New South Wales Supreme Court Dulhunty v Dewhirst [2005] NSWSC 607 CITATION : This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 28 & 29 October 2004, 4 & 31 March and 1 & 9 June 2005 JUDGMENT DATE : 23 June 2005 JURISDICTION : Equity JUDGMENT OF : Hamilton J DECISION : Further provision made for the plaintiff by way of a legacy of $120,000. CATCHWORDS : SUCCESSION [320] - Family provision - Principles upon which relief granted - Applications of children - Adult children generally - Further provision made by way of a legacy for one of two sisters. LEGISLATION CITED : Family Provision Act 1982 ss 7, 9, 12, 24, 27 & 28 Dulhunty v Dewhirst [2005] NSWSC 350 Hughes v National Trustees Executors and Agency Co of Australasia Ltd (1979) 143 CLR 134 Hunter v Hunter (1987) 8 NSWLR 573 CASES CITED : Massingham v Massingham NSWCA 27 June 1996 unreported Permanent Trustee Co Ltd v Fraser (1995) 36 NSWLR 24 Singer v Berghouse (1994) 181 CLR 201 Vigolo v Bostin (2005) 79 ALJR 731 Judith Anne Dulhunty (P) PARTIES : Patricia Mary Dewhirst (D) FILE NUMBER(S) : SC 5293/01 I D Roche (P) COUNSEL : L J Ellison (D) McGlynn & Partners (P) SOLICITORS : Turnbull Hill Lawyers (D) LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J THURSDAY, 23 JUNE 2005 5293/01 JUDITH ANNE DULHUNTY v PATRICIA MARY DEWHIRST JUDGMENT 1 HIS HONOUR: This is one of two sets of proceedings heard together between two sisters concerning their father's estate. I have already determined the first ("the trust proceedings") and concluded that no moneys were taken from the father's bank account in circumstances such that the defendant ought be ordered to repay moneys to his estate: Dulhunty v Dewhirst [2005] NSWSC 350 ("my first judgment"). 2 There remain to be determined these proceedings, in which a claim is made by the plaintiff for provision under the Family Provision Act 1982 ("the FPA"). 3 The issues are whether the plaintiff was left by the testator with inadequate provision for her maintenance and advancement in life and, if so, what provision ought be made out of the estate for the plaintiff. THE LAW 4 A majority of the High Court (Mason CJ, Deane and McHugh JJ) said in Singer v Berghouse (1994) 181 CLR 201 (at 208 - 209) that the court in determining an application for provision under the FPA is required by ss 7 and 9 to carry out a two stage process. The first stage requires a determination "whether the applicant has been left without adequate provision for his or her proper maintenance, education and advancement in life." The second stage, which arises if that determination be made in favour of the applicant, is "to decide what provision ought to be made out of the deceased's estate for the applicant." The determination of the first stage "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 applicant and the deceased, and the relationship between the deceased and other persons who have legitimate claims upon his or her bounty." The correct view of the first stage is that the question is strictly one of fact, notwithstanding that it involves the exercise of value judgments. The second question involves an exercise of discretion in the accepted sense, although that discretion must, of course, be exercised judicially. That majority of the High Court disapproved the use in determining these questions of reference to the concepts of "moral duty" or "moral obligation", or even the use of those terms, since this might be thought to place a gloss upon the statute. Whilst there has been some debate as to whether or not that view was an obiter dictum only, the Court of Appeal has since determined, despite the eloquent dissent of Handley JA, that that expression of opinion ought be taken in this Court as the binding view of the High Court upon this subject matter: see Permanent Trustee Co Ltd v Fraser (1995) 36 NSWLR 24; Massingham v Massingham NSWCA 27 June 1996 unreported. The matter was revisited in the High Court in Vigolo v Bostin (2005) 79 ALJR 731. Gleeson CJ at [25] doubted that there was any vice in references to "moral duty", provided it was regarded as a form of shorthand and not allowed to operate as a gloss upon the statute. Gummow and Hayne JJ in their joint judgment at [73] thought it "better to forgo any convenience that these shorthand expressions may offer in favour of adherence to the relevant statutory language." All three of those Judges, constituting a majority of the High Court, shared the view that Singer v Berghouse should be taken as an appropriate guide to the construction and operation of family provision legislation: see [5] and [73]. 5 I have approached the matter as prescribed in Singer v Berghouse. This being a claim of an adult child of the testator, I shall simply carry out the two stage process in relation to the plaintiff in the context of this family and this estate. The appellate Courts have negatived that there is any "special" test or approach to the process in the case of adult children, as opposed to other persons with a claim: see Hughes v National Trustees Executors and Agency Co of Australasia Ltd (1979) 143 CLR 134; Hunter v Hunter (1987) 8 NSWLR 573; Vigolo v Bostin supra at [26]. The time at which adequacy or inadequacy is to be judged is the time at which the Court is determining whether or not to make an order: see s 9(2). Section 12 of the FPA provides that where the Court makes an order for provision, it may specify the portions of the estate which shall bear the burden of the provision. By s 24 of the FPA, where the Court is satisfied that an order for provision ought be made and finds that property is held by a person as a result of a distribution from the estate, it may, subject to restrictions in ss 27 and 28, make an order specifying such distributed property as notional estate. THE FACTS 6 The basic facts, including the facts as to the testator's relationship with the defendant and the plaintiff respectively, were set out in my first judgment in terms quoted here for ease of reference. "[3] The deceased, Robert George Dulhunty, was born on 16 October 1917 and died on 8 August 2000 at the age of 82. He had two children, the defendant, who was born on 24 April 1947, and the plaintiff, who was born on 24 January 1949. It is clear from the evidence of both parties that the defendant had during their joint lives a much closer relationship with the deceased than with the plaintiff. It appears that in their youth the defendant was more accepting of her parents' wishes and the plaintiff more rebellious. The defendant lived with her parents until she married in 1968. She lived with her husband and had four children. In 1978, the deceased's wife and parties' mother committed suicide. The defendant's marriage broke up in 1979 and she returned with her children to live with her father in the family home at Ryde. She continued to live there until 1981, rendering the deceased domestic services and herself being afforded accommodation. In 1981, she moved back into her own home at Dudley, a suburb of Newcastle. In about 1987 or 1988, the defendant sold her home in Dudley, but at about that time started living with Vince Della-Bianca in premises of his, also in Dudley, which then became her home. She says that, between 1981 and 1998, she and her father lived between his home at Ryde and her home at Dudley spending considerable periods in each residence. She still performed domestic tasks for him and looked after him when he was ill. In about 1995, the deceased lost his driver's licence and the defendant did all the driving between Newcastle and Sydney, which had previously been shared between them. This did not change the pattern of alternation between Ryde and the defendant's home in Dudley. ………….. [7] At this stage there is no need to say more about the plaintiff than what follows. She went in early adulthood to live in the USA. Since then she has been in Australia for only a few periods of weeks and one period of some months. Her contact with her father has been much less than that of the defendant. There were various breaches in her relationship with her father, but none proved permanent, and she continued till his death to have a relationship with him, although much more distant than his relationship with the defendant." 7 Reference should also be made to my first judgment at [5] and [6] for an account of the testator's real estate dealings late in his life. Indeed, my first judgment and this judgment should be read together in relation to the FPA claim generally. 8 The provisions of the testator's will made on 20 April 1998 were essentially that the defendant should receive his house property at 16 Goulburn Street Dudley and the residue of his estate should be divided equally between the plaintiff and the defendant. Probate of the will was granted on 27 October 2000 to the defendant, who was named as executor. 9 Thereafter the defendant distributed the Dudley property to herself. She subsequently sold it for a net price of some $561,000. Of that, she expended some $300,000 on a new home for herself and paid the balance into a Controlled Moneys Account in the name of her solicitors, Turnbull Hill, in which some part of that sum still resides. There was also paid into that account moneys acknowledged to have been funds of the estate. 10 Each of the plaintiff and the defendant has had distributed to her out of the estate some $130,000, of which $10,000 was from the testator's building society account shortly after his death and some $120,000 was distributed on 22 January 2001. 11 In addition, each sister received distributions from the estate of their Aunt Beryl, probate of whose will was granted on 6 November 2003. Each received cash distributions totalling about $206,000 and shares distributed in specie worth $129,000 at probate valuation. Aunt Beryl's executor still holds undistributed shares, of which the share of each of the sisters will be about $30,000. 12 As a result of the above distributions and payment of estate expenses, the funds held in the estate are about $26,000 and there are not sufficient funds there to meet the costs of these proceedings or to meet any award which is made in favour of the plaintiff. 13 The following facts need to be stated concerning the defendant's situation. 14 Her assets are worth some $827,000, of which $330,000 is represented by her new home at 99 Tirriki Street, Charlestown, $162,000 by a superannuation fund and the balance largely by assets in cash or readily converted into cash. Her affidavit states in one place that these include some $203,000 in the Turnbull Hill Controlled Moneys Account, although in another place it states that the balance of that account at the same time was some $255,000. The explanation is that the difference of some $52,000 odd were funds of the estate, rather than funds of hers. That $52,000 has now been diminished to the $26,000 noted in [12] above as the funds still held in the estate. She includes among her assets such of the shares that she received from her Aunt Beryl's estate as she has not subsequently sold, but not the $30,000 worth of shares she is still to receive from that estate. Her assets may be tabulated as follows: House property $330,000 Vehicles 41,000 Furniture, etc 11,000 Superannuation 162,000 Shares 69,000 Deposits 11,000 Controlled Moneys Account 203,000 $ 827,000 Still to be received from Aunt's Estate 30,000 $ 857,000 15 Her income is a fortnightly Centrelink widow's allowance of $252.32, together with dividends from shares and interest. These are not quantified, but cannot be considerable. Her weekly outgoings she lists as $544 and says that the difference between that sum and her income she expends out of capital. 16 She suffers from sleep apnoea, diabetes and depression. She has also suffered from intestinal bleeding, for which she has had a number of hospital admissions, but the cause has not been identified. 17 The following facts need to be stated concerning the plaintiff's situation. All amounts are stated in Australian dollars. 18 Her assets in the USA, where she lives, are $6,000. Her assets in Australia are said to be $202,000. This includes the shares she received from her Aunt Beryl's estate which she still holds. She is still to receive $30,000 worth of shares from that estate. Her liabilities in the USA are $16,000 and her liabilities in Australia are nil. 19 She previously earned money in the USA as an astrological counsellor. As she pursued this calling from some time in the 1980s, it would seem that her earnings constituted a living, on which she brought up her son born in the USA. However, her earnings contracted over the latter years and she went bankrupt in 1998. What remained of those earnings evaporated as a result of the medical conditions recounted in [22]. Her US income tax returns showed earnings (in $A) of recent years in round figures as follows: 1998 $ 15,900 1999 6,800 2000 12,900 2001 7,400 2002 4,000 2003 1,250 However, it must be remembered that she admitted dishonesty in respect of her income as returned to the US revenue authorities. 20 The estimates of the costs of both sets of proceedings to date are as follows: these proceedings: plaintiff $122,000; defendant $78,000; the trust proceedings: plaintiff $47,000; defendant $45,000. 21 The plaintiff's assets will be further diminished by the amount of the defendant's costs of the trust proceedings, which she has been ordered to pay. The plaintiff has, however, already paid a large part of her own costs of both sets of proceedings. 22 On 15 October 2003 she was diagnosed in Los Angeles with cancer in the left breast. She was treated first with chemotherapy, which did not succeed in shrinking the tumour significantly. On 3 May 2004 she underwent extensive surgery, which included removal of the left breast. However, she is left with a deformed breast, plus scarring and ongoing pain at an abdominal site from which flesh and muscle were removed to reconstruct the breast. On her own account, she is still being treated for the following conditions: (a) Neuropathy : nerve damage in hands and feet, resulting from chemotherapy. (b) Lymphodemia : pain swelling and hardness of the left arm, and pain above the breast which was removed – caused by removal of lymph glands under the arm, and above the breast during surgery. (c) Chronic (possibly "osteo") arthritis : most severely in the lower back and neck; also bilateral knees and shoulders. (d) Carpal tunnel syndrome : in both hands, the left more severe. (e) Bouts of mental confusion : difficulty with cognition and delayed thought and speech patterns, apparently a side effect of the chemotherapy. (f) Anxiety, depression and stress : She is presently under the care of Dr Kay Calvin, psychologist. 23 Her surgeon and her psychologist are hopeful that she can be back at work by the end of 2005. Most of her medical expenses have been met under a Californian government subsidised health scheme. Although the cancer treatment appears to have been successful, there is some continuing risk of recurrence. 24 She lives in rented accommodation. Her monthly rent is $1,517. Her other monthly expenses are about $1,360, totalling about $2,877 per month. In the absence of any income it must be taken that she is living out of capital. 25 The evidence concerning the cost of buying accommodation for her is sparse. It appears to indicate that the sum required to buy even modest accommodation in Los Angeles is beyond her resources, even if there be added to them any possible award out of this estate. It would seem that suitable accommodation could be purchased much more cheaply in Australia. However, no sum is put on the purchase price of accommodation in the evidence. Whilst it is possible, it is certainly not clear that she will return to live in Australia, where she maintains most of her assets. The claim she in fact makes is for further provision by way of a legacy in the range of $200,000 to $100,000. 26 The following facts, in addition to those quoted from my first judgment, need to be stated concerning the plaintiff's relationship with her father. On some occasions over the years she asked for financial assistance, but was refused. On some other occasions, he gave her some financial assistance. The plaintiff went to Los Angeles in 1970 at the age of 21 on holiday and ended up staying. She met Louie Sanchez and married him in 1971. They spent time in Australia over Christmas 1972/January 1973, including time with both her mother and her father. Her parents' marriage was by this stage problematical, owing at least in part to the mother's mental condition, which led to a number of suicide attempts between 1965 and her death by suicide in 1978. 27 The plaintiff's marriage broke up in 1974 and she was divorced in 1976. She returned to Australia in September 1974 and remained for about 12 months. During that time she spent time with both her mother (with whom she lived for four months) and her father. She returned to the USA in September 1975 and spoke to her father, not frequently but regularly, to the time of her mother's death in February 1978, of which she was informed by telephone call from her father. She did not return to Australia for her mother's funeral. She has been criticised for this, but says that she was so distraught that she required psychiatric treatment including extensive therapy. 28 In December 1979 she returned to Australia at Christmas for about two or three weeks, most of which time she spent with the testator, including a holiday which they both spent with the defendant and her family. 29 Between 1979 and 1982 she worked and travelled in Mexico, telephoning her father from time to time. In 1982 she met Dan Payton. They started to live together in December 1982, when her son Padric Dulhunty Payton was born. She and Dan Payton were married in December 1983. They separated late in 1987. The plaintiff returned to Australia on 13 November 1987. At that time the plaintiff and her father were not getting along, so she did not tell him of her return. However, he tracked her down and saw his grandson. After her return to the USA in May 1988, he started sending her money for Christmas and birthdays to share with Padric. She continued to live in the USA because of arrangements concerning the custody of Padric. Over the ensuing years she maintained telephone contact with her father a few times a year. 30 The plaintiff's contact with the defendant and, I gather, the testator diminished in the period from 1996 to 1999, owing to difficulties in the plaintiff's life. (It was during this period that she went bankrupt.) After the testator went into the nursing home she could not contact him by phone, except on one occasion when she arranged to speak to him at the defendant's home. 31 The account in pars [26] – [30] is derived from an affidavit of the plaintiff. Despite reservations I have expressed concerning her credit, I accept her account of this subject matter. In telling the story of her relationship with her father she appears to have recounted it warts and all, not pretending that it was without its problems. Furthermore, her account, as she has given it, appears to me to have an inherent probability. Her relationship with her father was stormy from the start, unlike her sister's. Nevertheless, despite some breaches, it persisted throughout their joint lives. This was not a case in which the relationship between father and child was severed. It certainly had its ups and downs and it was necessarily conducted from a distance, with much less frequent contact than the father had with the defendant. However, the relationship was maintained. The testator himself acknowledged this by the provision he made for her in his will. The question remains whether this was adequate provision, judged in the circumstances prevailing at the time of this judgment. 32 It is not entirely easy to place an amount on the value of the estate in its present distributed form. The value at the time of the distributions was about $820,000, being the $561,000 for which the real estate distributed to the defendant was sold and $260,000 being the cash distributed equally to the two sisters. In my view that should be increased by $30,000 for the increase in value of the home which the defendant bought out of the proceeds of the real estate. If the plaintiff succeeds in these proceedings, it should be diminished by about $150,000 for the costs of these proceedings (about $200,000), reduced by the costs which the plaintiff is liable to pay to the defendant in the trust proceedings (about $50,000). As best I can, I take the value of the estate at present to be about $700,000. This is represented by the following sum: Estate real estate $561,000 Increment to value of defendant's home 30,000 Cash distributed to sisters 260,000 $851,000 LESS Costs of these proceedings net of plaintiff's costs liability to defendant 150,000 SAY $700,000 It is to be remembered that during the last years of the testator's lifetime the defendant had $142,000 out of his building society account, of which perhaps $100,000 was for her own benefit. CONCLUSION 33 The view that I have come to is that I am satisfied that the provision made in favour of the plaintiff by the testator is, judged at the present time, inadequate for the proper maintenance and advancement in life of the plaintiff. I have come to the view that in all the circumstances the provision that ought be made for the plaintiff is by way of a legacy in her favour in the sum of $120,000. This will mean that she will receive out of the estate of about $700,000, about $250,000 and the defendant about $450,000. This means that the plaintiff will have received about one third of the value of the testator's bounty and the defendant about two thirds (bearing in mind the indefinite sum (about $100,000) that the defendant received in the testator's lifetime). 34 This seems to me to hold the balance correctly between the sisters, bearing in mind the greater closeness of the testator to the defendant and the greater service and devotion that the defendant rendered to the testator. The defendant stayed in Australia all her life, remained close to her father and, importantly, was the one who cared for him as he became older and more infirm. With what she received, the defendant has acquired an unencumbered home. That situation will not be disturbed by the order I propose. She has a modest, but assured income in her pension. The plaintiff's case has been conducted on a basis that recognises the defendant's claims. She has asked for a legacy in the range of $200,000 to $100,000. The justification of the sum of $120,000 which I propose to award to the plaintiff is as follows. It will not provide her with accommodation either here or in the USA. It will not supplement her income to any great extent for the future. However, in the present phase of her life while she is recovering from cancer and facing a decision as to whether to continue her life in the USA or return to Australia, it will provide a reserve fund that will assist her in living through the next two or three years. Bearing in mind the size of the estate and her sister's greater claim, the sum I have proposed appears to me the additional provision that is appropriate in all the circumstances. 35 The defendant has opposed any further provision for the plaintiff. She has said that, in effect, the plaintiff maintained no real or a minimal relationship with the testator. She points to the testator having said, in answer to the question, "what about Jude?", "stuff her, she's never done anything for me". I accept that he made some such remark as alleged, but I have already expressed my conclusion that a relationship was maintained between the plaintiff and her father, as was evidenced by his making some provision for her in his will. It was also submitted that the plaintiff was profligate, having expended large sums from her inheritances from the testator and her Aunt Beryl in a short time. Bearing in mind her illness, her lack of income at the relevant time and the legal costs she has paid, a characterisation of profligacy does not seem to me to be justified. 36 There is, in effect, no estate left, so that the designation of notional estate is necessary to provide a source of the provision. Where the inadequacy of the estate is the result of distribution the appropriate provision is s 24 of the FPA. All the relevant assets are held by the defendant. I have not received submissions as to what part of the assets held by the defendant should be designated as notional estate for this purpose. The assets to be designated as notional estate need not, of course, be assets that have come out of the estate, but may be other assets of the relevant person. It may be that this can be the subject matter of agreement between the parties, bearing in mind that it is only the plaintiff and the defendant who are interested in the subject matter. 37 The question of costs also requires resolution, but may not be the subject of controversy. I have tentatively approached the matter on the basis that it may be appropriate to order that the plaintiff's costs be paid out of the estate, but with the deduction of the amount of costs for which the plaintiff is liable to the defendant in the trust proceedings. This, again, is possible in this case because the plaintiff and the defendant are the only persons interested. Again, the defendant is entitled to, but may not require, an order for the payment of her costs out of the estate, bearing in mind that no one else is interested in the balance of the estate after the plaintiff is paid out. 38 Short minutes of order should be brought in to give effect to this decision. At that time it may be seen to what degree the questions as to notional estate and costs are agreed and to what extent they require determination by the Court. ********** 30/06/2005 - Incorrect file number on coversheet and inadvertement omission of section number. - Paragraph(s) Coversheet, 5 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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