Succession - Family provision and maintenance - Principles upon which relief granted - Quantum - Widows - No competing claims - Whole estate required for adequate provision to be made.

R G Woolnough, M B Rush & R H Morrison: G W Tremayne

R G Woolnough, M B Rush & R H Morrison : Jackson & Tremayne

Judgment Number: [2005] TASSC 50

1 This is an application under the Testator's Family Maintenance Act 1912 ("the TFM Act") by a widow for provision out of the estate of her husband, who died on 21 February 2002. By his will, the testator gave his widow the right to have the use and enjoyment of all his assets during her lifetime. He did not give her any greater interest in any of his assets.

2 The will is difficult to interpret, but there is no dispute as to its proper interpretation, and I agree with the submissions of counsel as to the testator's intentions. For reasons that I will state shortly, I think the proper interpretation is that, subject to the life interest of the applicant, the estate of the testator was to be divided into eleven equal shares; that one of each such shares was to go to each of his ten surviving children; that the eleventh share was to be divided amongst the family of his deceased son, Stephen John Woolnough; that half of that share was to pass to the deceased son's widow; and that one eighth of it was to pass to each of the deceased son's four children. The will did not include a clause appointing an executor. Letters of administration with the will annexed have been granted to the Public Trustee.

3 The applicant contends that the testator did not make proper provision for her, having regard to the size of the estate and her financial position, and that the only appropriate course is for her to receive an absolute interest in the whole estate. Three of the children of the testator, namely Rodney Gordon Woolnough, Marian Bromley Rush, and Rosemary Helen Morrison, were represented at the trial. Their counsel conceded that the testator had not made proper provision for the applicant, but submitted that she should receive less than the whole estate. The other beneficiaries were notified of the proceedings but elected to take no part in them. The respondent made no submissions as to what the outcome of the proceedings should be, but provided information about the estate.

4 The relevant provisions of the will read as follows:

"I THOMAS JOHN WOOLNOUGH LEAVE ALL MY ASSETS AND PERSONAL POSSESSIONS TO MY WIFE MAUREEN DAWN WOOLNOUGH TO HAVE THE USE AND ENJOYMENT DURING HER LIFETIME.

IN THE EVENT OF US BOTH BEING DECEASED AT THE SAME TIME EVERYTHING IS TO BE LEFT TO OUR CHILDREN ON EQUAL PARTS. THE CHILDREN'S NAMES ARE AS FOLLOWS:

STEPHEN JOHN WOOLNOUGH (DECEASED) ONE HALF OF ONE SUCH PART TO MY DAUGHTER-IN-LAW MAUREEN ELIZABETH WOOLNOUGH THE REMAINING ONE HALF TO MY GRANDCHILDREN: JOHN CARLOS WOOLNOUGH, AMANDA ANNETTE BROOKS, NONA NICOLE WOOLNOUGH AND ELAINE ELIZABETH WOOLNOUGH. IN THE EVENT THAT MAUREEN SHOULD REMARRY THEN HER ONE HALF SHARE SHOULD BE LEFT TO THE ABOVE STATED GRANDCHILDREN.

5 The applicant was the second wife of the deceased. A number of the children mentioned in the will are the children of his first marriage. Evidently it was his intention that each of the children of both marriages, or their descendants, should be provided for from his estate.

6 The will makes clear that the testator intended his surviving children and the family of his deceased son to share his estate in the event of his widow not surviving him, but it does not expressly provide that, in the event of his widow surviving him and therefore taking a life interest, the estate is to be so distributed upon her death. However the intention of the testator must be deduced by reading the document as a whole, and there is a presumption that a testator does not intend an intestacy, total or partial. It is hardly likely that he intended the will not to govern the eventual distribution of his estate in the event of his wife surviving him. It is reasonable to infer that the testator intended that, in the event of his wife outliving him, his estate was to be divided into 11 shares upon her death, and distributed in the same way that he intended it to be distributed upon his death in the event of his wife dying before him.

7 The testator was a farmer. His principal asset was a farm property named "Topeka" at Little Swanport. As is usual, the values of the testator's assets as at the date of his death were estimated for the purpose of the respondent's application for letters of administration. According to the inventory prepared for that purpose, the assets and liabilities as at the date of death were as follows:

8 The real estate has increased in value. A firm of property valuers has valued it at $420,000 as at August 2004. The Mercedes Benz motor vehicle has apparently been transferred to the applicant. An account manager from the Public Trust Office, Mr Webb, swore an affidavit as to the values of the assets on 28 September 2004. According to that affidavit, the four tractors were then worth $6,500, rather than $10,000, and the farm plant and equipment was then worth $10,000, rather than $20,000, but the other chattels had retained their original estimated values. In an affidavit sworn in February 2003 the applicant said that the four tractors were worth only $2,500. For reasons that will become clear, I do not think I need make a finding as to the value of the tractors.

9 The debt owing by Scott Kube arose from a transaction in 1996. Mr Kube is the husband of Rebecca Kube, who is a daughter of the testator and the applicant. Mr and Mrs Kube borrowed money from a trustee company ("Perpetual Trustees") for the purpose of a business venture. The testator mortgaged Topeka to secure those loans. The business apparently failed. Mr Kube became bankrupt. The testator remained liable to Perpetual Trustees as Mr Kube's guarantor. The original debt was $132,000. Despite his bankruptcy, Mr Kube made payments of principal and interest to Perpetual Trustees. As a result, the debt to Perpetual Trustees had been reduced to $72,112.91 by the time the testator died. I do not understand why the amount said to be owing by Mr Kube to the testator was slightly lower, it being shown in the respondent's inventory as a debt of $68,256. It is important to note that, because of the bankruptcy, that debt is unenforceable. By the time of Mr Webb's affidavit of 28 September 2004, Mr Kube had reduced the debt to Perpetual Trustees to about $58,000, and the amount that he would have been liable to pay to the respondent if he had not become a bankrupt had been reduced to $54,000. Although he has been continuing to make payments that he apparently he has no legal duty to make, I think it appropriate, with due respect to him, that I take into account the possibility that he will cease to make such payments at some stage in the future.

10 The amount that the respondent charges by way of commission will depend on whether it sells the farm or whether, as a result of these proceedings, it transfers the farm to the applicant. If the farm is sold for $420,000 by the respondent, the following will have to be paid out of the estate:

11 If the farm is transferred to the applicant and the commission is less, the corresponding figures will be as follows:

12 If the real estate is sold, an estate agent's commission and expenses will probably be payable, but no allowance has been made for such expenditure in the above calculations. Further, those calculations do not take into account the Public Trustee's costs and disbursements in relation to this litigation. It is common ground that its costs will not exceed $5,000, and that its disbursements include a valuer's fee of $1,100. It is likely that, whatever the outcome of these proceedings, the applicant and the represented beneficiaries will seek orders that their costs be paid from the estate on a solicitor and client basis.

The applicant's financial position and moral claim

13 According to the applicant's undisputed evidence, her only significant asset is a flock of sheep. In an affidavit sworn on 30 April 2004, she said she owned 175 sheep, worth between $80 and $100 each. I infer that their total value is now about $16,000. According to the same affidavit, the applicant had debts totalling $26,750 owing to a credit union, Perpetual Trustees, a retail store, a finance company, and a pastoral company. Her liabilities exceed her assets. She is an age pensioner. As at April 2004 her pension payments were about $413 per fortnight. They have no doubt increased a little since then, but only a little. The applicant is not able to live within her means. She estimated her expenditure in April 2004 to be about $490 per fortnight. It seems likely that she is gradually getting further into debt. She does not have private health insurance. Some of her expenditure appears to be a consequence of living on a farm at Little Swanport. Her estimated expenditure includes $28 per week on insurance, $20 per week on petrol, $16 per week on pharmaceuticals, $16 per week on animal expenses, and $22 per week on the registration of two motor vehicles.

14 The applicant was 59 years old when the testator died. She is now 62 years old. She would like to be able to sell Topeka, purchase a small house in the country, invest the proceeds of sale, and draw a small income from the investment to supplement her pension. She may one day need to live in a nursing home, and that could be costly.

15 The applicant lived with the testator from 1960 until his death in 2002. When she commenced living with him, he was a widower with four daughters aged 2, 4, 6 and 8 living with him, and two sons living with their grandmother. She went to live with him as a nanny for his daughters, having responded to an advertisement in a newspaper. One of the sons, Rodney Woolnough, came to live with them about a month after her arrival. They were on a property about 27 miles from the nearest township. The applicant and the testator were married in 1962. The property belonged to the testator's father initially, but the testator bought it from his father in 1968. In 1977 the testator sold that property and purchased Topeka, and the family moved there. The applicant worked very hard for over four decades with the testator, bringing up a very large family and doing farm work on the two properties. She looked after him during periods of ill health, and ran Topeka single-handed at times. She has not had a holiday since a camping trip to the East Coast of Tasmania in 1969, though she considered her trips to hospital to have her children as holidays. She does not spend money on any type of recreation. She cuts her own hair, or gets one of her granddaughters to cut it for her. She has been to a hairdresser only once since 1960. She has heart trouble, and is taking medication accordingly. She might eventually require by-pass surgery. She might need a couple of operations during the next 20 years.

The financial positions and moral claims of the other beneficiaries

16 Rodney Gordon Woolnough has sworn an affidavit that reveals that he lives in West Moonah and is an investment adviser. Marian Bromley Rush has sworn an affidavit that reveals that she also lives in West Moonah, and is an insurance officer. Rosemary Helen Morrison has sworn an affidavit that reveals that she lives at Grove, but does not reveal her occupation. Otherwise there is no evidence before me as to the financial positions of any of the beneficiaries other than the applicant. There is no significant evidence before me as to the relationship that any of the testator's children had with him. None of them has sought to establish that they have any particular need, nor any moral claim warranting any provision from the estate upon the eventual death of the applicant.

The contentions of the applicant and her opponents

17 The applicant contends that because of her age, state of health, financial position, needs, long marriage, and contributions to the property of the testator, she should receive the whole estate.

18 The three beneficiaries who oppose the application concede that the applicant should receive part of the estate absolutely, but contend that she should receive only a life interest in the balance of the estate, and that the balance should be distributed upon her death in accordance with the will. Each of the three swore an affidavit in November 2004 saying that he or she had no objection to the sale of Topeka, the purchase of a smaller property for occupation by the applicant, the investment of the remaining funds, and the payment of the interest thereon to the applicant during her lifetime. Each said that he or she was willing for a deed of family arrangement to be entered into, with provisions that, after the payment of all debts, administration expenses and legal costs, half the remaining funds were to be paid to the applicant, and the other half invested with the income therefrom being paid to her during her lifetime. Their counsel, Mr Tremayne, submitted that Topeka should be sold; that $150,000 from the proceeds of the sale should be paid to the applicant absolutely, in the nature of a legacy; and that the residue of the estate should be used to purchase a residence for the applicant in which she would have only a life interest, with any surplus funds being invested and the interest going to the applicant during her lifetime as the life tenant.

19 It being common ground that the testator did not make adequate provision for the proper maintenance and support of the applicant, it is necessary only to determine what provision would be adequate. In determining that question, it is necessary to have regard to the applicant's financial position, the size and nature of the estate, and the totality of the relationship between the applicant and the testator. Had there been any significant evidence about the relationship between the testator and anyone with a legitimate claim upon his bounty, that would also have been relevant. See Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201 at 209 - 210.

20 Mr Tremayne relied on a comment made by Mason J (as he then was) in White v Barron [1980] HCA 14; (1979) 144 CLR 431 at 444 - 445 as follows:

"A capital provision should only be awarded to a widow when it appears that this is the fairest means of securing her proper maintenance. However, the provision of a large capital sum for a widow who is not young, may, in the event of her early death, result in a substantial benefit to her relatives, contrary to the wishes of the testator, when a benefit of another kind would have afforded an adequate safeguard to her personally, without leaving her in a position in which she could benefit her relatives from the proceeds of the legacy."

21 He also relied upon King v White [1992] VicRp 72; [1992] 2 VR 417. In that case at 425, Hedigan J quoted with approval the following passage from Re Crewe [1956] NZLR 315 at 323:

"It may probably be said with truth that the proper maintenance which a testator owes to his widow in cases where there are no claims of other dependants is such maintenance as will enable her, taken in conjunction with her own means, to live with comfort and without pecuniary anxiety in such state of life as she was accustomed to in her husband's lifetime, or would have been so accustomed to if her husband had then done his duty to her."

"A court must bear in mind at all times, that it is not fee to 'write a new will'. This means, however, no more than that the court cannot ignore the will and make fresh testamentary dispositions as if the will had never been written. Since the court's power to interfere necessarily involves setting aside unjust dispositions, at least in part, the court will always provide a new disposition in those cases in which it exercises its discretion.

... One view of that exercise of discretion is that, if after the court has made adequate provision ... for the proper maintenance of, say, a widow in respect of whom the testator failed to discharge his duty, if [sic] finds a surplus remaining, the court has no power or right to dispose of that surplus, other than amongst those selected by the testator as the original objects of his bounty."

22 Mr Tremayne relied on evidence of the applicant and the testator having lived a penurious existence over many years, and on evidence that three-bedroom residences can be bought in Swansea for as little as $170,000. He submitted that the net proceeds of the estate were likely to be about $390,000 after the sale of Topeka, the payment of the debts of the testator and the applicant, the payment of the respondent's commission and expenses, and the payment of all legal costs. On that basis, he submitted that it would be appropriate for the applicant to receive $150,000 in the nature of a legacy, for a $180,000 residence to be bought for her, for use during her lifetime, and for the balance of about $60,000 to be invested, with the applicant receiving the interest during her lifetime, so that the applicant could receive the income from investments totalling $210,000. He falsely assumed that her age pension would not be reduced in consequence of that income, apparently not being familiar with the means test provisions of the Social Security Act 1991 (Cth).

23 Counsel for the applicant, Mr Williams, relied on actuarial evidence as to how large a lump sum the applicant would need to receive in order to be able to draw $20,000 per annum for the rest of her life, allowing for taxation, inflation, age pension entitlements, and the age pension means test. The average life expectancy for an Australian woman aged 62 years is 22.39 years, but the actuary allowed for likely mortality improvements, and adopted a figure of 25.80 years. On that basis, he concluded that a lump sum of $200,905 would be needed. On his calculations, that sum would be exhausted in 25.80 years' time. That figure assumes that the applicant would separately receive a home. For the fund to last until the applicant's 100th birthday, the actuary calculated that $286,670 would be needed.

24 On the basis of these figures, it appears that if the applicant were to receive the whole estate, and if Mr Kube were to repay with interest every cent that he originally borrowed, and if the applicant were to content herself with a house costing $180,000, the remaining funds would be exhausted at about the time of her death if she spends the interest and capital at a rate equivalent to $20,000 per annum in today's money, assuming she has an approximately average lifespan. Mr Kube might stop making his payments. A house costing $180,000 is likely to be very modest in my view, even having regard to the penurious life style of the applicant. She will have to live frugally if she lives on $20,000 per annum, after tax and rent-free. She will need to live particularly frugally if her lifespan proves to be greater than average.

25 In the circumstances, I am satisfied that the applicant will need to have access to the whole of the capital of the estate. The only way that the testator could have made proper provision for the applicant was to leave the whole of his estate to her.

26 I therefore order that provision be made for the applicant out of the estate of the testator to the extent of an absolute gift to her of the whole estate. I direct that a certified copy of this order be made upon the letters of administration.