New South Wales Supreme Court CITATION : Farquharson v Grace [2005] NSWSC 87 HEARING DATE(S) : 04.02.05 JUDGMENT DATE : 4 February 2005 JURISDICTION : Equity Division JUDGMENT OF : Acting Master Berecry at 1 DECISION : See paragraphs 70-73 CATCHWORDS : Family Provision Act - Long and happy marriage - Son who was denied by father - Small estate - Distribution after notice - Liability of executor - Wealthy widow - Well educated son - Paramount duty to wife - Special circumstances surrounding son. LEGISLATION CITED : Family Provision Act 1982 Luciano v Rosenblum (1985) 2 NSWLR 65 Bladwell v Davis 2004 NSWCA 170 Singer v Berghouse (1994) 171 CLR 201 CASES CITED : Kleinig v Neal (1981) 2 NSWLR 532 Walker v Walker, Young J, 17 May 1996, unreported Gorton v Parkes (1989) 17 NSWLR 1 Ernst v Mowbray 2004 NSWSC 1140 P: William Stirling Farquharson PARTIES : D: Mareta Minnie Grace as executrix of the estate of the late Neville Austin Grace FILE NUMBER(S) : SC 4645.03 P: P Blackburn-Hart; Ms D Robinson COUNSEL : D: JE Armfield P: Lee Sames Egan Solicitors, Lismore SOLICITORS : D: Richard Barron Lawyer, Sydney LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION ACTING MASTER BERECRY 4 February 2005 4645.03 William Sterling FARQUHARSON v Mareta Minnie GRACE as Executrix re Estate Late Neville Austin GRACE JUDGMENT 1 CORAM: These proceedings were commenced by way of summons on 3 September 2003. The plaintiff claims an order for provision to be made out of the estate of the late Neville Austin Grace, pursuant to s7 of the Family Provision Act 1982. The defendant in these proceedings is the executrix of the deceased's estate and the widow of the deceased. The proceedings have been brought in time. 2 The plaintiff isthe son of the deceased. However, he was not brought up as a part of the family of the deceased. For many years, the deceased and the plaintiff's mother had an affair and, during the course of that affair, she fell pregnant to him on at least two occasions. On the first occasion, there was a termination of the pregnancy. On the second occasion, the plaintiff's mother's evidence is that he was excited about the thought of parenthood. The pregnancy continued and the plaintiff was born in 1973. 3 The plaintiff's evidence is that he did not know who his father was until he was about thirteen (1987), when his mother informed him that Neville Grace was in fact his father. During the first thirteen years of his life, he had come across the deceased from time to time when the deceased visited his mother at her accountancy practice at Thornleigh in Sydney. The evidence, however, is that no recognition was given by either the plaintiff's mother or the deceased to the fact that the deceased was the plaintiff's father. 4 In his early teens, the plaintiff and his mother moved from Sydney to the Coffs Harbour district. She entered into a relationship with another woman and she conducted a practice as an accountant in that area. The frequency of contact between the deceased and the plaintiff's mother dropped off once she moved to Coffs Harbour. The evidence is that, from time to time, she attended Sydney and she saw him but, as time went on, the frequency was more remote. After a period of time, she regarded the deceased as a good friend and adviser and that relationship continued until his death. 5 Her evidence is that, from time to time, the deceased made enquiries of the plaintiff, concerning his health and his education. However, with the exception of paying a $500 deposit to Newington College for the purposes of placing the plaintiff's name on the waiting list of that college, the deceased played no part in the plaintiff's upbringing, from either an emotional point of view, or a financial point of view. 6 The plaintiff, ultimately, went to Brisbane Grammar School. There he completed his schooling and that completion could be regarded as nothing less than successful. He then attended the Queensland University of Technology, where he obtained two degrees, a Bachelor in Business and a Bachelor in Laws. 7 During that time, the plaintiff made no attempt to contact his father. Similarly, during this time, the father made no attempt to contact the son. 8 The plaintiff's mother bore the burden of his upbringing and his education. She had approached the deceased from time to time about giving some assistance. Her evidence is that the deceased had indicated that he would be happy to support her in bringing up the child. That support never materialised. 9 When the plaintiff went to Brisbane Grammar School, the plaintiff's mother approached the deceased, seeking assistance with the school fees. The evidence is that the annual school fees ranged between $15,000 and $20,000. His response to that was, "I can't afford to meet those fees". He made no contribution. The plaintiff's mother bore the whole burden of those fees. 10 On completing his university education, the plaintiff obtained employment with PriceWaterhouseCoopers in Brisbane. He worked there for a period of time and formed the view that he was not cut out to do the type of work that he was employed to do with that firm. 11 He decided to go overseas and set off for London, where he worked for a number of years. He then entered into a relationship with a French woman and they have lived in a de facto relationship for a number of years and it is their intention to marry in the next two to three years. She holds down a good job and does not appear to have any difficulty in maintaining employment. She is currently employed in New York and has a two year contract on an income currently at AUD $120,000 per year. Her evidence is that her monthly income is approximately $6,900, including the rent received for a Paris flat, to which I will return in a moment. However, the evidence is that the occupancy rate of that flat runs no higher than 30%. It seems to me that, in reality, any moneys they earn from the flat can be discounted. Her income, therefore, on a monthly basis is approximately $6,400. Her outgoings are $6,000, leaving a surplus per month of somewhere between $400 and $500. 12 The plaintiff gave up his employment in London to go to New York with his partner. He has had some difficulty in obtaining employment, but is currently working in a temporary capacity with an investment bank in New York City. The hourly rates he is paid are approximately AUD $55. That translates to a monthly income, excluding the rent received from the Paris flat, of approximately $6,000. His expenses are also $6,000. He has no surplus. 13 He and his partner have together purchased a unit in Paris. They have very little equity in that unit and, at the time of the purchase, had no equity at all. The whole of the purchase price had to be acquired through a mortgage, under which there is still a significant debt owing. 14 Currently, the plaintiff's assets and liabilities position is such that shows a deficit of some $22,000. The plaintiff and his partner have a number of aspirations. Firstly, she seeks to continue her education. Secondly, he also wishes to continue his education and he wishes to obtain an MBA. Initial enquiries were made in Paris but, with the posting of his partner to New York, he has made enquiries in New York at three universities and has been told that the cost of a two year course would be approximately AUD $266,000. Mr Blackburn-Hart has indicated, however, that even though the range that is in evidence, one should look at the medium and the cost to him of obtaining the degree would be $200,000. The plaintiff's evidence is also that, during the time he undertakes studies he will be unemployed; he would need a supplement to pay for his expenses and day to day living. 15 The plaintiff also sought provision to enable him to put down a deposit on a residence in either Sydney or Melbourne so that, when they eventually move back to Australia, they have a property. 16 He also has a HECS debt repayment liability of approximately $35,000. 17 The plaintiff and his partner, although they have very little to show in the way of assets, are both in well paid jobs and neither of them has had any degree of difficulty in obtaining and retaining employment. 18 The defendant is the widow of the deceased. They had been married for sixty years. The defendant only became aware of the existence of the plaintiff five days prior to the death of the deceased, which, no doubt, came as a great shock to her. 19 This case, in a number of respects, is a sad case. It is sad because the son never had a relationship with his father. It is sad that the husband lived a lie for thirty years with his wife, and it is sad that the expectations people have cannot be met out of this estate. 20 Despite the assets that are in evidence, at the end of the day, the reality is that there is an actual estate of some $210,000 and a notional estate of approximately $300,000. 21 If there needs to be a declaration, the plaintiff's best claim is that he would like provision made for him which would cover the deposit on a property, to complete the Masters, to pay the HECS debt and some further provision to enable he and his wife and, ultimately, their children, to spend some time in France each year, visiting her relatives. Quite properly, Mr Blackburn-Hart indicated that there would be no part of this claim by him for provision of that nature. He also indicated that the deposit was not pressed. 22 In essence, therefore, what the plaintiff claims through his counsel is provision to be made out of the estate for the costs associated with the Masters course and the payment of the HECS debt. 23 The defendant, Mr Armfield submitted, led a typically traditional role and life of a wife married in the 1940's. She and her husband had a child, who died in adulthood in 1992. She worked up until the time the child was born and thereafter, she remained at home and looked after the child and the house for the deceased. She has had no opportunity during her lifetime to acquire independent assets. There is no doubt that, although she has significant assets in her own right now, those assets, over the marriage, have come to her via the deceased. 24 She is currently 86 years of age. She lives in an apartment at the retirement village at Fernbank at St Ives. In paragraph 18 of her affidavit of 2 December 2003, she sets out her annual expenses. Those expenses total just over $69,000. Mr Armfield, in his written submissions, stated that the defendant receives an income from her investments of $53,000. There is a shortfall of some $16,000. 25 A report has been prepared by Mr Miller, an accountant briefed by the plaintiff. Mr Miller has prepared a report into the assets and income of the defendant. As a result of that report, counsel have reached an agreement on the assets that are also held in respect of the estate on a notional basis. 26 Mr Miller makes comment on a number of the items that are set out in paragraph 18 of the defendant's affidavit. At page 9 of his report, he deals with the depreciation of the motor vehicle. He deals with taxation on the income the defendant receives from the investments and he deals with a number of other items. 27 He forms an opinion that, in relation to the taxation and depreciation, whilst the depreciation is reasonable, there is further information that he required which was not available. 28 In relation to the liability for taxation, he points to the fact that the defendant's tax liability has decreased and, in all probability, will continue to decrease. The total of the expenses she shows in paragraph 18 of her affidavit will, in all probability, not be maintained at that level. 29 Mr Blackburn-Hart tendered the life expectancy tables, which have become exhibit PX1. The purpose of tendering the life expectancy tables was to draw to the Court's attention the age expectancy of the defendant. She is currently 86. According to the tables, she has a life expectancy of 6.08 years. She set out in paragraph 19 of her affidavit a number of health problems that she is currently suffering, or has been exposed to in the past. Looking at those matters, there is nothing there which would indicate that the defendant's life expectancy is likely to be shortened. Therefore, considering her position on the basis of at the very least, she will live the 6.08 years set out in the life expectancy tables. 30 At its highest, the defendant puts her position as this; that because of arthritis and spinal problems, she will be less mobile in the years to come than she is now. She relies on assistance presently and that reliance will increase in the future. She acknowledges that, in all probability, she will need to go into a nursing home at some stage. 31 Mr Blackburn-Hart submits that, in considering her position, however, I should move from the position of considering the income she receives and look at the capital from which she derives that income and consider whether or not it would be proper, in all the circumstances, for her to expect that at some time into the future she should rely, in part, on her capital to assist her with her day to day living expenses. I will return to that later on. 32 Mr Blackburn-Hart indicated at the outset that he was not taking a position that the Court should not regard the defendant as the person for whom the deceased had the primary obligation from his estate. There probably needs to be some comment made in relation to that because of recent comment made by the Court of Appeal. 33 The position of this Court has been since Luciano v Rosenblum 1985 2 NSWLR 65 that the Court should consider a widow, especially one who had a harmonious marriage, made contributions to the assets of her husband and was in a long marriage, primacy to her claim. 34 In Bladwell v Davis 2004 NSWCA 170, Justices Ipp and Bryson made observations in relation to the comment made by Justice Powell. It was never the case that Justice Powell said that primacy was to be given to a widow in the circumstances that I have just outlined. At pages 69 to 70, he said: "It seems to me that, as a broad general rule and in the absence of special circumstances, the duty of a testator to his widow". 35 It is those phrases that have been picked up by Justices Ipp and Bryson in Bladwell v Davis (supra). 36 Justice Bryson, at paragraph 19, made the following comment when considering the position of a widow: "In the application of the test in s7 and of the exposition thereafter in Singer v Berghouse by Mason CJ, Deane and McHugh JJ at 409-411 1994 171 CLR 201, it would be an error to accord to widows general primacy over all other applicants, regardless of circumstances and regardless of performance of the stages of consideration described in Singer v Berghouse and in full with reference to the instant facts." 37 It is in that context that that this case needs to be considered. As I understand Mr Blackburn-Hart, that is no less than what he was submitting from the bar table. 38 The tests applied in Singer v Berghouse are trite. Counsel is well aware of them. There is no need for me to quote from that case, other than to say that, in approaching a claim under the Family Provision Act, the Court must deal with the two stage test. 39 The first test is to determine whether or not adequate provision was made for the plaintiff. If it is found that the provision was inadequate, the next matter the Court needs to consider is what provision ought to be made for the plaintiff. 40 In considering those two stages, there are a number of matters that need to be taken into account. Justice Bryson alluded to some of those matters in the case to which I have earlier referred. The cases that have applied Singer v Berghouse (supra) and applied the matters that are set out in the legislation are legion. This afternoon, there is no need to go into all those matters, but the starting point is whether or not adequate provision has been made for the plaintiff. 41 In determining whether adequate provision has been made for the plaintiff, there is another matter which also needs to be considered, that is, the nature and extent of the relationship between the deceased and the plaintiff and the obligations that flowed from the deceased to the plaintiff. 42 Mr Armfield referred to a number of cases during his submissions. There were also submissions by Mr Blackburn-Hart on that point. Mr Armfield submitted that, in considering the position of the plaintiff, one needs to consider the relationship he had with his father and also, what steps he took to develop that relationship. If it is found that there was a total absence of any form of relationship and there was no effort made by the plaintiff to create a relationship with his father, then there is nothing but bare paternity and that no provision should be made for the plaintiff because it cannot be said that the plaintiff is one whom the community would regard as being an object of testamentary benefit by the deceased. 43 Not unnaturally, Mr Blackburn-Hart makes a contrary submission. His position is that the deceased never attempted to create a relationship with his son. He promised the plaintiff's mother that he would support her, and that he would contribute towards the education of the son. Other than the provision of five hundred dollars, he made no other contribution. He saw the plaintiff from time to time during the first thirteen years of the plaintiff's live, yet at no stage did he indicate to the plaintiff that he was his father. The son found out later on when he was aged thirteen. 44 He gives evidence of how he felt when he discovered who his father was. He was a man who, from time to time, visited his mother in what he thought was a professional capacity. In paragraph 29 of his affidavit of 1 February 2004, his evidence is as follows: "When I learnt as a child that the deceased was my father I felt hurt and resentment, but he has never contacted me, nor been a part of my life. In my resentment, I convinced myself that I could live without a father. It was not until I met Zohra and began to think of starting a family that I thought of myself taking the role of a father and began to think of my own father. I began to ask questions, such as, what was he like; what kind of person was he? Was not having a father in my life going to affect how I was going to be a father? Was this good or bad? Zohra and I were postulating these questions when we received news from my mother that the deceased had died. I was not aware of his condition before his death". 45 There may well have been the possibility of an approach by the plaintiff, once he decided to settle down, to meet with his father. That may have been rebuffed by his father for a variety of reasons. Nevertheless, in my view, there is a distinction to be drawn between the facts in this case and the facts in some of the other cases that have been referred to this afternoon. 46 This is not a case where the plaintiff formed a part of the household as a family member and child of the deceased. This is not a case where, over a period of time, they drifted apart and the drift continued and the separation was lengthy. This is not a case where, through misunderstanding, or a different application of values, the father and the child fought and the child left the family home and did not attempt to resume the relationship and neither did the father attempt to resume the relationship. This is one where the plaintiff was excluded from the beginning. It is not a case where one could apply what Justice Holland said in Kleinig v Neal (1981) 2 NSWLR 532 at 540 because the plaintiff in this case did not even get to the gate. There was no parent / child relationship. 47 Mr Armfield referred to Walker v Walker, an unreported decision of Young J as he then was, 17 May 1996, where his Honour talked about fault. Fault was not a matter to be ascribed to the determination of whether or not provision ought be made for the child. 48 Reference was also made to Gorton v Parkes (1989) 17 NSWLR 1. Justice Bryson, in that case, said that a testator cannot reject the obligation to provide for a child simply by steadfastly maintained repudiation or evasion. In the current case, the deceased falls into that position. For whatever reason and no doubt, in his mind, he thought he had good reasons, he did not include the plaintiff as a part of his life. In my view, the deceased, in failing to make provision for the plaintiff, has not made adequate provision for him. 49 The next matter to consider is what provision, if any, ought to be made for the plaintiff. It, of course, has been said in a number of cases that having found at the first stage that adequate provision has not been made, when all matters are taken into account and weighed up that, notwithstanding that the first limb has been found in favour of the plaintiff, the Court will not make an order pursuant to the second limb. The most obvious example of that is where it is a small estate and to do so would create an unnecessary burden or hardship on the beneficiaries. 50 In this matter, the actual estate is agreed at $210,000. If notional estate is declared, it is just over a half a million dollars. The costs of these proceedings are just over $76,000. By Supreme Court standards, this is not a large estate. I would suggest it is not even an average estate. The actual estate, as I have indicated, is $210,000. If you take both parties' costs out of that, you are left with an estate of $140,000. If you claw back what has been distributed, $300,000, raises the estate to $440,000 clear of costs. 51 True it is that the plaintiff will be liable, subject to any offers of compromise, or Calderbank letters that have passed between the parties, to meeting the difference between his indemnity costs and his party / party costs, but the amount of costs that the estate is likely to bear is in the vicinity of 90% of the overall costs of both parties. 52 On the one hand, there is the widow of the deceased who, in her own right, has an investment portfolio, capital of $1,117,184.52. Although at various times during the hearing of this matter, both counsel referred to the figure of $1,000,000 as not being as great today as perhaps it was in years gone by, as I see it, there is no way you can dress a figure up like that as not being a significant sum of money. 53 Mr Blackburn-Hart submits that, in considering whether or not provision ought to be made for the plaintiff, I should consider that capital investment sum and the age of the defendant and consider whether or not, in all the circumstances, it would be appropriate for the defendant to, at some stage into the future, have to fall back on her capital. 54 On the other side of the ledger is the plaintiff. The plaintiff and his partner, notwithstanding the fact that they manage to spend just about every cent they earn, are people who earn a significant wage. It could not be said, certainly, in the Australian context that, individually or collectively, their wages are in the lower level of income. I suspect, notwithstanding some evidence of the high cost of living in New York that, even in New York, they would not be regarded as lowly paid wage earners. 55 In determining whether or not provision ought to be made for the plaintiff, they are the matters that need to be taken into consideration. 56 I put to Mr Armfield that the actual estate of $210,000 would not be sufficient to generate income that would make up the shortfall between the $69,000 that the defendant currently spends and the $53,000 she has as an income and, quite properly, Mr Armfield agreed with that proposition. 57 The defendant is not a person who does not have sufficient resources of her own to maintain a good standard of living. Mr Miller has indicated that, in all probability, there will be certain items of expenditure which will decrease. That will, in part, bridge the gap between income and expenditure. Some provision for the plaintiff out of the estate, depending on the quantum of that provision, would not necessarily adversely affect the defendant's standard of living. I accept everything she says in her affidavit about her current medical condition and about the prospects for the future. I must take on board the life expectancy tables that have been tendered in evidence this afternoon. This may not be a common law personal injuries claim but, nevertheless, the life expectancy table, in the circumstances, is a bona fide and relevant piece of evidence in these proceedings. 58 The plaintiff's position then is and Mr Blackburn-Hart submits that he should be entitled to a sum which would enable him to undertake a Masters course and to pay out the HECS debt. On the figures that Mr Blackburn-Hart submitted were appropriate, that would be an amount of $235,000 should be provided by the estate to the plaintiff. When one adds the costs to that, it can be seen that there would be little change out of $300,000. That would mean that, under the relevant provisions dealing with notional estate, I should next turn my attention to those sections. 59 Mr Blackburn-Hart has suggested that I should not consider what property forms part of the notional estate of the deceased, but I should be guided by the decision of the Chief Judge in Ernst v Mowbray 2004 NSWSC 1140. Mr Blackburn-Hart referred to paragraphs 64 and 65. 60 Without doing an injustice to the Chief Judge, paraphrasing those two sections, in essence, what his Honour said was where an executor is put on notice that a claim may be made on the estate and subsequently there is distribution, it is to the executor that the Court will look to make up any shortfall in any provision made out of the estate by the Court. That is, the next matter that I need to consider if I adopt Mr Blackburn-Hart's submissions. 61 The plaintiff has been considering for some time the possibility of undertaking a Masters course. Originally, he was going to undertake it in Paris; that didn't happen. They are now in New York for perhaps two years and he would like to undertake it in America. The intention is to return to Australia some time thereafter. The plaintiff already has two degrees. I do not think it could be suggested, especially if he is going to return to Australia that, based on his qualifications and, in all probability, on the experience that he has gained since his university days, that he will not be able to find employment, if not readily, certainly, it will not take him long to find employment. 62 The defendant is a person who is not impecunious, who does have assets, who is not down to her last dollar. Similarly, the plaintiff is one who, whether or not he marries, whether or not he stays with his current partner, has potential to earn a good income throughout his working live. 63 Therefore, what needs to be balanced is whether or not the provision that Mr Blackburn-Hart submits is appropriate, in all the circumstances, should be made, namely, the costs of the Masters course and the HECS repayment fee, or whether, as Mr Armfield submits, no provision should be made for the plaintiff. 64 If I were to make the provision Mr Blackburn-Hart submits, it seems to me that I not only run contrary to some of the matters that were raised in Luciano v Rosenblum (supra), but I also run contrary to the comment and considerations made by the Court in Bladwell v Davis (supra). 65 By providing the amount that is suggested, I will exhaust the actual estate. If I provide the amount that is requested, I will eat significantly into both the notional estate and the actual estate. It seems to me that, while primacy may not, at the end of the day, be the only factor, the courts, nevertheless, recognise that, in certain circumstances, when all matters are weighed up, that may still be the appropriate way to approach a claim. 66 In this case, it may be argued that, because of the lack of contact between father and son, no provision should be made for the plaintiff; that he has done nothing to try and create a relationship with his father, therefore, no provision should be made; there was not that obligation or that community expectation that I referred to earlier. However, in my view, for the reasons I have already given, that is not an appropriate position to take. 67 In my view, some provision should be made for the plaintiff, but that provision should be made by taking into account the nature and quality of the relationship albeit, to some degree, found to be a lie between the defendant and the deceased. 68 Nevertheless, it seems to me that, in all respects, but for that, it was not only a long, but a happy marriage. That needs to be weighed, on one side, with the potential that the plaintiff has to, if he so desires, continue his education, but even if, at the end of the day, he decides he does not wish to undertake any further courses, he is still in a position where he will be able to get employment on a regular basis at above average income. 69 In weighing those two things up, it seems to me that, in all the circumstances, having regard to the fact that we do have a small estate, that modest provision should be made for the plaintiff. 70 The order I make, therefore, is that the plaintiff be paid by way of lump sum from the estate, an amount of $36, 000. 71 The plaintiff's costs of these proceedings to be paid out of the estate, but such costs to be capped to the extent of the legacy. 72 The defendant's costs should be paid out of the estate on an indemnity basis. 73 Interest is not to run for 28 days, in accordance with the Wills Probate & Administration Act. ********** 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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