New South Wales Supreme Court CITATION : Linda GOLAN v June FREY; Estate of the late Kurt FREY [2002] NSWSC 848 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 2102/01 HEARING DATE(S) : 09 & 10/09/2002 JUDGMENT DATE : 16 September 2002 PARTIES : Linda GOLAN v June FREY; Estate of the late Kurt FREY JUDGMENT OF : Acting Master Berecry at 1 COUNSEL : Mr P. Strasser (Plaintiff) Mr J. Wilson (Defendant) SOLICITORS : Milne Berry & Berger (Plaintiff) C.P. White & Hetherington (Defendant) CATCHWORDS : Family Provision Act - notional estate - daughter inadequate provision during lifetime - surviving spouse - long, happy marriage - balancing of needs - contributions by widow. LEGISLATION CITED : Family Provision Act 1982 Luciano v Rosenblum (1985) 2 NSWLR 65 Marshall v Carruthers (unreported, [2002] NSWCA 47) Mallet v Mallet (1984) 156 CLR 605 at 636 CASES CITED : Evans v Marmont (1997) 42 NSWLR 70 Hunter v Hunter (1987) 8 NSWLR 573 Golosky v Golosky (unreported, NSWCA, 5 October 1993) Elliot v Eliott (unreported, 29 April 1986) DECISION : Refer paras 41 & 42. - 13 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION ACTING MASTER BERECRY MONDAY, 16 SEPTEMBER 2002 2102/01 Linda GOLAN v June FREY; Estate of the late KURT FREY JUDGMENT 1 MASTER: The plaintiff, the daughter of the deceased, the late Kurt Frey, commenced proceedings on 6 April 2001 seeking orders pursuant to ss 7 and 23 of the Family Provision Act. The deceased died on 1 January 2002. The plaintiff obtained Letters of Administration on 17 November 2002. The defendant, June Frey, is the widow of the deceased. The plaintiff's mother was the deceased's first wife. Of that marriage there were two children, namely the plaintiff and her sister, Brenda Bence. 2 Background and quality of marriage The defendant, the deceased's widow, is seventy-four years of age. She commenced co-habitation with the deceased in 1966 and they married on 9 August 1997. Therefore, the relationship lasted thirty-four years, during which period they were married for twenty-nine years. There is no evidence to suggest that the marriage was anything but a happy one. 3 The defendant's evidence is that the parties pooled their income and from the pooled income all household and living expenses were paid. The defendant worked throughout the relationship until 1991. The deceased worked full-time until 1983. Thereafter, until 1993 he undertook casual week-end work. He received a pension from the Austrian Government in 1983. He had a heart by-pass operation in 1991 and a pacemaker fitted in 1983. In 1999 he was diagnosed with stomach cancer. Over the last six months of his life the defendant became the deceased's full-time nurse and carer. From November 1999 the deceased was unable to walk by himself. She assisted him in a wheelchair when they went out. Therefore, it would appear that not only was the marriage a long marriage but it was a happy one in which both parties shares their resources and cared for each other. It would appear that the defendant was called upon to play a greater role as carer than perhaps the deceased was, as the deceased had medical problems from 1991. The defendant's evidence is that she is in good health although she suffers from osteoporosis. 4 Defendant's income and assets The deceased had purchased a property at Turramurra in 1966 prior to commencing the relationship with the defendant. It would appear that he made mortgage repayments. The parties resided at this property from the commencement of their relationship until 1995 when it was sold and the Bondi Junction unit was purchased. Some time in the first five years of the relationship the deceased purchased a second property at Wahroonga. He used money from a personal injury claim as the deposit. There is no evidence in relation to the repayment of the mortgage. 5 In 1995 the deceased transferred all his assets so that he and the defendant owned them as joint tenants. At the date of death those assets were as follows:- The Bondi Junction Unit $400,000.00 Westpac Term Deposit $410,000.00 National Australia Bank $225,000.00 1993 Holden Commodore $ 13,000.00 $1,048,000.00 6 The deceased was the recipient of an Austrian pension at the date of his death. In 1981 the defendant received a legacy from her mother's estate in the sum of $39,000.00. This money was invested by her and kept separate from the jointly held assets. At the date of hearing the defendant's assets were:- Bondi Junction Unit $510,000.00 Korora Townhouse $162,000.00 1993 Holden Commodore $ 8,000.00 Westpac Term Deposit $215,000.00 N.A.B. Account $ 43,000.00 N.A.B. Account $ 14,000.00 A.N.Z. Account $ 3,000.00 Gateway Credit Union $ 73,000.00 Gateway Credit Union $ 60,000.00 Home contents (unknown) $1,088,000.00 7 The defendant has no liabilities. Her taxable income for the financial year ended 30 June 2002 was $16,444.00. In addition, she receives the Austrian pension as the deceased's widow which is indexed and currently is $1,500.00 per month. Her income covers her household and personal expenses. 8 The deposits which were the joint assets are currently with banks attracting interest at the rate of 4%. The legacy from her mother's estate, together with her long-service payout and superannuation are deposited with the Credit Union and are currently earning approximately 7%. 9 Post-death of deceased Since the deceased's death, the defendant has continued to live in the unit at Bondi Junction. She has not remarried or entered into a de facto relationship. From the joint assets she has made the following payments:- To the deceased's former wife $100,000.00 To the plaintiff $ 35,000.00 To the plaintiff's sister, Brenda Bence $ 35,000.00 10 These payments were made to honour a dying request of the deceased. They were also consistent with the provisions of his Will of 17 August, 1995 which was superceded by the creation of the joint tenancy. She has purchased the Korora townhouse for the sum of $162,000.00. Korora is located in the Coffs Harbour district. The reason why the plaintiff purchased the townhouse was to visit her son and family who reside in Coffs Harbour. The townhouse is in the joint names of her son and herself. She gave evidence that the reason for purchasing the townhouse was to enable her to visit her son from time to time. 11 She intends to replace her motor vehicle later this year. She has no other major expenses and has no liabilities. 12 In the defendant's opinion, the purchase of the townhouse was not an extravagance. The only family she has is her son. Since the death of the deceased she has spent between two and three months each year at Korora. She doesn't want to impose on her son's family but wants to spend time with them. The townhouse enables her to do this and enables her to visit whenever she desires or they invite her. 13 Plaintiff's background The plaintiff is the daughter of the deceased. She was born on 1 March 1948 and is currently fifty-four years of age. She married Charles Golan in 1968. She is in reasonable health. Her mother and the deceased separated in about 1960. The plaintiff and her sister continued to live with the mother. There is no evidence to suggest that she didn't enjoy a good relationship with the deceased. They had a common interest in music and visits, in the early years of the plaintiff's marriage, occurred weekly. When the plaintiff was about fifteen years old the deceased encouraged her to leave school. She decided to do a secretarial course. However, she received no financial support from the deceased and no encouragement from him. Upon completion of the course she worked as a secretary until she married. Since her marriage she has not worked but has played the major role of homemaker for her husband and their two children. 14 Other than the deceased's request that the plaintiff receive $35,000.00, the only other money that he gave to the plaintiff was the sum of $10,000.00 in 1995. There had been occasions, however, such as birthdays and Christmas, when the deceased gave the plaintiff $50. The plaintiff's husband approached the deceased for financial assistance to enable him to acquire a service station. The deceased lent them $10,000.00 but later informed the defendant that the loan be treated as a gift as it was highly unlikely that it would be repaid. 15 Plaintiff's income and assets When considering the plaintiff's financial position it is necessary to treat the family income and assets as her income and assets. The family receives income from the following sources: her husband, the Charles Golan Trust and Advatech Pty Limited. The plaintiff's evidence was that she has no understanding of financial matters and leaves such matters in the hands of her husband. 16 Her husband is a qualified accountant. He is sixty-eight years of age. He has a history of failed businesses. In the 1980's he set up a restaurant business which failed with catastrophic consequences for the family. Large debts had accumulated and he was forced to sell the family home and some valuables. He also lost his superannuation. There was a subsequent restaurant business which also failed and in 1998 he acquired a service station. To raise the money to purchase the business he borrowed from friends and the deceased. In 2000, Caltex did not renew his lease and the business lost the value of its goodwill. 17 After the sale of the family home the plaintiff and her husband rented a unit at Bondi Junction. They continue to reside in the unit. Their affairs are structured in such a way that the family company and trust are used as the vehicle for income producing endeavours. To minimise the tax liability and also, up to 2000, to obtain the benefits from tax losses, all income and expenses were met through the company. Any profits were then paid to the trust and distributions were made from the trust to family members. 18 Since 1997 Advatech has had two sources of income. First, the service station and secondly, from the services of the plaintiff's husband as a bookkeeper. Although he is a qualified accountant he cannot practise as a public accountant. The evidence on behalf of the plaintiff is that with the loss of the service station lease the only income will be provided by the husband in his capacity as a bookkeeper. It is expected that his income will decrease in 2002 because of the loss of a major client who had been billed up to $50,000.00 each year, in previous years. Although the evidence is not clear, it seems that the husband has personal debts in the amount of $140,000.00 representing the outstanding borrowings from friends in respect of the service station business. 19 Thus, their asset position is as follows:- Term deposit $ 43,477.00 Plaintiff's loan account $113,193.00 Husband's loan account $ 55,561.00 Shares $ 9,946.00 Paintings & furniture $ 30,000.00 $252,177.00 Debts $140,000.00 Total $112,177.00 20 For the last two years the husband has received income from his services as a bookkeeper in the following amounts:- Year ending 30 June 2001 $108,000.00 Year to 30 March 2002 $ 73,000.00 (projected to 30 June 2002) ($ 97,000.00) 21 Family expenses and health The husband gave evidence of the family's living expenses. Most expenses are met by either the plaintiff or her husband, using credit cards debited to Advatech. Paragraph 11 of his affidavit of 5 July 2002 states that:- Annual living expenses are approximately $88,000.00. Two major components are rent, $36,480.00 per annum (Exhibit "H") and food $20,800.00. The weekly food bill for three persons (their son lives with them) of $400.00 seems high. The husband attempted to justify the costs by reference to the plaintiff's irritable bowel syndrome which requires the consumption of fresh food; i.e. food purchased on the day when it is consumed. 22 Evidence was given that the plaintiff has been looking for alternative accommodation. However, to date there is nothing in the Bondi area, either for rent or purchase, which is suitable to their needs. Application has been made to a lender to borrow up to $400,000.00 for the purchase of accommodation. 23 The husband's evidence is that Bondi is where they must live because the plaintiff has spent most of her life in that area. He also stated that because of its close proximity to the rail station he is able to attend on clients by using public transport, thus enabling the plaintiff to use the family car. Further, his evidence was that most of his clients are in the Eastern Suburbs. He has recently lost his major client and is endeavouring to find new clients by advertising in the Wentworth Courier, thus maintaining his client base in the Eastern Suburbs. 24 However, having regard to his income, it seems to me that maintaining accommodation at a rental of $710.00 per week is excessive, as it leaves the family with little ability to save. 25 Generally, the plaintiff enjoys good health. The husband, however, is not so blessed. He is sixty-eight years old and since 1991 has had glaucoma and myopia. His medical history is contained in the report of Dr Goldberg annexed to the doctor's affidavit of 12 August 2002. His prognosis is not good. The husband is going to require ongoing frequent ophthalmological review and intensive care if he is to be offered a reasonable chance of preserving his residual sight. For a sixty-eight year old man who relies heavily on his eyesight to earn a living, it must be a worrying prospect that he may not be able to provide for his wife. 26 What were the deceased's testamentary obligations? In respect of a wife, Powell J made the following statement in Elliott v Elliott, (unreported, 29 April 1986):- "I take the view which I believe, is supported by the authorities, in a case such as this, where the marriage of a deceased's to his widow has been long and harmonious, where the widow has loyally supported her husband, and assisted him to build up and maintain his estate, the duty which a deceased owes to his widow can be no less than (to the extent to which his assets permit him to achieve that result), first: to ensure that his widow be secure in her home for the rest of her life, and that if, either, the need arises, or, the whim strikes her, she has the capacity to change her home; secondly, that she have available to her an income sufficient to enable her to live in a reasonable degree of comfort, and free from any financial worry; and, thirdly, that she have available to her a fund to which she might resort in order to provide herself with such modest luxuries as she might chose, and which would provide her with a hedge against any unforeseen contingency or disaster that life might bring." 27 A similar review was expressed in Luciano v Rosenblum (1985) 2 NSWLR 65 and approved with qualification in Marshall v Carruthers (unreported, [2002] NSWCA 47). There was a suggestion by the plaintiff that the realty owned by the deceased at Turramurra and Wahroonga were purchases by him without any contribution by the defendant. I do not accept that suggestion. The defendant's evidence is that she worked and they pooled their money to meet household and daily expenses. It seems to me that she made indirect financial contributions to the properties. In any event, having regard to the length and quality of the marriage, the defendant's contribution as a homemaker should be recognised in a substantial way; Mallet v Mallet (1984) 156 CLR 605 at 636 and Evans v Marmont (1997) 42 NSWLR 70. 28 In 1995 the deceased made a Will in which the major beneficiary was the defendant. After legacies of $170,000.00 to his former wife and two children, the residue of the Estate was bequeathed to the defendant. That provided her with the security referred to in the above authorities. Clearly it was the deceased's intention to make adequate provision for the defendant. Subsequently, he changed his affairs by creating a joint tenancy with the defendant in respect of his assets. This also clearly demonstrates his intention. It is clear that his intention did not alter and there is evidence that notwithstanding the effect of the joint tenancy on the Will he still wanted provision to be made for his daughters and his former wife in accordance with the Will. Thus, he recognised an obligation he had to them but also recognised that his primary responsibility was to the defendant. 29 Although he recognised that the plaintiff was a person who would be regarded as a natural object of testamentary recognition, it is necessary to determine whether he has met his obligation to the plaintiff. 30 It was submitted that the primary provider for the plaintiff is her husband and that no adjustment should be made in her favour. It seems to me that if I were to adopt that position it would place a married daughter in the same position as an adult son found himself in under the Testator's Family Maintenance Act. It is clear that an adult child is an eligible person under the current legislation; see Hunter v Hunter (1987) 8 NSWLR 573. See also comments by Kirby P, as he then was, in Golosky v Golosky (unreported, CA, 5 October 1993). There must be some other basis other than the fact that a daughter is married or a son is able-bodied to disqualify them from provision or further provision out of the estate of a parent. 31 At the time of the execution of the Will the deceased was aware of the plaintiff's financial position although he may not have been aware of the full extent. The plaintiff's husband's businesses had failed, the family home had been sold, they were living in rented accommodation and the husband had approached the deceased for financial assistance in relation to the acquisition of the service station business. 32 Up to this point in time the deceased had not assisted the plaintiff either with her education and career training or throughout her married life, save for small gifts on birthdays. There had been no provision for the plaintiff during his lifetime other than indirectly by the loan to her husband in 1995. The plaintiff's position didn't materially change between the making of the Will and the death of the deceased. In my view the deceased hadn't given proper consideration to the needs of the plaintiff. Whilst clearly the person with the primary responsibility for the needs of the plaintiff is her husband, it is also equally clear that he is not able to completely fulfil this role and the deceased had not equipped the plaintiff with the necessary educational base to enable her to advance her position in life. A balance therefore was required between the provision for the defendant and a provision for the plaintiff. 33 Notional state It is clear that because the deceased failed to sever the joint tenancy in jointly owned assets, there is a prescribed transaction. The plaintiff seeks an additional order that half the interest in the Bondi Junction unit and the monies held on deposit at the date of death, namely $317,500.00 be designated as notional estate. 34 In order to make an order designating property as notional estate, I must determine what proper provision should be made for the plaintiff, (Family Provision Act, s 28(2)). The plaintiff contends that provision should be made for her to the extent of $250,000.00. The plaintiff in her affidavit of 29 May 2001 stated the need to be satisfied as follows:- "21. I seek further provision out of the estate of my father to enable me to provide for a more comfortable lifestyle. I also seek further provision to provide for security for my future." 35 At first blush it is difficult to identify a need as provision for a more comfortable lifestyle. The evidence establishes that over the last three years her husband has generated an income of approximately $100,000.00 per year from his activities as a bookkeeper. By community standards that level of income is sufficient to provide a comfortable lifestyle. In my opinion, when one looks at the competing needs of the defendant and the deceased's obligation to make proper provision for her, it is difficult to see that provision on this basis can be made for the plaintiff. Whilst the assets which were jointly held by the deceased and the defendant are in excess of $1 million including the defendant's separate assets in the sum of $133,000.00; the joint cash assets, amount to $275,000.00. The total cash controlled by the defendant amounts to $408,000.00. From these investments she receives a taxable income of $16,444.00 per year. Any significant reduction of the capital will greatly reduce her income although the Austrian pension will remain. 36 Therefore, there needs to be a balance between the obligations to provide a more comfortable lifestyle for the plaintiff and the maintenance of a comfortable lifestyle for the widow. 37 The plaintiff also seeks further provision to provide security for her future. The evidence is that she was trained as a secretary but has not been in the workforce for over thirty years. Her husband is sixty-eight years of age with significant health problems, their combined assets are approximately $112,000.00; there will be a significant reduction in his income next year. They do not own any realty. 38 There is evidence that they may be able to borrow up to $400,000.00 for the purchase of accommodation. It was suggested that repayment of the mortgage would be slightly less than the current rent, if they had to borrow that amount. 39 In my opinion, it is unrealistic for the plaintiff to expect the Estate to provide a significant sum towards the purchase of a property. Whilst it would reduce the size of the mortgage they would need to take out, resulting in a significantly lower monthly repayment, it would also significantly reduce the defendant's assets to a point where she would receive little income. Another matter to be factored into the provision is the costs of the proceedings. Both parties have put on affidavits dealing with the costs of the proceedings. The total costs have been estimated at $105,660.00. The defendant should be entitled to the use of the Bondi Junction unit without any charge or other encumbrance. Therefore, if provision is to be made for the plaintiff, and if the Korora property is not designated notional estate, the cash remaining in the Estate after deduction of costs, will be approximately $170,000.00. Of course, the defendant also has her own investments of $133,000.00 and the Austrian pension. Nevertheless, the adjustment proposed by the plaintiff would result in the defendant having no cash assets from the joint funds. 40 In my view, the plaintiff should be entitled to some provision out of the Estate. However, in determining whether or not property should be designated as notional estate, I must consider the matters set out in s 27(1)and (2). I have dealt with a number of these considerations in this judgment. 41 In my view, the plaintiff should be given additional provision which would be on the basis that she received little provision during the deceased's lifetime and on the facts she has a current need to secure her future. By making provision of $65,000.00, the plaintiff will have approximately $108,000.00 in addition to the other family assets. 42 Therefore, I designate as notional estate a one-half interest in the Westpac Term Deposit and a one-half interest in the deposit of $43,000.00 with the National Australia Bank. Out of the notional estate I order that the plaintiff receive a sum in the amount of $65,000.00. The plaintiff's costs be paid out of the notional estate on a party/party basis. **************** Last Modified: 09/17/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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