KELEHEAR v SMITH SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL KIRBY P, MEAGHER and HANDLEY JJA 3 August 1990, 4 October 1990 [1990] NSWCA 102 TESTATORS' FAMILY MAINTENANCE — dairy farmer's will leaves real estate to sons and legacies of $1,000 to three daughters — one daughter dies before action — one daughter secures order under the Act for a legacy of $35,000 — claim of one son and a daughter for further provision under the Act, dismissed — daughter appeals — trial judge (Waddell CJ in Eq) finds that the will failed to provide adequately for the daughter — finds that the deceased had an obligation to provide her with a small legacy to deal with contingencies — finds further that no such order could be made having regard to the size of the estate and the prior claims of one brother and the other sister — held: (1)(by the Court) Care must be taken in the review by the Court of Appeal of determinations as to entitlement to an order under the Act and as to the amount of any such order. White v Barron (1980) 144 CLR 431, 445; Hunter v Hunter (1987) 8 NSWLR 573, 576 applied; (2)(per Handley JA, Meagher JA concurring; Kirby P dissenting) Having regard to the evidence of the assets and liabilities of the estate and the finding of the prior entitlements of the brother and the sister, there were insufficient assets to permit the making of an order under s3 of the Act in favour of the appellant sister. The power or "jurisdiction" to make an order does not oblige the Court to make such an order — that depending on the available estate at the time of the order. Borthwick Borthwick [1948] Ch 645, 651; Dun v Dun [1959] AC 272 applied. EXECUTORS and ADMINISTRATORS — commission -entitlement to — discussion by Handley JA of the nature of and entitlement to executors' commission. In re McIntosh (1902) 2 SR (NSW) 185 (Eq); Commission of Stamp Duties v Pearse [1954] AC 91, 113 referred to. Testator's Family Maintenance and Guardianship of Infants' Act 1916, s3. Family Provision Act 1982, s7. Supreme Court Rules, Pt77, R27. Appeal dismissed with costs. Kirby P This appeal involves a challenge to an order of Waddell CJ in Eq dismissing an application by Mrs Heather Kelehear (the appellant) for provision to be made in her favour pursuant to s3 of the Testators Family Maintenance and Guardianship of Infants Act 1916 (the Act). An Additional challenge is brought to his Honour's order that the appellant pay the costs of her proceedings. No separate argument had been heard at the trial on the order for costs. The success of this second challenge will depend upon the outcome of the first. Provisions of the will The issues before this Court are simplified by the fact that the findings of fact of the trial judge are not disputed. Nor is there a challenge to certain other orders made under the Act and, in one case, a family agreement to dispose of a small claim by compromise. Despite this measure of agreement, the case illustrates, once again, the energy with which intrafamily disputes of this kind are often litigated, necessarily at considerable cost in legal fees. 2 UNREPORTED JUDGMENTS In October 1980 Mr Robert Smith (the deceased) died. In September 1978 he had made a will dividing his estate equally between his children. The deceased was survived by his wife, Mrs Olive Smith and five children. They were Mrs Melvie Davis (born 1918), Mrs Hilda Harris (born 1920), Mr "Bruce" Smith (born 1922), Mr Lindin Smith (born 1936) and Mrs Heather Kelehear (born 1945). Mrs Hilda Harris was to die soon after the deceased, in June 1982. An application was duly made for probate to be granted in respect of the 1978 will. However, this was opposed upon the ground that the deceased lacked testamentary capacity when he made it. Unfortunately, the resulting probate suit lasted nine days before it was eventually accepted that the lack of testamentary capacity had been established. Pursuant to terms of settlement of the proceedings, probate was granted in December 1983 to an earlier will made by the deceased in 1969. For reasons which were not explained, the probate was not sealed until March 1985. The 1969 will named as executors Mr Lindin Smith (the respondent) and Mr Alwyn Kelehear, the husband of the appellant. In June 1987, Mr Kelehear retired as executor in circumstances which it is unnecessary to recount. By the 1969 will, the deceased gave his son Bruce Smith his land known as "Dog Trap" or "Sheep Station Creek" ("Glenroy"). This contains an area of approximately 50 acres. He also bequeathed twelve head of cattle which he specified should be selected by the executors. He then gave each of the three daughters, and a granddaughter, Kay Thrift, a legacy of $1,000 with interest to be paid after the expiration of three years from his death. The rest and residue of his real and personal property he left to Mr Lindin Smith, subject to the payment by him to his wife, Mrs Olive Smith, of the sum of $40 per week and subject also to her having the right to reside in the home during her lifetime. As a result of the death of Mrs Hilda Harris, her claim on the estate may be ignored. As a result of a compromise payment of $3,000 to Kay Thrift (in which all surviving family members concurred) her interest if any in the estate may also be ignored. But that left claims by Mrs Davis, Mr Bruce Smith and the appellant that each of them was entitled to have provision made for their respective maintenance and advancement pursuant to the Act upon the ground that each had been "left without adequate provision" by the terms of the will. Proceedings were duly commenced, some of them out of time, seeking orders under s3 of the Act in favour of these family members. It is because the death of the deceased was in 1980 that the claims fall to be determined under the Act and not under the Family Provision Act 1982. The delay in the resolution of the litigation is not wholly explained. It may be inferred that it has arisen from the protracted probate suit and the interlocutory skirmishes in the proceedings under the Act, all of which were hard fought. In the outcome of the proceedings under the Act heard by Waddell CJ in Eq, his Honour dismissed the claim by Mr Bruce Smith. No appeal was brought from that order, nor from the order for the payment by him of costs which was attached to it. Accordingly, the entitlement of Mr Bruce Smith, under the Act, can now be safely put to one side. Nor was any appeal brought from the order under the Act in favour of Mrs Melvie Davis. His Honour found that Mrs Davis had indeed been left without adequate provision by the terms of the will. He found that the deceased had a moral duty to provide, as far as he could consistently with his other obligations, by way of a legacy which would make somewhat easier the problems of Mrs Davis's old age. In the result, Waddell CJ in Eq ordered that the executor pay Mrs URJ KELEHEAR v SMITH (Kirby P) 3 Davis a legacy of $35,000 together with her costs on a common fund basis. He also ordered that interest be paid upon this sum. An affidavit placed before this Court by consent proved that the sums paid to or on behalf of Mrs Davis, including taxed costs, amounted to $38,153.13. Having been paid out in this amount which no party challenged in the appeal, the claim of Mrs Davis can therefore, likewise, be now regarded as satisfied. This left in dispute only the claim of the appellant, the youngest daughter of the deceased. Despite the earlier experience in the contested probate suit, in which costs of no less than $54,202.39 had been incurred to be paid out of the estate, or possibly because of the feelings engendered by that litigation, the claim of the appellant under the Act could not be satisfied by agreement. It therefore fell to be determined by the trial judge according to the terms of the Act, with its broad mandate expressed in words of broad generality. The decision of the trial judge rejecting claim to entitlement to an order under the Act is not, strictly speaking, discretionary in character. See Hughes v National Trustees, Executors and Agency Company of Australasia Limited (1979) 143 CLR 134, 149. Nevertheless, it is appropriate, because of the evaluation which is necessarily involved in determining whether the provision made is "adequate" or "proper" to approach the appellate review of the decision with the care which is usually taken in reviewing discretionary decisions properly so described. White v Barron (1980) 144 CLR 431, 445; Hunter v Hunter (1987) 8 NSWLR 573, 576. The reason for this care was explained by this Court in Hunter (ibid): "Tn part, it is simply a reflection of the advantage a trial judge necessarily has in the evaluation of the detail of evidence taken before him, usually in a continuous trial in which evidence is presented to him consecutively. In part, it is a reflection of the recognition by appellate courts of the evaluative considerations which necessarily arise when the relevant statutory language to be applied contains words requiring judgment, such as 'adequate' and 'proper' do. In such cases there is always a risk of differing solutions at differing levels of the judicial hierarchy, with no satisfactory principles to justify the preference of one opinion over another... In part, it is the operation of the well known principles which governs the review of discretionary decisions. Although the determination of the qualification of a claimant under the Act is not, strictly speaking, a discretionary decision, the relief provided certainly is, as repeated references in s3 of the Act make plain." With these matters of approach in the forefront of my mind and reminding myself also of the principle that disturbance of the provisions of a will is confined by our law only to cases where adequate provision has not been made for a spouse or child who claims, I turn to the detail of the case. It is against the examination of the facts proved that the conclusion reached by the trial judge concerning the claim of the appellant may be reconsidered by this Court. The claims of the children The deceased was a dairy and cattle farmer. In 1926 with his then family he moved to "Glenroy". In 1936 he took over "Whitfield" which was part of his father's estate. "Whitfield" was sold in about 1951 and the proceeds divided between those entitled to the estate. At about this time the deceased bought two properties namely "Horse Creek" and "Fairview" some 19 kilometres away. The deceased lived on "Fairview" until shortly before his death. All of his children helped with the farmwork. In due course all of them, except the respondent, left 4 UNREPORTED JUDGMENTS the family home. From about 1970, the deceased became increasingly difficult and irrational. In 1978 he was admitted to hospital and remained there until his death. Mrs Davis was found to have worked very hard on the family farm, without reward, from the age of fourteen until she left home at the age of twenty to live in Sydney. She married at aged 26 but returned to help her mother with the birth of the appellant in 1945. She had four children of her own before her husband left her for another relationship. She worked as a nurse's aide to keep herself and her children, returning to her parent's home over Christmas. She would help with the housework then and at later times when she also returned. She was sixty-nine at the time of trial. Her personal assets were minimal, her widow's pension being supplemented by board provided by the remaining son who lived with her. She sought provision for the cost of a suitable home unit with a value of up to $150,000. The respondent offered her a residence on "Fairview". She refused this and the trial judge found that the refusal was reasonable in the circumstances of her long term residence in Sydney. Mr Bruce Smith also left school at thirteen and helped on the farm without reward. He lived on "Fairview" until his marriage in 1965. Only after his marriage did the deceased provide him with a regular income, paying him then a quarter share of the milk cheque. At about the same time, Mr Bruce Smith and the deceased built a small house on the "Horse Creek" property. A number of the deceased's cattle were put on the property at that time; but the farm was not viable. Mr Bruce Smith left that farm in about 1969. Thereafter he did not have any contact with his father for about twelve years. His father accused him of robbing him of money, in that he had sold certain cattle and had allegedly given nothing to the deceased for them. Mr Bruce Smith resumed his relationship with his father from about the time of his admission to hospital until his death. He had worked at the Singleton Army Camp from about 1971 to 1981. At the time of the trial before Waddell CJ in Eq he was living on workers' compensation payments and a part invalid pension. He lived in a quarter acre block at Branxton in a two bedroom unlined fibro house proved to have a market value of about $20-26,000. The property of "Dog Trap" left by the will to Mr Bruce Smith was valued at between $40-45,640 by the respective valuers qualified by the opposing parties. Mr Bruce Smith agreed in cross examination that the twelve head of cattle left to him would be worth about $3,000 or more. He sought provision under the Act to enable him to buy a new car and a better house. Mr Lindin Smith, the respondent, followed the same pattern as his siblings. He left school at the age of fifteen. He claimed that he did 99% of the milking and 90% of the farm work on "Fairview" until 1968. Although the trial judge found that this might have exaggerated his evidence, he concluded that he undoubtedly had done "a very substantial proportion of such work". Like the others, he received no wages until he was twenty-one although he was provided with keep. At twenty-one he was paid 2 pounds per week. He married in 1957. He lived with his wife in the old homestead of the property. his wages were increased to coincide with his marriage, but only to 9 pounds per week. Like his brother Bruce, he later received a quarter share of the milk cheque. In 1978, the respondent secured a job at the Tyrell's Vineyard because he was having the greatest difficulty in supporting his family from what he earned from "Fairview" in partnership with his father. Through the battles which attended the probate suit, Mr Lindin Smith continued to live on "Fairview" with his wife. The evidence showed that he had tried to carry on his father's business after his death URJ KELEHEAR v SMITH (Kirby P) 5 in addition to his real property interests in the estate, the respondent owned a block of land at Gresford, a village close to "Fairview". He stated his intention, if able to retain "Fairview", to move the older house standing on that property to his block at Gresford. He gave evidence of his endeavours to improve the properties and to work the cattle left on them. Notwithstanding these efforts, it was found that his income was extremely modest. He contended that "Fairview" was not viable as a cattle raising property without additional land, such as that at "Horse Creek". There was evidence, which was accepted, that the respondent had health problems which were associated with his work on the land. Because of these his prospects of obtaining other employment were considered slight. The appellant married in 1964. She then left "Fairview" to live with her husband's parents at a property not far away. Thereafter she and her husband regularly visited "Fairview" and helped in various ways described in the evidence and accepted by the trial judge. He found that there was "no reason not to accept (her) evidence that she got on well with both her parents and that the only gift she received was that her father paid for her wedding and her mother gave her a trousseau box". The appellant had virtually no assets of her own except personal possessions, a bank account with about $400 in it and a Building Society account with about $3,000 in it. She had no income, except $20 per week which she derived from doing parttime housekeeping work. She lived with her husband on a property at Lostock. There was no evidence as to what income her husband earned from the property. According to the evidence the appellant was solely dependent upon him. She claimed that her husband did not make a good living from the property. Their three children had left home. She sought a legacy of around $20-25,000 as a "safeguard against contingencies". The trial judge found that the appellant's evidence did not "suggest any specific needs". On the other hand, the facts that the appellant had to do parttime housework for a mere $20 per week as well as her meagre liquid assets; that she was totally dependent upon her husband's income indicate her relatively modest personal circumstances. By reason of the fact that she was the last born of the children of the deceased, her education and opportunities had been somewhat better than those of her siblings who grew up in the harder times of the Depression. Nevertheless, if she were to lose her husband's support and source of income (a risk about which there was no specific evidence) her financial position would seem to be perilous. Her separate financial position, that is to say apart from the support of her husband, was more disadvantaged than the two surviving sons of the deceased. Only the factor of the support from her husband made her position significantly better than that of her sister, Mrs Davis who, it will be recalled, had been deserted many years earlier. This, then, was the evidence accepted by Waddell CJ in Eq and not challenged in the appeal to this Court. Upon the basis of that evidence his Honour reached his conclusions concerning the entitlements of Mrs Davis and Mr Bruce Smith, respectively, to orders under the Act. No challenge is made to the statement of the legal principles which prefaced these findings. It was agreed that his Honour had expressed the issue to be determined, and his jurisdiction to make orders under the Act, in terms which were both economical and accurate. When he came to the claim of the appellant, this is what he said: 6 UNREPORTED JUDGMENTS "As for Mrs Kelehear, I think that the deceased had a moral obligation to leave her more than $1,000. Although she had been and was likely to continue to be supported by her husband in modest but secure circumstances, he had an obligation to provide her with some small standby amount of money to deal with the contingencies of life which are apt to affect persons growing older." Having made such a finding of a moral obligation which was not satisfied by the terms of the will, his Honour had determined the so called "first" or "jurisdictional" question. He was thereupon empowered to make an order under the Act, as he did in the case of the appellant's sister, Mrs Davis. However, he did not do so. His reasons for declining an order in the appellant's case were, again, expressed briefly: "On the view which I take of the evidence, in considering what orders should be made having regard to present circumstances, the starting point is that Lindin should be left with at least 'Fairview' which would make provision for him which is reasonable in the circumstances... To reduce the provision of Lindin to anything else would, I think, be contrary of the moral obligations of the deceased to him.... The most that can be done to assist (Mrs Davis) in her old age is, I think, to order that she receive a legacy of $35,000 in addition to the legacy provided by the will... of such a provision is made for Mrs Davis, then it seems to me that, having regard to the debts of the estate, there is no room for making any additional provision for either Mrs Kelehear or Bruce Smith. It seems to me that to make such a provision for Mrs Davis will make it necessary, having regard to the estimated debts for Lindin to sell "Horse Creek" or else borrow a substantial sum. In saying this *Horse Creek" is assumed to be worth about $55,000, which would mean that after sale and satisfying such a legacy to Mrs Davis, there would remain something less than $20,000 which would oblige Lindin to find another $14-18,000 to meet the estimated debts. This he could probably do by selling his land at Gresford. Even so, there remains the possibility that he will have to borrow to some extent. Accordingly, no order can be made in favour of either Bruce Smith or Mrs Kelehear." His Honour then proceeded to dismiss the appellant's application and to order her to pay the costs of the executor in resisting it. It is from those orders that the appeal comes. The decision miscarried In considering the appeal, it is to be noted that Waddell CJ in Eq did not conclude, on the primary question, that the appellant had failed to establish that the will had left her "without adequate provision for (her) proper maintenance, education or advancement in life". To the contrary, his Honour concluded positively that, by the will, the deceased had failed to provide adequately for her. In the light of the foregoing statement of her circumstances, this is scarcely a surprising conclusion. The will was grossly discriminatory against the three daughters, leaving them (and a granddaughter) legacies of only $1,000 whereas the two sons, including Mr Bruce Smith who had left the family circle and its farming environment long before, were each left valuable real property. In the case of the daughter Hilda and the granddaughter, their moral claims may be regarded as having expired. But it was necessary to correct the claim of Mrs Davis by the order for a legacy of $35,000. Only the appellant is then left but $1,000 as a legacy to meet the found moral obligation which rested upon the deceased to provide something more than $1,000 for the contingencies of her old age. URJ KELEHEAR v SMITH (Kirby P) 7 There is no evidence that the appellant will not continue to enjoy the support of her husband. She herself acknowledged in evidence her opinion of the superior claims of the other children. It is clear from the available assets of the estate that in her case, as in the case of Mrs Davis, no provision could be made, consistent with the moral claims of the other children (especially the respondent) which would truly meet the need for a fund to protect her against the contingencies of life. Adjustment and a consideration of the claims of the other beneficiaries requires careful fine tuning, particularly in an estate of such a relatively modest size. But to leave the found entitlement of the appellant for proper provision completely unfulfilled, would in my view require a solid case to be made in my view that the making of an order under the Act in her favour would, in effect, offend the requirements under the Act to make orders for any other claimants shown to be entitled and to disturb the will to the minimum extent necessary. This, presumably, is the conclusion which Waddell CJ in Eq reached. It is a conclusion which the appellant challenges. In particular, she challenges his Honour's conclusion that "no order can be made" in her favour. She contends that, in coming to that conclusion, his Honour omitted to have regard to available liquid assets which were available to provide a fund for a legacy which would fulfil, at least in part, the entitlement to have provision made which was "adequate" having regard to the modest size of the estate and the prior or competing claims, notably of the respondent and of Mrs Davis. His Honour accepted that the stock of cattle belonging to the deceased and forming part of his estate at the date of trial was worth approximately $38,000. From this stock it will be remembered that Mr Bruce Smith was entitled to select a certain number whose value he put at $3,000. After such stock was removed from the assets of the estate, there would still be cattle to the value of $35,000 within the estate. It was not possible, on the evidence, to allocate with mathematical precision that part of the stock which could fairly be ascribed to "Fairview" and that part to be assigned to "Glenroy" and "Horse Creek". Accepting the approach which his Honour did that the deceased's primary obligation (so far as consistent with the obligation to the other children) was to leave the respondent with at least "Fairview", it is necessary in my view to adopt a division of the stock between "Fairview" and the other properties. If such a division is accepted according to the size and value of the respective properties, it will result in three-fifths of the stock being applied to "Fairview" and the remaining two-fifths to the other properties. It is true that this was not put specifically to the respondent at the trial. But it necessarily follows from the provisions of the will, the necessity to assign the stock and the need to find an equitable basis for doing so. Upon this basis, the value of the stock at the date of trial which may fairly be assigned to properties other than "Fairview", willed to the respondent by the deceased, is $14,000. It is reasonable to infer that this sum would be realisable in cash within a reasonable time to meet the obligations of the deceased to the appellant, as found by his Honour. Likewise, the other assets of the estate which were found by the trial judge included items which would be fairly readily converted into cash. Some of these items may, however, properly be assigned to "Fairview" as necessary plant and equipment for the viable operation of the "Fairview" property. Such items would include furniture (valued at $417), a Land Rover and plant and machinery (valued at $17,700), fodder (valued at $660) and firearms (valued at $637). Nevertheless, certain other items which his Honour found to be assets of the 8 UNREPORTED JUDGMENTS estate at the time of the trial should not be considered as part of "Fairview". These include shares in dairy cooperatives valued at $4,210 and cash balances of nearly $8,000. Therefore, if the readily realisable liquid assets at the time of the trial are put to one side, divorced from the assets which can fairly be looked upon as part of the "Fairview" property, they amount to $26,210 made up as follows: Value of non-"Fairview" stock of cattle 14,000 Shares 4,210 Cash 8,000 $26,210 I realise that part, at least of the cash balances may be attributable to the efforts of the respondent in running "Fairview" after the death of the deceased. The precise arrangements upon which he did so, with the permission of the executors, is not disclosed by the evidence. I also realise that, after the trial, some or all of the liquid assets may have been exhausted in discharging the order for a legacy in favour of Mrs Davis and for the payment of interest and her costs. I put entirely out of account the possible claims for executors' commission. In a hard fought case, this was never mentioned. It is then the duty of this Court to consider whether Waddell CJ in Eq was correct to say that, at the date of the trial, no order under the Act could be made, despite his earlier finding that the deceased's will had failed to make proper provision for the appellant. The provision of the legacy for Mrs Davis was to be discharged, in his Honour's reasoning, not from the foregoing liquid assets but from the sale by the respondent of "Horse Creek" or by borrowing. Whether "Horse Creek" was sold or not is unknown to this Court. But for present purposes, it is enough to say that his Honour did not contemplate the liquid assets to be the fund to provide Mrs Davis' legacy. Accordingly, those assets remained available to meet the need which his Honour had found for adequate provision for the appellant which the will had not made. The respondent argued that Waddell CJ in Eq must have considered the liquid assets for he had referred to them, and listed them, but five pages earlier in his reasons for judgment. They must therefore have been in his mind when he concluded that no order "can" be made in favour of the appellant. The Court was urged to conclude that such an elementary mistake would not have been made by his Honour and that he must therefore be taken to have concluded that the liquid assets were not available to meet an order under the Act in favour of the appellant. Various speculative arguments were explored to explain how this conclusion could have been reached. Perhaps his Honour took the view that "Fairview" was a viable economic proposition only if the entire stock of cattle left by the deceased were apportioned to it. Perhaps he considered that the shares and cash balance were the product of the respondent's own labours. Perhaps he contemplated that some or all of the liquid assets would necessarily be expended in legal costs. But none of these reasons was advanced by his Honour. It is true that "Fairview" does appear to have been of only marginal economic viability only. On the other hand, effectively what was left to the respondent was "Fairview" upon a condition providing for his mother. Apart from the stock that may properly be ascribed to "Fairview", the remainder are available to meet an order under the Act. The cash and shares were stated to be assets of the estate. The costs were separately provided for. URJ KELEHEAR v SMITH (Kirby P) 9 In these circumstances, I have concluded that his Honour must have overlooked the personal assets which were available to meet an order under the Act in favour of the appellant. She claimed a legacy of between $20,000 and $25,000. Even if a legacy of only $10,000 had been provided, it could, as a matter of practicalities, have been met from the assets listed by his Honour without preventing the fulfilment of the prior entitlements of the respondent and of Mrs Davis in the terms in which his Honour found them. It is important to remember that it was only the absence of available funds which led Waddell CJ in Eq to conclude that his earlier finding that the deceased had an obligation to provide the appellant with "some small standby amount of money to deal with the contingencies of life" could not be reflected in an order under the Act. His Honour did not conclude that, by reason of the size of the estate and the prior competing claims there was no such obligation to provide for the appellant. Had he so concluded, the appellant's case would have been much more difficult to mount in this Court. Instead, he concluded that the preconditions established by s3 of the Act had been fulfilled in the case of the appellant. He only held back from ordering the "small standby amount of money" because he came to the conclusion that there was no fund to permit him to do so. As I have demonstrated from his Honour's own reasoning, there was such a fund, to the extent of the modest legacy which the appellant claimed. Certainly there was a fund, if a legacy of $10,000 or thereabouts had been ordered. The respondent complains that the provision of such a modest legacy would cause disproportionate inconvenience to him, working a rural property at the very margin of viability. This may be true. But the alternative which flows from Waddell CJ in Eq order is still more unacceptable. It is particularly unacceptable if the view is taken that the premise upon which only his Honour dismissed the claim is removed by a careful examination of the availability of liquid assets not otherwise attributed to discharging the obligations under the will and as varied by the order under the Act in favour of Mrs Davis. Fresh exercise of discretion The foregoing conclusion requires that the order made by Waddell CJ in Eq in the case of the appellant be set aside. It is then necessary for this Court either to send the matter back for retrial or to make the order under the Act which his Honour ought to have made, exercising correctly the discretion reposed in the Court. The latter course may only be taken only if the Court has before it all of the relevant materials upon which to exercise the discretion. It was common ground that the Court did not have all such materials. Some evidence concerning the costs of the estate and the payments to Mrs Davis was placed before the Court. However, it was agreed by both parties that this would not provide a sound basis upon which the Court could reexamine the assets of the estate to consider whether, at the time of its order, provision could be made under the Act in favour of the appellant and if so in what sum. See In re Borthwick [1948] Ch 645, 561. In this much protracted litigation, there are powerful reasons why this Court should endeavour, on an appeal by way of rehearing, to conclude the dispute with a simple order disposing of the whole proceedings. I took this also to be the wish of both parties. The prospect of another trial at first instance is too awful to contemplate in an estate of a modest size already bearing the burden of the costs of protracted litigation which, in retrospect, might have been better expended to the advantage of the beneficiaries. Even now, at the end of this melancholy saga, it could be possible for the parties to agree on a provision, in the light of the 10 UNREPORTED JUDGMENTS conclusions which Waddell CJ in Eq reached that the will did not make adequate provision for the appellant and the conclusion which I have reached that such provision could and should have been made out of the assets disclosed at the time of the trial. If no such agreement could be reached, the proceedings should in my view be relisted before the Court. If then adequate evidence of the assets of the estate at this time permits the Court to make an order under the Act in favour of the appellant, this should be done. If the evidence is inadequate, unfortunate though it may be, it will be necessary to send the matter back for retrial. Orders and findings At this stage I would withhold final orders. The course which I favour is that the appeal should be relisted within 21 days of the publication of these reasons to permit the parties to consider the reasons, to file any further affidavits upon which they rely and to consider whether additional argument may be concluded by written submissions. If either party wishes to have the matter relisted for oral argument the Court should, in my opinion, so order. Such oral argument should be confined to the amount, if any, of the legacy that may be provided out of the estate of the deceased in the circumstances and the orders for costs which should be made. Meagher JA I agree with Handley JA. Handley JA The late Robert Smith died on 30 October 1980 of advanced years leaving a net estate sworn for Probate of approximately $260,000. By his last will dated 30 October 1969, which because of litigation in the Probate Division was not admitted to Probate until 29 March 1985, the deceased appointed his son Lindin Smith and his son in law Alwyn Kelehear his executors and trustees. He gave to his son Bruce Smith "Dog Trap" a property of approximately 50 acres together with twelve head of cattle to be selected by his trustees. He gave to each of his three daughters and to a grand daughter legacies of $1,000 and he left the rest of his estate to his son Lindin subject to the payment to his widow of $40.00 per week and subject also to her having the right to reside in the home. The deceased was survived by five children, three daughters and his sons Bruce and Lindin. Proceedings under the Testators Family Maintenance Act were commenced within time by his daughter Mrs Melvie Davis on 21 March 1986. Subsequently another daughter Heather Kelehear (the present appellant) and Bruce Smith were granted extensions of time to bring further applications. All three applications were heard together by Waddell CJ in Eq in March 1988. In a reserved judgment his Honour dismissed the applications by Heather Kelehear and Bruce Smith but made an order in favour of Mrs Melvie Davis. Mrs Heather Kelehear has appealed to this Court. Since the proceedings came on for hearing nearly eight years after the death of the deceased it is necessary to refer to the composition and value of the estate at the time of hearing as found by the trial judge. The costs of the Probate litigation totalling $54,202.39 had been paid as had the legacies including an increased legacy of $3,000 payable to the granddaughter under the terms of settlement of the Probate litigation. The trial judge estimated the net value of the estate at the date of hearing as being between $230,000 and $277,000. In his judgment he set out the family history and the personal situation of the three applicants and the respondent executor in some detail. His Honour's analysis of these matters was not challenged on appeal. The deceased was a dairy URJ KELEHEAR v SMITH (Handley JA) 11 farmer with a modest income and a sizeable family. The children grew up on the property and from an early age helped their father in the work on the farm. They all left school as soon as possible so they could spend more time helping on the property. Except for Bruce and Lindin in their adult years the children received little more than their keep for their work. Mrs Melvie Davis was deserted by her husband after six years of marriage and left to bring up their four children on her own with no financial support from him. At the date of the hearing she had few assets and no home of her own, residing with her unmarried son in his home unit. He was proposing to marry in the near future and after his marriage Mrs Davis would have nowhere to live. Her only income was the widow's pension then $249.20 a fortnight. His Honour found that she had been left without adequate provision for her proper maintenance and advancement in life and that the deceased owed her a moral duty to provide as much as he could, consistently with his other obligations, by way of legacy to assist her in her old age. Bruce Smith after leaving school had lived and worked on the deceased's principal property "Fairview" until his marriage in 1965. After his marriage he and his wife lived in a small house which he and the deceased built on the deceased's second property "Horse Creek". For some time after his marriage he, his brother Lindin and the deceased carried on the dairy farming business in an informal partnership with Bruce receiving one quarter of the milk cheques. The deceased had expected Bruce to clear "Horse Creek" within a few years after his marriage so as to be able to raise cattle on it and support himself. This did not happen and Bruce left the deceased's property some time in 1968 or 1969 and obtained work elsewhere. From about 1970 or 1971 he worked at the Singleton army camp operating bulldozers and maintaining tractors. Some time about 1981 Bruce had to leave this employment because of injuries he had sustained at work. Apart from his benefits under the will he had a house property at Branxton and some other modest assets. His income consisted of worker's compensation payments and a part invalid pension which at the date of hearing totalled $472.00 per fortnight. His wife was also in receipt of a part old age pension of $110.00 per fortnight. The property at "Dog Trap" devised to him by the deceased's will was said to be worth $40,000 by his valuer and $45,640 by the executor's valuer. At the date of hearing the twelve head of cattle to which he was entitled under the will were said to be worth some $3,000. His Honour held "that it is at least arguable that the deceased, as at the date of his death, had a moral obligation to make some small additional provision for" Bruce "provided he could do so without failing to provide adequately for his other children". The remaining applicant was Mrs Heather Kelehear, the youngest of the deceased's children. She married in 1964 and lived with her husband on his property "Guygallen" at Lostock not far from "Fairview". At the date of the hearing her only assets comprised personal possessions, a bank account of abut $400 and a building society account with about $3,000. She was earning about $20.00 a week doing parttime housekeeping work. Her husband's property comprised some 1400 acres and was used for grazing cattle. Mrs Kelehear is thus solely dependent on her husband. She said that her husband does not make a good living from the property and that when times are bad he goes out and does work under contract. Their children have grown up and left home. Mrs Kelehear did not place before the court specific evidence as to her husband's assets and liabilities or as to his net income from his grazing business and any other sources. 12 UNREPORTED JUDGMENTS His Honour concluded that the deceased had a moral obligation to leave Mrs Kelehear more than the legacy of $1,000. His said: "Although she had been and was likely to continue to be supported by her husband in modest but secure circumstances, he had an obligation to provide her with some small standby amount of money to deal with the contingencies of life which are apt to affect persons growing older". The position of the executor, Lindin Smith, was as follows. He left school at the age of fifteen and thereafter worked in his father's dairy business. There is some dispute as to how much of this work he did prior to Bruce leaving the land. Until he turned twenty-one he received no wages only his keep. After he turned twenty-one he was paid 2.00 a week. Lindin married in 1957 and he and his wife lived in the old homestead on "Fairview" and his wages were increased to 9 pounds 4 shillings a week. Once the farm was paid off he received a quarter share of the milk cheques. Later a new house was built on "Fairview" for Lindin and his wife and Bruce helped with its construction. After 1969 Lindin managed the farm and did most of the work. By this time Bruce had left and the deceased was too old to do much work. He and the deceased were in partnership sharing the milk cheques equally. However after 1973 the deceased began to deteriorate mentally and became increasingly difficult to deal with. His Honour held that it became more and more difficult for Lindin to operate the dairy business because of difficulties which the deceased put in his way and in 1978, because of declining production, the milk quota was lost. Thereafter the properties were used for cattle grazing but Lindin's half share of the profits of the business was not sufficient for the support of himself and his family and he was forced to get outside work at Tyrells' Vineyard. In the period between the death of the deceased and the termination of the Probate proceedings in 1983 there were disputes and difficulties between Lindin and the executors of the later will, Bruce Smith and Mr Kelehear who took over the running of the properties. After the settlement of the Probate proceedings in 1983 there were further disputes and difficulties between the Lindin and Mr Kelehear his co-executor under the earlier will. These came to an end on 7 June 1987 when Mr Kelehear retired as an executor. His Honour held that at the date of his death the deceased had a moral duty "so far as consistent with his obligations to his other children" to leave Lindin at least "Fairview" and if possible some additional land to enable him to continue to live modestly on the property on which he had lived all his life and which he had for many years managed. It is clear therefore that his Honour found that at the date of the death of the deceased in 1980 each of the three applicants had been left without adequate provision for their maintenance or advancement in life. Those questions having been answered in the affirmative the Court became authorised under s3 in its discretion, and after taking into consideration all the circumstances of the case, to make such provision for the maintenance and advancement of the three applicants as the Court thought fit. In exercising this discretionary power the Court takes into account the facts as they exist at the date of its order. See Dun v Dun [1959] AC 272. In the present case substantial litigation in the Probate Division had intervened before the hearing and the assets of the estate had been depleted by payment of costs and the additional legacy. These payments constitute a material change of circumstances between the date of death and the date of hearing and on any view they greatly reduced the capacity of the estate to support orders in favour of the applicants. URJ KELEHEAR v SMITH (Handley JA) 13 At the date of hearing the estate included the three grazing properties of the deceased known as "Fairview", "Horse Creek" and "Dog Trap". The executor's valuations of these properties were "Fairview" $117,492, "Horse Creek" $55,428 and "Dog Trap" $45,646. The plaintiffs' valuer valued the properties at $155,000, $50,000 and $40,000 respectively. Both valuers were cross examined and having heard their evidence his Honour expressed the view that he would favour somewhat higher values than the lower of the alternatives for each property but that it was neither possible nor necessary to make any precise finding. On the higher valuations the properties were worth $245,000 and on the lower $219,000. In addition the estate included personal property worth some $70,000 comprising livestock $38,000, furniture $417.00, a Land Rover and plant and machinery $17,700, fodder $660.00, fire arms $637.00, shares in dairy cooperatives $4,210.00 and cash balances of nearly $8,000. However there were estate liabilities which his Honour estimated at $38,000. These included the arrears of the annuity a week due to the widow since the date of death (which at the date of judgment totalled $16,200), $4,000 held in a bank account in trust for her, legal costs, and in particular the estimated costs of the proceedings under the Act. Accordingly on his Honour's calculations the net estate available to satisfy orders under the Act was worth between $251,000 and $277,000. His Honour did not disturb the specific devise of "Dog Trap" in favour of Bruce or the specific bequest of twelve head of cattle worth approximately $3,000. Thus the interest of Bruce in the estate was worth at the date of hearing something between $43,000 and $48,646. The widow was entitled to an annuity of $2,080.00 a year payable at the rate of $40.00 per week. Neither party appears to have placed any evidence before the Court as to her age, life expectancy, or the actuarial value of this interest. However clearly the annuity had some value and since no one suggested that it ought to be disturbed its existence diminished to some extent at least the size of the estate available to support orders under the Act. This annuity was not a merely personal obligation of Lindin's. It was charged on the residuary estate. The relevant principle is that stated by Dixon J. in The Countess of Bective v FCT. (1932) 47 CLR 417 at 419 as follows: "Whenever a gift is made to one person beneficially, subject to his paying money to another, the provision takes effect as a charge, notwithstanding that words of condition are used, unless an intention clearly appears that it should operate by way of condition. The second object of the disposition thus obtains proprietary and not merely personal rights and is not left in danger of losing the intended benefit through the donees electing to reject the gift with its attendant condition, rather than to accept it cum onere." See also Jacob's Law of Trusts Sth edition, 1986 at pages 29 to 35. His Honour award a legacy of $35,000 in favour of Mrs Davis to carry interest at 12% if not paid by 31 December 1988. This order also carried with it an entitlement to an order for costs, and the usual order, on a common fund basis, was made in her favour. The estate which then remained to satisfy the moral claims of Bruce, Mrs Kelehear and Lindin, was therefore worth between $193,354 (taking the higher values) and $173,000 (taking the lower). However, as will appear, further deductions would have to be made from these figures, apart altogether from some deduction for the value of the widow's annuity. The personal estate, as already mentioned, comprised assets valued at approximately $70,000. These assets however included livestock of $38,000 (less $3,000 worth of cattle given to Bruce) which were an integral part of the grazing 14 UNREPORTED JUDGMENTS business being carried on by Lindin on the deceased's properties. Likewise the Land Rover, plant and machinery and fodder. It follows that assets worth a total of $53,360.00 were involved in the running of the grazing business, and were not available to satisfy an order under the Act if Lindin was in any meaningful sense to be left with "Fairview". I have already referred to his Honour's finding that the deceased had a moral obligation, so far as consistent with his obligations to his other children, to leave Lindin at least "Fairview" and if possible some additional land in order to enable him to continue to live modestly on the property on which he had lived all his life and which he had managed for many years. His Honour further stated: "On the view which I take of the evidence, in considering what orders should be made having regard to present circumstances, the starting point is that Lindin should be left with at least 'Fairview* which would make provision for him which is reasonable in the circumstances on the assumption that he will either have to seek or continue parttime employment or lease extra land. To reduce the provision for Lindin to anything else would, I think, be contrary to the moral obligations of the deceased to him." In making those remarks I take it that His Honour meant that Lindin should not simply receive the "Fairview" property but should receive the grazing business owned by the deceased at the time of his death and then being carried on on "Fairview" and his other properties. A gift by will of a grazing property, in a proper case, will include the livestock depasturing on that property and the other assets of the pastoral business. See In re McIntosh (1902) 2 SR 185 (Eq) On this basis the available personal estate which was not being used in the grazing business comprised assets worth a mere $13,264. As previously mentioned his Honour estimated estate liabilities at the date of hearing as being about $38,000. In my view this figure is probably conservative. His Honour referred to the arrears of annuity payable to the widow as amounting to $15,000. However to the date of judgment the arrears totalled $16,200 so that a total of $20,200 was due to the widow leaving a mere $17,800 from the estimated figure of $38,000 to meet the costs ordered to be paid to Mrs Davis, any other estate liabilities, and the executor's own costs including the costs of unsuccessfully resisting Mrs Davis' claim, less any recovery from Mrs Kelehear and Bruce. The parties, and in particular the executor, do not appear to have adverted to the liability of the estate for executor's commission which can be awarded by the Probate Division. Executor's commission is a testamentary expense, see In re McIntosh (above), and is not a legacy because it is awarded by the Court pursuant to statute and does not depend upon any gift in the deceased's will. See Commissioner of Stamp Duties v Pearse [1954] AC 91 at 113. Executor's commission therefore is payable in priority to legacies or to any amounts ordered to be paid under the Act. However the evidence filed on behalf of the executor does not enable this liability to be quantified. The evidence does not reveal how the profits from the cattle business carried on since the death of the deceased have been treated. After the death of the deceased the executors named in the later will took over the running of the properties and continued to do so until the settlement of the Probate proceedings in 1983. Between 1983 and 1987 Lindin and Mr Kelehear acted as joint executors under the earlier will and this was followed by a period of some nine months when Lindin was sole executor immediately before the hearing commenced in March 1988. Presumably Bruce Smith and Mr Kelehear have accounted for any profits made by them as executors during their period of control and presumably any profits made during the period when Lindin and Mr Kelehear were joint URJ KELEHEAR v SMITH (Handley JA) 15 executors have also been accounted for. These profits were presumptively income of the estate since the land, the livestock and the plant and machinery were all assets of the estate. Such profits would form part of the estate available to satisfy orders under the Act. However to the extent to which such profits were earned as a result of the personal efforts of Lindin the Court in ordering either executor's commission or remuneration for the executor/trustee under its inherent jurisdiction or both would have ensured that profits earned as a result of Lindin's personal exertion were retained by him up to the level of a reasonable living wage. Only the balance, if any, of those profits after such allowances had been made would have been truly available to satisfy orders under the Act. Unfortunately the evidence fails to address these questions. It is possible that the cash balances of $8,000 referred to represent profits from the cattle business and as such, they may not be available either wholly or in part to satisfy orders under the Act. The executor has the duty of placing before the Court full complete and up to date information relating to the assets and liabilities of the estate. This duty is reflected in but not based on the provisions of RSC Pt77 r 27. The duty is a continuing one flowing from the nature of the jurisdiction, the fiduciary status of the legal personal representatives and their relationship to the court. See Re SJ Hall [1958] 59 SR (NSW) 219 at 226-227. See also Blore v Lang (1960) 104 CLR at 130-131, 136-7, 138. The case seems to be one to which the remarks of Dixon CJ in Blore v Lang (above) at 130-131 apply: "It seems fairly evident that the parties, perhaps because their attention was so absorbed in mutual personal controversy, never did bestow enough care in laying before the court the materials for estimating the real value of the estate whether at death or at a time when the application came on to be heard". It appears that this duty has not been fully performed by the executor in this case and in these circumstances this Court is not free to draw inferences from incomplete evidentiary materials in favour of the person who had the duty to complete those materials. The only proper course is to treat the whole cash balance of $8,000 as a free asset of the estate available to satisfy orders under the Act. Earlier I had held that the personal assets not committed to the cattle business totalled in value $13,264 and that there were estate liabilities estimated by the trial judge at $38,000 which included only $17,800 for the costs of these proceedings at first instance. This left a deficiency of at least $24,736.00. To this figure must be added the legacy ordered in favour of Mrs Davis of $35,000 to give total liabilities of at least $59,736. The appellant did not seek further provision for herself at the expense of the order in favour of Mrs Davis. His Honour considered that the order in favour of Mrs Davis would make it necessary for Lindin to sell "Horse Creek" or else to borrow a substantial sum. At this point in his judgment his Honour assumed that "Horse Creek" would be worth about $55,000 so that after the sale and payment of the legacy to Mrs Davis there would remain something less than $20,000 which would oblige Lindin to find another $14,000-$18,000 to meet the estimated debts. This analysis assumed the higher value of $55,000 for "Horse Creek" rather than the executor's valuation of $50,000 or a "somewhat higher" value that his Honour had earlier thought appropriate. These figures leave out of account the legal costs and agent's commission which would be incurred in any sale of "Horse Creek". 16 UNREPORTED JUDGMENTS When his Honour said that the sale of "Horse Creek" would leave Lindin with something less than $20,000 to meet the estimated liabilities of the estate it would appear that his Honour overlooked the existence of available personal estate, earlier referred to, worth $13,264 which were not committed to the cattle grazing business. The appellant strongly relied upon this error in support of the appeal. Nevertheless accepting his Honour's revised estimate of estate liabilities at $38,000 which, as I have already said, appears to be conservative, resort to these items of personal estate would still leave a deficit of $4,736.00 to which would have to be added the legal costs and commission incurred in a sale of "Horse Creek". It is also necessary to take into account the risk that "Horse Creek" may not realise the higher figure of $55,000 assumed by his Honour and the costs and risks of realisation in respect of so much of the available personal estate as did not comprise moneys in bank accounts. I have also previously referred to the actuarial value of the widow's annuity and the question of executor's commission which represented liabilities of the estate although the evidence did not enable them to be quantified. In these circumstances I am of the opinion that his Honour was correct in holding that once provision had been made for Mrs Davis, as ordered by his Honour, then having regard to the debts of the estate there was no room for making any additional provision for either Mrs Kelehear or Bruce Smith. In this connection it is particularly significant, in my opinion, that Mrs Kelehear did not adduce evidence as to the financial position of her husband. Financial support provided by a husband to his wife constitutes "means of support" within the meaning of s3 of the Act. See Blore v Lang (above) at 129, 135. The deceased's moral obligation to Mrs Kelehear, as found by his Honour, was to provide her with "some small stand by amount of money to deal with the contingencies of life which are apt to affect persons growing older'. In the absence of precise evidence of her husband's means the strength and extent of this moral duty was left by Mrs Kelehear, on the evidence, quite indeterminate. For all this Court knows a complete account of her husband's assets and liabilities would have revealed that she had no moral claim which required the Court to further diminish the assets passing to Lindin under the will. In my opinion any order in favour of Mrs Kelehear after the available estate had been diminished by orders in favour of Mrs Davis, would be contrary to his Honour's finding, which has not been directly challenged, that in the circumstances at the date of the Court's order Lindin should be left with at least "Fairview" and that this would make provision for him which was no more than reasonable in the circumstances. Counsel for the appellant submitted that some of the estate livestock were surplus and available to support an order in favour of Mrs Kelehear. He submitted that the Court should infer that some of the livestock were depastured on "Dog Trap" which would now pass to Bruce, and on "Horse Creek" that his Honour thought would have to be sold. He also submitted that the Court should infer that this livestock could not be supported on "Fairview" and would have to be sold in any event. He then invited this Court to apportion the estate livestock worth $35,000 (after deducting the bequest to Bruce) over the three properties in proportion to their values in order to identify the "surplus" cattle. In my opinion this is a wholly inadmissible process. Relevant evidence may have been before the trial judge, but if so, it was not included in the appeal book and is not before us. Moreover Lindin does not appear to have been cross URJ KELEHEAR v SMITH (Handley JA) 17 examined on this issue. We do not know the carrying capacity of the three properties. There are houses on some of the properties and these will have affected the values but we do not know in what way. We also do not know whether Lindin had any cattle of his own. In these circumstances the attempt to identify "surplus" cattle in a manner suggested involves mere speculation. His Honour contemplated that Lindin may borrow money to pay the legacy to Mrs Davis and the other estate liabilities which would enable him to retain "Horse Creek". He also contemplated that Lindin may be forced to lease additional land in order to earn sufficient income from his cattle raising business. In either event it is clear that there might be no surplus cattle at all. Moreover as I have already pointed out there was in any event a deficit of at least $4,736.00 which might well be significantly greater and one way or another this deficit may have required some of the livestock to be sold. Counsel for the appellant submitted that his Honour's order dismissing Mrs Kelehear's application was inconsistent with his earlier finding that the deceased at the date of his death had owed her a moral obligation to leave her more than a legacy of $1,000. In my opinion in the circumstances of this case there is no substance in this submission. It is well established that the Court's power or "jurisdiction" to make an order in favour of an applicant depends in the first instance upon a finding being made that, at the date of death, the applicant had been left without proper provision for his or her proper maintenance or advancement in life. That issue must be decided in the light of the circumstances as they existed at the date of death. If that question is answered favourably to the applicant the Court must then consider, in the light of all the circumstances at the date of hearing, what order, if any, should be made. If the available estate, and the claims on it, have not materially altered between the date of death and the date of hearing or if the estate has in fact increased in value, an order in favour of an applicant would normally follow as of course upon a favourable conclusion on the first issue. However in the present case the sad fact is that the available estate had been diminished by at least $54,202.39 as a result of the Probate litigation and was to be further diminished as a result of the proceedings under the Act. In addition it would appear likely that the disputes over possession of the property and the running of the grazing business had further adverse consequences on the values of the deceased's properties. In these circumstances it is not at all surprising that in the present case an order in favour of Mrs Kelehear did not flow as a result of his Honour's earlier finding that there was power to make an order. (by majority; Kirby P dissenting) For these reasons in my opinion the appeal should be dismissed with costs. Counsel for the Appellant: N F FRANCEY Counsel for the Respondent: B W WALKER / S GAGELER Solicitors for the Appellant: EMERY SHERIFF and WATSON Solicitors for the Respondent: MCMAHON and MCMAHON