Santos v Santos

1 MASTER: This is an application under the Family Provision Act in respect of the late Alberto Santos who died on 28 October 2002. He was survived by the plaintiff, a former wife, and the defendant who was his widow. 2 The deceased had five children. One of these was Marcus, son of the plaintiff and the deceased, who, unfortunately, died of spinal cancer on 22 January 1999, aged nineteen years. There is information that there were four children of the deceased born as a result of other relationships in the past. They were: Gloria Gabrina of the Philippines; Annabelle Rodriguez of Florida in the United States of America; Alberto Santos Junior of Hong Kong and Eddie of Hong Kong. 3 Notice has been given to Annabelle Rodriquez, who makes no claim. The addresses of the others are unknown and it is thus impractical to serve a notice on them pursuant to s 21. 4 Under the will of the deceased, which was made on 11 June 2002, the deceased left the whole of his estate to the defendant and appointed her as executrix. The assets in the estate consist primarily of a half share in the property known as 3 Linum Street, Macquarie Fields. The parties are agreed that the value of that property is $240,000, putting a half share at $120,000. The whole of the property is subject to a mortgage in the sum of $49,789. Taking into account the half share of this mortgage, the estate's half share is worth $95,105. 5 There was also a car which was the subject of hire purchase, but that has been distributed to the defendant who has continued to meet payments on that hire purchase agreement and that she substantially reduced the amount owing. 6 There are a number of other debts in the estate has. There is a David Jones account in the sum of $3716; a debt due to the defendant's niece by the deceased in the sum of $12,000; legal costs incurred by the deceased before his death of $1650. This gives a total of $17,366 and this would bring the estate share down to $77,739. 7 The defendant's costs are estimated at $19,799, reducing the estate further to $57,940. If the plaintiff's costs were to be paid out of this, and they are estimated at $9000, this leaves an estate of merely $48,940. 8 Clearly, the debts of $17,366 and the defendant's costs will have to be paid. This will mean that the property will in some way have to be sold, incurring sale expenses which are probably in the order of $5000. There is no evidence to suggest that the plaintiff could re-finance to meet these expenses in order to keep the house. 9 I will deal with a little of the family history. There is not much in the evidence about the deceased's earlier life. It is apparent that he married the plaintiff on 17 January 1975. As the deceased was already married at the time, that was an invalid marriage but the parties commenced living together. Their son Marcus was born on 7 February 1979. In 1981 there was a purchase by the plaintiff and the deceased as joint tenants of the property 3 Linum Street, Macquarie Fields. A deposit of $2500 was paid from the joint bank account and the balance of the purchase price was financed by a loan with the St George Bank. The evidence indicated that both the plaintiff and the deceased contributed to the savings account before the purchase. 10 On 4 April 1983 there was a marriage again between the plaintiff and the deceased, presumably after the earlier marriage had ceased, whether by way of death or divorce does not appear in the evidence. 11 On 25 April 1989 the plaintiff and the deceased separated. In May that year the deceased commenced cohabitation with the defendant. 12 On 15 April 1991 the plaintiff and the deceased were divorced. There was no property settlement at that time or subsequently. The plaintiff remained in occupation in the house. However, the deceased paid the mortgage payments until 1993. After that the deceased ceased making the payments and the plaintiff commenced those payments. She continued them until 1997 when the mortgage was repaid. 13 On 13 July 1991 the deceased and the defendant were married. 14 After the repayment of the St George mortgage there was, in 1997, a loan from Avco Finance which was secured by a mortgage on the property. This was done with the consent of the plaintiff. In 1998 there was a further Avco loan, also with the consent of the plaintiff. As I have recounted, on 21 January 1999 Marcus died; he was then aged nineteen years. 15 In September 1999 there was a further mortgage given in order to replace the Avco loan. By that stage the deceased had not been paying them but in fact had been making efforts to avoid paying the Avco loans. After some threats relating to the sale of the property, he took out a new mortgage with Direct Mortgage and that discharged the Avco loan. This was also consented to by the plaintiff and that mortgage remained in place until the death of the deceased, with the amount owing being approximately $50,000. 16 It seems the deceased made the repayments on the loan from 19 September 1999 until his death and thereafter the plaintiff has paid it. She still, of course, occupies the house. 17 It was on 11 June 2002 the deceased made his last will. On that date he also made a statutory declaration in which he set out the reasons why he had made no provision for his former wife. That was as follows: "I have omitted to provide for my former wife, Elsie Elaine Victoria Cashen Santos, as I have had minimal contact with her over a long period of time and I feel no obligation to make provision for her in my Will. This is because I was responsible for primarily paying the mortgage on the former matrimonial home, after separation and I allowed my former wife to remain in occupation of that home for a long period of time after separation without seeking recompense or a property settlement under the Family Law Act. I feel by these actions, I have discharged my obligations to my former wife." 18 On 18 September 2002 the joint tenancy between the plaintiff and the deceased was severed when the deceased adopted a procedure allowed by the Real Property Act in transferring his interest to himself. The deceased died, as I have said, on 28 October 2002 and a grant was made in February 2003. The summons to commence these proceedings was filed on 2 July 2003 and was within time. 19 It is necessary to deal with the question of eligibility. The plaintiff, as a former spouse, is, under the definition, an eligible person. However, in respect of such an eligible person, the factors warranting the making of the application have to be demonstrated under s 9 (1) of the Act. The question of factors warranting in respect of former spouses has been dealt with in a number of cases. In Dijkhuijs (formerly Coney) v Barclay (1988) 13 NSWLR 639, a number of the judges dealt with this matter. Kirby P had the following to day: "Fifthly, the respondent, picking up one of the themes of Mr Landa's comments, urged that s 9(1) of the Act was to be read in the light of the policy of the law to promote the finality of settlements of property disputes by orders made in the Family Court. Where such orders had been made, an order under the Act in the case of a former spouse should be exceptional. Only if this approach were adopted would the policy of the Family Law Act (Cth) be fully achieved. That policy is that parties whose marriage has been dissolved and in respect of whom orders have been made disposing of their matrimonial property, could go their separate way. Save for the rare and exceptional cases provided under the Family Law Act (Cth), such parties should henceforth face no financial obligation from one to the other. This public policy was referred to by Young J in O'Shaughnessy (at 149). It was also stressed by his Honour in the present case. There is no doubt that in most cases, t he achievement of a final property settlement in the Family Court would be seen by the parties, in current social circumstances, as terminating any moral claim of a former spouse to provision in the will of the other. Confronted by the news that he or she had been excluded from the will of the former spouse, the response would, in the overwhelming majority of cases, be: 'Our marriage was dissolved. We settled our financial affairs. We can each start a new life. That was the whole point of the Family Court proceedings.'' To this extent, I agree with what Young J has written in O'Shaughnessy and in this case." 20 Mahoney JA said: "That which the court 'shall first determine' is whether 'there are factors which warrant the making of the application'. That phrase may be contrasted with the references otherwise made to the determination of, for example, 'what provision (if any) ought to be made in favour of an eligible person ...' On the face of s 9(1) there is a distinction between "factors which warrant the making of the application' and the factors which warrant the making of an order.

That distinction accords with the principle which, in my opinion, is inherent in the legislation, vis, that, special cases apart, an order is to be made only if the deceased has made default in the performance of a duty which he owed to the particular plaintiff. I do not think that this case requires a final analysis of the basis of applications under the Act: It will be sufficient to refer to this matter in general terms. But the Act authorises the court to 'order that such provision be made out of the estate or notional estate, or both, of the ceased person as, in the opinion of the Court, ought, having regard to the circumstances at the time the order is made, to be made for the maintenance, education or advancement in life of the eligible person' (s 7). That does not mean that, if the plaintiff establishes a financial need within the section and if on taking into account the considerations referred to in s 9(2) (the discretionary considerations) there be nothing to the contrary, an order must be made. The statute assumes that the deceased, in what he has done during his life and by his will, has failed to discharge a duty which he owed to the plaintiff (the moral duty). Thus, a plaintiff may be a former spouse who, on dissolution of t he marriage, received what on any view she was entitled to have and there may have been no further relationship between them so that none of the factors in s 9(3)(a) to s 9(3)(c) are of relevance. But, at the deceased's death, she may have a financial need. In such circumstances, the fact that the plaintiff has established that she was a former spouse and has a financial need would not, as such, entitle her to an order. It would be necessary for her to establish that, in some way or because of the circumstances within s 9(3)(d), the deceased had a duty to her which involved that he should have provided for her financial need. This will be so a fortiori where the basis for the eligibility of the plaintiff is alleged to be within par (d) of the definition of 'eligible person'." 21 Importantly, it can be seen that the question of need is a separate matter and factors warranting are something different from that. 22 In another case, Churton v Christian (1988) 13 NSWLR 241, his Honour Priestley JA said the following in respect of this type of application: "Mrs Christian is a member of a class in respect of whom warranting factors may often be more difficult to find. It is common experience that divorce sometimes brings to an end all inks between previously married people. In such cases, warranting factors might well be expected usually to be absent, although this need not be universally so. On the other hand, divorced persons may remain on close terms, sometimes little different from those on which they lived when married. In ever case it is necessary to examine the actual relationship between the two people concerned, as far as possible without preconceptions based only on the fact of divorce." 23 In his comments he illustrates a situation which sometimes applies after there has been a divorce and a property settlement: namely, that the parties still continue to have a close association. 24 There has also been in recent times further attention to this matter in the Court of Appeal in the case of Brown v Faggoter, a decision on 13 November 1998, which is a decision of Sheller JA, Sheppard AJA and Fitzgerald AJA. The main judgment was given by Fitzgerald AJA who seemed to suggest that an application might be warranted if the application has reasonable prospects of success. This seems to be a somewhat different and perhaps easier test than what was referred to in the other cases of the Court of Appeal to which I have referred. I will consider the matter on both bases, given that there may be some flux in the state of the law in this regard. 25 The plaintiff admitted that the following factors may warrant the making of the application:

1. The length of the relationship, namely, fourteen years. 2. That there had been no property settlement. 3. The fact of the agreement for the plaintiff to remain in the house with the deceased making payments in lieu of child support. 4. The fact that the plaintiff allowed the deceased to mortgage the property in 1997, 1998 and 1999 with the deceased arguably, not the plaintiff, receiving the proceeds of such mortgages. 26 The fact of no property settlement is normally a good reason to find factors warranting but in this case it is somewhat equivocal. If one considers what the plaintiff gave away in 1991 and 1992 when she failed to make an application, she probably would have a claim, having regard to the length of the marriage, for an equal division of property subject to any adjustments arising out of Marcus' situation and his care into the future. What she received in replacement was the use of the home for the next eleven years with some payments by the deceased off the mortgage between 1991 and 1993. 27 A matter which in my mind is important is her allowing the deceased to mortgage the property on three occasions without any benefit to herself, although this is slightly debatable and this is a matter which I will address later. 28 In these circumstances, on the basis that she does not receive any substantial benefit from these mortgages, it seems to me that there are factors warranting on the traditional test and I will proceed with the application. 29 In applications under the Family Provision Act, the High Court in Singer v Berghouse (1994) 181 CLR 201 has set out the two-stage approach that a court must take. At p 209 it said: "The first question is, was the provision (if any) made for the application 'inadequate for (his or her) proper maintenance, education and advancement in life?' The difference between 'adequate' and 'proper' and the interrelationship which exists between 'adequate provision' and 'proper maintenance' et cetera were explained in Bosch v Perpetual Trustee Co Limited . The determination of the first stage in the two-stage process calls for an assessment of whether the provision (if any) made was inadequate or what, in all the circumstances, was the proper level of maintenance et cetera appropriate for the applicant having regard, amongst other things, t o the applicant's financial position, the size and nature of the deceased's estate, the totality of the relationship between the applicant and the deceased, and the relationship between the deceased and other persons who have legitimate claims upon his or her bounty.

The determination of the second stage, should it arise, involves similar considerations. Indeed, in the first stage of the process, the Court may need to arrive at an assessment of what is the proper level of maintenance and what is the 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 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." 30 I turn to the plaintiff's situation in life as directed by the High Court. The plaintiff is a single woman with no dependants. Apart from her half share in the house she has furniture and personal effects worth approximately $45,000 and a motor vehicle worth $2000. Leaving aside the mortgage she has credit card debts of $16,000. She lives on a pension of $400 a fortnight and $4000 per annum from casual work supervising examinations. 31 There is nothing to suggest that the relationship between the deceased and the plaintiff was anything but happy until its ending and both she and the deceased were involved in the acquisition of the home. 32 Since the separation she has spent some $3900 on improvements to the house. 33 It is also necessary to consider the situation of others having a claim on the bounty of the deceased, in this case the defendant. The defendant is a single person aged fifty-seven years with a daughter eighteen years of age who studies at the local TAFE college. The daughter has some part-time work but her mother provides her with accommodation and provides for her TAFE fees. 34 The defendant owns a car worth $8000, without about the same amount now owing on the hire purchase of the vehicle. She has personal effects worth some $400 and a bank account containing $5240. Apart from her car loan, she owes about $1100 on other hire purchase liabilities and has a credit card debt of $1677. The defendant works as a nurse and a carer earning $1640 per fortnight. Her rent for herself and her daughter runs to $1000 per month. She lives with her niece's family and would hope at some stage she could move from that situation. 35 The defendant likewise seems to have had a good relationship with the deceased and cared for him in the years before he died when he was suffering from lung cancer. Her salary contributed to their living expenses but she has not contributed to the house or its mortgage. 36 It is necessary to see how the plaintiff says she has been left without adequate and proper provision for her maintenance, education and advancement in life. The plaintiff says she would like the deceased's half share in the house transferred to her and she would then continue to meet the mortgage. That cannot happen because the deceased's debts and the estate's costs have to be met out of that half share. The plaintiff is on a pension and cannot demonstrate any ability to borrow to meet such liabilities and buy the house if it were appropriate to do so. In those circumstances, it is clear the house will have to be sold. 37 The estate's debts and costs will have to be met out of the estate's share of the house. 38 The difficult question is what should happen to the debt the subject of the mortgage? It is a liability to both the estate and the plaintiff and on a sale would normally come out of the shares equally. The question is whether there should be any adjustment of this result. 39 The plaintiff gave evidence that her son Marcus finished high school in 1996 and that she met all his high school expenses. He started to get sick in year 11 and she says that Medicare met all his medical expenses. In para 12 of her affidavit the defendant had the following to say on the use of the mortgages: "In about 1997, Alberto and the plaintiff took out a further joint mortgage with AVCO to pay for Marcus' education and medical treatment. Some of the money was also used to purchase a car for Marcus and the plaintiff to use (since the plaintiff had a car accident about 1997 in the car they had been using). Alberton continued to pay for the car's registration, NRMA insurance and membership until his death. I know these details from conversations I had with Alberto and also because I physically paid for some of these bills." 40 Given the lack of detail and the fact Marcus was finishing his school in either 1996 or 1997, it is somewhat unlikely that a substantial part of these advances was used for schooling. Given the value of the plaintiff's car, it is also somewhat unlikely that there was a substantial contribution to a car. It is highly likely that Medicare would be able to meet his medical expenses for the following two years. 41 Although there may have been some benefit to the plaintiff, I take the view the plaintiff did not receive any substantial benefit from those loans. 42 The property in question is the product of the efforts of the plaintiff and the deceased. The defendant no doubt had an equally lengthy happy marriage to the deceased but she did not contribute to that property. It seems the deceased received the majority of the benefits from the later mortgages. 43 Consideration of all the circumstances incline me to the view that the estate's share of the property should bear the whole of the costs in the discharge of the mortgage. It is, of course, possible for me to make orders for the sale of the estate's share of the property with consequential orders for a discharge out of that share of the mortgage, and the plaintiff's and the defendant's costs. If that course were followed it would no doubt lead, if there was some disputation, to other proceedings to arrange the sale of the property under S 66G of the Conveyancing Act and in this case it would be highly beneficial that no further costs be incurred. 44 In those circumstances, it occurs to me that it would be preferable for there to be consensual orders providing for the sale of the whole of the house with orders such as the payment of costs as I indicated, the mortgage and the estate debts. 45 Accordingly, I think I will give time to the parties to consider these matters in order to resolve an appropriate a time-table for the sale and other matters. 46 Accordingly, I direct the parties to bring in short minutes at 10am on Tuesday next. I order the exhibits be returned. **********

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