EGGLER v MITCHELMORE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL PRIESTLEY, HANDLEY and SHELLER JJA 23 October 1992, 11 November 1992 [1992] NSWCA 63 The deceased, the appellant's mother, left a substantial estate, which, under her will and apart from two small legacies was to be divided, as to half, between five charities and as to the other half equally between the appellant and her three children. The appellant had since her marriage been financially supported by her husband. At the date of the orders she was 52; at the date of the appeal nearly 54. Her husband was 56 at the date of the orders and approximately 59 at the date of the appeal. The three children were adult and independent. Since adolescence the appellant had spent a significant part of her life caring for the deceased and later managing her property. The deceased's need for care was brought about by her lifestyle and heavy drinking. The appellant and her husband had foregone business opportunities so as to be in a position to give this care. The deceased had made some monetary provision for the appellant during her lifetime. The Master made orders to the effect that the appellant should receive from the estate either $80,000 or her interest under the will, whichever was greater. Held: In the circumstances and there being no other competing claims on the deceased's bounty: 1. The provision in the deceased's will for the appellant was inadequate for her proper maintenance. 2. Adequate provision for the appellant's proper maintenance called for a sum sufficient to enable her to maintain a reasonable standard of living accordant with that she currently enjoyed without recourse to her capital assets, consisting, in large part, of the matrimonial home. In particular she should not have been left in a situation of anxiety as to future provision. 3. The amount awarded by the Master was so low as to demonstrate that it must have been arrived at upon an entirely erroneous estimate of what, in the circumstances, was adequate provision for the appellant's proper maintenance. 4. An amount of $250,000 should be substituted for the amount of $80,000 in the Master's orders. Family Provision Act 1982 Blore v Lang (1960) 104 CLR 124 Stott v Cook (1960) 33 ALJR 447 White v Barron (1980) 144 CLR 431 Hunter v Hunter (1987) 8 NSWLR 573 Gorton v Parks (1989) 17 NSWLR 1 In re Harris (1936) SASR 497 Priestley JA I agree with Sheller JA. Handley JA I agree with Sheller JA. Sheller JA This is an appeal from a decision of Master Windeyer (as he then was) given on 18 July 1990 in proceedings commenced by the appellant, Norma Mavis Eggler, by summons filed on 6 September 1989 for an order that provision be made out of the estate of the late Dulcie Mary Cornwell pursuant to s7 of the Family Provision Act 1982. 2 UNREPORTED JUDGMENTS Dulcie Mary Cornwell, ("the deceased") was the mother of the appellant. She died a widow on 3 July 1988 aged 85. The deceased had been twice married, first to Jan Theodore Kvapil and second to Harold Acott Cornwell. The appellant was the only child of the first marriage which was dissolved in 1947. Mr Kvapil had since died. The deceased married Mr Cornwell on 20 June 1949. There were no children of this marriage. Mr Cornwell died in 1967. WILL The last will of the deceased was dated 22 May 1986. Probate of it was granted on 12 January 1989 to the respondent, Dean Joseph Mitchelmore. By it the deceased gave all her jewellery, clothing and other personal effects to the appellant and provided that the rest and residue of her estate should be held in trust, as to one half to be divided equally, in the events which have happened, between the appellant, Mark Eggler, Peter Eggler and Eliza Eggler, the children of the appellant, and as to the remaining one half to be distributed, in the events which have happened, by giving two pecuniary legacies each of $5,000 to a niece and friend of the deceased and the remainder to be divided equally between five well known charities. The executor was given wide powers in his absolute discretion to sell or retain the whole or any part of the estate in the form of investment existing at the deceased's death and to manage or improve the same. THE DECEASED'S ESTATE The Master found that the net value of the estate as at death was $769,430 and that, as at the date of the making of his order, the distributable estate might be in the order of $800,000 or as low as $600,000. At that time it consisted of three Auburn properties which were being or had been occupied as shops and approximately $73,000 in cash. The legacies had each been paid and liabilities for costs and commission were not likely to exceed $60,000. The difficulty in being more precise as to what would be available for distribution was caused in part by the collapse of one of the shop properties as a result of excavations on a neighbouring property. This had led to Council orders for demolition and questions as to the liability of the neighbouring property owner. There were two valuations of the shop properties, one at $540,000 and the other at between $700,000 and $820,000. FINDINGS OF FACT The Master made findings of fact which dealt, inevitably in an abbreviated way, with the appellant's particularly sad young life, none of it due to any fault of hers and much of it due to the deceased's lifestyle and drinking, and her later life of heroic devotion to the deceased's care and wellbeing. The need for the appellant's care was the result in large measure of the deceased's lifestyle and drinking. As one reads and recounts this story one must acknowledge the profound effect that the deceased's ways must have had upon the appellant's marriage and upon the ability of the appellant and her husband to provide for their future. Despite all this the appellant staunchly, loyally and uncomplainingly remained by the deceased's side. The appellant was born on 23 December 1937 and was 52 at the time the orders were made and is now nearly 54. At the age of six and a half she was sent to a boarding school at Lawson. The deceased told her that because she, the deceased, had to work she could not look after the appellant. The appellant did not go home in the school holidays but went to live with a Mrs Marsh at South Cronulla, or if that was not possible, stayed at school. At the age of nine she left the boarding school and went to live with Mrs Marsh at South Cronulla. From there she went to school. After the deceased's remarriage in 1949 the appellant URJ EGGLER v MITCHELMORE (Sheller JA) 3 went to live with her step father and the deceased. The Master found that she had a most difficult time for some years, being subjected to various ill treatment and assaults by her step father without being protected by the deceased. Both the deceased and the step father engaged in constant drinking. The evidence is that the step father was admitted in 1953 to Callan Park and then to Gladesville Hospital where he remained until he died in 1967. In 1953, aged 15, the appellant commenced work as a filing clerk with AMP. The Master found that the deceased's drinking seemed to increase. The appellant was locked out of home by the deceased on one occasion in 1954 and a few years later she arrived home to find all her clothes thrown onto the front door step. That was apparently too much and the appellant left home in 1956 and went to work in Cooma. Her evidence was that she returned to Sydney to care for the deceased shortly thereafter and although, because of the deceased's drinking habits and the effect of alcohol on her, the appellant could not live with her permanently, when needed, she always returned to look after the deceased. The appellant met her husband in 1959 and they married in 1961. The eldest child of the marriage, Mark, was born on 2 May 1962, Peter on 18 January 1965 and Eliza on 13 September 1967. They are all now adult and the Master found independent. It was not really suggested to the Master that the benefits they received under the will should be reduced but it was pointed out that they were well provided for and the appellant was unlikely to have any obligations of a financial kind so far as they are concerned. The Master found that the appellant was, in relation to the deceased, the only eligible person within the meaning of s6 of the Family Provision Act. After having lived in various places in Sydney, towards the end of 1961 the appellant and her husband moved to Melbourne where the husband obtained employment with the Tongala Milk Company. Some time later they moved to Tongala where they remained until 1967. During this time the appellant saw the deceased during holidays and on other occasions. The deceased was still drinking heavily. In 1967 the step father died. He had apparently been under the care of the Protective Office for some time. The appellant's husband assisted the deceased in negotiating arrangements for the payment of the debt due from his estate to that office. In 1967 at the request of the deceased the appellant and her husband left Tongala and returned to Sydney. The appellant's husband gave up an offer of promotion - to make that move. They moved to a property at West Epping. The Master said: esses for the next twenty years the (appellant) provided constant care and attention to her mother paying frequent visits to her home, cleaning it up, cleaning up her mother and generally speaking trying to assist her through her problems as a result of her drinking. She took her home to live with her on numerous occasions, included her in most important family activities and allowed her life to revolve around her mother's demands. It is unnecessary to set out the full attention given by the (appellant) to the deceased and all that need be said is that it was far more than would be thought required of a good daughter. In addition the (appellant) for many years assisted her mother with the Auburn properties and took over the management of them and from 1979 until the date of death received reasonable income for that work she having been given a power of attorney by her mother in 1978." The deceased apparently inherited the Auburn shops from her second husband. In 1972 the appellant and her husband made additions to their home at Epping so that the deceased could go to live with them there. The deceased provided $6,000 4 UNREPORTED JUDGMENTS out of a total of about $11,000 for that purpose. The Master found that the deceased stayed at Epping for about two years but the evidence appears to be that she remained for a much shorter time and then lived for a time in Melbourne and a time in Burwood until 1975, when she sold her home at Concord and bought a unit at Burwood. In 1978 the deceased sold her unit in Burwood for approximately $29,500 and made a gift to the appellant of $28, 063, which the appellant used to discharge a mortgage of $12,263 and to pay for alterations to a house the appellant and her husband had purchased at Beecroft, their present home. During the period between 1966 and 1978 the deceased made many payments for the benefit of the appellant or her family in addition to the $6,000 and the $28,000. The Master found that these additional payments totalled about $34,000. The evidence shows that from early 1979 until late 1982 the deceased lived at the appellant's home at Epping and Beecroft. In October 1982 she moved into Twilight House at Beecroft where she lived until her last illness. In 1979 the appellant had left work to care for the deceased. PREVIOUS WILLS The Master referred to two earlier wills made by the deceased, one on 18 November 1982, whereunder the appellant and her children would have benefited in the same proportions as under the 1986 will and the other on 16 September 1983, whereunder the appellant would, after certain small legacies, have received 70 percent of the estate, the remaining 30 percent going to her three children. In his reasons for judgment the Master said: "..... in May 1986 the deceased gave instructions to Mr Mitchelmore to prepare the will for her which became her last will she signing various statements which have the effect of alleging dissatisfaction with her daughter's conduct towards her and her handling of her financial affairs. In so far as the statements allege any improper conduct on the part of the (appellant) then in my view the (appellant's) evidence must be accepted and those statements completely rejected. Nevertheless it is of some significance that the charities did not come onto the scene for the first time when the 1986 will was made." By this the Master meant that in t he 1982 will one half of the residue of the estate went to two of the five charities mentioned in the 1986 will. ASSETS OF THE APPELLANT AND HER HUSBAND At the date of the order the appellant and her husband owned the following property: 16 Finlay Avenue, Beecroft worth about $270,000 A timber home at Blackheath worth $70,000 Bank deposits of about $10,000 1984 Laser motor vehicle worth $7,000 In addition the evidence shows that the appellant's husband had a superannuation policy with a surrender value at 26 June 1990 of $11,600. The appellant's husband was employed by Arnotts Snack Foods as an accountant and earned a salary of $48,900 gross a year. He had been employed with Arnotts since 1981 and seems to have had little difficulty in getting employment. He said that he had foregone various job opportunities so that his wife would be near the deceased. The Master said that while he accepted that to be the position there was no basis on which any financial loss could be quantified which might have resulted from that other than, perhaps, his late entry into the Arnotts Superannuation Fund. There was evidence, about which the Master made no finding, not only of various job opportunities and entry into some sort of small business lost, but also of a failure by the appellant's husband to enter a URJ EGGLER v MITCHELMORE (Sheller JA) 5 superannuation plan in the belief, based upon the deceased's statements, that suitable provision would be made for the appellant. REASONS FOR CONCLUSION The Master described the estate as quite a large one and acknowledged that the appellant was the only person to whom the deceased owed any moral obligation to make proper provision and that the appellant was unlikely to reenter the workforce. He found that "the (appellant) gave what some people would think to be almost heroic assistance to the deceased in looking after her welfare and that the life of the (appellant) and her family have been very much circumscribed by the effect which the deceased had upon it." The Master also considered, quite correctly, that it was necessary to pay close attention to the financial position of the appellant and to remember that the deceased made what the Master described as substantial provision for the appellant during her life although she got some benefit from this. "Leaving aside her interest from the estate the (appellant) has no substantial fund of her own and her assets are held jointly with her husband with whom she has had a long and happy marriage. While the Beecroft home is a fibro home it is comfortable enough and provided satisfactory accommodation for three adults and three children; and while it is stated the Blackheath home is not in good repair it is a valuable asset. Finally the (appellant's) husband earns quite a substantial salary. Faced with this financial position it was difficult for counsel for the (appellant) to point out any need of the (appellant) as it seemed and it was readily admitted that all her requirements were adequately covered at the present time. She will of course have the benefit of the share which she receives from the estate and although that amount is not certain it seems that it will be certain to produce income which will considerably exceed that which the (appellant) received for looking after and managing her mother's properties yet leave the fund intact. " Having stated, again correctly, that it is not the duty of the court to substitute its view of what is fair for the testamentary disposition made by the deceased and that those dispositions must be left intact except so far as it is necessary to disturb them to provide proper maintenance and advancement for eligible persons, the Master said: "In my opinion having regard to the matters which I have mentioned and the claims of the (appellant) on the deceased (that) proper provision for her requires her to receive from the estate a reasonable capital sum to provide her with some independent income and perhaps some protection against possible disasters such as her husband's inability to work. On the other hand it seems that she will receive from the estate an amount at least of over $70,000 and the question is whether or not that is proper maintenance or whether some additional amount should be given to her..... There are special circumstances in this case which would justify making an order to ensure the (appellant's) future is secure but as the (appellant) has not established any particular need (except a requirement for some independent capital sum which requirement was not really put forward by her or for her) I do not think it could be said that if her interest in the estate comes to at least $80,000 then the testatrix failed in the obligation which she had to her." The Master made an order that in addition to the bequest of jewellery, clothing and personal effects given to her under the will but in lieu of her share in residue in the said estate the appellant should receive whichever is the greater of: (a) the sum of $80,000; plus any interest calculated thereon from 1 September 1990 at the rates provided for judgments pursuant to s95 of the Supreme Court Act; and 6 UNREPORTED JUDGMENTS (b) the interest she would receive in residue under the will were it not for this order. In effect the Master ensured that the appellant would get no less than $80,000 from the capital of the estate and provided for interest if distribution was delayed beyond 1 September 1990. The burden of the orders was to be borne equally by the five charities. The costs of the appellant on the common fund basis and of the respondent on the trustee basis were to be paid out of the estate. APPEAL As stated in her notice of appeal the appellant's appeal was in substance: * that the Master was wrong in finding that the appellant had not established any particular need; and * that the Master ought to have found that in the circumstances, the appellant having no substantial fund of her own, and her assets being jointly held with her husband, she was in need insofar as she ought to have been placed in a financial position whereby she would be reasonably financially independent. These grounds may be read as overlooking the threshold point, of whether the Master's orders, the result of a discretionary judgment, involved such error as to require that they be set aside. It is trite law that this Court will not interfere simply because the amount awarded to the appellant is less than this Court itself would have awarded in all the circumstances. While some play was made by the respondent in the course of argument about the way in which the appellant put her appeal, in my opinion, the orders made by the Master, in terms of quantum, were so low as to demonstrate that they must have been arrived at upon an entirely erroneous estimate of what, in the circumstances, was an adequate provision for the appellant's proper maintenance; In short, with all respect, I do not think the Master, exercising his discretion soundly, could have made the order he did. The Master considered that the provision in the will in favour of the appellant was inadequate for her proper maintenance within the meaning of s9(2). He noted that apart from her interest in the estate the appellant had no substantial fund of her own and her assets were held jointly with her husband. He found, and I agree entirely, that proper provision for the appellant required her to receive from the estate a reasonable capital sum to provide her with some independent income and protection against possible disasters such as her husband's inability to work. Apparently he considered, and again I agree, that anything less than $80,000 was inadequate for this purpose. However, I do not think it can be said that $80,000 is adequate for such purposes. In his judgment the Master remarked upon the difficulty of pointing out any need of the appellant. Unfortunately in this application, as in many under the Act, a great deal of evidence has been led about the relationship between the deceased and the appellant and the devotion and loyalty of the appellant but very little to demonstrate any particular need of the appellant; compare Blore v Lang (1960) 104 CLR 124 at 137 per Windeyer J. The income of the appellant and her husband was $48,900 a year gross before tax. The husband was, at the time of the order, aged 56. One can surmise that he could legitimately have expected to retire from his present employment at the age of 65, although there is no evidence of this. The appellant and her husband, or she alone if he predeceases her, had two houses, one comfortable and the other in the country and in disrepair. No evidence was led whether the husband would be likely on retiring to obtain other full or part time employment. He is a qualified accountant and, as the Master observed, seemed to have had little difficulty in getting employment. It is not URJ EGGLER v MITCHELMORE (Sheller JA) 7 known how long he planned to continue working. The impact of inflation and social service benefits was not addressed. Neither the appellant nor her husband gave evidence of their future plans, whether they proposed to leave their family home and retire to Blackheath or elsewhere, perhaps to a retirement village. If the husband's income ceases either on his death or retirement or due to illness, the appellant could not maintain the lifestyle she was then enjoying in the absence of assistance from her children or somebody else, except by selling one or perhaps both of the houses. As at the date of the order, according to the Australian Life Tables 1980-1982, the applicant's life expectancy, aged 52, was approximately 29 years and that of her husband, aged 56, approximately 20 years. A fund of $80,000 is inadequate to provide properly for such eventualities. All this is said without regard to the effects of inflation or the particular exigencies of unexpected expenses brought about, for example, by ill health. I do not accept that a wise and just testatrix in the position of the deceased with an estate of $800,000 to distribute and aware of her only child's substantial moral claim upon her bounty and that there were no other competing moral claims upon her, would think it right to leave that child, who to her own disadvantage had cared for the deceased over so many years, an amount of no more than $80,000 in circumstances in which quite easily, if not inevitably, that child to maintain a reasonable standard of living accordant with that she currently enjoyed would be forced to have recourse to her capital assets, consisting, in large part, of the matrimonial home; compare the remarks of Kitto J in Stott v Cook (1960) 33 ALJR 447 at 450 right column. In particular she would not leave her only child in a situation of anxiety as to future provision, especially when she had the means to protect her from the risk of financial anxiety in the future by a provision which enabled her to conserve her capital assets; compare White v Barron (1980) 144 CLR 431 at 457 per Wilson J, speaking of a claim by a widow against her late husband's estate. No longer are children required to show some "special need" in order to claim provision under the Act; Hunter v Hunter (1987) 8 NSWLR 573 at 580; see also the illuminating judgment of Bryson J in Gorton v Parks (1989) 17 NSWLR 1, particularly at 7-12. As was said by Cleland J in In re Harris (1936) SASR 497 at 501: "Proper maintenance is (if circumstances permit) something more than a provision to keep the wolf from the door - it should at least be sufficient to keep the wolf from pattering round the house or lurking in some outhouse in the back yard - it should be sufficient to free the mind from any reasonable fear of any insufficiency as age increases and health and strength gradually fail." In my opinion with the greatest respect the Master's discretion in this case miscarried and accordingly O.1 and O.2 made by him should be set aside. The parties accepted that this Court should proceed to make orders in substitution. ORDERS IN LIEU In making the order he did the Master was required pursuant to s7 of the Family Provision Act to have regard to the circumstances at the time the order was made. When this Court substitutes an order under the Act for that made at first instance, it may sometimes be convenient, with the agreement of the parties, to do so on the basis of the material available at the time of the hearing, but this is not such a case. The section enjoins us to have regard to the circumstances at the time we make orders in substitution for those set aside. On 9 October 1992 the respondent swore and later filed an affidavit to indicate the present position of the estate. Counsel for the respondent read this affidavit on the basis, again I 8 UNREPORTED JUDGMENTS think correct, that we would have regard to it only if we came to the conclusion that the Master's orders should be set aside and that we should make orders in lieu thereof. Counsel for the respondent pointed out that no material had been filed on behalf of the appellant to show her current financial situation or the current financial situation of her husband and children all of whom gave evidence at the hearing. Time was given to the appellant to indicate whether or not she wished to lead further evidence and for the respondent to consider whether, if the appellant led no further evidence, the respondent would wish to cross examine any of the witnesses called by the appellant at first instance concerning their current financial situation. In accordance with directions given by us we were told that it was not proposed to call any further evidence or seek further to cross examine witnesses. In the result this means that the parties have agreed that we consider what orders should now be made on the basis that, within the meaning of the section, the circumstances at this time do not differ from those disclosed by the evidence before the Master subject only to such changes as are revealed by the affidavit of 9 October 1992. As the result of litigation by the estate to recover damages for the subsidence caused to the Auburn property by the excavation an amount of $350,000 was received by the estate by way of verdict and costs. From this must be deducted the legal costs of the estate and another defendant, executor's commission, the legal costs and disbursements of this appeal and costs in relation to the general administration of the estate. There is in addition a taxation liability which the respondent describes in the following terms: "The taxation position is complicated due to the fact that of the verdict moneys received $147,000 related to loss of rent and interest and would in normal circumstances be taxable. The advice received from my accountant is that if a distribution of such moneys is effected in the current financial year, then the estate will not be liable to tax, but the beneficiaries will include the respective proportion in their own income tax return. This is of particular relevance for the charitable beneficiaries who may not be liable to tax." Tax on the rents received is estimated to be approximately $6,000. The latest valuation of the real estate ranges from $620,000 to $720,000 with the benefit of a right of way, unregistered at this time but said to have been acquired by prescription, and $500,000 to $600,000 without the benefit of that right of way. In the course of his submissions counsel for the appellant estimated that the amount available for distribution would be about $900,000 and accordingly the appellant's share, about $112,500. I think we should proceed on the basis that these are acceptable estimates. According to the Australian Life Tables the appellant has a present life expectancy of approximately 27 years and her husband approximately 18 years. Thus it seems likely that her present source of income will cease, if not upon her husband's retirement from his present occupation or upon some incapacity, well before her death. There is the risk of her husband being unable to continue to work and there are the usual vicissitudes associated with ill health and the unexpected. In making an order we must look at the matter as a wise and just, rather than a fond and foolish, testator would. Through her counsel and at the Court's request the appellant quantified her claim under the Act as for an amount of $250,000 to be borne by the charities in equal shares out of the one half share of the estate in URJ EGGLER v MITCHELMORE (Sheller JA) 9 which they are interested in addition to her share of the other half of residue. This would produce a total benefit of about $360,000 to the appellant. I would not regard an order in those terms as an appropriate exercise of discretion. The Master approached the matter on the basis that the order should be such as to make certain that the appellant would receive at least an amount certain. I agree with this approach. In my opinion, in all the circumstances that amount should be $250,000. This, with normal adjustments to their assets such as, perhaps, moving out of the large matrimonial home on the husband's retirement, should produce an amount sufficient to allay the anxieties to which I have referred. This can, in my opinion, best be achieved by substituting in the orders proposed by Master Windeyer the new figure and ordering interest to run from the date of the order. O.3 should not be disturbed. However, it seemed appropriate and the parties agreed that we should publish our reasons and then call upon the parties to submit draft minutes of orders in accordance with those reasons. Orders accordingly. Counsel for the Appellant: JS Van Aalst/P Geissler Instructed by: Gates Moffitt, Eastwood Counsel for the Respondent: GC Lindsay Instructed by: CP White and Sons, Burwood