New South Wales Supreme Court CITATION : Xian Horvat v Bruce Percy Hocking [2007] NSWSC 212 HEARING DATE(S) : 26 February 2007 JUDGMENT DATE : 13 March 2007 JUDGMENT OF : Associate Justice McLaughlin DECISION : 1. I order that, in lieu of the benefits given to her by the will of late John Mirku Horvat ("the Deceased"), the Plaintiff receive the house property situate at and known as 880 Elizabeth Street, Zetland absolutely, and a legacy in the sum of $200,000, such legacy not to bear interest if paid on or before 13 May, 2007, and, if not so paid, to bear interest at the rates prescribed for unpaid legacies pursuant the Wills, Probate and Administration Act 1898 ; 2. I order that the costs of the Plaintiff on the party and party basis and the costs of the Defendant on the indemnity basis be paid out of the estate of the Deceased; 3. The exhibits may be returned; 4. Reserve liberty to apply in respect to the date referred to in order 1 hereof. CATCHWORDS : Succession. Family Provision. Claim by widow. By will Plaintiff receives only a right of residence in matrimonial home. Unhappy marriage. Financial and material cicumstances of Plaintiff. Whether Plaintiff has been left without adequate provision for her proper maintenance. Chief beneficiaries are the sons of the Deceased, with whom he had no contact for more than fifty years. Competing claim of beneficiaries. LEGISLATION CITED : Family Provision Act 1982 CASES CITED : Singer v Berghouse (1994) 181 CLR 201 Vigolo v Bostin (2005) 221 CLR 191 PARTIES : Xian Horvat (Plaintiff) Bruce Percy Hocking (Defendant) FILE NUMBER(S) : SC 3420 of 2005 COUNSEL : Mr A. Hallas (Plaintiff) Ms E. Cohen (Defendant) SOLICITORS : Koutzoumis Lawyers (Plaintiff) Martin Place Lawyers (Defendant) - 15 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION ASSOCIATE JUSTICE McLAUGHLIN Tuesday, 13 March 2007 3420 of 2005 XIAN HORVAT –v- BRUCE PERCY HOCKING JUDGMENT 1 HIS HONOUR: These are proceedings under the Family Provision Act 1982. 2 By summons filed on 10 June 2005 Xian Horvat claims an order for provision for her maintenance, education and advancement of her life out of the estate of her late husband John Mirko Horvat (to whom I shall refer as "the Deceased"). 3 The Deceased died on 20 August 2004, aged 79. He left a will dated 2 June 2001, probate whereof was on the 15 March 2005 granted to Bruce Percy Hocking, the executor named in such will (who is the Defendant to the present proceedings). 4 The Deceased, who had been born in Barcelona in Spain, was married three times. By his first marriage, to Herta Kolling in Kiel in Germany in 1946, he had two children, Manfred Mirko Friedrich (who was born on 14 May 1946 and is now aged 60) and Jurgen Herbert (who was born on 13 April 1948 and is now aged 58). The Deceased came to Australia in 1948, shortly after the birth of his younger son. Subsequently, in about 1949 –1950 the Deceased and his first wife divorced. Mrs Herta Horvat later remarried in Germany. Neither she nor the Deceased's two sons ever came to Australia. 5 From the time when he came to Australia the Deceased appears to have virtually abandoned his first wife and his two children. He provided no support or maintenance for them and does not appear to have had any contact with them to the time of his death. Manfred and Jurgen grew up in extremely modest circumstances, being maintained on social welfare payments in Kiel until 1957, when their mother obtained employment on a very small wage, until they removed to Leipzig in 1961. Manfred and Jurgen as children had been informed by their mother that their father had died when they were very young. It was only when the Defendant located them and informed them of the present proceedings that they became aware that their father had survived until recent times. By the same token, however, it should be recognised that Mrs Herta Horvat, who is still alive, appears to have made no attempt to locate the Deceased, and even after her children had grown up did not inform them that their father was still alive. She appears to have been content not only to have made no effort to contact the Deceased, but also to have created a situation where her children would not be enabled to contact him. 6 In 1959 the Deceased married his second wife Jean Ella Harmon, from whom he separated in 1985. Mrs Jean Horvat later removed to Tasmania. She and the Deceased divorced in May/June 1990. 7 The Plaintiff (who had been born in Shanghai in China on 14 April 1957 and who is now aged 49) came to Australia on 3 January 1990 on a student visa. She met the Deceased several months later, and they commenced to cohabit in about May 1990. 8 The Deceased at that time was residing in a house property owned by him at 880 Elizabeth Street, Zetland. It was into that property that the Plaintiff moved when she and the Deceased commenced to cohabit in about May 1990. The Deceased shortly thereafter instituted divorce proceedings against his second, and estranged, wife, with a view to his marrying the Plaintiff. (The Plaintiff said that, until then, the Deceased had not told her of the existence of his second wife.) They married on 8 December 1990, and continued to reside in the house property at 880 Elizabeth Street, Zetland until the death of the Deceased almost fourteen years later. The Plaintiff has continued to reside in that house property to the present time. In or about 1994 the Plaintiff became a permanent resident of Australia. 9 No children were born to either the second marriage of the Deceased or the marriage of the Deceased to the Plaintiff. 10 The Plaintiff was in employment at the Cauliflower Hotel at Redfern (working 2 to 3 days a week in the bistro) at the time when she met the Deceased, who was a patron of that establishment. Throughout most of the period of their cohabitation and marriage the Plaintiff continued in employment. She gave up work only as a result of health problems, in May 2005, almost a year after the death of the Deceased. Since that time the Plaintiff has been in receipt of Centrelink benefits. 11 At the time when the Plaintiff met, and subsequently married, the Deceased, he owned the following assets: House property situate at and known as 880 Elizabeth Street, Zetland Vacant land situate at and known as 876 Elizabeth Street, Zetland Vacant land situate at and known as 6 Kuke Road, Blackheath 12 At the commencement of their relationship the Deceased conducted a panel beating business from his residence at 880 Elizabeth Street. However, as a result of injuries sustained in a motor accident in 1995 the Deceased thereafter was no longer able to continue that business. 13 At the time of his death the Deceased owned the foregoing three pieces of real estate, to which the following valuations were attributed in the inventory of property: House property, 880 Elizabeth Street, Zetland $950,000 Vacant land, 876 Elizabeth Street, Zetland $500,000 Vacant land, 6 Kuke Road, Blackheath $170,000 14 In addition, the inventory of property discloses the following assets owned by the Deceased at the time of his death: Commonwealth Bank account $88,393 Commonwealth Bank term deposits, totalling $161,765 15 However, it is estimated on behalf of the Defendant that the present value of the house property at 880 Elizabeth Street, Zetland is $875,000, the present value of the vacant land at 876 Elizabeth Street, Zetland is $475,000, and the present value of the vacant land at 6 Kuke Road, Blackheath is $185,000. Further, the moneys presently representing the contents of the bank accounts and term deposits of the Deceased total $198,623. Since the death of the Deceased the estate has advanced to the Plaintiff, by way of a loan, the sum of $20,000 to enable the Plaintiff to effect essential and urgent repairs to the house property at 880 Elizabeth Street, Zetland. The Plaintiff has also purchased the Deceased's motor car (a 1990 Toyota Corolla sedan) from the estate for $3000, which amount has not yet been paid. Upon the foregoing figures, the estate has a present value of $1,756,623. 16 It will be appreciated that, in calculating the value of the estate available for distribution, the costs of the present proceedings must be taken into consideration, since, in the event that the Plaintiff be successful in the present proceedings, she will be entitled to an order that her costs be paid out of the estate, whilst the Defendant, irrespective of the outcome of the proceedings, will be entitled to have his costs paid out of the estate. It is estimated that on behalf of the Plaintiff that her costs will total about $35,000, whilst it is estimated on behalf of the Defendant that his costs will total about $60,000. In addition, the Defendant is entitled to claim commission, pursuant to the terms of the will of the Deceased. He estimates such commission in an amount of $20,000. Accordingly, it is appropriate that I should proceed upon the basis that the totality of the costs, in an amount of $95,000, will be paid out of the cash funds presently available in the estate. 17 Upon the calculations prepared by the Defendant in his affidavit of 22 February 2007, those cash funds now total $198,623. If provision be made for the costs and disbursements of both parties in respect to the present proceedings (in a total amount of $95,000), the Defendant's entitlement to commission (in an estimated amount of $20,000) and liabilities for income tax ($1000) and land tax ($4000), there will remain in the estate a cash amount of about $78,600, together with the three pieces of real estate (now having a present estimated total value of $1,535,000). It will be appreciated, however, that, in the event that one or more of those pieces of real estate be sold, there will be costs and disbursements associated with such sale, as well as agent's commission. The Defendant considers it prudent to allow an amount of $50,000 for such costs, disbursements and commission. Further, the loan to the Plaintiff of $20,000, and the amount of $3000 presently owing by the Plaintiff for the purchase of the motor vehicle, although treated as assets in the estate, will not, in the event of her receiving an order for provision, be repaid by the Plaintiff. 18 According to the Plaintiff, the house property at 880 Elizabeth Street was in a state bordering upon dereliction throughout the period whilst she resided therein with the Deceased. The Plaintiff said that the Deceased, once they were married, was extremely mean with his money, which he was very reluctant to spend, even on their residence. She said that it was her earnings which largely supported and maintained herself and the Deceased throughout the period of their marriage. 19 The Plaintiff also said that the marriage was not a particularly harmonious one, since the Deceased consumed alcohol to excess (his death certificate supported that assertion). Further, that he would not allow her to socialise, either with work colleagues or with members of the Chinese community, but, in effect, kept her at home except when she was working. Further, that he constantly accused her of infidelity and of misconducting herself with at least one neighbour. I am satisfied from the Plaintiff's evidence that there was no basis for those accusations. 20 In addition, the Deceased (according to the Plaintiff) was physically abusive towards her, striking her on a number of occasions, from 1997. 21 By his will the Deceased provided that the Plaintiff have a right of residence in the house property at 880 Elizabeth Street, during her life and widowhood paying all outgoings and keeping the same in good repair and on her death or remarriage the residence shall form part of my residuary estate. 22 The Deceased gave his residuary estate to his sons Manfred Horvat and Jurgen (referred to in the will as Gehor) Horvat as tenants in common in equal shares. 23 Clause 5 of the will is in the following terms, I have not further included my wife (Chan) in this will because of her behaviour towards me and the help financially and otherwise I have given her and her parents since our unhappy marriage. 24 The Plaintiff is presently unemployed, and is in receipt of a NewStart allowance from Centrelink, in an amount of $416.40 a fortnight. In her evidence the Plaintiff said that that amount barely keeps her above the poverty line and that when all expenses and outgoings were paid she was left with about $90 a week for food. 25 The Plaintiff suffers from a number of health problems, being unstable hypertension, depression and osteophageal reflux (those conditions having been recognised in a job capacity assessment report from Centrelink, dated 20 September 2006). For those conditions she has been prescribed medication, which costs in the vicinity of $30 a week. 26 The Plaintiff receives counselling assistance and support from the Reverend Heather McClelland, an ordained Baptist minister, who has practised as a general counsellor for over 18 years. Evidence by way of affidavit and reports, was given by Ms McClelland, who was also cross-examined during the hearing. 27 The Plaintiff is in need of extensive dental treatment, including a fixed prosthesis, using four oral implants, and a hybrid prosthesis. For that treatment plan she has been quoted by Dr Nicholas J. Chronis, dental surgeon, in an amount of $12,000. 28 The Plaintiff is desirous of obtaining private medical insurance, and has ascertained from Medibank Private that for appropriate cover the annual premium would be $1721. 29 The Plaintiff is desirous of acquiring a new motor car. Her inquiries over the internet have established that the cost of a new Toyota Corolla motor car would be $21,840. The Plaintiff also placed before the Court detailed information concerning the present condition of the house property at 880 Elizabeth Street, and of the pressing and urgent repairs required for that property. The most urgent of those repairs involves the electrical rewiring of the house, for which the Plaintiff has received quotations totalling $9280. In addition, the Plaintiff placed in evidence a building inspection report from a licensed builder, dated 5 September 2005, setting forth that the cost of repairs to the entire residence would total about $220,000. 30 The Plaintiff has minimal savings. In her affidavit of 8 August 2006 she said that she had about $800 in her bank account, that sum representing savings from her earnings whilst she was in employment. 31 At the present time the Plaintiff maintains an extremely modest lifestyle, and her only pleasure and enjoyment appear to be derived from the garden which she has created at her residence. The house property at 880 Elizabeth Street, has the advantage of consisting of a double sized block, with the benefit that there is a large area next to the building available for the cultivation of flowers, shrubs, trees and vegetables. 32 Evidence has been placed before the Court concerning the financial and material circumstances of each of the sons of the Deceased. 33 Manfred, who resides in Leipzig, in Germany, is qualified as a machine fitter, but has been unemployed for the past five years. He has been married since 1966. His wife does not work and has no income. They have two children, neither of whom is dependent upon them. Manfred and his wife rent an apartment for which they pay 377 euros a month. They receive social security unemployment benefits totalling 961 euros a month. Manfred estimates their total average monthly expenses to be an equivalent figure. His only significant asset is a 1994 Citroen motor car, to which he ascribes a value of 3000 euros. 34 When he reaches the age of 65 Manfred will receive a pension of 898 euros a month, and his wife will receive a pension of 540 euros a month (totalling 1439 euros a month). Manfred and his wife have no savings. However, they do not have any liabilities. 35 Jurgen Horvat, who also resides in Leipzig, has tertiary qualifications as a mechanical engineer. He is presently employed as such in Cologne, receiving a net income of 2811 euros a month. He has been married since 1969, and has three children (two of whom are presently at university and are totally dependent upon Jurgen). He, his wife and their two dependent children rent a four room apartment, for which he pays 585 euros a month. Jurgen estimates that his outgoings total about 2609 euros a month. His only asset is a 2001 Audi motor car, to which he ascribes a value of 12,000 euros, and the furniture and contents of his residence (which are about 30 years old and have little value). Jurgen said that he has some small savings (in an amount unquantified). 36 When Jurgen retires at the age of 65 he will receive a pension of about 1376 euros a month. His wife will receive a pension of about 186 euros a month (totalling 1563 euros a month). Jurgen would like to purchase a newer motor car at a cost of about 25,000 euros. 37 Neither Manfred nor Jurgen has ever owned his own residence. 38 It is in the light of the foregoing facts and circumstances that the Court must proceed to a consideration of the claim of the Plaintiff. 39 I have had the benefit of receiving a written outline of submissions and a chronology from Counsel for the respective parties. Those documents will be retained in the Court file. 40 The Plaintiff, as the widow of the Deceased, is an eligible person within paragraph (a) of the definition of that phrase contained in section 6(1) of the Family Provision Act. As such she has the standing to bring the present proceedings. 41 The only other eligible persons in relation to the Deceased are his two sons (who are eligible persons within paragraph (b) of the foregoing definition) and his two former wives (each of whom is an eligible person within paragraph (c) of that definition). Mrs Herta Horvat (now Mrs Ehrhardt) has been served with a notice of claim, but has not herself made any claim against the estate of the Deceased. The Defendant has attempted to serve by post a notice of claim upon Mrs Jean Horvat at her last known address in Tasmania, but has received no response from her. 42 The statement of the Deceased set forth in clause 5 of his will is admissible in evidence, pursuant to the provisions of section 32 of the Family Provision Act. 43 The Deceased did not in his will particularise the "behaviour towards me" complained of in that clause. Neither did he identify the "help financially and otherwise" which he therein asserted that he had given to the Plaintiff and her parents (who stayed with the Plaintiff and the Deceased at the 880 Elizabeth Street residence for a period almost of three months in 1995). The Plaintiff herself did not dispute the characterisation of her marriage to the Deceased as "unhappy". 44 However, it should here be recorded that during the course of the marriage the Plaintiff, who said that she gave considerable assistance to the Deceased in his panel beating business (both physical assistance whilst he was performing the actual panel beating work and also assistance in keeping the financial and documentary records of the business), shared with the Deceased his interest in horticulture and gardening. In particular, she developed a considerable interest and expertise in creating and maintaining, a garden of flowers, fruits and vegetables and especially in cultivating orchids. Photographs admitted into evidence disclose that upon the large area adjoining the house at 880 Elizabeth Street the Plaintiff has established an extremely attractive garden filled with flowering plants, shrubs, trees, creepers, and more than two hundred pots of orchids. 45 In performing the first stage in the two-stage process identified by the High Court of Australia in Singer v Berghouse (1994) 181 CLR 201 at 208-210 the Court must first consider whether, in consequence of the testamentary dispositions of the Deceased, the Plaintiff has been left without adequate provision for her proper maintenance. (See also Vigolo v Bostin (2005) 221 CLR 191, where the High Court affirmed the correctness of the foregoing test in Singer v Berghouse.) 46 It is abundantly obvious that the terms of the will of the Deceased, which give to the Plaintiff only a right of residence (and that being subject to her paying all outgoings and keeping the property in good repair) in respect to the house property which had been the matrimonial home of the Plaintiff and the Deceased for a period of fourteen years, do not give to the Plaintiff adequate provision for her proper maintenance. The testamentary provisions of the Deceased give to the Plaintiff neither security nor flexibility in her accommodation or in her lifestyle. By the terms of the will she is required to live in the Elizabeth Street residence; otherwise she has no accommodation whatsoever. 47 It was recognised by the Defendant that the testamentary provisions of the Deceased were such that she must receive an order for provision in the present proceedings. However, it was submitted on behalf of the Deceased that it was not appropriate for the Plaintiff to receive (as she claimed she should receive) the house property absolutely. The Defendant submitted that it was appropriate that the Plaintiff should acquire a residence in the nature of a townhouse. Evidence was placed before the Court concerning the availability and cost of townhouses in the Zetland area (that being the locality in which the Plaintiff had expressed a preference to continue to reside). However, the Plaintiff also expressed a desire to continue to reside in the house property. Not only did the garden which she had established at that address have very happy memories and associations for her (she having created what might be described as a haven of tranquillity and respite in the midst of an otherwise unhappy marriage and life), but also, were she to move into a townhouse, she would be deprived of her collection of beautiful orchids, which she has built up over the past sixteen years. 48 It is all very well for the Defendant to submit that the house property at 880 Elizabeth Street is not appropriate for the Plaintiff's needs and requirements. But, the Deceased himself recognised that it was appropriate that the Plaintiff should continue to reside therein. Indeed, by the very terms of his will he was forcing her to continue to reside in that property. 49 Further, since the death of the Deceased the Plaintiff has borrowed from the estate an amount of $20,000 which has been expended on urgent renovations and improvements to the residence at 880 Elizabeth Street. In addition, the Plaintiff has purchased from the estate for $3000 the Deceased's motor vehicle, although that purchase price has not yet been paid. 50 In my conclusion the Plaintiff is entitled to receive the residence at 880 Elizabeth Street, Zetland absolutely. In addition, she is entitled to receive a sum of money sufficient to enable her to effect further necessary repairs and maintenance in respect to that house property, to meet her present medical and dental needs, and to receive an additional sum which will be available to meet unexpected contingencies. It is appropriate in my conclusion that for those purposes she should receive a legacy in the sum of $200,000. 51 It will be appreciated that the competing claims of Manfred Horvat and Jurgen Horvat, the two sons of the Deceased (who are the chosen objects of the testamentary beneficence of the Deceased, but with whom the Deceased chose to have no contact throughout the entirety of their lives) can have the effect of reducing, or even extinguishing, any order for provision an entitlement to which the Plaintiff might otherwise have established. 52 If the Plaintiff receives the house property at 880 Elizabeth Street and a legacy of $200,000, there will remain in the estate the vacant land at 876 Elizabeth Street (to which a present estimated value of $475,00 is ascribed by the Defendant) and the vacant land at 6 Kuke Road, Blackheath (to which a present estimated of $185,000 is ascribed by the Defendant). The totality of the moneys standing in the Commonwealth Bank account and held on the term deposits (presently $198,600) will be exhausted in meeting the costs of the present proceedings, the Defendant's commission and the other liabilities of the estate and in going some way to meet the foregoing legacy. 53 If from the value of the vacant land at 876 Elizabeth Street ($475,000), the value of the vacant land at 6 Kuke Street, Blackheath ($185,000) and the balance of the moneys presently held by the Defendant in a account and on a term deposit ($78,600) after deduction of the foregoing costs and disbursements of the present proceedings, executor's commission and other liabilities, and also the deduction of costs and disbursements and commission on sale of real property (in an estimated amount of $50,000), there will remain about $688,600 to meet the foregoing legacy of $200,000 to the Plaintiff. After payment of that legacy, there will then remain an amount of about $488,600 to be divided equally between Manfred and Jurgen, each of whom will thus receive about $244,000. Those amounts will go a long way towards the acquisition of a house property for each of those two sons of the Deceased (thus fulfilling the desire of each expressed in his affidavit), or at least to providing a not insignificant fund to enhance his lifestyle and to provide for unexpected contingencies. 54 In those circumstances I do not consider that the competing claims of Manfred and Jurgen will have the effect of reducing, let alone extinguishing, an order for provision of the foregoing nature, to which I consider the Plaintiff has established an entitlement. 55 Accordingly, I make the following orders: 1. I order that, in lieu of the benefits given to her by the will of late John Mirku Horvat ("the Deceased"), the Plaintiff receive the house property situate at and known as 880 Elizabeth Street, Zetland absolutely, and a legacy in the sum of $200,000, such legacy not to bear interest if paid on or before 13 May, 2007, and, if not so paid, to bear interest at the rates prescribed for unpaid legacies pursuant the Wills, Probate and Administration Act 1898. 2. I order that the costs of the Plaintiff on the party and party basis and the costs of the Defendant on the indemnity basis be paid out of the estate of the Deceased. 3. The exhibits may be returned. 4. Reserve liberty to apply in respect to the date referred to in order 1 hereof. 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. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.