Mas v The Estate of Gallaty Mas-Gallaty v Gallaty [2013] NSWSC 274

Supreme Court New South Wales

Medium Neutral Citation: Mas v The Estate of Gallaty Mas-Gallaty v Gallaty [2013] NSWSC 274 Hearing dates: 18/03/2013 Decision date: 18 March 2013 Jurisdiction: Equity Division Before: McDougall J Decision: Deceased's de facto wife to receive the whole of the estate subject to charge in favour of their son to secure the amount of $75,000.00 (increased per inflation) payable at age 18. Catchwords: SUCCESSION - Family provision -Application by de facto wife and minor son for provision from the deceased's estate - Matter determined on its facts. Legislation Cited: Family Provision Act 1982 (NSW) Category: Procedural and other rulings Parties: Mariela Mas (Plaintiff) (2010/420822) Michael Anthony Gallaty as executor of the will of Patrick Francis Gallaty (First Defendant) Margaret Mary Dowsett as executor of the will of Patrick Francis Gallaty (Second Defendant) Patrick Daniel Mas-Gallaty by his Tutor Olga Mas (Plaintiff) (2013/69536) Michael Anthony Gallaty (Defendant) Representation: Counsel: A L Hill (Plaintiff) (2010/420822) L J Ellison SC (Defendants) M M Pringle (Plaintiff) (2013/69536) Solicitors: Butlers Will Dispute Lawyers (Plaintiff) (2010/420822) Maclarens Lawyers (Defendants) Andrew Sheeley & Associates (Plaintiff) File Number(s): 2010/420822 2013/69536

Judgment (ex tempore - revised 18 march 2013) 1HIS HONOUR: The Court is faced with the all the too common problem of seeking to resolve two justified claims for maintenance out of a wholly inadequate estate. The estate is that of the late Patrick Francis Gallaty. The claimants are his de facto wife at the time of his disappearance, Mariela Mas, and their son, Patrick Daniel Mas-Gallaty. For convenience, and I hope without being thought to be condescending or offensive, I shall refer to those three people respectively as Patrick, Mariela and Patrick junior. 2Patrick and Mariela met in 1996, when Patrick was aged about 39 and she, about 29. They met through a shared interest in the Christian religion. By mid 1998, their interest had become more personal, and they commenced to cohabit at one or other of the houses that each of them then owned. 3Patrick made his will on 16 November 2000. By that will, he left legacies of $2000 each to various brothers, sisters, nephews and nieces (numbering 16 in all). He directed that the estate provide a study Bible to each of those persons. He gave the rest of his estate to the Bible Society in Australia Inc. 4It is common ground that each of Mariela and Patrick junior is an eligible person, and that each is entitled to have provision made, for her or him as the case may be, out of Patrick's estate. As I indicated at the outset, the question is how best those two deserving claims can be accommodated. 5I should start by saying that the position taken by the defendants, the executors of Patrick's will, was that provision should be made, in effect, out of the residuary interest of the Bible Society, but that the pecuniary legacies should be maintained. There is no evidence of the circumstances in life of the pecuniary legatees. I accept, as Mr Ellison of Senior Counsel (who appeared for the executors) submitted, that the cost of obtaining affidavit evidence from 16 people would have been out of all proportion to the likely increase in the store of useful knowledge relevant to this case. 6Nonetheless, the fact is that the Court is required to consider whether it is desirable that those pecuniary legacies should be maintained when, in my view, the estate (on that basis) would be even more clearly inadequate for the claims of Mariela and Patrick junior. 7In March 2011, the solicitors for the executors wrote to the solicitors for Mariela, stating among other things, that none of the pecuniary legatees would press for payment of his or her legacy "subject to us receiving formal instructions from each of the parties". I have no reason to think that the lawyers misapprehended the position at that time. Nor have I any reason to think that they have received formal instructions to the contrary. Thus, I conclude, it is appropriate that the pecuniary legacies should go. 8The circumstances relating to the death of Patrick are sad. It appears that he suffered from some form of depressive illness. He disappeared on about 24 August 2001. The coroner found that he had died on or about 25 August 2001. The Court has granted probate of Patrick's will to the executors, on the basis of a notional date of death of 17 August 2011. 9At the time Patrick disappeared, he and Mariela had agreed that Mariela would sell her house, and that they would continue to live at Patrick's house. By then, Mariela was pregnant with Patrick junior. Patrick junior was born in January 2002. 10The estate presently consists of the house formerly owned by Patrick at Minto, and a cash sum a little in excess of $131,000. The house is now unencumbered. It is valued at between $285,000 and $330,000. It is unnecessary to express a concluded view as to the value of the house, because it is common ground that the house should be given to Mariela, on the basis that she will use it as her residence and, as long as he should live with her, the residence of Patrick junior. I should add that, since Patrick disappeared in August 2001, Mariela has paid the outgoings on the house (including under a small mortgage), and has been responsible for the maintenance and support of Patrick junior. 11There was a small number of shares held, and there were small debts. It is common ground that the net cash in the estate (after payment of some small debts) will be a little under $128,000, subject to costs. 12The executors' costs, on the indemnity basis, have been estimated at $57,000. That estimate was prepared without reference to the separate claim brought by Patrick junior. However, Mr Ellison assured me that there would be no separate or additional claims made for costs, by reference to the claim now separately brought on behalf of Patrick junior. 13Mariela's costs, on the ordinary basis, have been estimated to be $45,000. The costs of Patrick junior, on the same basis, have been estimated to be $17,500. No-one has suggested that any of the costs estimates are inflated or that, having regard to the respective bases on which they have been assessed, in any way inappropriate. 14To jump ahead for a moment: Mr Ellison submitted that it might be appropriate to consider capping the costs recoverable by Mariela and Patrick to $30,000 and $10,000 respectively. There is no doubt that the Court would have power to make such an order. However, in circumstances where there is no reason to think that the costs are in any way inappropriate, or that it was inappropriate for the proceedings to be continued to the point of hearing, and in circumstances where there had been (as far as the evidence shows) no flagging of any relevant intention to apply for a capping order, I do not propose to do so. I said "relevant intention" because it may be that the prospect was raised last week. I do not think that that should be taken into account. 15Thus, if the costs of all parties come out of the cash in the estate, there will be an amount of about $15,000 or $18,000 left over in cash. That amount is calculated on the basis I have indicated, namely, that the pecuniary legacies are to abate in their entirety. 16The only real debate between the parties (leaving aside the question of capping costs, which was raised somewhat late in the day) relates to the way in which provision should be made for Patrick junior. As I have said, it is common ground that Mariela should receive the house. 17It was also common ground that there should be a charge over the house to secure payment of a sum of money to Patrick junior when he should turn 18 (as was submitted for him and, I think, for Mariela) or 21 (as was submitted for the executors). There was also some debate as to whether he should receive, in effect, as residuary legatee, whatever cash is left in the estate after costs have been paid. 18I agree that it is appropriate for an amount to be set aside for Patrick, and for Mariela's interest in the house to be charged to secure payment of that amount. I see no reason why payment should be postponed beyond the age of 18. That is the age of legal responsibility. By then, Patrick will be deemed to be able to make up his mind as to what is in his own interests. If he and his mother, appropriately and independently advised, wished to negotiate some alternative arrangement, that is a matter for them. But if they do not, then the charge should crystallise and Patrick should receive the provision in question. 19That leaves the question of the fixing of an amount. Mr Ellison submitted that the amount should be $100,000. That submission, however, was put on the basis that the pecuniary legacies, totalling $32,000, would be maintained. Ms Pringle of counsel, for Patrick, submitted that the charge should be for $75,000, and that Patrick junior should have whatever cash is left in the estate. Mr Hill of counsel, for Mariela, submitted that the charge should be for $50,000. I do not think that Mr Hill opposed the idea that Patrick should have the residual cash, or, alternatively, that Mariela should have it so that she could apply it to Patrick's needs. Without being disrespectful, Mr Hill's position, in relation to the residual cash, depended (as one can understand) on the Court's determination of the appropriate amount to be secured by the charge. 20I do think it is appropriate for there to be some amount of cash available for the benefit of Patrick junior before he turns 18. He will have expenses, including for his education. It is desirable that Mariela have access to funds, either in her own name or held on trust for Patrick, for those or other needs. 21It is unnecessary to go in detail to Mariela's present circumstances in life. It is sufficient to say that they do not appear to be such as to justify any conclusion that, independent of what provision might be received out of the estate of Patrick, she would be able to make proper provision for the maintenance and education of Patrick junior. That is why I have concluded that Patrick junior should have whatever cash is left in the estate after payment of costs. 22I return to the amount of the charge. Mariela was questioned on that. It is clear that she understood the concept of the charge, including that it would crystallise and become payable at whatever time the Court determined - the age of 18, or the age of 21, as the case may be. For the reasons I have indicated, it should be the former. 23It is clear that Mariela understood, further, that if she could not then pay or raise the amount secured by the charge, the house would have to be sold. That would be a hardship to her, and I am satisfied that she understands it is a hardship that is a real and not merely a theoretical possibility. 24Mariela expressed the hope that she would be able to raise the sum of $50,000. She is more doubtful about her ability to raise the sum of $100,000. That uncertainty is entirely understandable. 25I have talked in terms of the amounts presently proposed. However, it was common ground (and in my view, is entirely appropriate) that whatever the base amount might be, it should be increased according to some indexing factor to represent, at the date of crystallisation, the value at the date of the Court's orders of whatever the sum is to be. 26To my mind, balancing the various factors to which I have referred, in particular, the hardship to Mariela if the house will have to be sold, against the need to ensure that Patrick is given a proper start in life, the appropriate sum to be charged is, in present day terms, $75,000. If the estate were greater, that sum would be larger. If the estate were less, it would be smaller. But we do not live in a perfect world, and perfect provision cannot be made. The question is how the competing needs are to be balanced. As I have said, I think that the balancing exercise settles at that mid-point between the two competing contentions, for the executors on the one hand and Mariela on the other. 27It is apparent that the orders sought will have the effect of defeating entirely the gift in favour of the Bible Society. The Court has been given copies of correspondence between the solicitors for the executors and the Bible Society. It is clear that the Bible Society has been given notice of the claim, and that it is likely that the Court will make an order that will have a significant impact on its residuary entitlement. The Bible Society was invited to put forward evidence as to its needs. It has not done so. In those circumstances, taking in mind what I perceive to be the paramount claims of Patrick's widow and son, the unfortunate consequence is that the gift in favour of the Bible Society should fail. 28I indicated those views at the conclusion of argument. The parties have provided a form of order which they agree will give effect to the views that I indicated (including that the costs, in the sums then indicated, should be capped at those indicated sums). No-one objected to that proposal and it seems to me important to do so, to ensure that there will be a cash sum, even though relatively small, available for Patrick's maintenance and education. [Counsel addressed.] 29Having said what I did, Mr Ellison very properly reminded me that there remained the question of extension of time for Patrick junior to bring his claim. Mr Ellison indicated, further, that the making of such an order would not be opposed. I am satisfied, on the basis of the evidence led on behalf of Patrick junior (and it is not necessary to go to that evidence) that it is appropriate to make the orders sought. 30I make the following orders: (1) Order pursuant to section 16(2) of the Family Provision Act 1982 that the time for bringing the application by Patrick Daniel Mas-Gallaty, in proceeding 2013/69536, be extended until and including the date of filing of the summons in that proceeding. (2) Orders in accordance with paragraphs 1 to 5 as amended of the form of order initialled by me and dated today's date. [Counsel addressed further.] 31I order that the exhibits be handed out. 32To the extent that it may be necessary, I order that the time for bringing the application in proceeding 2010/420822, be extended up until and including the date of filing of the summons in that proceeding.