Lackey v Liddle [1999] NSWSC 1078

New South Wales Supreme Court CITATION : Lackey v Liddle [1999] NSWSC 1078 CURRENT JURISDICTION : Equity Division FILE NUMBER(S) : 3749/98 HEARING DATE(S) : 26/10/99 JUDGMENT DATE : 26 October 1999

PARTIES : Barbara Lackey v Joan Liddle (Estate of Donald Kenneth Thompson) JUDGMENT OF : Master Macready at 1

COUNSEL : Mr L. Ellison for plaintiff Mr M.J. Cohen for defendant SOLICITORS : Eric Butler Solicitors, Charlestown for plaintiff Matthews Dooley & Gibson, Blacktown for defendant CATCHWORDS : Family Provision. Application by a former wife who had no property settlement with the deceased. Discussion of factors warranting the making of the application. Modest legacy awarded. CASES CITED : Dijkhuijs v Barclay (1988) 13 NSWLR 639 Singer v Berghouse DECISION : Paragraph 30

- 1 - THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION MASTER MACREADY TUESDAY 26 OCTOBER 1999 3749/98 - BARBARA LACKEY v JOAN LIDDLE - ESTATE OF DONALD KENNETH THOMPSON

JUDGMENT 1 MASTER: This is an application in respect of the estate of the late Donald Kenneth Thompson, who died on 28 April 1998 aged 74 years. The deceased was survived by the plaintiff, a former wife. He is also survived by his and the plaintiff's son, Kenneth James Thompson, who has also brought proceedings. Those proceedings have been compromised and I will refer to them shortly. The deceased had two other wives, one - her name is Valerie - was apparently someone to whom he was married prior to 1952, and the third wife was someone known as Leonie. The evidence before me suggests that both of these persons are dead and I accept that evidence, which came from the deceased's sister. She had contact with the deceased over many years and no doubt has an appropriate basis for that evidence. 2 The will of the deceased was made on 26 February 1988. Under that will he appointed his sister the executrix. He gave a bequest to a friend of his, Rhonda Marshall, of some 600 shares in the National Bank and 600 shares in the Commonwealth Bank of Australia, which on today's values are worth about $37,000. He gave to his son, Kenneth Thompson, his property at Doonside. The rest of the estate passed to Joan Liddle and her husband, Desmond Liddle, as joint tenants. 3 The estate consisted of the deceased's house and also a substantial number of shares. The house at Doonside has a value of $150,000. The value of the estate at the date of hearing is approximately $665,000. This includes the house at $150,000. Because there are shares in there are capital gains tax implications on the transfer or distribution of the property. The maximum capital gains tax liability that might be incurred is some $77,353, and that may in fact be partly postponed if there are some shares distributed in specie. In any event, obviously some of it will apply and there will be a sale to meet expenses and the legacy in favour of Kenneth. 4 The terms of the compromise with Kenneth, which I have approved since they do not impact on this case, provide for him still to receive the property, worth $150,000, to receive the rents that have been accumulated, and also to receive the sum of $130,000. Having regard to the capital gains tax figure at its maximum and the estate's expenses for costs in these proceedings, the amount of the estate will reduce to $552,167.75. Taking out the properties and the legacy that will pass to Kenneth, there is left approximately $270,000. If one takes off the amount of the legacy to Rhonda Marshall of some $27,000, one is left with $243,000. In the event that the plaintiff is successful, her costs, which are estimated on solicitor and client basis at $25,000, would be payable in part from the estate. This leaves an estate in the order of some $220,000, with possibilities of increase if some shares are transferred in species. 5 Clearly the plaintiff is an eligible person, being a former wife of the deceased. It is necessary, however, for the plaintiff also to establish under section 9(1) of the Family Provision Act that there are factors warranting the making of the application. 6 The question of factors as warranting in respect of former spouses has been dealt with in a number of cases. In Dijkhuijs (formerly Coney) v Barclay (1988) 13 NSWLR 639, a number of the Judges dealt with this matter . Kirby P had the following to say: "Fifthly, the respondent, picking up one of the themes of Mr Landa's comments, urged that s 9(1) of the Act was to be read in the light of the policy of the law to promote the finality of settlements of property disputes by orders made in the Family Court. Where such orders had been made, an order under the Act in the case of a former spouse should be exceptional. Only if this approach were adopted would the policy of the Family Law Act (Cth) be fully achieved. That policy is that parties whose marriage has been dissolved and in respect of whom orders have been made disposing of their matrimonial property, could go their separate ways . Save for the rare and exceptional cases provided under the Family Law Act (Cth), such parties should henceforth face no financial obligation from one to the other. This public policy was referred to by Young J in O'Shaughnessy (at 149). It was also stressed by his Honour in the present case. There is no doubt that in most cases, the achievement of a final property settlement in the Family Court would be seen by the parties, in current social circumstances, as terminating any moral claim of a former spouse to provision in the will of the other. Confronted by the news that he or she had been excluded from the will of the former spouse, the response would, in the overwhelming majority of cases, be: 'Our marriage was dissolved. We settled our financial affairs. We can each start a new life. That was the whole point of the Family Court proceedings.' To this extent, I agree with what Young J has written in O'Shaughnessy and in this case." 7 Mahoney JA said the following: "That which the court 'shall first determine' is whether 'there are factors which warrant the making of the application'. That phrase may be contrasted with the references otherwise made to the determination of, for example, 'what provision (if any) ought to be made in favour of an eligible person...'. On the face of s 9(1) there is a distinction between 'factors which warrant the making of the application' and factors which warrant the making of an order. That distinction accords with the principle which, in my opinion, is inherent in the legislation, viz, that, special cases apart, an order is to be made only if the deceased has made default in the performance of a duty which he owed to the particular plaintiff. I do not think that this case requires a final analysis of the basis of applications under the Act: It will be sufficient to refer to this matter in general terms. But the Act authorises the court to 'order that such provision be made out of the estate or notional estate, or both, of the deceased person as, in the opinion of the Court, ought, having regard to the circumstances at the time the order is made, to be made for the maintenance, education or advancement in life of the eligible person' (s 7). That does not mean that, if the plaintiff establishes a financial need within the section and if on taking into account the considerations referred to in s 9(2) (the discretionary considerations) there be nothing to the contrary, an order must be made. The statute assumes that the deceased, in what he has done during his life and by his will, has failed to discharge a duty which he owed to the plaintiff (the moral duty). Thus, a plaintiff may be a former spouse who, on dissolution of the marriage, received what on any view she was entitled to have and there may have been no further relationship between them so that none of the factors in s 9(3)(a) to s 9(3)(c), are of relevance. But, at the deceased's death, she may have a financial need. In such circumstances, the fact that the plaintiff has established that she was a former spouse and has a financial need would not, as such, entitle her to an order. It would be necessary for her to establish that, in some way or because of circumstances within s 9(3)(d), the deceased had a duty to her which involved that he should have provided for her financial need. This will be so a foreshore where the basis for the eligibility of the plaintiff is alleged to be within par (d) of the definition of 'eligible person'." Importantly, it can be seen that the question of need is a separate matter and factors warranting are something different from that. 8 In another case, Churton v Christian (1988) 13 NSWLR 241, his Honour Priestley JA said the following, in respect of this type of application: "Mrs Christian is a member of a class in respect of whom warranting factors may often be more difficult to find. It is common experience that divorce sometimes brings to an end all links between previously married people. In such cases, warranting factors might well be expected usually to be absent, although this need not be universally so. On the other hand, divorced persons may remain on close terms, sometimes little different from those on which they lived when married. In every case it is necessary to examine the actual relationship between the two people concerned, as far as possible without preconceptions based only on the fact of divorce." 9 In his comments he illustrated a situation which sometimes applies after there has been a divorce and a property settlement: Namely, that 10 The parties still continue to have a close association. 11 There has also been in recent times further attention to this matter in the Court of Appeal in the case of Brown v Faggoter, a decision given on 13 November 1998, which is a decision of Sheller JA, Sheppard and Fitzgerald AJJA. The main judgment was given by Fitzgerald AJA, who seemed to suggest that an application might be warranted if the application has reasonable prospects of success. This seems to be a somewhat different and perhaps easier test than what was referred to in the other cases of the Court of Appeal to which I have referred. I will consider the matter on both bases, given that there may be some flux in the state of the law in this regard. 12 Before addressing the facts on this aspect I should give some of the chronology of the matter. The deceased was born in 1924 in India. He came to Australia after the War. In 1927 the deceased's sister, Joan Liddle, who is the defendant, was born. The plaintiff, Barbara Lackey, was born on 28 February 1934. Apparently the deceased separated from his first wife in 1952 and he commenced cohabitation with the plaintiff in 1954. They were married on 3 March 1956 and their son Kenneth was born on 3 June 1956. In late 1956 the deceased and the plaintiff separated. Apparently they were divorced in 1959 on the ground of the plaintiff's adultery. 13 The evidence before me contained references to the circumstances of the plaintiff's separation from the deceased. The only evidence before me is that of the plaintiff, and that suggests that the plaintiff in fact separated before she met a person in 1957 with whom she subsequently formed a relationship and by whom she had a child. The reason for the separation, according the plaintiff, was the deceased's sexual preferences. In any event, they went their separate ways thereafter, but there are a few things to be noted about what happened on that occasion. 14 There was in fact no property settlement. The reason for that was that the plaintiff was very attached to her son, who was only some months old. She was threatened, according to her, by the deceased with a claim for custody if she tried to obtain anything from the deceased by way of property settlement. In the result, the deceased kept the business and the property, which was subsequently sold by him. He retained the proceeds. 15 The deceased remarried in due course, as did the plaintiff. She remarried in 1964 and she was divorced in 1975. There are a number of children by that relationship, four in all, and clearly both she and the deceased lived their separate lives for many years after they parted ways in 1956. In the early 1980s, however, there was further contact between the deceased and the plaintiff and they continued to see each other on what the plaintiff describes as a friendship basis. I will come back to that in due course. The deceased made his will in 1988 and he died in 1988. Probate was taken out and the summons issued within time. 16 The factual matters which are advanced as factors warranting are a number. First, there was no property settlement in this case. The only evidence is to that effect and there is a reason why there was no property settlement sought by the plaintiff. The only property that appeared to have been accumulated over the period of their somewhat short marriage was taken by the deceased. 17 From the early 1980s it seems that the parties, according to the plaintiff, would occasionally come together in the sense that the deceased might come and stay with the plaintiff at her house or she would do the same. It is not suggested that this happened frequently, but every few months or so. There is no suggestion of a renewal of any sexual relationship; it was merely friendship. The fact that there was some friendship there is demonstrated by one matter which is supported by some documentary evidence. In 1989 the deceased, when discussing matters with the plaintiff at his home, opened a briefcase with a number of papers in it and said to the plaintiff that "All these shares belong to you, if anything happens to me, see Joan. If you want to sell them, she'll do it for you." 18 The papers were retained by the deceased, they were not given to the plaintiff. In due course, not unnaturally, the defendant did not know of any such arrangement. The plaintiff remembered the name of one of the companies concerned, which was a company known as Tindal, and she approached them to get some information about investments that might be in her name. The result is that there have been produced copies of investments made in Estate Mortgage Income Trust which are filled out in the plaintiff's name and contain what appears to be her signature. Apart from two documents which were an application form for investments which she says she signed, the balance of the documents are in the handwriting of the deceased and the deceased has written, according to the plaintiff, her signature. 19 The facts are clear that these were investments of the deceased. He provided the funds, and the plaintiff makes no suggestion that she provided any funds. The fact that the deceased in effect treated them as his own by signing the plaintiff's name to move and change investments probably indicates that he thought he had control of them during his lifetime and they were something that he was providing for the plaintiff after his death. In these circumstances, it seems to me that there is evidence of friendship demonstrated. Other possible scenarios might, of course, include the deceased not wishing to have the shares in his name for some reason. There is nothing in the evidence that would suggest that this was the case. Certainly there was no arrangement made with the plaintiff. If there was some income-splitting motive one would have thought there would be documents that might have indicated it. 20 There was, as I say, this contact. It has been suggested that it may have been just because of the circumstances of the grandchildren. However, that does not appear to be the case on the evidence before me. The extent of the visiting by each of the deceased and the plaintiff included matters done by the plaintiff for the deceased which one would expect if they were friends. For example, doing things such as washing, ironing, cooking meals, cleaning their respective places. All these matters are important aspects of what might be called the factors warranting in the traditional sense. 21 Of particular importance is the lack of a property settlement and the fact that the plaintiff bore the brunt of bringing up the child of the parties and that the deceased took the only property involved in the marriage. This is not a situation where the parties have made a clean break and started their lives all over again in the sense of having had a property settlement in the terms used by judges in the cases to which I have referred. There was in addition the friendship in later years, which I think is manifest by the intentions of the deceased to which I have referred. 22 In these circumstances, in the traditional sense I would be satisfied that there were factors warranting. However, to the extent that recent authority might indicate that the test is whether there are prospects of success I will refer to the prospects of success and whether it is appropriate for there to be an order. 23 The High Court has recently in Singer and Berghouse set out a two-stage process that a court must make. Page 209 it said the following: "The first question is, was the provision (if any) made for the applicant 'inadequate for (his or her) proper maintenance, education and advancement in life'? The difference between 'adequate' and 'proper' and the interrelationship which exists between 'adequate provision' and 'proper maintenance' etc were explained in Bosch v Perpetual Trustee Co Limited . The determination of the first stage in the two-stage process calls for an assessment of whether the provision (if any) made was inadequate or what, in all the circumstances, was the proper level of maintenance etc appropriate for the applicant have 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 applicant and the deceased, and the relationship between the deceased and other persons who have legitimate claims upon his or her bounty. 24 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 will largely determine the order which should be made in favour of the applicant. In saying that, we are mindful that there may be some circumstances in which a court could refuse to make an order notwithstanding that the applicant is found to have been left without adequate provision for proper maintenance. Take, for example, a case like Ellis v Leeder where there were no assets from which an order could reasonably be made and making an order could disturb the testator's arrangements to pay creditors." 25 When one turns to the plaintiff's situation one finds that she is a lady with virtually no assets. She has a 1971 Datsun motor vehicle worth about $800, personal property and furniture of little value. She has a few liabilities in the order of $577. Her income is the age pension in the sum of $364.30 per fortnight and she lives in rental premises which apparently cost her $70 per week. She has living with her a 33-year-old son who apparently pays her $70 per week board. It seem fairly clear that her income is totally used on her expenses. 26 The plaintiff does not advance a case which she claims that a substantial award should be made to her. The court has to consider the way in which she has been left without adequate and proper provision for her maintenance, education and advancement in life. In this respect she merely advances a number of matters concerning advancement. The first one is that her motor vehicle is a 1971 Datsun, which apparently is not very reliable. She has a need for a car as her mentally retarded son lives at a flat at Charlestown under the auspices of the Department of Youth and Community Services. She needs to visit him frequently when he has epileptic fits or turns and accordingly needs a reliable car. She also takes him to a number of venues connected with his sporting activities as a disabled athlete. The cost of a Nissan Pulsar sedan is in evidence before me, being $24,933. She also wishes to have some new electrical appliances costing to $7,138 and some furniture costing $4,038. These are modest requests for someone living in rented accommodation. 27 It is also, of course, necessary to consider the situation of others who have a claim on the bounty of the deceased. There is the beneficiary Rhonda Marshall who received a bequest, and it is not suggested that that bequest should be disturbed. The other person who has to be considered is the defendant, Joan Liddle, and her husband. The defendant is 72 and apparently they do not have dependent children living with them. Previously they had farmed a property and have retired. As is inevitable with a number of retired people, unfortunately, they have seen their capital erode since retirement. However, their situation at the present time, so far as assets are concerned, appears to be as follows. 28 They have a home at Forestville worth about $200,000. They have shares in public companies of $74,000, an investment property at Underwood of $84,000 and a small amount in the bank. They do not have significant liabilities but shortly they will have to spend some funds, probably slightly in excess of some $20,000, on their home. Their income is not substantial. Basically, it is in the order of some $24,000 to $25,000 and their expenses are a little less than that. As I have mentioned, they have been eating into their capital reserves. 29 The defendant was the sister of the deceased. They had a long and close association from childhood and clearly that close association continued throughout the deceased's life. It is very obvious that the deceased would wish to make provision for his sister. However, there is, even after the allowance of the provision made for the son, Kenneth, in the settlement of his matter, still some $220,000 in the estate, and in the circumstances I think a modest legacy is called for. In these circumstances there are prospects of success so I am also satisfied on this ground that there are factors warranting the making of the application. 30 The plaintiff seeks a legacy of $50,000 to $60,000. Bearing in mind the factors to which I have referred and the evidence, some of which I have referred to, I will award a legacy of $35,000. I make the following orders: