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[1994] NSWCA 286
Court of Appeal (NSW)
1994-02-11
Handley JA
Original judgment source is linked above.
SMITH v DAYMAN SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL
HANDLEY, SHELLER and POWELL JJA 11 February 1994, 9 September 1994
[1994] NSWCA 286 FAMILY PROVISION - exercise of Master's discretion.
FAMILY PROVISION - net assets of estate comprised home (subject to mortgage) and bank account moneys - appellant granted specific bequest of bank account moneys out of estate - respondents granted residue - Master granted further provision and ordered legacy of $26,000 in favour of appellant - whether Master's exercise of discretion miscarried - held: it had - the Master failed to have regard to the effect of his order on the housing needs of the respondents.
Handley JA This is an appeal by the plaintiff from orders made by Master Windeyer (as he then was) under the Family Provision Act ordering further provision for her benefit out of the estate of her father. The case at trial was a difficult one when decided by the Master on 18 October 1989 but has been made more difficult by subsequent events. In the result the appeal did not come on for hearing before this Court until 11 February 1994. As will appear complications arose because of events which occurred after the appeal was instituted and because of the failure by the appellant's legal advisers to comply with long established rules and procedures of this Court relating to the reception of further evidence.
The deceased died on 18 June 1987 aged 73 being survived by his three daughters, the appellant Barbara Smith, and the defendants Susan Parker and Elizabeth Dayman. His wife had predeceased him, dying in 1982. The deceased's will made on 5 May 1986 appointed the defendants joint executrices. Probate was granted to them on 12 October 1987. The net estate was $222,024 comprising the deceased's home at Bronte valued at $220,000 which was subject to a mortgage in favour of Defence Force Homes for $2,673, and the moneys in his bank accounts. By his will the deceased gave the plaintiff the moneys in his bank accounts after payment thereout of his funeral and testamentary expenses and he gave the residue of his estate to the defendants in equal shares as tenants in
common. The plaintiff received $4,472.69 net pursuant to her bequest while each defendant received a half interest in the deceased's home worth $108,663.50 net.
The following summary of the facts is taken from the Master's findings which were not challenged. The plaintiff was born in March 1947 and was 42 at the date of trial, Mrs Parker was born in 1951, and was 38 at the date of trial, while Mrs Dayman was born in 1956 and was 32 at the date of trial. The plaintiff has had a difficult life. She suffers from schizophrenia and other disabilities. In 1963 she was assessed as having a below average IQ of 82. She left school at the age of 14 and has since been an invalid pensioner. Between 14 and 18 she went through a bad period of depression and on several occasions was admitted to Rozelle Hospital for treatment. She had a good relationship with her mother and was able to communicate with her but not with her father. Her sisters say that in her teenage years she was almost impossible to live with, was rough with them, had outbursts of temper and would attack them and their mother and would damage and destroy property inside and outside the house.
She left home when she was about 20 and married in 1969 when she was 22. Her husband is fifteen years older and has helped her a lot. She has had no psychiatric treatment since her marriage. Her husband ceased work shortly after their marriage, receives a carer's pension and has concentrated on looking after her. He does most of the housework, cooking and shopping. They live in rented accommodation at Katoomba. The plaintiff did not see her mother for three years prior to her death and had not seen her father before he died for about nine years. She said that he had never shown any kindness or affection towards her. The combined pensions of the plaintiff and her husband at the date of trial totalled some $220 a week. Their rent was $120 a week and they then had $1729 in the bank, being the balance of the plaintiff's legacy. The Master inferred that their combined income was not sufficient to cover living expenses. Her husband was not in good health and the Master considered that he was unlikely to obtain employment and that she could not live independently without him.
Mrs Parker was married in 1969 and there were two children of the marriage, Lesa aged 18 at the date of trial and James aged 17. She was divorced in 1976. She was an invalid pensioner, suffered from epilepsy, and her health was not good. When her marriage failed Mrs Parker and her children moved back to her parents' home for several months before moving into rented accommodation. She had a good relationship with her parents and when her mother became ill in 1981 she looked after her during the day. After her father suffered a number of strokes she visited him three or four days a week to help her sister look after him.
At the date of trial Mrs Parker, apart from her interest in the estate, had an old car and a little furniture. She received an invalid pension of $312.40 a fortnight and did some casual work at a dog grooming salon for which she earned about $40 a week. Her outgoings absorbed most of her income.
Mrs Dayman left school at 16 and thereafter was employed for short periods but was mostly on unemployment benefits until she married in December 1977. There was one child of that marriage, a daughter born in 1983. After her marriage she and her husband lived in her parents' home and she continued to do so after her separation. She was divorced in 1987. Mrs Dayman also gave her mother loving care during her last illness and then looked after her father during his remaining years. At the date of trial she was living in the house with her daughter, receiving a supporting parent's pension of $165 a week and earning about $30 a week walking dogs. She had a 1961 mini-minor and little else apart from her interest in the estate. She too was not in particularly good health.
The Master said that this was a difficult case because all parties were pensioners. The plaintiff had a clear need in that she and her husband appeared to be drawing on their small capital to meet ordinary living expenses. Although the plaintiff had not visited her father in the nine years prior to his death and had never had a good relationship with him, he made provision for her in his will so he thought she had some claim on him.
On the other hand the defendants had strong moral claims because of the loving and tireless attention they had given their parents in their last years. The Master ultimately concluded that the deceased was under an obligation to make greater provision for his estranged daughter than he did. In assessing the amount of this provision he said that weight had to be given to the lack of any proper affection between father and daughter, whoever was at fault, and that weight also had to be given to the fact that the plaintiff and her husband were both receiving pensions whereas the defendants were only receiving single pensions. The Master awarded the plaintiff $26,000 and in the exercise of his power under s33 made no order as to costs. He said:
"T do that so that the defendants will know the precise amount they have to raise if somehow they are able to keep the family home and wish to do so. If they are unable to do this then I think it reasonable to assume that they would be able if they live together to purchase more modest accommodation and if they do not do so then they would each be able to obtain a relatively small unit."
The Master delivered his reserved judgment on 18 October 1989. On 15 November the plaintiff appealed to this Court. Mrs Parker died on 3 December. An amended notice of appeal was filed on 24 July 1991 pursuant to SCR Pt51 R12 naming the surviving executrix as sole respondent. Appeal books were eventually filed and in due course the hearing of the appeal was fixed for 11 February 1994. Although SCR Pt51 R13A dealing with further evidence on appeal has been in force since December 1975 the appellant's legal advisers did not comply with its undemanding requirement that affidavits be filed and served not less than twenty one days before the hearing. When the appeal was called on the Court was disconcerted to learn that the appellant proposed to rely upon further evidence relating to events which occurred in 1989 and 1991. It also became clear to the Court, although it had hitherto escaped the notice of the parties, that the record was deficient in that Lesa and James Parker had not been added as additional respondents.
The first effective step to place further evidence before the Court was taken on 10 February 1994 when an affidavit by the solicitor for the appellant was filed and served. It proved the death of Mrs Parker and the sale of the deceased's former home. Letters of administration in respect of Mrs Parker's estate had been granted to her children and on 28 November 1990 Mrs Dayman and the Parkers contracted to sell the house for $300,000. In return for the plaintiff lifting her caveat to enable settlement to occur and the proceeds to be distributed Mrs Dayman and Lesa Parker agreed that she could lodge caveats against the titles to the properties they proposed to purchase and they also agreed that the properties "be declared to be notional property" of the deceased's estate. The solicitors for the appellant and for the vendors signed a letter evidencing this agreement.
On 10 February an affidavit in answer was sworn by the solicitor for the respondent. This proved the sale of the house on 4 March 1991 and that the net proceeds of sale were $294,178.11. On the same day $31,373.81 being the legacy ordered by the Master plus interest was paid to the plaintiff. Mrs Dayman later purchased a residence at 4 Glennie Street, Gosford for $106,000. She received
$117,226.81 from her father's estate. The following month Lesa Parker purchased a residence at 40 Bishopgate Street, Wickham for $56,500. She received $64,386.44 from the estate of her mother and her brother $11,957.81. The bank account of the head estate still contained $70,654 of which $52,428.63 is payable to Mr Parker. It appears therefore that the defendants' costs of the trial have been paid. The respondents' costs of the appeal were estimated at $9,000.
The Parkers were not executors by representation of the deceased and if the estate assets had remained in the hands of the surviving executrix their joinder as respondents would not have been necessary.
However in my opinion the substantial distribution of the head estate and the substantial distribution of the sub-estate, with the consequent need, if the appeal succeeded, for orders to be made under s24 designating some or all of the assets acquired from the proceeds as notional estate of the deceased, made the Parkers necessary parties to the appeal. A court could not ordinarily make orders designating property as notional estate without the owners being parties to the proceedings. Accordingly the Parkers should have been joined as respondents, or notified that application to that end would be made at the hearing. See SCR Pt8 R8, R10, PtS51 R2, R6. However at that stage the respondent's solicitor had no instructions to act for the Parkers and had not been in touch with them for a long time. The Court therefore was not able to add them as additional parties immediately and to proceed with the hearing in the normal way.
In this awkward and embarrassing situation the Court decided to proceed with the hearing of the appeal against the Master's decision without adjourning to enable the Parkers to be joined and without providing any opportunity for the filing of further evidence by any party at that stage. The Court however ruled that it would only hear argument on the question whether the Master's decision had been correct on the materials before him. Over the lunch adjournment the respondent's solicitor was able to obtain instructions to appear for Mr James Parker but he could not contact Lesa.
After argument had been concluded and before the Court reserved its decision, it made further orders to ensure that the proceedings were properly constituted. It added the Parkers as additional respondents and directed that an amended notice of appeal be filed and served within seven days. The undertaking by the respondent's solicitor to enter an appearance for James Parker within fourteen days was noted and that solicitor having indicated his willingness to do so, he was directed to notify Lesa that she had been joined as a respondent and that she was entitled, if so advised, and at her own risk as to costs, to make further or other submissions to the Court either orally or in writing. Times were fixed for the entry of any appearance on her behalf and for notification of her decision as to the making of further submissions.
In the result the respondent's solicitor obtained instructions to act for Lesa Parker and entered an appearance on her behalf. She and her brother elected to rely on the submissions previously made by Mr Dowdy on behalf of their aunt. This Court therefore is able to determine the appeal on the limited issues argued on 11 February without a further hearing at this stage.
Mr Graham QC for the appellant submitted that the Master's exercise of discretion had miscarried for a number of reasons. Some of these reasons, in my view, were without substance. However I have reached the firm conclusion that one of the reasons relied on should succeed.
The Master might have decided that because of the love and care the defendants had given their parents between 1981 and 1987 and because of their general circumstances their moral claims on the deceased were such as to entitle them to reside in his house for the rest of their lives. On this basis the plaintiff would have failed because there were simply no other assets in the estate from which an order could have been made in her favour. Such a view may have been appellably wrong and Mr Graham submitted that it was. However the Master did not decide the case on this basis. On the contrary he ordered further provision in the form of a legacy of $26,000 inclusive of costs in favour of the plaintiff. The house was the only asset from which this legacy could have been paid. Moreover the house was already subject to a mortgage in favour of Defence Forces Homes securing a debt which was $2,673 at the date of death but may have been reduced somewhat by the date of trial. Moreover the defendants were also liable for their costs of the proceedings. The Court was informed without objection that a defendant's costs of a one day Family Provision Act matter conducted by junior counsel before a Master in 1989, taxed or assessed on a trustee basis, would probably be of the order of $6,000.
Accordingly the legacy ordered by the Master and other estate liabilities amounting in all to $34,673 were payable out of the estate and that is out of the house. At the date of trial the defendants, on the evidence and on the findings of the Master had no other assets from which debts of this order could have been paid and no prospects of borrowing the amount required. Indeed, as appears from his reasons, the Master did not expect that the defendants would be able to obtain the moneys to meet these liabilities from any other source. He said that he made the order he did inclusive of costs "so that the defendants will know the precise amount they have to raise if somehow they are able to keep the family home and wish to do so".
If the necessary effect of the Master's order was that the house would have to be sold then the position of the estate assets would radically change and the Court could more easily order increased provision for the plaintiff. On the evidence (68) the house was worth in the vicinity of $300,000 at the date of trial. If as later appeared, the proceeds of sale would have enabled the defendants to acquire modest housing either jointly or severally at a cost of $200,000 to $220,000 then clearly funds would have been available in the estate to support an increased order in favour of the plaintiff. With respect, the Master does not appear to have adverted to the likely effect of the order that he in fact made in releasing surplus funds in the estate over and above the minimum reasonably required to provide for the housing needs of the defendants. Accordingly in my opinion his exercise of discretion miscarried and this Court is bound to interfere.
In these circumstances there is no necessity for me to deal with the other grounds relied upon by the appellant to establish error. A decision that the Master's exercise of discretion miscarried on at least one ground means that this Court would either be bound to re-exercise the discretion for itself or to remit the proceedings to the Equity Division for further hearing. In either event the appellant will be entitled, without any difficulty, to adduce evidence of events since the original decision including the death of Mrs Parker, the sale of the house, and the distribution of most of the proceeds. The reception of this evidence will also require, in the absence of some agreement, evidence of the current situation of the plaintiff, Mrs Dayman, and the Parker. It may also be relevant to consider whether the Parkers were eligible persons within para(d) of the definition in s6.
The Court was not in a position, immediately after the hearing on 11 February, to make final orders and dispose of the proceedings. The Parkers were not before the Court and all parties had to be given an opportunity to file additional evidence dealing with events since 1989 and their current situation. A further hearing was inevitable and there was no particular reason why it should take place before this Court rather than before a judge or a master in the Equity Division.
For the same reasons the Court is not now in a position to deal finally with the costs of this appeal. Had the appellant filed the further evidence within time and ensured that the Parkers were before the Court the respondents would then have had a proper opportunity to file further evidence prior to the hearing date. Had these steps been taken the Court may have been able to rehear the whole case on 11 February and finally dispose of this litigation. A further hearing before the Equity Division is now inevitable and will be ordered by the Court. The parties to this litigation can ill afford the costs of a third hearing. In my view this situation, for which the appellant's legal advisers appear to be solely responsible, must be reflected in the costs orders made by this Court and those which should hereafter be made in the Equity Division.
If it became clear after the further hearing that these proceedings could never have finished on 11 February then there would be no reason why an order for the costs of the appeal should not then be made in favour of the appellant. If however it becomes clear that the whole proceedings could have been finally disposed of on 11 February then the default of the appellant's legal advisers will have occasioned the costs of a third hearing. Speaking for myself I would then be minded to make no order as to the appellant's costs of this appeal except an order that the appellant's legal advisers not charge their client any costs for the actual hearing.
In my opinion the following orders should be made: 1. Appeal allowed.
Sheller JA I have had the advantage of reading the judgments prepared by Handley and Powell JJA. I agree that the appeal should be allowed substantially for the reasons their Honours have given.
As Master Windeyer (as he then was) pointed out in his judgment the matter is a difficult one. The appellant suffers and has suffered throughout most of her life, if not her entire life, from grave disabilities. In the circumstances of the case, these would seem to give rise to a strong moral claim upon the bounty of the testator. However her two sisters have also demonstrated strong moral claims, by reason of the care and devotion they gave to their parents in their parents' later years. Balancing these claims is not easy. However I am satisfied that the provision made for the appellant was so low as to indicate some error had been made in the exercise of the Master's discretion. This may be explained by a perceived need for the defendants to retain the family home as a place to live in if they so wished.
The normal consequence of a successful appeal against the amount of provision made under the Family Provision Act 1982 in favour of a plaintiff is that this Court will determine the appropriate provision to be made. This can only be done having regard to the circumstances at the time the substitute order is to be made; s7 of the Act. It may be that the appellate Court is obliged in the absence of further evidence to assume that there has been no change or no significant change in the circumstances since the order at first instance was made. This may present no difficulty if the order was made recently or if the parties agree that there has been no significant change. In the present case there had been very significant changes in the circumstances since the Master made his order on 18 October 1989. One of the defendants had died. The family home had been sold. It was clear that if the appeal was to proceed the evidence had to be updated. Steps to do this were taken only on 10 February 1994, the day before the hearing date for the appeal, which had been fixed on 1 December 1993. This is very serious. The parties, who can ill afford it, have been put to increased expense and Court time has been wasted.
Powell JA I have read, in draft, the Judgment which has been prepared by Handley JA. Although I agree with His Honour that the appeal should be upheld, and the Appellant's application should be remitted to the Equity Division for rehearing, and although I agree that the virtual certainty - which was to become a reality - that the objective which the Master, by his Order, sought to achieve would prove incapable of attainment, provides a sufficient justification for the Orders proposed by His Honour, it seems to me, with respect, that there is another, and more fundamental, reason why the Masters' Order should be set aside.
It is clear that the Appellant, at all relevant times, suffered from, and, that, from an early age, she exhibited signs of, three significant disabilities, or limitations, they being, first, a significantly lower than normal IQ; second, a susceptibility to epileptic seizures; and, third, a susceptibility to episodes of psychiatric illness. It is also clear, in my view, that, because of these disabilities, or limitations, the Appellant was subjected to significant handicaps, some of an ever present, and continuing, nature, and some only of a periodic nature. It is also clear, that, by reason of these disabilities and handicaps, the Appellant, during the life of her parents, was, and that she has since continued to be, a person who had special needs far beyond those possessed by the general population - including her sisters
than the miserable pittance provided by the Deceased in his Will, and a greater provision than that made by the Master.
Despite the fact that the current view seems to be that raw IQ test scores give but a limited, and, at times a biased, perspective, of a person's abilities, the fact remains that such scores are still widely used in educational, medical and psychological settings, perhaps because the factors which might affect an IQ score - sensory impairments, emotional disturbance, chronic illness or disability, language barriers, cultural differences - are now better recognised, and may now be the subject of some form of compensatory adjustment. But even if one accepts the criticisms of, and the injunctions against an over-ready reliance upon, IQ scores, the fact remains that they do provide some - albeit a crude - guide.
Some indication of the way in which such scores may provide a guide is given when one records, first, that the definition of "mental retardation" accepted by the American Association on Central Deficiency (AAMD) is that "mental retardation refers to significantly sub-average intellectual functioning which manifests itself during the developmental period and is characterised by inadequacy in adaptive behaviour"; second, that, although the particular figures may vary according to the particular scale used, the following scores reflect the following classifications according to the World Health Organisation (WHO) and AAMD.
IQ RANGE CATEGORY WHO AAMD Borderline 68-85 70-84 Mild (OA level, educable) 52-67 55-69 Moderate (OF level, trainable) 36-51 40-54 Severe 20-35 25-39 Profound (non-trainable) less than 20 less than 25
("Dull normal" seemingly being in the range from the upper limit of "Borderline" to about 100); and third, that those falling into the "Mild", "Moderate", "Severe", and "Profound" classifications seem to represent no more than about 3 per cent (30:1000) of the population, with "Mild" representing about 2.5 per cent (25:1000), "Moderate" about 0.4 per cent (4:1000) and "Severe" and "Profound" about 0.1 per cent (1:1000), in total.
It will be apparent from what I have just written - and, indeed, since the Appellant has been in receipt of an invalid pension since adolescence, it was clearly apparent from an early time - that the Appellant was, not merely a person with "a below average IQ", but a person with - in this respect - a significant disability, and one who, if she was to have any real hope of attaining that level of skill, ability and self-sufficiency which would permit her to live an independent life, was in need of specialised education, training and the like to enable her to develop her abilities to their maximum potential (see now Article 2 of the United Nations Declaration on the Rights of Mentally Retarded Persons (1971)). Despite this, so the evidence suggests, the Appellant received no such specialised education and training, and she appears to have been left a person with but the most rudimentary of what might be called "living skills", unable to cope on her own, and totally dependent - even in relation to household chores - upon her husband, who, as Handley JA has recorded, receives a carer's pension.
As if her mental retardation were not a sufficient disability on its own, the Appellant, as I have earlier recorded, also suffers - as did her mother, and her sister, Mrs Parker - from epilepsy - which, as is generally known, is a chronic
condition involving recurrent, or repeated, seizures - the onset of the Appellant's illness seemingly having occurred at an early age, and her seizures seemingly having been of the most severe - grand mal - type. While, in this day and age, a person's epilepsy may be ameliorated, and the susceptibility to seizures to a degree controlled, by anticonvulsant drug therapy - as has been the case with the Appellant - it can never be cured - the Appellant still has seizures once or twice each month. Further, it is to be noted that, in some cases at least, the organic brain dysfunction producing the patient's seizures may be merely one particular manifestation of a more general cerebral dysfunction involving slowed mental function, disturbed behaviour and the like.
Then, to compound the Appellant's problems, there was her history of psychiatric illness. Although, given the very limited nature of the evidence, one can do little more than speculate about it, the fact that the Appellant's mother seems to have been subject to recurring episodes of a depressive illness seems to suggest that the Appellant may have been genetically predisposed to some forms of schizophrenic illness. The fact that the first onset of the Appellant's illness appears to have been at, or a little after, the onset of puberty, is hardy a matter of surprise, as schizophrenia is typically a disease of adolescence, or young adulthood.
Although, again, the very limited nature of the evidence makes it difficult to know what was the true nature of the Appellant's illness, some of the conduct which has been attributed to her - introversion, poor social skills, sudden outbursts of rage, or violence, directed towards family members - and the apparent absence of delusions or hallucinations suggests that it may have been what is sometimes called "simple schizophrenia" and sometimes called "schizoid personality disorder". Finally, it is to be noted that the fact that there appears to have been no recurrence of the Appellant's illness since her marriage about 25 years ago does not necessarily indicate that she has had a full and permanent recovery from her illness - one of the recognised outcomes for the schizophrenic patient is social remission, with personality defect and with the patient dependent on protection and supervision, a description which seems to fit the Appellant's present condition in life. It is thus clear that, if the Appellant were, in the future, subjected to any significant stress - as, for example, the untimely death of her husband - there would be a very real possibility - if not a probability - that her underlying illness would, once more, reassert itself.
Ihave thought it desirable to devote so much time to the nature, and possible causes, of the Appellant's disabilities, or limitations, and the handicaps to which, by reason of those disabilities, or limitations, she was subjected, as it seems to me that the Master's assessment of the nature, and extent, of the Deceased's testamentary duty to provide for the Appellant was - particularly when contrasted with his assessment as to the nature and extent of the Deceased's testamentary duty to the Appellant's sisters - significantly, if not fatally, flawed because of his failure fully to understand, and, thus, to make an appropriate allowance for, the nature and extent of the Appellant's disabilities and limitations, of the handicaps to which they subjected her, and of the consequences which they had upon her behaviour.
Lest it be thought that some demonstration that this was so is called for, I merely record, first, that the Master appears clearly to have felt that the extent of any testamentary duty owed by the Deceased to the Appellant was not great; second, that the Master was clearly of the opinion that, even if the lack of any proper affection between the Deceased and the Appellant were - as I believe the
evidence to indicate that it was - the fault of the Deceased, that lack of proper affection would still justify a reduction in the provision which might otherwise have been made for the Appellant (cp Gorton v Parks!); third, that, although the Master, when seeking to evaluate the respective strengths of the claims of the Appellant and her sisters upon the testamentary bounty of the Deceased, rightly gave weight to the care and attention which the Appellant's sisters - one of whom, however, it should be remembered, had, with her own family, lived for many years in her parent's home without charge - had given to their parents, he appears to have given no weight to the reasons why the Appellant did not do so; and, finally, that, while the Master referred to the Appellant's "medical condition" as the sole reason which justified the making f the Order which he proposed, the sum which he awarded - only about $20,000.00 after costs had been provided for
In these circumstances, and notwithstanding the limitations which such decisions as House v The King? place upon the power of an appellate court to overrule a discretionary judgment, or value judgment, such as that now in question, I consider that the Master's discretion would have miscarried even if the objective which, by his Order, he sought to achieve had been attainable in fact.
As, I have previously recorded, I agree with the Orders proposed by Handley JA.
. Set aside the judgment of Master Windeyer in so far as it ordered payment to the plaintiff of a legacy of $26,000 carrying interest from 18 February 1990.
advisers to abide the further order of the Court following the hearing in
Counsel for the Appellant: PR GRAHAM QC/J NEEDHAM Instructed by: ARDEN ASSOCIATES
SMITH
DAYMAN
(1989) 17 NSWLR 1
(1936) 55 CLR 499