Supreme Court New South Wales Medium Neutral Citation: Anne Marie McKenzie v Paul Lucas & Anor; Katrina Marie McKenzie v Paul Lucas & Anor [2011] NSWSC 1012 Hearing dates: 27, 28 June 2011 Decision date: 29 August 2011 Jurisdiction: Equity Division Before: Associate Justice Macready Decision: Parties to bring in short minutes. Catchwords: WILLS AND ESTATES - family provision claim - claimant maintained by deceased before death; whether - first claimant was wife of deceased but they had separated about 20 years earlier - disability of claimant - second claimant had serious health issues to take into account - financial resources and needs of claimant -discretionary considerations - forgiveness of debts owed to the estate - evidence of testamentary intention - deceased left a letter of wishes -- large estate Legislation Cited: Family Provision Act 1982 Cases Cited: Anasson v Phillips (NSSC, Young J, 4 March 1988, unreported) Bosch v Perpetual Trustee (1938) AC 463 Kleinig v Neal (1981) 2 NSWLR 532 Singer v Berghouse [1994] HCA 40 Re Scales; Pontifical Society for the Propagation of Faith v Scales [1963] Qd R 301 Scott v Scott [2009] NSWSC 567 Tchadovitch v Tchadovitch [2009] NSWSC 1398 Tchadovitch v Tchadovitch [2010] NSWCA 316 Category: Principal judgment Parties: 2008/00282048 Plaintiff - Anne Marie McKenzie Defendant 1 - Paul Lucas Defendant 2 - Roderick Dhu Cumming Defendant 3 - Susan Dewing (deceased) Defendant 4 - Slackks P/L as Trustee of the McKenzie Family Trust Defendant 5 - Brian Dewing as Executor of the Estate of Late Susan Dewing 2009/00289129 Plaintiff - Katrina Marie McKenzie Defendant 1 - Paul Lucas & Roderick Dhu Cumming as Executors of the Estate of the Late John Stanley McKenzie Defendant 2 - Susan John P/L as Trustee of the Slackks Superannuation Fund Defendant 3 - Slackks P/L as Trustee of the McKenzie Family Trust Defendant 4 - Susan Dewing (deceased) Defendant 5 - Brian Dewing as Executor of the Estate of Late Susan Dewing Representation: Counsel: 2008/00282048: Plaintiff (Anne) - Mr R McKeand SC with Mr M Hogg Defendants 3, 4, & 5 (the Dewing interests) - Mr L Ellison SC 2009/00289129: Plaintiff (Katrina) - Ms J Needham SC with Mr P Jeffriess Defendants 3, 4, & 5 (the Dewing interests) - Mr L Ellison SC Solicitors: 2008/00282048: Plaintiff (Anne) - Byles Anjos Lawyers Defendants 1 & 2 - Coleman Greig Lawyers Defendants 3, 4, & 5 (the Dewing interests) - Robert Bryan Cameron of Cameron Legal 2009/00289129: Plaintiff (Katrina) - Hansons Lawyers Defendants 1 & 2 - Coleman Greig Lawyers Defendants 3, 4 & 5 (the Dewing interests) -Robert Bryan Cameron of Cameron Legal File Number(s): 2008/00282048; 2009/00289129 Judgment 1HIS HONOUR : This is the hearing of two claims that are brought under the Family Provision Act 1982 in respect of the late John Stanley McKenzie who died on 13 June 2007 aged 69 years. Anne McKenzie, the deceased's second wife, with whom he had not lived for the last 18 years of his life, brings one claim. Katrina McKenzie, the deceased's daughter, brings another claim. I have ordered the proceedings to be heard together with the evidence in one to be evidence in the other. 2A defacto spouse, Susan Dewing, with whom he had lived for the last 18 years of his life, also survived the deceased. Three other children, Ashley, Lisa and Sarah, also survived the deceased. The last will of the deceased 3The last will of the deceased was made on 6 June 2006 and probate of that will was granted to the first and second defendants on 13 December 2007. Mr Lucas was the deceased's solicitor and Mr Cumming was a finance broker. 4Under clause 3 of the deceased's will he gave Susan Dewing the property that was his principal place of residence at his death and his shares in Slackks Pty Ltd. The property was in fact a house that Susan Dewing owned and accordingly, Susan, who survived the deceased, received his shares in Slackks Pty Ltd. 5In clause 5 of his will, the deceased gave the proceeds of his superannuation payable to his estate, net of any taxation liability arising from the payment, to the McKenzie family trust. The trustee of that trust was in fact the company, Slackks Pty Ltd. 6He gave the residue of his estate to three of his children, Ashley, Lisa and Sarah. In the events that have happened, there is no residue because the only substantial asset in the estate is the proceeds of the superannuation, which under the will went to the McKenzie Family Trust. 7At the time the deceased signed his will, he also signed a letter of wishes and a few months later wrote a letter to each of his children explaining the asset situation of himself and his partner Susan and the reasons why they had made the dispositions. I will return to these reasons later but it should be noted that in it the deceased explained why he did not leave property directly to Katrina. Shortly put, Katrina suffers from extensive medical problems and had been provided for during the lifetime of the deceased by the purchase of a residence in the name of the McKenzie Family Trust so that Katrina could use it as her home. The estate of the deceased 8The two significant assets in the estate were a deposit in the bank of approximately one million dollars and a death benefit from the Slackks Superannuation Fund, approximately $6,192,000. Other assets included some private share holdings, unit trusts and a loan made to Anne McKenzie of $238,700. The total estate for probate purposes was approximately $8,300,000. 9The debts owed by the estate totalled $2,490,000, of which the deceased's taxation debt was approximately $2,275,000. This made the net value of the estate approximately $5,808,000. 10Each of the deceased's four children and Anne McKenzie commenced proceedings under the Act. The proceedings Lisa and Sarah brought were settled by way of a lump sum payment to them inclusive of costs of $950,000. The proceedings brought by Ashley were settled by way of a lump sum payment to him inclusive of costs of $550,000. 11This case concerns the remaining claims brought by Anne McKenzie and by Katrina McKenzie. 12After payment of monies in connection with the settlements, a sum of $3,943,966.10 remained banked as at 23 June 2011. After the parties' costs and provision for the executor's commission there remains approximately $4 million in assets owned by the estate. The costs of each of the parties and the commission still to be charged are approximately as follows: Anne's costs $225,000 Katrina's costs $206,539 Estates' costs $23,735 Executor's commission $167,000 Third, Fourth and Fifth Defendant's costs (the Dewing interests) $109,010 Family history 13The deceased was born on 3 May 1938 and in 1963 he married his first wife Betty Cottral. They had two children, Ashley born in April 1964 and Lisa born in January 1966. 14The deceased and Betty McKenzie separated in 1971 and they divorced in 1975. Betty McKenzie subsequently died before the death of the deceased. 15In December 1975 the deceased married the plaintiff Anne McKenzie who had been born in June 1953. They had two children, Sarah born in March 1976 and Katrina born in September 1977. 16In 1978, a family home was purchased in Miranda and in 1983, Anne commenced casual employment, which became full time in February 1985. Anne was working in the public sector in the Department of Community Services or its predecessor and at that stage she had an opportunity to join the State Superannuation Scheme. I will refer to this in more detail but it seems that at the deceased's urging she did not join the scheme. 17In October 1989 and Anne and the deceased separated. At the same time there was a major change in the deceased's employment. He left his position as managing director of Tonka Australia and established his own company, Dorcy Australia. This was a new business that he had been planning to start for some time. At this time, around the end of 1989, the deceased commenced a defacto relationship with Susan Dewing who had previously been employed as his personal assistant at Tonka. 18Anne continued to live on the property at Miranda until 1998. However, the property was redeveloped in 1996 into three townhomes. Anne lived elsewhere during the development and returning to live in one of the townhomes when it was complete. That townhome remained in joint names of Anne and the deceased until 2001 when it was sold. Anne received the whole proceeds from the sale, which was $550,000. The deceased and Anne signed a power of attorney to the developer in relation to the other two townhomes who kept one and sold the other to pay the costs of the development. 19In 1994, Anne McKenzie commenced a relationship with Ken Swinfield, they have been together ever since and still live together as a defacto couple. 20In 1995, Katrina had attained her School Certificate through TAFE and trained in hospitality for some years. 21In 2000, Katrina was diagnosed with a bi-polar disorder and was admitted to hospital and ceased work. There followed a series of treatments, the detail of which I will deal with later. 22By 2002, the deceased had become sick and as a result, the company he had started was sold in 2006 for some $27 million. Half the proceeds went to the deceased. Apart from setting aside a million dollars each to himself and his partner, Susan, for their income, the majority of the proceeds were placed into Slackks Superannuation Fund. 23On 20 March 2006, the McKenzie Family Trust was established. On 6 June 2006 the deceased made his last will and signed a letter of wishes, which was also signed by Susan Dewing. 24As part of the arrangements to look after Katrina, the deceased organised for Slackks as Trustee for the McKenzie Family Trust to purchase, on 25 October 2006, the residential property at Woonona for Katrina. Katrina then commenced to reside in the property and the deceased and after his death, Susan Dewing, paid the expenses. 25On 8 June 2007, the deceased signed a binding nomination of beneficiaries form which directed the trustee of the "Slaccks [sic] Superannuation Fund" to pay 100 percent the deceased's death benefit to his nominated legal personal representative. 26As I have mentioned the deceased died on 13 June 2007. Susan Dewing survived him and made her last will on 25 August 2008. She died on 11 July 2010 and probate of the will was granted to her brother. Her estate was left to her brother and sister. Eligibility 27Both plaintiffs are eligible persons. 28The High Court has, in Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201 at 208-210, set out the two stage approach: "The first stage calls for a determination of whether the applicant has been left without adequate provision for his or her proper maintenance, education and advancement in life. The second stage, which only arises if that determination be made in favour of the applicant, requires the court to decide what provision ought to be made out of the deceased's estate for the applicant. The first stage has been described as the "jurisdictional question". .... .... The first question is, was the provision (if any) made for the applicant "inadequate for [his or her] proper maintenance, education and advancement in life"? The difference between "adequate" and "proper" and the interrelationship which exists between "adequate provision" and "proper maintenance" etc were explained in Bosch v Perpetual Trustee Co Ltd [1938] AC, at p 476. The determination of the first stage in the two-stage process 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 determination of the second stage, should it arise, involves similar considerations. Indeed, in the first stage of the process, the court may need to arrive at an assessment of what is the proper level of maintenance and what is adequate provision, in which event, if it becomes necessary to embark upon the second stage of the process, that assessment will largely determine the order which should be made in favour of the applicant. In saying that, we are mindful that there may be some circumstances in which a court could refuse to make an order notwithstanding that the applicant is found to have been left without adequate provision for proper maintenance. Take, for example, a case like Ellis v Leeder (1951) 82 CLR 645, where there were no assets from which an order could reasonably be made and making an order could disturb the testator's arrangements to pay creditors." 29I turn to consider the claim and the situation in life of the various people who have a claim on the bounty of the deceased. In this case there are two plaintiffs in the respective actions. The only other persons who had a claim on the bounty of the deceased are of course, Susan Dewing, the deceased's defacto partner for the last 18 years of his life and those possible beneficiaries under the McKenzie Family Trust who are, apart from the children of the deceased, the brothers and sisters of Susan Dewing and their children. None of these people have put forward their financial circumstances or relationship with the deceased for consideration by the Court, except Susan Dewing before she died. At the time of her affidavit, her assets amounted to $4,230,024. The situation in life of Katrina McKenzie 30Katrina is single, aged 33 and lives in a townhouse provided by the McKenzie Family Trust. 31The plaintiff has significant health problems. She suffers from Schizoaffective Disorder (a combination of Bipolar disorder and Schizophrenia), a Benign Pituitary Tumour, Benign Intracranial Hypertension resulting in Pappilledema in both eyes, insulin resistance, Polycystic Ovarian Syndrome, Fatty Liver Syndrome, weight gain due to medications and irregular periods. She has previously suffered from bulimia, asthma and tinnitus. 32Recently Katrina managed to reduce her weight from 154 kilograms to 134 kilograms. This is principally because she has changed from a number of medications that are known to increase weight. However at this stage the change in medication has not been completely successful because she still suffers from hallucinations and other effects of her disorder. It is plain from the reports that her severe and chronic psychiatric disorders would require lifelong treatment and her medical disorders are also severe and long term. Katrina's psychiatrist suggests that it would be extremely unlikely that she would have access to the more usual life experience such as full time paid work, marriage and children. 33Her principal disorder, Schizoaffective Disorder, which is classified as extremely severe, has been present for some 15 years and is characterised by frequent relapses. Another matter which is apparent from the psychiatric reports is that because of the nature of her psychiatric disorder and its instability, she is a vulnerable person who could be financially exploited. Therefore any money set aside for her future medical needs or support should be managed and released only to provide for her support and medical treatment. 34However, Katrina has been doing a course for some years that will give her some qualifications in counselling. The course may be completed next year. At the moment Katrina works occasionally at the Outlook Centre at Austinmere which does psychiatric rehabilitation work. Even if she obtains some qualifications I think it is fairly plain that although she may, from time to time, be able to assist in such a venture, given the nature of her illness she would not be able to support herself with paid work. 35The life expectancy of a 33 year old female that age is 55.28 years. The medical evidence of three of the psychiatrists has addressed the question of the reduction in her life expectancy. Her recent treatment in hospital, during which she lost weight, has increased her life expectancy, but only if she can maintain a health regime that includes using a personal trainer to keep her weight down. The parties are agreed that the appropriate conclusion as to the reduction in her life expectancy, as a result of those reports, is that her life expectancy would be reduced by 10 to 15 years. This reduction is reflected in the various tables to which I will refer later relating to the cost of her maintenance in the future. 36It is clear that Katrina, leaving aside the effects of her illness, had a good relationship with her father. For example, she visited him daily when he was in hospital in the month before he died and he would continually keep in touch with her. The deceased was plainly concerned for her welfare. The situation in life of Anne McKenzie 37Anne is 58 years of age and as I have mentioned, since 1994, she has been in a long term relationship with her partner Ken Swinfield. She has no dependents. For many years Anne was working in the public sector with the Department of Community Services. In recent years she ran two small women's clothing boutiques in Thirroul on the South Coast. This business has been somewhat unsuccessful for quite some years although in the recent year to 30 June 2010 she received a modest return of $19,342 from the business. Her partner Ken has recently retired as a science teacher in the public system and is supported by a weekly superannuation payment of $1,000 for the next 3 years. After that time the amount will fluctuate. So far as their assets are concerned Anne and Ken own their home at Coalcliff, which was valued in 2008 at about $1.1million. Anne currently has some superannuation of some $5,809.40 and is likely to be eligible for the pension in some eight years time. 38Unfortunately Anne has substantial debts and they are as follows: a) Westpac Business Overdraft Account (XXX594) $33,059.98 b) Westpac Mortgage Account (XXX331) $68,294.52 c) Westpac Mortgage Account (XXX750) $34,894.33 d) Westpac Mortgage Account (XXX485) $204,500.00 e) Westpac Mastercard Personal (XXX514) $4,908.14 f) Westpac Mastercard Business (XXX516) $ 16,981.72 g) Westpac Mastercard Business (XXX551) $0.00 h) St George Mastercard Personal (XX95) $19,717.67 i) IMB Mastercard - Personal (XXX017) $27,319.83 j) Woolworths Everyday Money (XX84) $7,217.94 k) David Jones - Store Card $1,504.94 l) Loan to Ken Swinfield $19,000.00 Total liabilities =SUM(ABOVE) 437,399.07 39Although secured on the jointly owned property, the debts are in fact Anne's. Probably a large part of the credit card debts relate to a problem that Anne had in recent years since the death of the deceased, where she gambled on poker machines and at times she will spend up to $7,500 per session using credit cards for that purpose. Anne has had counselling and says that now she no longer has a gambling problem. There is no other evidence indicating that the problem might continue and accordingly, I will accept that Anne has appropriately addressed her problem. 40Apart from the external liabilities to which I have referred above, Anne also owes the estate the sum of $238,700. This amount is owed because the deceased, after separation, had a continuing interest in Anne's business and supported her from time to time with loans and the provision of funds. I will deal with this aspect a little later because it is interrelated with assistance that Anne gave to the deceased immediately after their separation when the deceased was starting a new business. 41It is also clear that Anne is more likely to survive her partner and will receive some $200,000 from his superannuation. The claims of the two plaintiffs 42Katrina's claim is large one and it should be noted that although Anne advanced what she claimed were significant needs, she was prepared to defer her claim to that of her daughter Katrina. In these circumstances I will first turn to Katrina's claim to examine it and to determine what is appropriate. 43The first element of the claim relates to the accommodation for Katrina. She currently resides in the townhouse at Woonona, which is adequate for her needs. She can keep her pets there and have a small garden. Katrina wishes to remain there. Those who now control the McKenzie Family Trust, namely the brother and sister of Susan Dewing, have no objection to the transfer of that unit to a new trust which will be set up to provide for the management of funds going to Katrina. 44I have earlier referred to the evidence of the psychiatrists as to the need for Katrina's assets to be maintained in a separate trust fund. As a result of the Court's orders, the parties have investigated that aspect. The chosen preferable appointment will be the appointment of The Trust Company rather than the NSW Trustee and Guardian. This is in accordance with Katrina's wishes as they will probably be able to provide a more personal service to her. Their expenses are only marginally higher than that of the NSW Trustee and Guardian. 45Accounting evidence from Mr Katehos of Furza Crestani Services was tendered and the most recent being contained in Exhibit P - a report of 27 June 2011. This report takes into account the costs for financial management that the Trust Company will charge. The relevant results appear in this report having regard to both a 10 year reduction and a 15 year reduction in the normal life expectancy of Katrina. This report also gives different figures depending upon whether or not the pharmaceutical safety net and health insurance rebate is included or will be excluded in the future as a result of changes in the Commonwealth legislation. 46In respect of the 10 year reduction in normal life expectancy, the capital sum necessary to support Katrina including the pharmaceutical safety net and health insurance rebate is $1,932,988. Excluding the rebate the figure is $2,096,368. 47For a 15 year reduction in normal life expectancy the figures are respectively $1,714,093 and $1,853,356. 48In addition, Katrina is also seeking a lump sum to cover extraordinary expenses of some $350,000 and asks for the forgiveness of any debt that she might owe the estate as a result of the estate paying expenses in respect of her unit since the date of death. 49The calculations detail her fortnightly costs and also provide for motor vehicle running costs, insurance and the replacement of her vehicle every 5 years. Some of the weekly costs were subject to criticism in cross-examination particularly the use of cigarettes and a personal trainer. 50I turn to a consideration of Anne's claim. Anne's claim has a threshold problem with respect to the appropriateness of that claim. This arises because of the substantial benefits that the deceased provided for Anne at the time of their separation. In Scott v Scott [2009] NSWSC 567, Ward J considered the authorities on the question of whether a surviving spouse in a Family Provision application has a moral claim in relation to both settled and non settled property disputes prior to the death of a party. In paragraph [130] - [142] her Honour said: "[130] In Dijkhuijs (formerly Coney) v Barclay (1988) 13 NSWLR 639, Kirby P noted the public policy underlying the finality of settlements of property disputes and agreed with what had been said by Young J (as his Honour then was) in O'Shaughnessy v Mantle (1986) 7 NSWLR 142 (at 149) that in most cases the achievement of a final property settlement in the Family Court would be seen by the parties, in current social circumstances, as terminating any moral claim of a former spouse to provision in the will of the other. Kirby P noted (at 652) nevertheless that: [P]ublic policy, important though it is, must adapt itself to the new provisions of the Act, with its reforming inclusion of a specific entitlement of a former spouse to claim. That provision contemplates there will be cases where such a claim will succeed, notwithstanding the public policy [of finality of property settlement]. [131] Similarly, in Dijkhuijs' case, Mahoney JA said that it was inherent in the Family Provision legislation that, special cases apart, an order was only to be made if the deceased had defaulted in the performance of a duty which he owed to the particular plaintiff. His Honour said (at 657): That does not mean that, if the plaintiff establishes a financial need within the section and if on taking into account the consideration referred to in s 9(2) (the discretionary considerations) there be nothing to the contrary, an order must be made. The statute assumes that the deceased, in what he has done during his life and by his will, has failed to discharge a duty which he owed to the plaintiff (the moral duty). Thus, a plaintiff may be a former spouse who, on dissolution of the marriage, received what on any view she was entitled to have and there may have been no further relationship between them so that none of the factors in s 9(3)(a) to s 9(3)(c), are of relevance. But, at the deceased's death, she may have a financial need. In such circumstances, the fact that the plaintiff has established that she was a former spouse and has a financial need would not, as such, entitle her to an order. It would be necessary for her to establish that, in some way or because of circumstances within s 9(3)(d), the deceased had a duty to her which involved that he should have provided for her financial need (my emphasis). [132] In Smith v Smith [1986] HCA 36; (1986) 161 CLR 217, however, the High Court pointed out that there was a very real difference between settling financial affairs between living persons under the Family Law Act and the position of persons entitled to make an application under a statute such as the Family Provision Act. [133] Bryson J in Mulcahy v Weldon [2001] NSWSC 474 noted (at [22]), "According to general community standards a former spouse who has been accorded all rights under a property settlement and does not have any continuing entitlement to maintenance, adjudicated or not, is not generally regarded as a natural object of testamentary recognition. Although such testamentary recognition does occur, it is, in my understanding, regarded as altogether exceptional and remarkable when it occurs". [134] In Ernst v Mowbray [2004] NSWSC 1140, Young CJ in Eq (as his Honour then was) considered what he had said in O'Shaughnessy v Mantle in relation to the effect of the Family Law Act on an application by a divorced spouse. His Honour noted (at [32]) that the ex-spouse might obtain an order under "limited circumstances" under the Family Provision Act such as where the parties had not finally settled all their property dealings at the time of the divorce or where there was continued financial dependency after the divorce. [135] Here, no final property settlement orders were made, nor was there a binding financial agreement for the purposes of the Family Law Act . The parties were not divorced. Nevertheless, accepting that financial need of some degree is established by Mrs Scott, the question still remains what would be regarded as adequate provision for her in all the circumstances. Those circumstances must take into account both the fact of her separation from the deceased and the fact that, as between themselves, a division of their assets appears to have already been effected (albeit predicated on a 50:50 basis for all assets, as opposed to the 75:25 split required (in the absence of particular agreement) for the Long Jetty property). [136] What then is the position of a spouse, separated from her husband, in circumstances where an informal division of assets has taken place and where it would seem the marital relationship is to all intents and purposes at an end? [137] Considering the above authorities, it seems to me that, while Mrs Scott remained the deceased's wife even after their separation, and hence was a person for whom the community might expect the deceased to have made some provision for her continued support and maintenance in life (in recognition of the long marriage and her contribution to the building up of their joint assets and to his welfare in life), the community might also consider that a testator in the deceased's position had done "the right thing" by effecting an amicable division of their assets prior to his death and had limited, if any, further moral duty to support his widow. [138] In Kalmar v Kalmar [2006] NSWSC 437, White J noted (at [50]) that the bond of matrimony, prima facie, gave rise to a testamentary obligation, citing Re Clissold (deceased) [1970] 2 NSWR 619 at 621, and that it could not be assumed that that obligation would come to an end on the parties separating without their being divorced at least where there had been no disentitling conduct by the claimant (again citing Re Clissold , as well as Re Mercer deceased [1977] 1 NZLR 469 at 472-473 which had been cited with approval in Palmer v Dolman [2004] NSWCA 361 at [118]). [139] In Armstrong v Sloan [2002] VSC 229, Harper J in the Supreme Court of Victoria, noted (at [43]) that: [A]rrangements made by a husband during his lifetime which on his death leave his widow in comfortable financial circumstances would ordinarily discharge his moral duty to make in his will adequate provision for her proper maintenance and support. That would (again, generally speaking) only not be so if, although comfortable, her circumstances did not allow her as a widow to maintain a standard of living comparable to that which she enjoyed as a wife. [140] His Honour noted that a settlement reached under the Family Law Act does not necessarily preclude a claim by a former spouse for family provision but that in those circumstances different considerations come into play. [141] In Armstrong v Sloan , Harper J considered that Mrs Armstrong's position was as close to that of a divorcee as could be in the absence of a divorce. There, his Honour considered that Mrs Armstrong was not left by the deceased without adequate provision for her proper maintenance and support but that, if she was, he would have exercised his discretion against the claim for further provision stating (at [56]) that "by giving effect to the settlement, Mr Anderson discharged his moral duty to his wife, and thereby removed the "legislative justification to abridge freedom of testation": Grey v Harrison [1997] 2 VR 359 at 365 per Callaway JA. [142] On balance, I consider that Mrs Scott's position comes very close to that of Mrs Armstrong in that the marital bond had come to an end and the deceased had taken steps to effect what seems to have been an amicable and relatively fair (though not precise, having regarding to their unequal entitlements to the Long Jetty property) division of all of their assets so as to terminate any moral claim the deceased might have had to the spouse from whom he was separated (and with a degree of finality appreciated by both parties from at least six months before his death). Nevertheless, I accept that the deceased himself appeared to recognise that there was scope for Mrs Scott to regard their financial dealings as not finally resolved and I am prepared to accept that from a community perspective there was some moral claim remaining, given the length of this marriage and the subsistence of an amicable relationship between the couple for some period after their separation." 51At the time of separation a number of events occurred, which included the fact that the deceased was fired from his position at Tonka. In that role he had been earning between $150,000 and $200,000 per year with benefits. This meant that the deceased could proceed with the establishment of his own business, which was something he had been planning for some years. To obtain funds to set up a new business he needed to mortgage the matrimonial home. Although this was somewhat of a risk for Anne she agreed to it and from shortly after separation, the house was subject to a mortgage to support the deceased setting up his new business. 52By 1995, the deceased had repaid the whole of that mortgage and it was discharged. Thereafter there was a development at the property to which I have earlier referred. The property was turned into three townhouses, one of which was retained by Anne. Mr Swinfield started living at the residence from about 1994. From 1998 to 2001, the property was rented out fairly continuously while Anne and Mr Swinfield lived elsewhere. Anne retained the rent from the property and the benefit of the tax deductions gained in relation to the expenses incurred by the rental property. In 2001, she sold the property to its tenant for $550,000 and Anne received the whole of this sum. That enabled her to pay off the mortgage on her property at Thirroul and to start out in the new house in Coalcliff, which was owned equally by her and Mr Swinfield, debt free. 53There does not seem to be any evidence of any other assets held by the deceased and Anne at that stage and it is very much a situation where Anne was completely given the parties' capital assets, apart from the new business which the deceased started up. In addition the deceased paid maintenance and a number of matters such as Anne's private health insurance. 54Another matter, which has to be considered of course, is that the deceased also loaned Anne funds to enable her business to continue. It was plain from the terms of communication between them that in the later years they had a good relationship in the sense of the contact between them and the advice given by the deceased to Anne about the business. 55Notwithstanding this, it is clear that over the 18 years of separation there were no domestic services provided by Anne to the deceased. Susan Dewing took on those tasks. Anne was not involved in his care, neither were there any frequent visits. Over that long period Anne saw the deceased on only two family occasions. 56There is another factor also to be considered in this question, which relates to the period when Anne was in a position in 1985 to take up an option to join the State Superannuation Scheme, which was offered by her employer, the State Government. As a result of discussions between Anne and the deceased, Anne did not take up that option because the deceased was of a view that at that time they did not need super, what they really needed was cash to pay back their debts. 57Evidence was given by Mr Driver, an accountant, who was familiar with superannuation schemes and about the nature of the public scheme that Anne could have joined at that stage. He calculated what would have been available if Anne had retired at age 55 years and referred to a number of different scenarios. 58The first scenario was a full defined benefit pension received fortnightly plus a basic benefit. That gave a fortnightly pension of $958.65 and a basic lump sum benefit of $21,504. The value of that was $767,007.75. 59Next scenario was a commutation of the full defined benefit pension plus a basic benefit at a value of $285 per $1 of the pension. This would have given a lump sum of $273,215.25 plus the basic benefit lump sum of $21,504. The total benefit that could have been received under this scenario was $294,719.25 60The third alternative offered was a commutation of half of the defined benefit pension and retention of half the pension plus the basic benefit. This would have given her a half pension of $479.30 per fortnight and a commutation value of $136,607.62. The total benefit that could have been received under this scenario was $530,867.38 being an initial lump sum of $158,111.62 at the age of 55 and the balance as a pension over an estimated period of 29.9 years. 61This decision not to join the superannuation fund no doubt left Anne in a worse financial position when she finally left her employment in 2008. However it is just one of the many decisions that people make in the course of a marriage. Both accepted her decision and it seems inappropriate to consider it as a form of penalty somehow entitling one to a claim on the estate of the deceased. Further, Anne could have commenced making contributions to her super after she and the deceased separated, if she had wanted to do so. 62Anne has raised a number of matters as to why she says she has been left without adequate and proper provision for her maintenance, education and advancement in life. She would like a sufficient sum that would include a discharge of the debt due to the estate of $234,700, funds to enable her to discharge her liabilities and start afresh and some funds for provision by way of superannuation for the future. In total she seeks provision for an amount of $1,000,000 out of the estate. 63In relation to the loan, although Anne signed a document acknowledging receipt of the funds it is notable that the deceased never required repayment and may never have wanted the funds back, particularly having regard to his good fortune with respect to the sale of his business in the later stages of his life. 64In an email that the deceased sent to his daughters on 8 September 2006, in which he discusses his duty to provide for his family and expresses his wishes as to how his estate will be dealt with after his death. The deceased stated: "The bulk of my Estate has been generated from the Dorcy Group of companies I founded some 16 years ago. What should be said here is that my Partner, Susan Dewing, was a co founder and together we worked very hard an sacrificed many things to build a successful organisation embracing a trading company and some industrial property. It is important to understand and recognise that Sue has made an equal contribution to me in whatever business success we have achieved. .... ...as our current assets are solely the result of many years hard yakka (as opposed to - say - a Lotto win), I believe Sue and I are entitled to live comfortably and, after my passing, as she has no children of her own, it is important she has the funds to ensure she is more than comfortable and has the facilities to be taken care of in her twilight years." 65In summary, by 1995, the deceased had repaid the mortgage on the property and the property was given to Anne. By 2001, the property was sold and Anne kept the proceeds. This was clearly an informal property settlement between Anne and the deceased. However, Anne and the deceased never divorced. After separation, the deceased paid any bills Anne gave him in relation to maintenance and the children's expenses. Also the deceased would assist Anne financially from time to time and he gave her business advice. 66This informal property settlement had by 1995 discharged the deceased's duty to provide for Anne as a result of their married life together. After separation the relationship was one where the deceased recognised that he had some obligation to assist Anne. There was continuing contact of a limited kind. This provides a separate basis for a somewhat limited duty to provide for Anne. Taking into consideration the size of the estate and the deceased's decision to advance Anne funds, I think it is appropriate to give Anne the benefit of forgiveness for the $238,700 amount owing to the estate. In relation to Anne's other claims, the provision the deceased made for Anne during his lifetime appears to have been adequate and the deceased's remaining duty would not extend to these other claims. 67In respect of the provision for Katrina, I have mentioned that the Trust Company is to manage her fund. A suggested trust deed ("Declaration of Trust") has been handed up and which for the purpose of identification I will mark as Exhibit Q. This trust deed is obviously meant to take account of the management of funds for some motor vehicle accident recipient of an award. 68The things that need to be addressed in the trust deed are as follows: 1. In the definition of general beneficiary (b)(3) there shall be a deletion of "brother, sister, grandparent". 2. The "ineligible person" provision should be removed from the Deed. 3. The "determination date" should simply be the date of death of the principal beneficiary with no other alternative to terminate. 69The terms of the trust which would be appropriately included are: (a) power to advance capital as well as income for Katrina's maintenance and advancement in life; (b) power to provide for Katrina's education; (c) power to change her residence as appropriate. 70The defendant has submitted that any provision left over on Katrina's death should revert to the estate. The plaintiff has submitted that this is inappropriate as it would cause a tension between the Katrina as a life tenant and the estate as remainder beneficiary and it would inhibit the trustee from performing its duty to provide for Katrina's need by overlaying a duty to retain capital for the remainder beneficiaries. I am not sure that this would be the necessary implication of such an order, but in any event the figures have been calculated with no capital return at the end of Katrina's life and I think it is more appropriate if the provision is be held in trust for her without a remainder going to the estate on her death. 71Cases involving large estates are different to those where the estate is modest. In such cases the Court tends to take a broader view of what might be a need: Re Scales; Pontifical Society for the Propagation of Faith v Scales [1963] Qd R 301; Bosch v Perpetual Trustee (1938) AC 463 at 478; Kleinig v Neal (1981) 2 NSWLR 532 at pp 540 -541; Anasson v Phillips (NSW Supreme Court, Young J, 4 March 1988, unreported). 72Tchadovitch v Tchadovitch was a case in which the estate had a net value of about $2.7 million. The plaintiff claimed an amount of $2,461,000, which included a lump sum of $1,436,000 to ensure that she should receive an amount of $3,000 net per month for the rest of her life and a $100,000 fund for contingencies. Rein J considered that $1000,000 for contingencies was reasonable, as was a lump sum of $1.2 million to provide for the plaintiff's maintenance, education and advancement in life over and above the provision of a home and a car. The parties put forward competing actuarial evidence and his Honour discussed the different approaches to calculate whether an amount awarded by the Court is appropriate or overly generous or makes insufficient provision. Rein J made the following findings at [30] to [32]: "[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." 73In Tchadovitch v Tchadovitch [ 2010] NSWCA 316 the decision was appealed. T he appellants submitted that Justice Rein had erred in including the amount of $1.2m in the award and that his Honour should have used 3 percent discount tables to calculate the lump sum. Campbell JA considered the issue and disagreed, pointing out (at [53]) that the principle behind an award under the Family Provision Act is to provide for the maintenance, education and advancement in life of an eligible person, which is different from an award under the common law that takes into account the discount tables, because in those latter matters the court's task is to assess damages. Therefore, his Honour pointed out, the methods of calculation are not necessarily the same. 74Campbell JA stated (at [54]) that Family Provision Act claims concerning a claimant who is to be provided for for the rest of their life face an additional complexity that arises from the uncertainty of how long that person will live. His Honour stated that in an estate that is large enough to satisfy all the claims upon it, the court should take into consideration the fact that a claimant may live longer that the statistical average for their age. His Honour then stated: "[55] Depending on the evidence and submissions made in a particular case, it can be part of the task for a judge fixing the quantum of a Family Provision Act award to make a judgment about whether, and if so to what extent, any discount table is of assistance in assessing the proper provision for the eligible person. At least until such time as a court has the benefit of argument that seeks to narrow the range of discount tables that might be used for that purpose, there is no reason of principle why the 3% tables should be treated as the bottom of the range of discount tables that are considered. In Todorovic , in the different economic conditions that then prevailed, Stephen and Murphy JJ were of the view that a nil discount should be applied in calculations of common law damages, and Mason J would have preferred to use the 2% tables, but agreed with use of the 3% tables for the sake of comity. Likewise it is part of the judge's task to decide (if asked) whether, and if so to what extent, any actuarial calculations that are tailored to the individual circumstances of that claimant are helpful. In my view, there is no principle requiring that the 3% discount table always be used. [56] There is a world of difference between it perhaps sometimes being appropriate to calculate a lump sum for the purposes of the Family Provision Act by using the 3% discount tables, and it always being required as a matter of principle. Just as the nature and quantum of the provision that is made for an applicant under the Family Provision Act involves an exercise of judicial discretion, that is exercised in the light of the facts of the particular case and the evidence and submissions in the particular case, so the choice of the appropriate methodology to use in arriving at the quantum is a matter of judicial discretion, that is likewise exercised in the light of the facts of the particular case and the evidence and submissions in the particular case. In my view the Appellant's submission that adoption of the 3% discount tables as a common approach "will not affect or diminish the exercise of a judge's discretion when determining what provision is, in any case, adequate for the proper maintenance of an applicant" is wrong. In the present case it was within the scope of the discretion open to him for the judge to have regard (as he did) to the 3% tables, as one factor taken into account, but also within the scope of his discretion to award a sum different to that obtained from the use of the 3% tables. [57] There is another reason, more closely tied to the circumstances of the present case, why the judge made no error in failing to award the sum obtained from the 3% discount tables. The expert evidence in the present case proceeded on a different basis to that which Todorovic had decided was appropriate for the purpose of assessing lump sums in personal injuries litigation. In the present case, the experts had made assumptions about what the rate of increase of wages and prices would be, (matters said by two judges in Todorovic at 420 to be " unverifiable surmise and inadmissible ") and had made calculations of the effect of income tax that were specific to the position of the Respondent. Those calculations were admitted without objection. In those circumstances, fundamental reasons why the majority in Todorovic had favoured the use of the 3% tables were absent." 75With those considerations in mind, in the circumstances of this case, particularly with regard to Katrina's health, it seems appropriate to use the life expectancy tables and Furzer Crestani Services Reports as a guide to what the provision should be made for Kristina. It was submitted that consideration should also be given to the fact that any award greater than about $181,750 will affect Katrina's pension and any award over $668,000 will disentitle her to a pension. In the circumstances of this case this is not a relevant consideration. The defendant also submitted that an appropriate lump sum would be $1,000,000. 76Given the recent more positive outlook in terms of Katrina's health and the lack of other substantial competing claims, it seems appropriate to award a figure of $2,032,988 to Katrina to be managed by the Trust Company. This figure includes $100,000 for emergencies and extraordinary expenses. There should also be forgiveness of any moneys paid by the estate on Katrina's behalf for housing and other costs after the deceased's death. 77Katrina has submitted that she should not have to rely on the fourth and fifth defendants for the continuation of the accommodation provided for her by her father. It is suggested that the accommodation is suitable and she wishes to remain there, thus proper provision in this case should include transfer the title in the townhouse to the trustee to be held for Katrina. I understand that there is no objection to this course. I note that in the deceased's letter of wishes, he expressed the view that the property should be part of the estate of Katrina's estate to be dealt with according to her will. 78Another matter to consider is in relation to costs, which was discussed by Bryson J in this matter on 15 September 2010. His Honour considered whether the 'Dewing interests' should reimburse themselves out of their own assets for their costs. His Honour stated: "[6] Joinder of beneficiaries and their participation in the hearing of family provision proceedings is extremely unusual but in my experience it is not unknown. In this case the interests which the applicants seek to protect are very large and in my judgment they should be permitted to join in the hearing if they wish to do so. However, they should only be joined in the hearing on terms which withhold from them any prospect of recovering costs in proceedings; I propose to act on the view that their interests are protected by the joinder of the executors, and if they wish for and obtain additional protection it is for them to pay for it." 79Having regard to this order I will make no order as to costs in relation to the fourth and fifth defendants. Given their control of the McKenzie Family Trust they will have funds from which their costs can be paid. Orders 80The orders I propose to make are: 1. Katrina McKenzie is to receive a legacy of $2,032,988 out of the estate of the deceased. This fund is to be managed by the Trust Company pursuant to the terms of the trust deed as amended by this judgment, subject to any application for a different order in relation to the drafting of the trust deed. 2. The McKenzie Family Trust is to transfer the title to Katrina's home to Katrina McKenzie for management by the Trust Company. 3. All debts owing to the estate by Katrina McKenzie and Anne McKenzie are to be forgiven. 4. The plaintiffs' costs are to be paid on the ordinary basis and the first and second defendants' costs are to be paid or retained out of the estate of the deceased. 5. Interest is to run on the legacy at the rate provided in the Probate and Administration Act 1898 from three months after the date of these orders. ********** 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. Decision last updated: 02 September 2011