New South Wales Supreme Court CITATION : Tchadovitch v Tchadovitch [2009] NSWSC 1398 HEARING DATE(S) : 26 - 28 October, 30 November 2009 JUDGMENT DATE : 30 November 2009 JURISDICTION : Equity Division JUDGMENT OF : Rein J EX TEMPORE JUDGMENT DATE : 30 November 2009 In lieu of the provision made under the will of the testator, provision ought be made for the plaintiff in the sum of $1,925,000, being: (1) $600,000 for the purchase of a home; DECISION : (2) $25,000 for a new car; (3) $100,000 for contingencies; and (4) a $1,200,000 lump sum. CATCHWORDS : SUCCESSION – family provision and maintenance – failure by testator to make sufficient provision for applicant – where plaintiff widow is the only eligible person – where plaintiff, who is now 44 years of age, was married to the testator for 25 years and testator has no issue – where agreed that the provision for the plaintiff by the testator is inadequate – consideration of the relationship between the plaintiff and the testator – calculation of lump sum provision based on plaintiff's future needs – provision for the purchase of a home and car and a fund for contingencies LEGISLATION CITED : Family Provision Act 1982 CATEGORY : Principal judgment Fisher v Thomson [2006] NSWSC 527 Golosky v Golosky (New South Wales Court of Appeal, 5 October 1993, unreported), cited in Wilson v Knight [2009] NSWSC 230 Hertzberg & Anor v Hertzberg [2003] NSWCA 311 CASES CITED : Mayfield v Suzy Carolyn Lloyd-Williams [2004] NSWSC 417 Palmer v Dolman [2005] NSWCA 361 Todorovic v Waller (1981) 150 CLR 402 Walker v Walker (Supreme Court of New South Wales, 17 May 1996 per Young J (as he then was), unreported) Sylvia Tchadovitch (Plaintiff) PARTIES : George Tchadovitch (First defendant) Boris Tchadovitch (Second defendant) FILE NUMBER(S) : SC 4563/08 COUNSEL : J Needham SC, V Culkoff (Plaintiff) R Wilson, S Adair (Defendants) SOLICITORS : Steven Klinger (Plaintiff) Rosier Partners Lawyers (Defendants) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION Rein J Date of Hearing: 26 – 28 October and 30 November 2009 Date of Judgment: 30 November 2009 4563/08 Sylvia Tchadovitch v George Tchadovitch and anor JUDGMENT (EX TEMPORE) 1 REIN J: This is a claim by Sylvia Tchadovitch, the widow of the late Michael Tchadovitch ("the testator") who died on 18 August 2008. The claim is brought against the estate of the testator, pursuant to s 7 of the Family Provision Act 1982 ("the FPA"). 2 The testator left a will dated 27 May 1995 and probate was granted of the will to George and Boris Tchadovitch, the testator's brothers, who were appointed executors under the will and who are, in that capacity, the defendants in these proceedings. 3 The testator had no issue. 4 The will bequeathed a specific property in Bligh Park to the plaintiff and further left her a bequest of $75,000, being the life insurance policy moneys. The balance of the estate was left to George and Boris. 5 The plaintiff is the only 'eligible person' under the FPA. The defendants accept that the will as it stands makes inadequate provision for the plaintiff as widow, and accept that she is entitled to additional benefit from the estate. The defendants have indicated that they accept that the plaintiff should receive more of the estate than was left to her by the will, so that although by virtue of the sale of the house the subject of the bequest no real estate was left to the plaintiff, the defendants accept that the house in which the couple resided at the testator's death, and in which the plaintiff, still resides should be transferred to the plaintiff. In addition the defendants accept that the superannuation funds in the name of the testator should be paid to the plaintiff. In fact, during the time this matter has been stood over, further moneys have been paid to the plaintiff: see Exhibit E. In effect, the plaintiff has received approximately $200,000 from the estate, of which $50,000 has been received by way of interim maintenance. 6 Section 7 of the FPA provides that the court "may order that such provision be made out of the estate or notional estate, or both, of the deceased person as, in the opinion of the Court, ought, having regard to the circumstances at the time the order is made, to be made for the maintenance, education or advancement in life of the eligible person." 7 Section 9(3) provides: "(3) In determining what provision (if any) ought to be made in favour of an eligible person out of the estate or notional estate of a deceased person, the Court may take into consideration: (a) any contribution made by the eligible person, whether of a financial nature or not and whether by way of providing services of any kind or in any other manner, being a contribution directly or indirectly to: (i) the acquisition, conservation or improvement of property of the deceased person, or (ii) the welfare of the deceased person, including a contribution as a homemaker, (b) the character and conduct of the eligible person before and after the death of the deceased person, (c) circumstances existing before and after the death of the deceased person, and (d) any other matter which it considers relevant in the circumstances." 8 On the defendants' case, the estate has a net value of approximately $2.7 million. On the plaintiff's case there is a further $523,533 which should be treated as part of the estate. The $523,533 was a loan made by the testator to the Tchadovitch Kogarah Trust and on the defendants' case was forgiven by the testator sometime between one and two years before his death. The plaintiff asserts that the $523,533 should be treated as part of the estate or alternatively, should be treated as a notional asset pursuant to s 23 of the FPA and challenges the evidence upon which the defendants rely. 9 There is also an issue as to the worth of shares held by the testator in Tchadovitch Joinery Pty Ltd ("TJPL"), a business founded by the testator and later conducted in conjunction with George and Boris. The defendants claim the business and hence the shares of the testator have a nil value. 10 The principle dispute between the parties is how much provision should be made for the plaintiff out of the estate. The plaintiff claims that she should receive an amount which will enable her to receive $3,000 per month for the rest of her life (agreed by the parties to be another 44 years to age 88). She is 44 years old now. 11 The figure of $3,000 is derived by the plaintiff from her calculation that she needs $50,000 a year to live from and that she will provide $14,000 of this amount from earnings as a sales assistant. The $50,000 assessment is based on the absence of any need to pay rent or mortgage repayments. The plaintiff did admit in cross-examination that the $50,000 was a figure that had been suggested by her solicitor. 12 There was a significant dispute over what lump sum would be needed to reflect an income of $3,000 per month net of tax and some aspects of this issue were agreed, but the defendants do not accept that $3,000 per month is an appropriate figure because they say that the earnings the plaintiff can achieve have to be taken into account, and they do not accept the methodology, which was what might be called an actuarial approach. 13 There is another element in the dispute which is that the defendants' claim that the testator was not well disposed to the plaintiff and indeed was close to divorcing her. The defendants maintain that the testator was deliberate in his approach to providing very little to the plaintiff in his will. This is not advanced to deny any obligation at all to expand the bounty of the estate to the plaintiff, as I have already indicated, but rather to resist any overly generous endowment, given the court's need to respect the wishes of the testator. It has been said that the court should not make any provision more than is needed to reflect the requirements of s 7 of the FPA and having regard to the fact that the testator, has by his or her will, indicated his or her testamentary intention: see Walker v Walker (Supreme Court of New South Wales, 17 May 1996 per Young J (as he then was), unreported) and Palmer v Dolman [2005] NSWCA 361 at [112]. 14 There is evidence that the testator was very close to his two brothers and their children. Based on the testimony of the plaintiff, which in this regard was not challenged, the testator did not inform her that he was unhappy with her as his wife or that he was considering leaving her. He did appear to her to be a reserved and private man, who continually resisted the plaintiff's wish to have children. They married when the plaintiff was 17 years old and the testator 25 years old, and they had been married 25 years as at the testator's death at the age of 50. 15 A number of the friends of the plaintiff and of the testator attested to the absence of any outward signs of disharmony between the testator and the plaintiff and expressed a positive view of the relationship. George and Boris claimed that the testator had indicated to them his unhappiness in the marriage and his desire to exit from the relationship. A Mr Nickle, who gave evidence on the defendants' behalf, offered corroboration of that: see his affidavit of 29 January 2009. On the basis of the plaintiff's evidence and the evidence of those of her friends who saw the plaintiff and the testator together, and having regard to her unchallenged evidence that the testator never told her of his unhappiness, I have considerable doubt as to what his true feelings were, but whatever they were, there is no evidence that the plaintiff had done anything to deserve such a response from the testator. 16 Whatever the true state of the testator's feelings, he lived with the plaintiff in a marital relationship for 25 years and she was, on her unchallenged evidence, homemaker, cook and cleaner and did those things while the testator worked long hours in the joinery business. The plaintiff wanted children but the testator continually resisted that wish. It is also her evidence, on which she was not cross-examined and which I accept, that the testator encouraged her not to work other than for a small amount of time per week. In part, this was linked to another matter, which was that she was listed as an employee of TJPL although in fact she did not work there and there was a concern that if she worked it might imperil the tax advantages that were seen to be obtained by these arrangements. I shall return to that point subsequently. 17 The plaintiff has no family and she wishes to move to an area close to her mother and brother in Shell Harbour. The plaintiff puts her claim on the estate as a claim of $2,461,000. That is made up of the following: (1) $900,000 for the cost of a home including a parcel of land, legal fees, stamp duty and some new furniture; (2) $25,000 for a new car; (3) $100,000 fund for contingencies; and (4) a lump sum of $1,436,000 to ensure $3,000 net per month: see paragraph 55 of the plaintiff's submissions of 28 October 2009 and paragraph 87 of the plaintiff's submissions in reply. 18 Dealing now with the house, on one view the plaintiff's need for a house is met by the property in which she currently resides. Accepting that she wishes to move and that her wish is reasonable, as I think it is, a house of equal value in the area in which she wishes to reside might at first glance suffice. The plaintiff, however, says she wishes to reside in a new house so she seeks enough to buy land and build a substantial home. While she is free to choose a new house, I do not think it is necessary to meet her needs that she be given provision of that kind. There is evidence that she could buy a three-bedroom house in the area for between $450,000 and $500,000. 19 I do take into account that the plaintiff resided in a substantial home with her husband and that there were plans, although this was disputed by the defendants, for a grander home to be their final home. Taking all matters into account, I am inclined to allow a figure of $600,000 inclusive of stamp duty, legal fees and furniture for the house. In coming to this view I have had regard in particular to Exhibits 2 and 3, which are relied on by the defendants. Exhibit 3 is an advertisement for what appears to be a new house at Blackbutt, being a very substantial home of five bedrooms with three bathrooms and two car spaces at $600,000. I do not think, and it was not put, that the plaintiff needs a five-bedroom home. In fact, I would have thought a three-bedroom home would have been sufficient but it does give an indication of a substantial home available on the market. Another example at a lower figure is Exhibit 2: a house and land package in Blackbutt for $430,000. These are the asking prices, so there may be some movement on the final price. I have had regard to this evidence simply as indicators of the type of property in the Nowra area that a provision in the order of $500,000 to $550,000 (allowing therefore some amount for stamp duty and furniture and legal fees) would enable the plaintiff to obtain. 20 So far as the car is concerned, I think that $25,000 is a reasonable amount, and I would allow that. 21 So far as the contingency fund is concerned, I do not think that $100,000 is an unreasonable amount. 22 So far as the lump sum is concerned, the defendants first contended that the court should simply award a lump sum without trying to endeavour precisely to assess what the plaintiff's needs are: see the approach of Windeyer J in Fisher v Thomson [2006] NSWSC 527. Approaching the matter in that way, and taking into account the following matters: (1) that the plaintiff is a relatively young widow without any training or significant experience in the workplace, in some measure because the testator did not want her to work beyond a small amount of casual work, and noting that in her youth she did commence a hairdressing apprenticeship but did not complete it; (2) that the plaintiff has made a significant contribution to the welfare of the testator as the homemaker and that it was accepted that the testator's contribution at home was minimal; (3) that the plaintiff has helped the testator amass the wealth that he has amassed both through the acquisition of property and through the process of buying and selling homes of which she has been an integral part; (4) it has been said that a court should not be niggardly in determining what provision should be made for a widow when there are no children or competing demands on the testator, and having regard to the decision of the New South Wales Court of Appeal in Golosky v Golosky (5 October 1993, unreported), cited in Wilson v Knight [2009] NSWSC 230 at [29] per Macready AsJ: "(d) A mere right of residence will usually be an unsatisfactory method of providing for a spouse's accommodation to fulfil the foregoing normal presupposition. This is because a spouse may be compelled by sickness, age, urgent supervening necessity or otherwise, with good reason, to leave the residence. The spouse provided and will then be left without the kind of protection which is normally expected will be provided by a testator who is both wise and just. See Moore v Moore , Court of Appeal, unreported, 16 May 1984, per Hutley JA, 2; (e) Considering what is "proper" and by inference what is "improper" as a provision in a will, it is appropriate to take into account all of the circumstances of the case including such matters as the nature and quality of the relationship between the testator and the claimant; the character and conduct of the claimant; the present and reasonably anticipated future needs of the claimant; the size and nature of the estate and of any relevant dispositions which may have reduced the estate available for distribution according to the will; the nature and relative strengths of the competing claims of testamentary recognition; and any contributions of the claimant to the property or to the welfare of the deceased. See Re Fulop Deceased (1987) 8 NSWLR 679 (SC); Churton v Christian and Ors (1988) 13 NSWLR 241 (CA), 252." In Hertzberg & Anor v Hertzberg [2003] NSWCA 311 Einstein J cited passages from two decisions of Powell J: "a widow in the position of the Plaintiff ought to be put in a position where she is mistress of her own life…" [ Langtry v Campbell (Supreme Court of New South Wales, unreported, 7 March 1991)] "I take the view -- which view, I believe, is supported by authorities -- that, in a case such as this, where the marriage of a deceased and 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 the deceased owes to his widow can be no less than, to the extent which his assets permit him to achieve that result; first, to ensure that his widow be securely in her home for the rest of her life, and that if, either, that need arises, or, the whim strikes her, she have the capacity to change her home; second, that s he have available to her in an income sufficient to enable her to live in a reasonable degree of comfort, and free from any financial worries ; and third, 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 choose, and which would provide her with a hedge against any unforeseen contingency or disaster that life might bring ." [ Elliott v Elliott (Supreme Court of New South Wales, unreported 18 May 1984) at 11] 23 Apart from that reference to "harmonious" (which the defendants dispute is the situation here) the words of Powell J seem to be apt in the present circumstances. 24 In the absence of any competing need on the part of the defendants, and indeed the fact that they received the testator's share in the joinery business and his one third interest in the trust known as the Tchadovitch Kogarah Trust, which consists mainly of real estate and has an approximate worth of $4.7 million, the size of the estate even without the $523,533 debt, points to the estate having ample means to ensure that the testator's widow leads a dignified life in a home of her own. If the $523,533 debt was genuinely forgiven by the testator then the defendants have both received the benefits of that in addition to the Tchadovitch Kogarah Trust and TJPL. 25 In these circumstances, I would regard the sum of $1.2 million as a reasonable lump sum to provide for the plaintiff's maintenance, education and advancement in life over and above the provision of a home and a car, and I would allow a further $100,000 to allow for contingencies on the basis that the testator's house would have to remain in the estate. The plaintiff has already received, as I have noted, $150,000 (that is, leaving aside the $50,000 for interim maintenance) from the estate so that would need to be deducted. That amount approximates to 60% of the estate with the Averela debt of $523,533 included and approximately 75% of the estate if the Averela debt is not included. 26 Two other competing approaches were put by the parties. The plaintiff put forward actuarial evidence as to what lump sum amount would yield $3,000 a week. The defendants put forward competing actuarial evidence and they also submitted an approach applying 3% tables, being the amount fixed by the High Court in Todorovic v Waller (1981) 150 CLR 402. This was an approach adopted by White J in Barbara Mayfield v Suzy Carolyn Lloyd-Williams [2004] NSWSC 417. 27 There was agreement that if the actuarial approach was the correct approach, 4% was the appropriate figure for inflation and productivity increases and that the plaintiff's life span was a further 44 years. There was agreement on what the figure would be, depending on the approach taken to certain matters which included, firstly, the appropriate investment return rate calculated on Exhibit D between 4.5% and 6%, and also whether the plaintiff working either no days per week or three days a week (or in between) was appropriate. 28 The figure based on 3% tables was calculated at approximately $888,000. 29 $1.2 million, if invested today at 5%, would yield an annual gross income of $60,000 before tax, which I think would produce an income sufficient to enable the plaintiff to live in a reasonable degree of comfort and free from financial worries. 30 In considering whether the $1.2 million is sufficient, I have had regard to the 3% figure yielding $888,000 and also had regard to the competing actuarial views. On the question of the actuarial views, I do not think that the defendants are required to provide a sum on the basis of the most conservative approach that a widow might take to investment, and I would regard what was described as the "capital stable" approach as the most appropriate. I have had regard to those figures to consider whether the $1.2 million arrived at is an appropriate figure or is overly generous or makes insufficient provision. 31 So far as employment is concerned, I accept that the plaintiff is capable of earning and could expect to obtain income of up to three days a week as a sales assistant in a store such as Katies, where she has worked previously, but I think the plaintiff should not be expected to work more than she has done for many years, and I do not think that there should be any significant deduction from the amount that she is to receive by reason of that, although it is a factor to take into account and I have done so. 32 Accordingly, I fix the amount of the lump sum at $1.2 million but I would note that, of that, $150,000 has already been received. 33 On the view that I take, it is not perhaps strictly necessary to determine whether the $523,533 is part of the estate or not, but in my view it should be treated as property of the testator. I say that because I am not satisfied on the evidence before me that the testator ever agreed to transfer that loan debt to his brothers. Mr Zobec, was an accountant for the testator, his brother and their trusts and corporations. I found Mr Zobec's evidence to be most unconvincing and I do not think he was a truthful witness. His explanation in the witness box as to what the testator had said to him was different to his explanation in his affidavit and he had no notes of his conversation on a topic of considerable importance. 34 I have doubts as to the truthfulness of George and Boris for these reasons: (1) they both asserted in much the same terms that the plaintiff had no knowledge of the fact that the testator had placed sperm in a sperm bank and endeavoured to support this contention until confronted with clear evidence to the contrary: see T165 and T167 – T168. George even then refused to accept the truth of the objective evidence: see T207 – T208; (2) they presented evidence which if correct made the testator out to be an uncaring and insensitive person who had no affection for his wife – this was not only contrary to the evidence of the plaintiff and the witnesses she called but also contrary to the evidence of the defendants' witnesses as to the testator's character, in respects other than the testator's relationship with the plaintiff; (3) Boris' assertion in his oral evidence that the $1,000 a week he was taking out of the business was in part a loan repayment, was not one that he had made in his affidavits and appeared to be a deliberate attempt to paint a false impression of the worth of TJPL, see also paragraph 5 of his affidavit of 24 March 2009 and the comments about TJPL below; (4) Boris and George were each prepared (as was the testator) to list their wives as employees of TJPL when in fact they were not employees; and (5) Boris gave evidence that he saw the accounts for Averela and then spoke to the testator. This evidence tied in with Mr Zobec's evidence but because Mr Zobec's evidence was so patently unreliable it impugns Boris' evidence as well; and these aspects when coupled with the fact that it does not make sense for the testator to have forgiven the loan when under his will the defendants would receive his interest in any event, lead me to conclude that the loan remained an asset of the testator's on his death. Even were I to accept Boris' evidence that he did see the accounts which showed that the loan had been forgiven and asked the testator about it, I would need determine whether the loan took effect within the period of one year before the testator's death, as I am not satisfied that Boris saw the accounts at an earlier time. At all times the testator had a moral obligation to make adequate provision for the plaintiff and no moral obligation to his brothers. 35 During the case, the plaintiff has admitted that she has been shown in the records of TJPL as an employee of TJPL, and has filed tax returns which indicate that she is employed by TJPL when, in fact, she has never worked there. She has obtained tax refunds on that false basis. She has informed the court, through counsel, that she will be seeking advice from an accountant as to whether or not the Australian Taxation Office ("ATO") should be informed of this and thereafter seeking a reassessment of tax liabilities. 36 It appears from the evidence that the wives of Boris and George, that is, Ana and Vera Tchadovitch, have also been listed as employed by TJPL when they, in truth, have not been employed by it. It also appears, on the plaintiff's evidence, that TJPL has been receiving income which has not been declared to the ATO. I think a copy of these reasons should be provided to the ATO and will direct the Registrar in Equity to do so, so that that the ATO can consider whether further investigations are called for and it may be that, as a result of that, income tax may be payable by the estate on behalf of the testator which will need to be assessed. 37 That leads me to one other matter which is in relation to the question of the joinery, TJPL. I do not accept that the value of the testator's share in the company is $1. As to what it is worth, that depends upon correct and adequate information being provided and a proper assessment being made of any amounts, for example, of the type that the plaintiff described as having been received in cash. 38 Also, one would need to take into account the fact that the company has been purporting to pay income to three employees who, it would appear, are not employees of the company. There is insufficient information available to be able to make an assessment of what that business is worth, but the plaintiff's submissions draw attention to the evidence of the defendants themselves, that the business was a successful one and I do not accept that there has been any realistic assessment of its true worth. An expert was called on behalf of the defendants but I think cross-examination demonstrated that his report was based upon assumptions about earnings that are not justified. 39 I will stand the matter over for counsel to fix an agreed date for directions. If the parties cannot reach agreement by the end of this week the matter should be relisted through my associate for one morning next week to be arranged between counsel at their convenience. 40 The exhibits can be dealt with in the short minutes of order. ******** 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.