claims on the deceased's estate and the question whether Donna and Kerryn have been left without adequate provision for their proper maintenance or advancement in life must be considered in that light."
19. His Honour next stated, at [84], that before considering the claims of Donna and Kerryn it was "desirable to say something about the position" of Esmae and Michael. His Honour then dealt with the respective position of each. His Honour described Donna's relationship with the deceased as "good" and that she had been a "dutiful daughter". His Honour concluded, at [87], "that against that background", he was not satisfied that inadequate provision had been made for Donna. He explained why this was so by reference to her relationship with the deceased and Esmae and her financial circumstances. Clearly, in my opinion, it was Donna's satisfactory financial circumstances that resulted in an order for provision not being made in her favour. His Honour then stated, at [90], that the position with Kerryn was different. Again, it is apparent that it was Kerryn's financial circumstances that led his Honour to make an order in her favour, as she too had had a good relationship with the deceased.
20. The appellant's submission requires, in effect, that those parts of his Honour's judgment dealing with Kerryn's claim be read in isolation from the earlier part of his judgment. However, that would involve a completely wrong reading of his Honour's judgment. His Honour had stated, at [83], reproduced above, that Donna and Kerryn's claims had to be considered against Esmae and Michael's strong claims on the deceased's bounty. It was not necessary, when dealing with Kerryn's position, for his Honour to repeat what he had already said as to Esmae and Michael's positions. I would reject this aspect of the appellants' submissions.
21. The appellants also submitted that even if his Honour had correctly determined that inadequate provision had been made for Kerryn, he erred in the provision he ordered in her favour. They pointed out that when regard was had to the provision made for Kerryn by his Honour's order, Michael's position was not substantially different from Kerryn's and that having regard to the contribution Michael had made to the deceased in his lifetime, the result of his Honour's determination left Michael with inadequate provision. Whether or not this submission is well-based depends on the outcome of the other issues and will be considered as part of the overall determination of the issues on the appeal.

Third issue: failure to make factual findings

1. Two principal challenges to his Honour's judgment were made in what I have characterised as the third issue.
2. First, the appellants contended his Honour's finding that it "was not obvious" that Michael could not raise the money to pay Kerryn the legacy he proposed to order was not open on the evidence. They also submitted that an observation that something "was not obvious" was not sufficient to enable a proper determination of a fact in issue. Secondly, the appellants submitted that his Honour failed to have proper regard to the fact that the farming enterprise had at all times been operated as an integrated operation and that the provision the deceased made under his will was designed to maintain Esmae in the family home as well as to ensure the continued economic functioning of the farming enterprise.
3. As to the first challenge, the appellants contended that it was apparent on the evidence that Michael could not raise the funds to pay Kerryn's legacy of $200,000 without selling one or more of the properties and that his Honour erred in his observation that it was "not obvious" that he could not do so. Michael had given unchallenged evidence in his affidavit that he did not have the cash value of any of the properties and, even assuming that he was able to borrow the money, he did not have the income to repay a loan or even to pay the interest on a loan, given his current income and commitments. The appellants contended that Michael's unchallenged evidence that he did not have the money to purchase Mundowy, which had been devised to Luke, supported their case on this question. The appellants submitted that without making a finding as to whether Michael could or could not raise the funds to pay Kerryn without selling any of the properties, it was not possible to properly determine what provision ought to be made for Kerryn by reference to the competing claims that Michael also had on the deceased's bounty.
4. In my opinion, his Honour erred in considering that it was "not obvious" that Michael could not raise the funds to pay a legacy of $200,000 to Kerryn. Michael gave unchallenged evidence that even if he could raise those funds by way of loan, he would not have the income to pay the monthly instalments on any borrowing. That was apparent, in any event, from the evidence of his financial circumstances.
5. It is true that his Honour found that it was difficult to work out the net profit Michael and his wife earned from the farming enterprise, and also considered that it was not easy to get a clear picture of Michael and his wife's assets and liabilities from the evidence. It appears, however, that his Honour's concern in that regard related to the difficulty of ascertaining the value of the cattle belonging to the partnership, because their value fluctuated from time to time.
6. On the evidence, the cattle were valued at approximately $162,000: see judgment at [58]. Even if the actual value was more or less than that sum, two comments can be made. First, there was no evidence to suggest their value would be markedly different. Secondly, the cattle were not realistically a source of funds for the payment of the legacy. As his Honour had noted, the gross profits of the farm are substantially derived from the sale of cattle. His Honour also accepted the farm machinery had minimal value and that neither Michael nor his wife had any superannuation. His Honour also accepted Michael's evidence as to why the Ditch Witch Hire business folded and found that Michael's ability to continue to earn non-farm income into the future was limited. Added to these matters was the fact that the seasons over the last decade were such that farming conditions had been difficult.
7. Thus, even if, on the evidence, the value of the cattle and the income from the farming enterprise could not be stated definitively, it was clear that Michael did not have the means to pay the legacy without selling one of the properties. And, as the appellants pointed out, Michael was not cross-examined that he could otherwise pay the legacy. Thus, even had Michael not directly asserted that he could not borrow the funds to pay Kerryn a legacy of $200,000 (as in fact he had), both the evidence before the court as to his current financial circumstances and his evidence that he could not repay any such loan, effectively negatives any ability to borrow the necessary funds. In my opinion, the evidence was clear that unless one or more of the properties were sold, Michael did not otherwise have the means to pay the legacy his Honour ordered be paid to Kerryn.
8. It follows, in my opinion, that this challenge to his Honour's fact finding has been made out.
9. The second challenge the appellants made to his Honour's fact finding was that he had failed to have sufficient regard to the fact that the farm had at all times been operated as an integrated farming unit and would only remain viable if it continued to be so operated.
10. As I understand the submission, it was that it was incumbent upon his Honour to make clear findings of fact on this issue, given that it was central to the appellants' case. The appellants submitted that had his Honour directed his attention to making clear factual findings, he would have had to consider matters such as which of the properties could be sold to satisfy the legacy, the fact that there would be costs of sale, and the impact that the sale of one property as opposed to another would have on the farming operation and therefore upon Michael's ability to remain on the farm. They posited, for example, that if Michael were to stay on the farm, the obvious property to sell would be Olivers, which, at probate, was valued at $200,000. If this property was sold, it would be necessary for funds to be found for the costs of sale. The appellants contended that his Honour had failed to turn his attention to such factors. The appellants also challenged his Honour's reasoning process in making the finding that the provision for Kerryn should be borne by Michael's share of the estate.
11. In my opinion, this aspect of the appellants' argument has not been made out. His Honour clearly accepted that the farming operation had always been conducted on all of the properties as an integrated farming unit and that the farming operation was "a marginal operation": judgment at [70]. His Honour considered, however, that even if the farming operation would not be viable if one or more properties were sold, that factor was not determinative: judgment at [92]. Although the appellants contended that the last finding was itself an error, I have concluded that was not the case: see at [77] above.
12. The appellants further contended that the question whether one or more properties would have to be sold should have been considered by his Honour at the jurisdictional stage of the s 59 test, in which he considered whether Kerryn had been left without adequate provision. They contended that had his Honour considered the question at that stage, he would have found this issue against Kerryn.
13. For the reasons already given above at [98], I do not agree that this consideration would have meant that Kerryn would not have established any entitlement to provision out of the estate.

Fourth issue: provision for Kerryn disproportionately high

1. In accordance with the terms of the will, the value of Michael's interest under the estate was $594,325, comprised as follows: (a) Olivers $200,000 (reasons, [4], [75]) (b) Flanagans $310,000 (reasons, [4], [75]) (c) Plant Minimal (reasons, [8], [9], [59]) (d) Livestock $84,325 (reasons [58]) TOTAL: $594,325

1. In accordance with his Honour's orders, the value of Michael's interest was decreased by $200,000, being the amount of the legacy payable to Kerryn, which was ordered to be borne by Michael's share of the estate. Michael's interest under the estate was also to bear a proportionate burden of the restitutionary debt to Kerryn, although that was relatively small. The value of Michael's share of the estate was thus reduced to less than $400,000.
2. In my opinion, even at that point, without regard being had to the costs ordered to be borne by Michael's share of the estate, the legacy ordered in Kerryn's favour is disproportionate to any rightful claim she may have when regard is had to Michael's rightful claim to the deceased's bounty. Michael's position is further affected when the impact of the costs order is taken into account. His Honour's costs orders were subject of a separate determination: Peters v Salmon (No 2) [2013] NSWSC 1071. In that judgment, his Honour observed that the appellants' costs were estimated to be $166,000 (judgment (No 2) at [23]). The respondents' costs were approximately $150,000.
3. His Honour ordered that Kerryn's costs were to be paid out of the estate and that Kerryn's costs be determined as 50 per cent of the respondents' costs. The amount of costs to be borne by the estate under this order was approximately $75,000. Those costs were to be borne by Esmae and Michael according to their share of the estate, which were approximately 78 per cent and 22 per cent respectively, further reducing Michael's entitlement under the estate by approximately $20,000. The estate was also to bear its own costs of the proceedings.
4. In addition, interest was accruing on the unpaid legacies, including on the provision made for Kerryn. The parties did not favour the Court with a calculation of the interest that had accrued as at the date of the appeal.
5. It is apparent that when these additional figures are taken into account, Michael's interest under the will is substantially and disproportionately reduced from that to which he was otherwise entitled.

Fifth issue: error in making provision to ensure Kerryn had her own home

1. This conclusion also impacts upon the fifth issue, namely, the appellants' contention that his Honour erred in determining that an appropriate provision for Kerryn required ensuring that she had her own home.
2. It will be recalled that underlying his Honour's reasons for ordering provision in the sum of $200,000 was to allow for the repayment of that sum off her existing mortgage, leaving her with a mortgage of approximately $124,000. At her then repayments of $400 per week, that mortgage, at an interest rate of 6.5 per cent per annum, would have been repaid in eight years. As his Honour noted, at [91], that would leave Kerryn "in a position where she owned the unit [at age 65] and had a modest amount of superannuation" upon which to retire, together with any entitlement she had to a pension.
3. In Kohari v Snow [2013] NSWSC 452 Hallen J, at [121], observed: "The community does not expect a parent, in ordinary circumstances, to provide an unencumbered house, or to set his, or her, children up in a position where they can acquire a house unencumbered, although in a particular case, where assets permit and the relationship between the parties is such as to justify it, there might be such an obligation …"
4. As White J explained in Mayfield v Lloyd-Williams [2004] NSWSC 419, at [110]: "… there is no rule to the effect that proper provision for an adult and presently able-bodied child does not extend to providing him or her with a house or money to buy one … cases are infinitely variable and what is proper maintenance and advancement in life depends on all the relevant circumstances."
5. In the present case, having regard to Michael's significant contribution to maintaining the farming enterprise and the absence of any contribution by Kerryn other than the help she provided when visiting both parents, I am of the opinion that this is not a case where a wise and just testator would have made provision for Kerryn such as to ensure she had her own home.
6. I agree, therefore, with the appellants' submission that the effect of the provision made by his Honour for Kerryn was so as to enable her to have her own home but that such provision was not warranted having regard to the rightful extent of her claim on the estate.

Sixth issue: interest rate of 6.5 per cent

1. The appellants contended that his Honour erred when, in determining what provision to make for Kerryn, he based his calculations on an interest rate of 6.5 per cent. There is some merit in this criticism, although had it been the only error established by the appellants, it would not have been sufficient to displace his Honour's orders.

Seventh issue: error in finding that Esmae had transferred Swansea to Michael

1. His Honour, at [76], observed that the evidence established that Esmae had signed a transfer of Swansea to Michael. That was correct. At [85], his Honour noted that Esmae had transferred many of her assets to Michael, including property that she inherited under the will. Later in the same paragraph, his Honour stated that: "The fact that [Esmae] has transferred, or proposes to transfer, to Michael her assets is relevant to Michael's own position."
2. His Honour again referred to this question in the costs judgment, at [32], when he stated that: "… there was evidence … that [Esmae] had transferred her interest in the farm (including the interest she inherited under the will) to Michael. Although it is not seriously disputed that that is her intention [counsel for the appellants] submitted that that intention had not been effected ..."
3. It is apparent from his Honour's observations that he did not make a definite finding that Esmae had transferred Swansea to Michael. To that extent, therefore, this particular challenge to his Honour's decision must fail. To the extent that his Honour took into account the strong likelihood that this was to occur, I consider he was entitled to do so on the evidence.

Consideration of issues on the notice of contention

1. Donna and Kerryn contended that his Honour ought to have found that Esmae and Michael had attempted to sell Ganmurra in 2010. Esmae gave eivdence to that effect in the course of her cross-examination. She denied, however, that the reason for the attempted sale was because it was no longer going to be useful for the farm and also said that she could not recall the reason for trying to sell it. Having regard to that evidence, I do not consider that his Honour erred in failing to make a finding about the attempted sale.
2. Donna and Kerryn also contended that his Honour ought to have found that Michael was capable of earning additional off-farm income. In my opinion, his Honour was entitled to reject Donna's and Kerryn's assertion that Michael was capable of suplementing the farm income by off-farm work. Michael gave evidence why that was no longer feasible and his Honour was entitled to accept that evidence. No error has been demonstrated in his doing so.

Appeal made out

1. In my opinion, the appellants have succeeded in establishing error in the primary judge's determination. Neither party sought a retrial of the proceedings. Accordingly, it is necessary for this Court to determine whether Kerryn has established an entitlement to provision out of the estate of the deceased and if so, what provision ought to be made. However, as the appellants sought leave to adduce further evidence, it is first necessary to determine whether leave to do so should be granted.

Application to adduce further evidence

1. Pursuant to Supreme Court Act 1970 (NSW), s 75A(6), the court on an appeal has the powers and duties of the court from which the appeal is brought, including the power to determine the relief that ought to be granted in the matter. In the usual course, this power is exercised in accordance with the statutory nature of the appeal by way of rehearing: s 75A(5). Subject to the Court's discretion to receive further evidence, an appeal to the Court is based upon the transcript of the hearing before the primary judge and the other evidence admitted at trial: CSR Ltd v Della Maddalena [2006] HCA 1; 80 ALJR 458; Fox v Percy [2003] HCA 22; 214 CLR 118.
2. Section 75A subs (7), (8) and (9) govern the receipt of further evidence. Pursuant to subs (7), the Court may receive further evidence. However, on an appeal after a trial or hearing on the merits, further evidence is not to be received except on special grounds: see subs (8). The requirement for special grounds does not apply in respect of matters occurring after the trial or hearing: see subs (9).
3. The evidence which is sought to be adduced by the appellants involves evidence that was available before the trial, evidence that seeks to explain the evidence given at first instance and evidence of the positions of Esmae and Michael subsequent to the judgment. Special grounds need to be established in respect of the first and second aspects of the evidence and none were advanced. Special grounds are not required in relation to the updating evidence, although the Court retains a discretion as to whether to admit that evidence and, in exercising that discretion, is to be guided by the principles governing a rehearing under s 75A, discussed above.
4. Pursuant to the Succession Act s 59, the court, in making an order for provision, is to "[have] regard to the facts known to the Court at the time the order is made". It is appropriate, and may in some cases be necessary that the court have up-to-date information as to the position of the parties. Accordingly, it is appropriate in this case, where the Court is being asked to re-exercise the evaluative and discretionary tasks imposed by s 59, to have regard to the updated evidence relating to their present financial and domestic circumstances. I consider, therefore, that the Court should receive certain of the further evidence.

The valuation evidence

1. Updated valuation evidence of the four properties, Swansea, Flanagans, Olivers and Ganmurrra, was given by Mr Graham on behalf of the appellants, dated 26 March 2014. Mr Lucas, on behalf of the respondents, provided an updated valuation of Swansea dated 2 September 2014. That valuation evidence was as follows (with the probate value also being set out for the convenience of comparison): Property Probate Value ($) Valuation of Mr Graham ($) Valuation of Mr Lucas ($) Swansea 900,000 692,000 750,000 Flanagans 310,000 300,000 - Olivers 200,000 193,000 - Mundowy 180,000 - - Ganmurra 300,000 288,000 -

1. As is apparent from this table, there has been a decrease of approximately $200,000 in Esmae's financial position, accepting for present purposes that she retains the legal and beneficial ownership of Swansea. There has been a slight decrease in the value of the provision for Michael.

Esmae's updated circumstances

1. Esmae commenced to receive the aged pension in June 2013 which provides an income of $827.10 per fortnight. She has a little over $100 in bank accounts. She has a significant liability for legal costs relating to the court proceedings and a non-estate legal debt of approximately $1,000. Many of her living expenses are now met by Sue and her partner and by Michael and his wife.
2. Esmae has received a capital return and special dividend on the Exco Resources N/L shares in the sum of $15,200. That sum has been expended on estate expenses. Exco Resources was subsequently acquired by Washington H Soul Pattinson & Co Ltd. Esmae accepted Washington H Soul Pattinson's offer of $0.265 per share when the company was removed from the official listing on the ASX in January 2013.
3. Mr Woods, solicitor, in his affidavit sworn 25 March 2014, provided a calculation of Esmae's net position under the orders made by the primary judge. Mr Woods calculated Esmae's position on the basis of his Honour's orders as entitling her to 78 per cent of the estate, with a net worth as follows: Value of Esmae's share … $1,200,000 Add: Rebate estimated to accrue to Esmae's share through Donna paying her costs to the Estate of the lower Court proceedings $19,584 Less: Proportion of Kerryn's costs of lower Court proceedings burdening Esmae's share -$42,559 Less: The share of the Defendant's costs of $167,391.06 in the lower Court proceedings burdening Esmae's share, 78% as per Order 10 in the Court below -$130,565 Nett value of Esmae's share of the Estate $1,046,460

1. This assessment is affected by the reduction in value of Swansea, so that the gross value of the estate left to Esmae is approximately $1,000,000. However, this reduction will only become relevant if the costs order made by his Honour, which, relevantly, required Kerryn's costs to be borne by Esmae and Michael in proportion to their share in the estate, remains in place.
2. Mr Woods estimated that the net amount that Esmae was required to pay under the orders in the court below was $153,540. The respondents' solicitor, Mr Bilinsky, in his affidavit of 4 September 2014, stated that his assessment of the costs payable by Esmae was $167,513.
3. Following the hearing at first instance, Esmae and Michael sought financial advice in relation to Esmae obtaining the pension. As a result of that advice, Esmae transferred the cattle and the 43 acre lot on the Flamingo property to Michael, so as to meet the asset eligibility test for a pension. In addition to being granted the fortnightly pension, Esmae received a pension bonus and a back payment totalling approximately $13,500, of which $9,900 was paid in fees to the financial adviser.
4. Esmae stated that if it was necessary to sell the farm, including Swansea, her living options were either to live in Sydney with her daughter Sue, the third appellant, or to reside in a nursing home in the district. She did not wish to choose either option. She explained that she had always lived in the country and did not want to live in Sydney. She also said that the accommodation that Sue could provide her was not suitable for a person of her age. Esmae stated that if she lived in either of the nursing home facilities in the Walker District, she would be permanently cut off from everything that was familiar to her and, in particular, from the constant contact that she has with Sue and with Michael.
5. Sue, in an affidavit sworn 26 March 2014, stated that, in October 2013, after the primary judgment was handed down in this matter, she attended with her mother upon the ANZ bank in Wagga to ascertain whether it was possible to borrow the sum of $200,000 to pay the legacy ordered by the court in favour of Kerryn. They were informed that the bank would not lend that sum either to Esmae or to the estate, because neither had sufficient income to meet repayments.
6. Sue stated that the current care arrangements for her mother involved her living with Esmae virtually on a full-time basis. From time to time, she would return to Sydney to attend to her family, personal and business interests. She prepared meals for her mother before she left. Whilst she was away, Michael would call in several times a day and ring late in the evening to check on Esmae and to provide whatever care she needed. Michael's wife also assisted in this regard.
7. Sue arranged for Esmae to be assessed by an Aged Care Assessment Team to ascertain what care would be available for her. Sue understands that, as a result of that assessment, respite care will be available for Esmae in both the short and longer term, should that be needed.
8. Sue stated that there had been no contact by the respondents with their mother since the conclusion of the lower court proceedings in June 2013. She said that Luke, who did not participate in the proceedings, keeps in regular contact with their mother and has visited on one occasion since the hearing.
9. Sue stated that if it was necessary for Swansea to be sold, her own accommodation in Sydney was not suitable for Esmae and she and her partner would be required to find alternative accommodation with the attendant costs involved. Sue confirmed that there were nursing home or aged hostel facilities in the district, depending upon vacancies. She pointed out, however, that she would then be six hours away from her mother, greatly limiting Sue's ability to make regular visits to give Esmae support and comfort. Sue stated that this would be distressing for both her mother and herself.
10. Sue stated that this would be "an unhappy ending to [her] mother's life", given her wish to stay on Swansea and the length of time she had spent in that property, working hard as a farmer's wife and raising the family there.
11. Sue also referred to Kerryn's circumstances. She noted that in Kerryn's lifetime, she had owned a home with her ex-husband, and a block of land and two earlier homes prior to the purchase of the unit at Dee Why with Mr Long. Sue stated that she did not know what had happened to the proceeds of sale of those properties. The time to introduce that evidence was at the trial. However, Kerryn had not been cross-examined about those matters and I do not consider that leave should be given for this evidence to be adduced.

Michael's updated circumstances

1. Michael swore a lengthy affidavit on 29 April 2014. In addition to providing details of Esmae's updated financial circumstances, which are set out above, he also gave an explanation of his evidence given at trial as to the value of his unremunerated work on the farm calculated in accordance with social security rules. In his evidence at trial, he had claimed the value of his unremunerated work to be approximately $1,400,000. He was strongly challenged on this evidence in cross-examination. The trial judge did not make any finding in relation to this evidence. He also denied in cross-examination that he had not paid any consideration for the transfer to him of the 43 acre Flamingo lot, stating that he had transferred some of his foregone wages for that property. The primary judge had not made any finding on this. I would not give leave to Michael to adduce this explanation of his evidence which I do not consider falls within s 75A.
2. Michael provided details of his present financial circumstances. These included a cheque account, held with his wife, which was overdrawn in a sum of approximately $69,000. That debt was secured by a mortgage over Flamingo at an interest rate of 5.61 per cent per annum. The net partnership income for himself and his wife for the year ended 30 June 2013 was just over $30,000. Michael said that for the six months from September 2013 to February 2014 the net income from the farm was approximately $12,000.
3. Michael stated that he and his wife have had to defer significant expenditure because of lack of funds. This included expenditure to replace old farming equipment, as well as expenditure for dental work for his wife and laser treatment for his eyes.
4. Michael gave evidence that he had approached both the Rural Bank and the Bendigo Bank to ascertain whether he could borrow $200,000 in order to pay out Kerryn's legacy. He said that he had done this notwithstanding that he believed that he did not have the financial capacity to repay such loan. He said, however, that he thought it was prudent that he do so. Both financial institutions refused the application.
5. Michael also provided extensive evidence in his affidavit as to how he has operated the farm in the past. In my opinion, even though this evidence was not objected to (apart from the general objection to any further evidence being adduced) and although there was no request for cross-examination, this aspect of Michael's evidence ought not to be admitted, because it does not update his financial circumstances and was evidence that either was or ought to have been given at trial.
6. Michael gave updated evidence as to how the various properties are used in the farming operation and what the position would be if he had to sell one or other of them if the orders of the primary judge remain in place. In this regard, he stated that he understood that under the orders made by the primary judge, he would incur a net liability of $243,000, comprising the legacy payable to Kerryn, together with the costs he was ordered to bear. This evidence was essentially an update of his evidence at trial and I have had regard to it.
7. There are two matters of significance emerging from this evidence. Michael has reconfirmed that if any of the properties were to be sold, it would have an impact on the farming operation. He also said that he was moving to different and improved farming practices, which, taken with a number of options he has with his cattle, he believed would allow the farm to survive. As I understand that evidence, it was that the viability of the farming operation would potentially be enhanced by the adoption of these practices.
8. There is also the question of the status of the ownership of Swansea. For my part and, notwithstanding the existence of an executed transfer of the property to him, I do not consider that this ought to be taken into account in assessing Michael's circumstances. Whilst it appears that Esmae had and may still have an intention to transfer the property to him, there is no certainty that will occur. Esmae may, for example, simply change her mind and decide not to transfer the property to Michael or she may decide that she needs Swansea to provide for her long term care.

Kerryn's updated circumstances

1. Kerryn filed an updating affidavit dated 4 September 2014.
2. Kerryn stated that she reached a Binding Financial Agreement dated 23 April 2014 with Mr Long, pursuant to which she paid him the sum of $151,000 on 23 May 2014. She stated that in order to keep the unit at Dee Why, she took out a loan of $320,000. The weekly repayments on that loan are $650, repayable over 18 years. Kerryn stated that by that time, she would be 75 years of age and that it would be unrealistic for her to continue performing the physical job that she presently does to that age. The unit has increased in value and is presently worth approximately $570,000.
3. Kerryn's superannuation has also increased. As at 23 April 2014, her superannuation entitlement was $66,800: see Schedule to Binding Financial Agreement.

Should provision be made for Kerryn and, if so, in what amount?

1. I have already examined the principles governing the determination of whether provision should be made for an eligible person out of a deceased's will and the matters to be taken into account in determining what provision ought to be made. The appellants effectively accepted in argument on the appeal that Kerryn was entitled to some, albeit modest, provision out of the estate of the deceased, additional to that which was provided for her under the will.
2. In the present case, the deceased made his will in 2009, about three months before Kerryn and Mr Long purchased the unit at Dee Why. It will be recalled that their relationship broke down at about that time. The deceased died on 26 February 2011. Kerryn and Mr Long formally separated in 2012. The evidence does not reveal whether the deceased was aware that Kerryn had separated from Mr Long. Nor is it apparent from the evidence what he knew of her financial circumstances, although having regard to their good relationship and reasonably frequent contact, it is likely that he would have known, at least in general terms, what her financial position was. It is also at least possible that he knew that Kerryn's relationship was over or at least faltering.
3. A testator, acting in accordance with the precepts of a wise and just father, would and ought to have been concerned with Kerryn's capacity to provide herself with adequate accommodation, including whether she would have the financial capacity to retain her unit. However, any consideration of that question would have been tempered by his own financial resources and the other significant claims of Esmae and Michael. I will discuss below what provision I consider the deceased, so acting, would have considered appropriate.
4. Having thus determined the jurisdiction question in Kerryn's favour, the question becomes what provision ought to be made for her. In determining that question, there are two significant considerations to which regard has to be had. The first is the financial position of Esmae and Michael. This has already been referred to in detail above. The other is Kerryn's own financial position.
5. Other than her ownership of the unit in Dee Why, Kerryn's principal asset is superannuation of $66,800. That will increase over the years until her retirement. If she works for another eight years, then, on her present income, her superannuation will accumulate by at least $70,000, giving her a total superannuation sum of approximately $140,000. (According to the Australian Taxation Office website, her accumulated superannuation will be $144,778.) The outstanding balance on her mortgage would have decreased over the same period. The Court was not favoured with any figures to assist in determining whether, at a retirement age of 65, and with a superannuation amount available to her of approximately $140,000, Kerryn would have been in a position to pay off her mortgage in full by making a lump sum payment at that time. Accordingly, it is only possible to estimate in fairly broad terms what the position is likely to be.
6. According to Kerryn's affidavit evidence, she is making weekly repayments of $650 on a loan of $320,000. She stated that the term of the loan is 18 years. Again, by reference to a bank ready calculator (the NAB personal loan home calculator) using an interest rate of 5.4 per cent, Kerryn would owe approximately $160,000 or a little more in eight years' time. If Kerryn applied her superannuation payout of approximately $140,000 in reduction of her loan, she would have a balance of mortgage of about $20,000. That figure will vary depending on the interest rate payable from time to time and Kerryn's superannuation at the time of her retirement. That in turn will depend upon her income over that period.
7. If Kerryn worked another 10 years, whether by choice or because, for example, the eligible age for the receipt of a pension was raised to 67 years, she would be in a position to pay off her mortgage using her accumulated superannuation. Using the same sources on the same assumptions as in the previous paragraph, Kerryn's superannuation would be slightly in excess of $165,000 (the figure according to the Australian Taxation Office website is $168,274). Kerryn would then be in a position to pay off the balance of her loan, upon which an amount of approximately $112,000 would be owing. She would also have approximately $55,000 remaining from her accumulated superannuation.
8. Had the deceased been aware, at the time of his death, of her relationship breakdown and its financial consequences, I consider that as a wise and just testator, he would have made provision for her in addition to the forgiveness of the $14,000 debt Kerryn owed to him.
9. In determining what provision ought to be made for Kerryn, regard is to be had to her age, her financial ability to pay her mortgage both on a weekly basis, as well as in the longer term, and to her assets. Kerryn is 57 years of age. She is in permanent employment in a supermarket doing work which is substantially physical in nature. Kerryn is likely to be eligible for a pension at age 65 (or possibly at 67 years of age, as governmental policy appears unsettled on this question). It is reasonable to assume that Kerryn would be likely to remain in employment until she becomes eligible for a pension, even if not in the same employment in which she is presently engaged.
10. There are, of course, other variables. Kerryn may not be able to work for another 10 years. She may not be able to continue to work the long hours she presently does. She may incur medical expenses or require time off work for medical reasons. She may also be able to generate some income by her daughter paying board either immediately or when she finalises her studies. The appellants also suggested that Kerryn may be able to let the second bedroom of her unit. Whilst that is possible, I would place little emphasis on it. In my opinion, Kerryn has an entitlement to privacy in her own home. However, the various matters to which I have referred may impact upon her income, either positively or negatively.
11. Even accepting that these vicissitudes would have suggested themselves to the deceased, I am of the opinion that as a wise and just testator, he would have given Kerryn a lump sum to assist her to pay out Mr Long, by way of a property settlement. I do not consider that the deceased, acting as a wise and just testator, would have given her the entire amount (approximately $125,000) to pay him out.
12. When regard is had to Kerryn's present position and taking into account the usual vicissitudes that affect a person's life, particularly to those which I have referred above, and having regard to Esmae's and Michael's circumstances, I consider that an appropriate provision is between $30,000 and $50,000. In the end result, I am of the opinion that an appropriate provision is $50,000.

(a) Offers of compromise

1. The appellants also challenged the primary judge's determination that the offers of compromise made by the appellants to Donna on two occasions were not genuine compromises such as to entitle them to a favourable costs order.
2. The appellants made two offers of compromise, the first on 8 January 2013 and the second on 31 May 2013, pursuant to the Uniform Civil Procedure Rules 2005 (UCPR), r 20.26(3). The offers were in identical terms save for the date of acceptance. Each offered to settle Donna's claim on the basis that judgment be entered for the appellants and an order that each of Donna and the appellants pay their own costs of the proceedings insofar as the proceedings concerned Donna.
3. After the conclusion of the first instance proceedings, the appellants sought an order for indemnity costs from the date of one or other of the offers pursuant to UCPR, r 42.15A.
4. The relevant rules of court are as follows: "20.26 Making of offer (1) In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms. (2) An offer under this rule: … (c) must not include an amount for costs and must not be expressed to be inclusive of costs … … (3) An offer under this rule may propose: (a) a judgment in favour of the defendant: (i) with no order as to costs, or (ii) despite subrule (2) (c), with a term of the offer that the defendant will pay to the plaintiff a specified sum in respect of the plaintiff's costs, or (b) that the costs as agreed or assessed up to the time the offer was made will be paid by the offeror, or (c) that the costs as agreed or assessed on the ordinary basis or on the indemnity basis will be met out of a specified estate, notional estate or fund identified in the offer. (4) If the offeror makes an offer before the offeree has been given such particulars of the offeror's claim, and copies or originals of such documents available to the offeror, as are necessary to enable the offeree to fully consider the offer, the offeree may, within 14 days of receiving the offer, give notice to the offeror that: (a) the offeree is unable to assess the reasonableness of the offer because of the lack of particulars or documents, and (b) in the event that rule 42.14 applies to the proceedings, the offeree will seek an order of the court under rule 42.14 (2). … 42.15A Where offer not accepted and judgment no less favourable to defendant (1) This rule applies if the offer is made by the defendant, but not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim no less favourable to the defendant than the terms of the offer. (2) Unless the court orders otherwise: (a) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and (b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis: (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made."
5. One matter that is relevant in determining whether an offer of compromise contains a genuine compromise is the time at which the offer is made. The respondents filed their summons seeking orders for provision out of the estate on 3 April 2012. The affidavit evidence was completed by 30 October 2012. By that time, substantial costs would have been incurred both by the appellants and Donna. In the ordinary course, a judgment for a party would result in a costs order in favour of that party: the Civil Procedure Act 2005 (NSW), s 98 and UCPR, r 42.1. As the affidavit evidence was complete at the time the first offer was made, the parties were in a position to assess the likelihood of success of their claims on the whole of the evidence. The rules make specific provision for a defendant (here the appellants) to make an offer to a plaintiff that judgment be entered for the defendant but that each party pay their own costs: UCPR, r 20.26(3). In the case of an offer in those terms, the compromise is in respect of costs. Were it otherwise, the prima facie effect of an offer under r 20.26(3) would never, or hardly ever, succeed.
6. It may be that where a defendant makes an offer at such an early point in the proceedings, where few costs have been incurred and the likely prospects cannot be adequately assessed, a plaintiff will be successful in having an order made other than that specified in UCPR, r 42.15A. However, as I have explained, this is not that case. In my opinion, with respect to his Honour, I consider that he erred in making an order for costs in respect of Donna's claim other than that for which UCPR, r 42.15A provides. I see no reason why the appellants should not have indemnity costs based on the first offer of compromise.

(b) Costs of the proceedings

1. There is also a question as to costs generally. The first is how the costs of the proceeding should be borne.

(i) Costs at first instance

1. Pursuant to the Civil Procedure Act, s 98, costs are in the discretion of the court. Section 98 is subject to any other Act and the UCPR. UCPR, r 42.1 provides, relevantly, that costs follow the event, unless the court considers some other order ought to be made.
2. The Civil Procedure Act, s 98 is subject to the Succession Act, s 99, which provides: "99 Costs (1) The Court may order that the costs of proceedings under this Chapter in relation to the estate or notional estate of a deceased person (including costs in connection with mediation) be paid out of the estate or notional estate, or both, in such manner as the Court thinks fit."
3. As is implicit in s 99, family provision claims raise different issues with respect to costs which set them apart from other forms of litigation. As such, there are potentially different considerations from the 'usual case' where a claim under the Family Provision Act is unsuccessful: McCusker v Rutter [2010] NSWCA 318 at [33] per Young JA.
4. In Singer v Berghouse, Gaudron J noted, at [6], that: "Family provision cases stand apart from cases in which costs follow the event … costs in family provision cases generally depend on the overall justice of the case. It is not uncommon, in the case of unsuccessful applications, for no order to be made as to costs, particularly if it would have a detrimental effect on the applicant's financial position. And there may even be circumstances in which it is appropriate for an unsuccessful party to have his or her costs paid out of the estate." (citations omitted)
5. Nonetheless, the "overall justice of the case" referred to by Gaudron J is "not remote from costs following the event": Jvancich v Kennedy (No 2) [2004] NSWCA 397. The only difference is that family provision cases call for additional "liberality and discrimination" in considering whether to exercise the discretion to override the usual rule: Chapple v Wilcox [2014] NSWCA 392 at [138]-[139].
6. Even though I have concluded that provision in the sum of $50,000 ought to be made in Kerryn's favour, that is, a much smaller sum than she had sought in her claim, either by way of transfer of property or the payment of a money sum.
7. In those circumstances, I am of the opinion that Kerryn ought to bear her own costs of the proceedings at first instance.

(ii) Costs of the appeal

1. It has been held that s 99 does not apply to an appeal from a decision on a claim brought under the Succession Act: Chapple v Wilcox at [146] per Barrett JA. Rather, s 98 of the Civil Procedure Act and the provisions of the UCPR apply of their own force to the appeal. In Chapple v Wilcox, Barrett JA further noted, at [147], that unless the appeal court has good reason to think that some other result is more appropriate, costs should follow the event.
2. As the appellants have been successful on the appeal in a substantial way, I am of the opinion that the appellants should have their costs of the appeal. I consider that those costs should be borne by Kerryn as to 90 per cent and by Donna as to 10 per cent to reflect the substantial proportion of the appeal being concerned with issues that related only to Kerryn's position.
3. Accordingly, I propose the following orders:
4. Appeal allowed;
5. Set aside the orders made in the court below;
6. Order that in addition to the provision made for the first respondent Kerryn Therese Osmond under the will of the late Maurice Augustine Salmon (the deceased), Kerryn Therese Osmond receive a legacy out of the estate of the deceased in the sum of $50,000;
7. Order that no interest is payable on the legacy in favour of Kerryn Therese Osmond if paid within 90 days of the date of this order. Otherwise interest is payable on the said legacy or so much as remains unpaid from time to time at the rate prescribed by the Probate and Administration Act 1898 (NSW) on unpaid legacies calculated on the last day of each month thereafter until the legacy has been fully paid;
8. Order that the second respondent, Donna Maree Peters, pay the respondents' costs of proceedings in the court below on an indemnity basis as and from 9 January 2013;
9. Make no order as to the costs of the first respondent Kerryn Therese Osmond in respect of the proceedings in the court below, with the intent that she bear her own costs of those proceedings;
10. Order that the respondents pay the appellants' costs of the appeal and that those costs are to be borne by the first respondent Kerryn Therese Osmond as to 90 per cent and the second respondent Donna Maree Peters as to 10 per cent. The respondents are to have a certificate under the Suitors' Fund Act 1951 (NSW) if so entitled.
11. McCOLL JA: I agree with Beazley P.
12. GLEESON JA: I agree with Beazley P.

Amendments 14 May 2015 - Para [4]: typos corrected in third sentence. 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: 14 May 2015