WOODS v cimIno

Judgment - EX TEMPORE (revised) 1These proceedings, in which claims for family provision relief are made under chapter 3 of the Succession Act 2006 NSW, demonstrate the difficulties inherent in accommodating the competing entitlements of the members of a deceased person's family, in a reconstructed family, in a middle class setting. 2A wife of longstanding, now widowed, has to live with uncertain health and limited prospects of employment for an indefinite future. Her children of a previous marriage make no claim on their stepfather's bounty. Within the constraints of available property he has endeavoured to accommodate his widow, their two children and his three children of a previous marriage. 3All five children whose circumstances bear upon the outcome to these proceedings are young adults; rich in potential, but not bankable treasure. One of the three children of the deceased's first marriage (Anna, married to the first defendant) may be materially better off than the others; but, if so, not by so much as to deny her entitlement to benefit from her father's bounty. 4John Joseph Woods ("the deceased") died on 30 June 2011, aged 69 years. He left a will dated 1 March 2010, probate of which was granted to the defendants on 5 January 2012. 5He left an estate which, aside from personal property, comprised a one-half share, as a tenant-in-common with his wife (now widow), in the matrimonial home in Cormac Street, Balgowlah. That property has been valued, now, at $1.58 million. The deceased's share is valued at half that: $790,000. 6He also left a trust fund (the proceeds of a self-managed superannuation fund) of approximately $900,000 (subject to an outstanding tax liability) available for designation as notional estate. It is presently held on trust for the same beneficiaries, and in the same shares, as are entitled to the residuary estate of the deceased under his will. 7The pool of assets available for consideration of claims for relief under chapter 3 of the Succession Act is of the order of $1.69 million, subject to the outstanding tax liability and the costs of the proceedings. 8The costs incurred, on both sides, are, as has sadly become too familiar, a heavy charge on the family's resources. 9The deceased was twice married. His first wife, Mary, to whom he was married for nine years, died in 1979. In 1987 he married his second wife, now his widow, Margaret. 10She and her children by him are the plaintiffs in the present proceedings. They claim family provision relief in two separate proceedings. Margaret is the plaintiff in one set of proceedings. Her daughters are the plaintiffs in the other. Both sets of proceedings were commenced by a summons filed on 1 May 2012. 11By his first marriage the deceased had four children. The youngest of them was born, and died, in 1978. The three surviving children are: Anna, born in 1972 and now aged 41 years; Matthew, born in 1973 and now aged 40 years; and Elizabeth, born in 1975 and now aged 37 years. 12The deceased named two executors in his will. Probate of the will was granted to them. They are the defendants in these proceedings. The first defendant is the husband of Anna. The second defendant is the deceased's daughter, Elizabeth. 13The two children of the deceased's second marriage, to Margaret, are Monique (born in 1990 and now aged 23 years) and Bridget (born in1991 and now aged 21 years). They are both living with their mother, in the family home at Balgowlah, while continuing their tertiary education. 14Margaret's marriage to the deceased was her second. Her first marriage ended in divorce. By that marriage (which subsisted between 1969 and 1986) she had three children: Damian, now aged 43 years; Martin, now aged 41 years; and Collette, now aged 27 years. 15Each of Margaret's three children by her first marriage has been named by the defendants as a person who is, or may be, an "eligible person" entitled to claim relief under the Succession Act. In fact, none of them has made a claim for relief, notwithstanding the fact that they have been served with notice of these proceedings. They have taken no part in the proceedings. Their interests can be ignored in the disposition of the proceedings: Succession Act, section 61. 16After the marriage of their father to Margaret, the three children of the deceased's first marriage moved, with him, into the Balgowlah property. Although there is a simmering dispute about whether (and to what extent) the deceased, Margaret and their respective children formed a "blended family", after the marriage all of them lived as a single household. They were a single family unit, albeit with distinct branches. 17Under his will, the deceased left personal property to the children of his first marriage (Anna, Matthew and Elizabeth) and divided the residue of his estate into five shares. One of those shares was left to each of the children of his first marriage. Another one-fifth share was left to Margaret. The remaining one-fifth share was divided, equally, between the children of the deceased's second marriage: Monique and Bridget. 18Margaret was born in 1949 and is presently aged 63 years. She works part time as a teacher's aide. Her earnings (approximately $600 a week) are absorbed by ordinary living expenses. Her health is not great. Her working life is probably coming to an end, whether or not she maintains a resolve to continue in paid employment. In fact, she is tired and craves retirement. She suffers from a medical condition which exposes her to the possibility of injury. On 26 February 2013 she fractured her arm, necessitating corrective surgery on 1 March 2013. This is a graphic demonstration of an ongoing risk of ill health. 19Margaret's only substantial asset is her half-share in the family home. Her other assets are modest in dimension: a few thousand dollars in savings, a share portfolio not much bigger, two old motor vehicles and superannuation entitlements of about $27,500. She has debts of about the same dimension, representing borrowings from her children. 20In historical terms, Margaret has a special attachment to the Balgowlah property. She has lived there for 37 years; initially with her first husband, then with the deceased, always with her children in the days of their youth. She transferred half of the property to the deceased in 1989, at his request, when he funded renovations. 21As young people still engrossed in study and yet to enter the workforce full time, Monique and Bridget have their own special needs. Their aspirations, reasonable in themselves, presently outreach their resources. They remain dependent on Margaret. Unless the unexpected materialises, they will remain dependent on her for a few years yet. 22The claims for relief advanced by Monique and Bridget have been pressed as independent claims; but as claims which, the girls accept, should be subordinated to the dominant claim of their mother. In adopting that stance, the young women demonstrate maturity; filial respect; and an appreciation that they remain members of their mother's household. Their welfare is interwoven with hers. 23Of the deceased's three children by his first marriage, Anna appears to be the most settled. Her husband gave evidence in terms that suggest that they are modestly well off. He is self-employed in the building industry. Anna works part-time as a nurse. They have two young children. 24Matthew has struggled to come to terms, first, with his father's terminal illness and, since then, the loss of his father. He is, in formal terms, "unemployed." However, he has devoted himself to charity work, and subsisted with accumulated savings and casual employment. He and his fiancée, Keri Sharpe, plan to marry soon. Life is not without its happy prospects. 25The personal circumstances of Elizabeth, the second defendant, demonstrate that she is a person of ability, and ongoing prospects, not beyond a need for assistance from family. She owns her own home unit, subject to a mortgage. She has aspirations for further study at a tertiary level. She is presently employed on a contract that falls for renewal in two months' time. As patently capable and independent as she is, she too is not beyond a need for family assistance. 26Each of the claims before the court was made within the 12 months limited by the Succession Act, section 58. As has been noted, the deceased died on 30 June 2011 and the originating process underlying the current proceedings was filed on 1 May 2012. 27There is no dispute about the eligibility of the plaintiffs to apply for family provision relief. They are all "eligible persons" as defined by section 57 of the Succession Act. Margaret is the widow of the deceased: section 57(1)(a). Monique and Bridget are his children: section 57(1)(c). 28In my assessment, made at the time of hearing of their applications for relief, as is required by section 59(1)(c) of the Act, each of the plaintiffs has been left without adequate provision for her proper maintenance, education and advancement in life by the will of the deceased. The standard to be applied in the evaluation of adequacy of provision is that of "community standards": Andrew v Andrew (2012) 81 NSWLR 656 at [12]-[16] and [34]-[36]. 29Margaret's claim is a classic "widow's claim", as considered in cases such as Luciano v Rosenblum (1985) 2 NSWLR 65, qualified by a need to accommodate competing claims on the deceased's bounty: Spata v Spata [2011] NSWSC 1221 at [83]-[86]. She was a dutiful wife. Her marriage to the deceased was, perhaps, affected by an overly controlling tendency of mind on his part in relation to financial matters; but it was well within the range of experience of a happy marriage. Tensions within the family appear to have been a reflection of several factors: the disparity in the ages of the married couple; the deceased's anxiety (in life and on death) to provide for the children of his first marriage; and tensions, not abnormal, between different branches of his family. Two apparently well adjusted young women, children of the marriage, testify to its success. 30Prima facie, Margaret should be permitted to retain the Balgowlah property as her residence, with full ownership of it and a modest capital sum to assist her generally. Any such capital sum has to be modest because of a need to accommodate competing claims. 31It may be that, at some time, Margaret will be moved to sell the Balgowlah property; perhaps, to "downsize" to a more manageable living area, or to set aside a capital fund. That should be her choice, working within ordinary constraints. She should be allowed the autonomy, and dignity, to make such decisions, not forced by the deceased's will to move out of the family home in a peremptory fashion. 32In making these decisions, Margaret will, no doubt, reflect on the fact that Anna, Matthew and Elizabeth remain part of her extended family. They are siblings of Monique and Bridget, all children of her late husband. There is more connection here than the mere fact that all the children were, for a time at least, members of the same household and dependent on both Margaret and their father. As their unhappy, shared experience of these proceedings fades in collective memory, one can but hope that they will concentrate on the positives of their family connection. Whether they view that connection positively or not, it will remain important throughout their lives. There is no immediate prospect that chapter 3 of the Succession Act 2006 will be repealed. Nor is there any guarantee, other than family harmony, that a family provision application will not be made against Margaret's estate as such applications have been made against the estate, and notional estate, of the deceased in these proceedings. 33All the young people (Monique and Bridget no less than the deceased's other children) have a need of assistance from the accumulated resources of their father. Their needs are greater than the resources. The demands of establishing their own households, careers and the like are pressing upon them all. As the youngest of the children, Monique and Bridget are, perhaps, in greatest need in this respect; but, in need of assistance they are. They have yet to move out of home or to finish their formal education. 34The disparity in provision made by the deceased for the children of his first marriage and for those of his second does not, of itself, mandate a different outcome upon an application of the provisions of chapter 3 of the Succession Act. Nevertheless, it is worthy of notice. The deceased appears to have assumed that Margaret would have an amplitude of resources available to her to equalise any imbalance in the inheritances of his younger children, vis-à-vis those of his first marriage. She does not have that wealth. 35Having regard to the criteria for which section 60 of the Succession Act provides - particularly the length of the deceased's marriage to Margaret, the relationships within the different branches of his family and the respective personal circumstances of Margaret and each of the deceased's five children - my finding is that, as contemplated by section 59(2) of the Succession Act, an order for provision should be made in favour of each of the plaintiffs. 36The primary problem in this case is quantification of that provision, particularly the provision that should be made for Margaret as the principal claimant. All questions of quantification need to be assessed in the context of the competing claims of Monique and Bridget, and the very real claims on the bounty of the deceased that should be acknowledged in favour of Anna, Matthew and Elizabeth. 37The deceased's estate is insufficient to meet all claims upon it, including orders for provision and the burden of orders for the costs of the proceedings. It is accepted, by both sides of the record, that a designation of the trust fund is open to the court (upon an application of Part 3.3 of the Succession Act) and, in practical reality, inevitable. 38Any inevitability attaching to the designation of notional estate stems, in part, from the costs incurred on both sides of the record in preparation of the proceedings for hearing. It stems also from the nature and strength of Margaret's claim to the matrimonial home. 39During the course of the hearing evidence disclosed that, on accounting advice that may have been misguided, an amount of $13,818.90 was paid out of the trust fund to each of the defendants ($27,637.08 in total) on 24 December 2012. Those moneys were paid out of the fund in a perceived need to allow for the defendants' personal exposure to taxation liability as trustees of the fund. 40It is not possible, within the constraints of these proceedings, to unravel this part of the case. There is no necessity to do so. In response to criticism of their conduct (admittedly conduct on professional advice), each defendant has volunteered an undertaking to the court, which I accept, to refund to the trust fund the amount paid out to them. Any such refund should include an allowance for interest calculated at the rate for which section 100 of the Civil Procedure Act 2005 NSW provides. 41In any event, given the orders I propose to make in disposition of the proceedings, any failure to comply with the defendants' undertakings will not be to the disadvantage of the plaintiffs. If anybody may be disadvantaged, I apprehend that it would be the deceased's first family, Matthew in particular. I draw to his attention, as well as the attention of that first family, the need to accommodate Matthew's position in replenishment of the trust fund. 42Pursuant to Part 3.3 of the Succession Act (particularly section 80 and having regard to sections 87-88), I propose to make an order that the whole of the trust fund (presently held in an investment account with the St George Bank) be designated as notional estate of the deceased. It should be augmented by the defendants' refund of moneys pursuant to their undertakings to the court. 43The effect of an order for the designation of property as notional estate is to extinguish the rights of the beneficiaries to the trust fund (Succession Act, section 84), and to subject the fund to orders for provision, and costs, made by the court. As no more property can be designated as notional estate than may be necessary to meet orders of the court in relation to provision and costs, and to forestall any dispute about the beneficial ownership of the balance of the fund, I propose to subject the orders for provision made in favour of the plaintiffs to a condition (to which they have agreed to submit) that they release in favour of the deceased's first family such beneficial entitlements they might otherwise have in the trust fund. 44The object of this scheme of orders is to ensure appropriate provision is made for the plaintiffs, recognising that the balance of the trust fund will have, as an ultimate destination, the pockets of Anna, Matthew and Elizabeth. 45It may be necessary for the orders I now announce, in draft, to be the subject of further consideration before final orders are pronounced. I am open to receiving submissions as to the form in which orders should be made. 46Subject to hearing from counsel as to the form of the orders, I propose to dispose of the proceedings by making notations and orders in the following terms: (1) Note the undertaking of the first defendant to the court that he will, no later than a date to be appointed and which I nominally and provisionally set at 30 June 2013, repay to the trust the sum of $13,818.90, together with interest calculated at the rate for which section 100 of the Civil Procedure Act 2005 provides. (2) Note the undertaking of the second defendant to the court that she will, no later than 30 June 2013 or such other date as may be appointed by the court, repay to the trust the sum of $13,818.90, together with interest calculated at the rate for which the Civil Procedure Act, section 100, provides. (3) Order that the following property be designated as notional estate of the deceased so far as may be necessary to meet orders for provision and costs made in these proceedings: (a) the trust moneys standing to the credit of the defendants in the investment account numbered xxxxxxxxx at the St George Bank; and (b) the debts respectively owed by the defendants pursuant to their respective undertakings to the court, noted in paragraphs 1 and 2 of these draft orders. (4) Upon condition that she releases in favour of Anna, Matthew and Elizabeth any beneficial entitlement she might otherwise have in the trust fund, order that, in lieu of the provision made for Margaret in the will of the deceased, she receive the following: (a) from the estate of the deceased, his one half share in the Balgowlah property, unencumbered; and (b) from his notional estate, a legacy of $100,000. (5) Upon condition that she releases in favour of Anna, Matthew and Elizabeth any beneficial entitlements she might otherwise have in the trust fund, order that, in lieu of the provision made for Monique in the will of the deceased, she receive from his notional estate a legacy of $100,000. (6) Upon condition that she releases in favour of Anna, Matthew and Elizabeth any beneficial entitlements she might otherwise have in the trust, order that, in lieu of the provision made for Bridget in the will of the deceased, she receive from his notional estate a legacy of $100,000. (7) Order that the legacies for which orders 4, 5 and 6 provide, are to bear interest (at the statutory rate), from today's date, if not paid earlier than 30 June 2013 (the intent of this order being that no interest will be payable on the legacies if paid before 30 June 2013). (8) Order that the costs for which these orders provide are to be paid, in the first instance, from so much as remains of the estate of the deceased after transfer of his share of the Balgowlah property to his widow, Margaret, and, thereafter, from his notional estate. (9) Order that the costs of the defendants be paid out of the estate or notional estate of the deceased on the indemnity basis. (10) Order that the costs of the plaintiffs be paid out of the estate or notional estate of the deceased on the ordinary basis. (11) Note that any liability of the estate of the deceased, or referable to the trust fund, for taxation is to be met by the fund before its ultimate distribution to Anna, Matthew and Elizabeth as tenants-in-common in equal shares, the intent of these draft orders being that they will each ultimately receive about $100,000 from the trust fund. (12) Reserve to the parties liberty to apply in the working out of these orders. 47In advancing these draft orders, I note that I have yet to hear precise submissions from the parties as to costs, including submissions directed to the possibility that there should be an order limiting or capping the costs that might be paid out of the resources of the deceased's estate or notional estate. I will receive submissions both as to costs and as to the form of the orders.