THOMAS v THOMAS SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL CLARKE JA, SHELLER JA and Simos AJA 1 November 1996 [1996] NSWCA 529 Family Provision Act 1982 — alleged failure of Master to consider whether applicant widow had been left without adequate provision — alleged error of Master in awarding whole of small estate to applicant widow — alleged error of Master in not ordering costs of executors to be paid out of estate. Held, appellants failed on all grounds - appeal dismissed. Clarke JA. I will ask Simos AJA to give the first judgment. Simos AJA. This is an appeal from the decision of Master McLaughlin sitting in the Equity Division of the Court, delivered on 28 October 1993. The learned Master was dealing with the application of the respondent to this appeal, the plaintiff in the proceedings below, under the Family Provision Act 1982, for an order making provision for her maintenance and advancement in life out of the estate of her late husband, the late Hugh OwenThomas. The deceased died on 27 March 1992 aged 64. The respondent was the second wife of the deceased. By his will dated 25 February 1989 the deceased appointed the appellants, his son and daughter of his first marriage, to be executors and trustees of his will, and gave his whole estate to his executors and trustees, upon trust to pay thereout his just debts, funeral and testamentary expenses, and any death or estate duties and then for such of his children as should survive him in equal shares as tenants in common. The deceased made no provision in his will for the respondent in respect of whom he stated in his will as follows: 5. I record that I have made no provision in this my will for my wife Valma Mary Thomas as she has her own resources and assets and is capable of maintaining herself. As found by the learned Master, the deceased had been married twice. His first marriage ended in separation and subsequent divorce in about 1978. He had two children of his first marriage being the appellants. He married the respondent on 29 December 1979. There were no children of the marriage. The respondent was born on 24 May 1934 and at the date of the hearing below was aged 59. She had also been married previously and had two sons of her firstmarriage. Her first husband died on 24 March 1978. At the time of her marriage to the deceased she was aged 45 and the deceased was aged 52. The deceased left a very small estate consisting of moneys in banks on deposit and a motor vehicle. The value of the estate at the date of death was $24,434.68 and is today $21,400. The original amount had been reduced to $19,672.74 at the date of the hearing, having been reduced by administration and other expenses in respect of the estate. It is not in dispute that the respondent and the deceased had a good and happy marriage until the death of the deceased. After their marriage the respondent and the deceased lived in a house at Caringbah owned by the respondent, where they 2 UNREPORTED JUDGMENTS lived until the deceased entered hospital several weeks before his death. The deceased had conducted his own business at Burwood prior to his death. He had been diagnosed as suffering from cancer some four years or so before his death. On the hearing of the appeal I referred counsel for the appellants to the decision of the High Court in Singer v Berghouse (1994) 181 CLR 201, which had been mentioned in her written submissions, where it was held in the joint judgment of Mason CJ and Deane and McHugh JJ (at 208-209)as follows, after quoting the provisions of sections 7(9) and 9(2) of the Act: — It is clear that, under these provisions, the court is required to carry out a two-stage process. The first stage calls for a determination of whether the applicant has been left without adequate provision for his or her proper maintenance, education and advancement in life. The second stage, which only arises if that determination be made in favour of the applicant, requires the court to decide what provision ought to be made out of the deceased's estate for the applicant. The first stage has been described as the "jurisdictional question". That description means no more than that the court's power to make an order in favour of an applicant under s 7 is conditioned upon the court being satisfied of the state of affairs predicted in s 9(2)(a). It was submitted, in effect, that the learned Master had failed to make the first stage determination required by that statement of principle by the High Court, in that he had failed to determine whether the respondent had been left without adequate provision for her proper maintenance and advancement in life, before going on to determine, if appropriate, what provision ought to be made out of the estate for the respondent. It was submitted that instead of approaching the matter in this way, the learned Master considered that he simply had to look at the 'moral duty' owed by the deceased to the respondent, to his wife and to his children, the concept of 'moral duty' being in any event a gloss on the statute as held by the High Court in Singer vBerghouse, supra. Counsel referred in this connection to the second and third paragraphs on page 109 of the appeal book which are passages from the Master's judgment dealing with moral duty, in which he said, inter alia: — In exercising the discretion invested in it by Section 7 of the Family Provision Act, the Court applies the principle of moral duty ... In considering the nature and extent of any moral duty which the testator may owe to such a claimant, the Court must consider the moral duty which the deceased may have owed to any other person and any other claim which there may have been upon the bounty of the deceased. In the instant case the only other persons to whom the deceased owed a moral duty were his two children, the two defendants. Reference was also made in the written submissions to that part of the Master's judgment where he held (at page 111) that: — ... the status of widowhood of itself creates a moral duty in a deceased person which is of a far higher order than that of the moral duty which a deceased owes to any other person. It was submitted that the learned Master was in error in determining the matter solely on the basis of widowhood which did no more than establish that the respondent was an eligible person within the meaning of the Act. It was submitted that the question which must be asked was not whether there was a moral duty but whether the respondent was adequately provided for. It was further submitted that in looking only at the 'moral duty' owed to therespondent by the deceased, the learned Master had 'cut out' consideration of the proper (first) question, and 'short-circuited' consideration of the second question, URJ THOMAS v THOMAS (Simos AJA) 3 namely, what is adequate and proper provision. It was submitted that there was only one answer to the first stage question, the answer being that the respondent had not, having regard to her own assets and resources, been left without adequate provision for her proper maintenance and advancement in life. In my opinion, the learned Master did not, in his judgment, neglect determination of the relevant first stage question, namely, whether the applicant had been left without adequate provision for her proper maintenance and advancement in life. In my opinion, the determination of that first stage question was necessarily involved in, at the very least, the following passage from the Master's judgment (at 111): — The plaintiff must establish that the deceased owed to her a moral duty which by the terms of his will he did not fulfil, and she must establish that in the context of her financial and material circumstances it is appropriate that she should receive the benefit of an order for provision for her maintenance and advancement in life out of the estate of the deceased.' (Underlining supplied). quot;appropriate that she should receive the benefit of an order. That this is the correct interpretation of what the learned Master was saying in his judgment is, in my opinion, made clear by the fact that it was preceded (at 10) by a consideration of what he described as 'The present financial and material circumstances of the plaintiff' and by a statement to the effect that 'the plaintiff must establish her claim on its own merits' and 'cannot establish her claim by comparing her financial andmaterial circumstances to those of the chosen objects of the testamentary beneficence of the deceased.' Later the learned Master stated that it was his opinion that: — In the case of a widow it is the duty of the deceased, so far as his estate allows, to make provision for his widow by ensuring that she has secure accommodation, that she is able to maintain the lifestyle to which she was accustomed during the lifetime of the deceased and that she has some fund to meet unexpected contingencies. The Master also referred to the fact that it was not suggested on behalf of the appellants that any order which ought otherwise be made in favour of the respondent should be reduced on account of the financial and material circumstances of the appellants. The consideration of these matters cannot be understood, in my opinion, as being in any context other than the context that the learned Master was considering whether the respondent had been left without adequate provision for her proper maintenance and advancement in life, having regard to her own assets and resources, but tested by reference to what she was entitled to expect from a husband who was discharging his moral duty to her in his will. This, in my opinion, is the very questionthat is required to be considered in the first stage of consideration of applications under the Act. The first stage consideration of applications under the Act involves consideration of the totality of the relationship between the applicant and the deceased, as well as the relationship between the deceased and other persons who have legitimate claims upon his or her bounty. And the determination of the second stage involves similar considerations. The position in these respects was dealt with by the High Court in the following passages from the joint judgment of Mason CJ and Deane and McHugh JJ (at 209-210) in Singer v Berghouse, supra: — 4 UNREPORTED JUDGMENTS ... The determination of the first stage in the two-stage process calls for an assessment of whether the provision (if any) made was inadequate for what, in all the circumstances, was the proper level of maintenance etc appropriate for the applicant having regard, amongst other things, to the applicant's financial position, the size and nature of the deceased's estate, the totality of the relationship between the deceased and other persons who have legitimate claims upon his or her bounty. The determination of the second stage, should it arise, involves similar considerations. Indeed, in the first stage of the process, the court may need to arrive at an assessment of what is the proper level of maintenance and what is adequate provision, in which event, if it becomes necessary to embark upon the second stage of the process, that assessment willlargely determine the order which should be made in favour of the applicant. In my opinion, when the judgment of the learned Master is properly understood in the light of these statements of principle, it is plain that what he did necessarily involved his consideration and determination of the first-stage question whether the respondent had been left without adequate provision for her proper maintenance and advancement in life. The submissions on behalf of the appellants to the contrary must therefore, in my opinion, be rejected. Counsel for the appellants submitted further, however, that even if it were to be held to be the case that the learned Master had correctly addressed the first-stage question, he was in error in holding that the respondent was entitled to an order awarding her the whole of the testator's estate. In this connection, the appellants, in my opinion, in order to succeed, must show, according to the test approved in Singer v Berghouse, supra, (at 212) that the Master made 'an entirely erroneous estimate of what, in the circumstances, was an adequate provision or the [appellant's] proper maintenance, education and advancement in life'. In my opinion the appellants have not shown that the Master's decision was "entirely erroneous' within the meaning of this statement of principle. The order made by the Master was based upon his view of what provision the deceased 'ought' to have made for the respondent in his will in all the circumstances within the meaning of section 7 of the Act, even though the Master expressed himself in general terms and also in terms of moral duty. In that respect, I am satisfied, as was Kirby P in Permanent Trustee Company Limited v Fraser (1955) 36 NSWLR 24 at 31, that the Master used the term 'moral duty' as a short hand phrase for the word 'ought' in section 7 of the Act and the words 'inadequate' and 'proper' in section 9(2) of the Act. In my opinion, it was quite plainly open to the Master on the evidence, to make the order which he made. It was finally submitted on behalf of the appellants that the Master erred in not ordering that the costs of the appellants of the proceedings before him be paid out of the estate of the deceased. It was submitted that the result had the effect of punishing the appellants for upholding the will in circumstances in which the respondent, on any view, did not have an objectively good case having regard to the facts that, although the respondent was a widow, the estate was small, her financial position was relatively comfortable, living asshe did in her own home, within her income and without specific need and with a paucity of evidence as to her health. In those circumstances it was submitted that any executor, properly advised, would believe that there was more than a reasonable likelihood of the plaintiff being unsuccessful and ordered to pay the executors" costs of the proceedings. URJ THOMAS v THOMAS (Sheller JA) 5 The learned Master referred to the fact that normally, executors are entitled to have their costs paid out of the estate as is a successful plaintiff. He then referred to the fact that if such orders were made in the present case, the plaintiff would receive a minimal amount out of the estate, 'probably no more than about $5,000 or possibly even less'. He said that he thought it would be wrong to make orders which would have that consequence. He thought that up to the time when the proceedings were on foot, probably up to the date of the offer of compromise made by the respondent, the appellants were justified in defending the proceedings, but were not justified in defending the proceedings up to a contested hearing. He had earlier said that the appellants should have entered into negotiations for the settlement of the case. In my opinion there can be no doubt that the Master would have been entirely justified in, in effect, orderingthe appellants to pay their own costs of the proceedings from the date of receipt of the offer of compromise, more especially since the appellants were the beneficiaries under the will as well as executors. Indeed, in my opinion, he would have been entirely justified in ordering the appellants to pay the costs of the respondent from that date, although that was not the Master's view. The only issue is, therefore, whether the Master was in error in not ordering that the appellants be paid their costs up to the date of receipt of the offer of compromise out of the estate. It is plain that the Master's view overall was that in view of the extremely small size of the estate, the appellants should have negotiated a settlement of the proceedings not later than the time when the proceedings were first on foot, and that their failure to do so, compounded by their failure to accept the offer of compromise, justified his refusal to make an order that their costs be paid out of the estate, especially having regard to the circumstances that he had held that the respondent was entitled to the whole estate and that the appellants had a personal interest as beneficiaries in the proceedings. In my opinion, it was plainly open to the Master to take this view and no reason has been shown to disturb the Master's exercise of discretion in this respect. The respondent has submitted that the appeal should be dismissed with costs on an indemnity basis. In my opinion, costs should be awarded in favour of the respondent on an indemnity basis. In my opinion, whatever the position may have been in respect of the proceedings at first instance, this was an appeal that never had any real prospect of succeeding since, in my opinion, as I have already said, it was plainly open to the Master on the evidence to make the order which he in fact made, and the appellants had no realistic prospect of satisfying this Court that the Master made a 'wholly erroneous estimate' of what, in the circumstances, was adequate provision for the respondent's proper maintenance and advancement in life. I also have regard to the extremely small size of the estate and to the rejection by the appellants of the offer of compromise of the proceedings below, and I maintain these views notwithstanding the offers of compromise of the appeal, evidence of which has been tendered to the Court this morning. For the above reasons, in my opinion, the appeal should be dismissed with costs payable on an indemnity basis. Clarke JA. I agree and I have nothing to add. Sheller JA. I also agree. 6 UNREPORTED JUDGMENTS Clarke JA. The order of the Court will be: the appeal is dismissed; the appellants to pay the respondent's costs on an indemnity basis. 1. Appeal dismissed. 2. Appellants to pay the costs of the Respondent on 5 an indemnity basis. Counsel for the appellants: J.A. Needham Solicitors for the appellants: Hancock Alldis Counsel for the respondent: A.M. Gruzman Solicitors for the respondent: McBride Harle and Martin