Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Neale v Neale [2015] NSWCA 206 Hearing dates: 11 June 2015 Decision date: 17 July 2015 Before: Basten JA at [1]; Macfarlan JA at [41]; Gleeson JA at [42] Decision: (1) Dismiss the appeal. (2) Order that the appellant pay the respondents' costs in this court. Catchwords: SUCCESSION – family provision – application by adult children of earlier marriage – deceased left entirety of his estate to his widow – no provision made for his children from first marriage – previously the children forwent part of their grandmother's estate in favour of deceased – deceased promised to make provision for them – whether court entitled to take into account the children's expectation resulting from the representation – whether foregoing part of the grandmother's estate a discharge of moral obligation to deceased and thus a reason not to make – Succession Act 2006 (NSW), s 60(2)(a) and (b) SUCCESSION – family provision – adult children with demonstrated financial needs – widow with competing claims to the estate – whether trial judge properly balanced competing claims – whether judge erred in his discretion finding the widow was financially "relatively secure" Legislation Cited: Civil Procedure Act 2005 (NSW), ss 60, 98 Succession Act 2006 (NSW), ss 58, 60; Pt 3.2 Cases Cited: Luciano v Rosenblum (1985) 2 NSWLR 65 Category: Principal judgment Parties: Sandra Cheryl Neale (Appellant) Craig Russell Neale (First Respondent) Michelle-Maree Best (Second Respondent) Representation: Counsel: L Ellison SC/A M Hawkins (Appellant) S A Wells (Respondents) Solicitors: Miller Noyce (Appellant Caldwell & O'Brien (Respondents) File Number(s): 2014/240357 Decision under appeal Court or tribunal: Supreme Court Citation: Neale v Neale [2014] NSWSC 965 Date of Decision: 16 July 2014 Before: Lindsay J File Number(s): 2012/364929 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Judgment 1. BASTEN JA: The deceased, John Anthony Neale, died on 25 November 2011, leaving the whole of his estate to his widow, Sandra Cheryl Neale. The inventory of property annexed to the application for probate estimated the value of the estate at $1.7 million. After the land and business half owned by the deceased and half owned by his widow, the appellant, had been sold, the net value was a figure between $1.21 million and $1.45 million. 2. The deceased had three children by an earlier marriage. Two of the three children sought provision from the estate under Part 3.2 of the Succession Act 2006 (NSW). [1] The claimants commenced proceedings in the Equity Division by summons filed on 23 November 2012. Those proceedings were determined by a judgment of Lindsay J delivered on 16 July 2014. [2] The Court awarded legacies to be paid from the notional estate of the deceased (his assets having been disposed of, although with notice of the claims) in an amount of $100,000 for each claimant. His widow challenged those orders. In addition to seeking to have the legacies set aside, she also sought orders that the respondents pay her costs of the appeal and in the court below. As will be noted shortly, the amounts of the costs involved are said to exceed the combined amounts of the legacies. 3. The claimants were 44 and 43 years of age respectively at the time of the trial [3] and each had young children. Each has a child or children with medical conditions and accompanying physical disabilities afflicting the children and causing expense and distress for the families. [4] The judge considered that it was not unreasonable for each to look to his or her father's estate for assistance, [5] a finding that was not challenged on appeal. The judge concluded that their claims fell ultimately to be measured against the competing needs of the appellant. [6] The appeal turned on five matters taken into account by the trial judge, together with a general ground alleging that the exercise of his discretion miscarried. Circumstances of claimants 1. It is convenient to address first grounds 3 and 4, each of which dealt with circumstances relating to the claimants which the judge found favoured an order for provision. The first circumstance arose out of an earlier family dispute, with respect to a will left by the deceased's mother. His mother, Muriel May Tofft, died in September 2005. [7] She left an estate valued at $1.2 million from which she provided for legacies of $100,000 each to her sons, being the deceased and his brother, Peter Neale. The balance of the estate was divided between her four grandchildren, including the present claimants. The deceased was dissatisfied with his share of his mother's estate, partly, it appears, because of his own declining health and the anticipated cost of ongoing care. [8] A dispute arose, with suggestions that there might be a challenge to the validity of Mrs Tofft's will or possibly an application made for a family provision order. On 26 February 2007 the family entered a "deed of arrangement" by which the grandchildren (including the present claimants) forewent parts of their entitlements in favour of the deceased. The judge described the outcome in the following terms: "48. First, all members of the extended Neale family entered a 'deed of arrangement' dated 26 February 2007 in which beneficial entitlements to Mrs Tofft's estate were adjusted. 49. Secondly, predicated on that foundation, Peter (as the executor named in the will dated 30 August 2004) obtained a grant of probate of the will on 5 March 2007. 50. Thirdly, the estate was administered on the basis of the deed so that Peter and the deceased obtained a greater share of the estate, largely at the expense of the children of the deceased's first marriage, than they would have obtained under the terms of the will. 51. Fourthly, the deceased secured his increased share of the estate, in part, via a representation to the children of his first marriage (including, importantly, the current plaintiffs) that he would make provision for them in his own will. 52. A point made by the defendant, in this context, is that the deed of arrangement favoured Peter (with 35 per cent of [Mrs Tofft's] net estate) over the deceased (who obtained 30 per cent of the net estate). However, the present focus for attention is not so much any benefit conferred on Peter (or speculation about the possibility that some of that benefit might flow through to the plaintiffs as his stepchildren) as on the benefit conferred by the plaintiffs, on their father, with an expectation that he would, in time, favour them with participation in his estate. 53. Under the deed of arrangement the plaintiffs effectively gave up, in favour of the deceased, about $112,600. Even if (as the defendant contends) that money was largely, if not wholly, absorbed in the treatment of, and care given to, the deceased in the last years of his life, the events surrounding succession to [Mrs Tofft's] estate did give rise – not unreasonably – to an expectation on the part of the plaintiffs that they would receive something from their father's estate." 1. The appellant challenged the finding that there was "a representation" by the deceased to his children, to the effect that he would "make provision for them in his own will." [9] The appellant also challenged the finding that the act of the children in giving up an amount of about $112,600 in favour of the deceased not unreasonably gave rise to "an expectation" on the part of the claimants that they would "receive something from their father's estate." As to the finding of a representation, the notice of appeal stated that "the evidence did not support such a conclusion." [10] With respect to the "not unreasonable expectation", the notice of appeal stated that there was a miscarriage in the judge's discretion in placing reliance on that finding. [11] 2. As counsel for the appellant recognised, the representation and the expectation were connected. In broad terms, the expectation arose from the representation together with the accommodation provided by the claimants in foregoing part of their entitlement. Little was said by way of submission in support of ground 3, alleging a lack of evidence upon which to found the representation. As the respondents contended, there was significant evidence to support the finding with no direct challenge in cross-examination. 3. Thus, the evidence of the first respondent, Craig Neale, in his first affidavit, was to the following effect. Having referred to his grandmother's will being contested by the deceased and his then wife, the appellant, over some two years, he stated: [12] "My sister, Michelle Best, my brother, Kristian Neale, and I sacrificed a large proportion of our inheritance in the end to keep them happy and resolve the family dispute. During a meeting (during the period of the Will being contested) at which all the grandchildren and children of Muriel Tofft (including the deceased) were present regarding the estate, we were told by the defendant, 'We had to wait our turn!' and that 'if we gave up our portion of our inheritance we would receive it back when the deceased died'. We were told that the defendant needed that money to accommodate the deceased in a nursing home." 1. The first respondent expanded upon that evidence in a second affidavit, referring to a conversation he had with the deceased in 1996 when the deceased had said words to the effect: "Don't worry, down the track, if something ever happens to me, you and your sister will be looked after later in life." [13] 1. In further explanation of the conversation at the meeting referred to in his first affidavit and said to have occurred in early 2006, he recalled the appellant saying words to the effect: "Nana wanted money to go to the grandkids but it's not your turn yet: you will end up with it after John has had it." He stated that the remark had been made in the presence of the deceased who did not do or say anything to contradict it. [14] 2. Although the cross-examination of Craig Neale touched on matters to do with Mrs Tofft's will and the meeting in 2006, and also suggested the possibility of collaboration between the claimants in preparing their affidavits, there was no direct challenge to this evidence of a representation. [15] 3. The second respondent, Michelle-Maree Best, referred only obliquely to representations in her first affidavit, in the context of outlining her relationship with the deceased. She stated: [16] "Things worsened after my grandmother's death over the contents of her Will and the distribution of her estate. There were several family discussions that usually ended in arguments with the defendant because we wanted my grandmother's wishes followed but they were unhappy with the contents of the Will. At the time the deceased and the defendant said that it wasn't our turn and that our turn would come when the deceased passed away." 1. In a second affidavit, Ms Best gave further detail of the meeting which was said to have taken place in early 2006, stating: [17] "We had a discussion to the following effect: Deceased: 'I wanted to see you all together as I want to discuss things with you and raise some issues with you. In my view, Peter and I should receive your grandmother's estate between us. It should go to her children and then to you grandchildren'. I said: 'But that wasn't what Nana wanted. I spent a lot of time with her especially over the last few months before she died and I know what she wanted. I just want her wishes followed.' Deceased: 'I really need this money. I have medical expenses and a loan. I will ultimately need to go into a nursing home.' The defendant then came into the room and the discussion became heated. She said words to the following effect: Sandra: 'It's not your turn. It's John's turn. You'll have to wait until he goes. It's not your turn'." 1. As with the first respondent, the cross-examination did not touch on the representation. Ms Best was asked questions about her knowledge that there was a question raised as to her grandmother's testamentary capacity and in relation to her father's disappointment in his share of the will. [18] She conceded those points. 2. The absence of cross-examination on the representation reflected the absence of any evidence given by the appellant contradicting that set out above. Ground 3 was entirely without merit, as was suggested to counsel in the course of oral submissions. Although it was not formally abandoned, it should have been. 3. The thrust of ground 4 may be encapsulated in two propositions, namely: (a) it was inappropriate for the judge to place any reliance upon a representation given and any expectation created, by statements made in the course of negotiations to settle a dispute, and (b) the additional funds obtained by the deceased as a result of the settlement were entirely expended on the costs for care incurred by him as he slipped into dementia. 1. The first proposition, stated in general terms, is unsupportable. It was refined in the course of oral submissions as an assertion that in order to place any weight on an expectation arising from the course of the negotiations, the judge would need to consider the strength of the potential claims concerning the validity of Mrs Tofft's will and possible family provision claims with respect to her estate. That course, it was submitted, was not undertaken and should not have been, because it was against the policy of the law to re-open settled disputes in this way. 2. The judge did not deal with the matter in this way, nor was he required to do so. This was not an estoppel case in which the claimants were required to establish a representation upon which they relied to their detriment. The concept of an "expectation" is quite amorphous. However, it is apt to describe aspects of the "family or other relationship between the applicant and the deceased person" and to form part of the "obligations or responsibilities owed by the deceased person to the applicant", these being factors which the court is entitled, and in most cases required, to consider on a family provision application. [19] There was no error in the use made by the trial judge of this evidence. 3. The second limb of the submission is also untenable. No doubt the money the deceased obtained from his mother's estate was spent, in part at least, on the cost of caring for him as his illness progressed. No doubt filial affection was one reason why the respondents agreed to the settlement of the deceased's claims to part of his mother's estate. However, the contributions of the respondents cannot be seen purely in terms of the discharge of an existing moral obligation. And to the extent that they can be so viewed, that provides no absolute defence to a later claim by the offspring on a parent's estate in circumstances where, at the date of his death, his widow, being the sole beneficiary under the will, was substantially better off than his offspring. The judge did not err in taking into account the representation made and the expectation created by the settlement of the dispute over Mrs Tofft's estate. Claims of the widow 1. The focus of the appellant's submissions in this Court was on various aspects of the judge's approach to her entitlements as the deceased's widow. Error was identified at a level of general principle, but also with respect to the factual findings made by the trial judge, as identified in grounds 1, 2 and 5 in the notice of appeal. It is convenient to deal first with these specific challenges, which can conveniently be addressed together. (a) Factual findings as to circumstances of appellant 1. Ground 5 alleged error on the part of the trial judge when taking into account his own assessment that she "presents as a formidable business woman, [who] can be expected to turn to business advantage the larger area of land she now contemplates living upon." [20] Ground 2 asserted that the judge was wrong in describing her financial circumstances as "relatively secure." [21] Ground 1 alleged that the judge was wrong in concluding that the legacies "will not materially affect" the appellant [22] when, as it was submitted, they would seriously affect her financial position and in particular her ability to build a home for herself on her property and generate income to meet her future needs. 2. Much time was spent, both at trial and in this Court, in exploring the appellant's evidence with respect to steps that she had taken after the death of her husband to look after her future circumstances. She and the deceased owned half shares in the matrimonial home at Berrilee, a semi-rural area on the north-west periphery of Sydney. From that land they had run a business, which was also half owned by each. The appellant and the deceased had a child of the marriage, Russell Neale, with whom she jointly owned an adjoining block of land. After the death of the deceased the appellant sold the matrimonial home and the business and purchased her son's interest in the adjoining block, on which she proposed to build a residence and operate a bed and breakfast business. Detailed plans of the proposed residence and the cost of construction were provided in evidence. 3. There is no dispute that the trial judge was required to consider the financial resources, including earning capacity, and the financial needs, both present and future, of the claimants and of the appellant as the beneficiary of the deceased's estate. This involved an essentially evaluative exercise. The past and present can be established by evidence, although the level of detail must bear a reasonable relationship to the amount at stake. Prognostication is not, in this context, a science. It will inevitably involve some assessment of what an individual has done in the past as a basis for speculation as to the future. The assessment of the appellant as a "formidable business woman" was patently not meant to suggest that she was a chief executive officer of a major corporation. It was to be understood as a reflection of the judge's assessment of her past business activities, her level of energy and her commitment to her future plans, which had already been partly effected by the prompt sales of the business and the land and the preparation of plans and costings for the new premises. It was she who put forward detailed evidence as to her plans in order to justify retention of the capital value of the whole of the deceased's estate. She could hardly complain if the trial judge in effect accepted her evidence at face value. Furthermore, the characterisation of her which is the basis of ground 5 was provided in the course of a broad overview of the case in the early part of the judgment. There is no substance in this challenge. 4. The other two factual challenges can be considered together. In substance the complaint was that she was not "relatively secure" in her financial circumstances unless she was able to keep the whole of the deceased's estate free of the reduction effected by the legacies in favour of the respondents. Her needs, it was said, extended to being about to build a new home and set up her bed and breakfast business, to generate extra income to meet her living expenses. 5. In making this complaint, there was no suggestion that the legacies were, in their terms, excessive or immoderate. Given the circumstances of each respondent, the amount awarded was entirely reasonable. Nor did they constitute a major proportion of the deceased's estate. Assuming that the estate was valued at approximately $1.4 million, net of expenses of realisation, the legacies, taken together, constituted less than 15%. The appellant sold the land and the business for $3.2 million. Payment of the legacies would have constituted 6.25% of that capital sum. 6. Different calculations may of course be undertaken: the relevance of these figures is that they indicate what the trial judge had in mind in stating that the payments would not materially affect the appellant financially. As must be expected in this area of discourse, there is no intended element of precision in the concept of material affection: the complaint contained in ground 1 must be rejected. 7. The final element to the factual complaints arises from an assumption that the appellant's essential needs were reflected in her plans. That assumption no doubt accounted for the detail of those plans as presented in evidence. The appellant's affidavit indicated an approximate value for the home when completed of $1.9 million. The cost of construction, estimated at $700,000 included $100,000 for a swimming pool. The estimate also included a two car underground garage, partly suspended polished concrete floor slabs and a gym. In cross-examination, the appellant agreed she had purchased a motor home for $150,000. [23] 8. The evidence demonstrated that the appellant was financially secure, in comparison with the respondents, and that her security would not be materially affected by payment of the legacies. 9. Each of the specific challenges should be rejected. (b) General considerations: exercise of discretion 1. The written submissions with respect to ground 6 did little more than advert to the general question as to whether a court is justified in interfering with a testamentary disposition in favour of able-bodied adult children. To raise that question is to advert to some relevant issues, but by no means all. However, the introductory section emphasized the other side of the equation, namely the moral obligation of the testator to his widow. To that end, reliance was placed on the statement of Powell J in Luciano v Rosenblum: [24] "It seems to me that, as a broad general rule, and in the absence of special circumstances, the duty of a testator to his widow is, to the extent to which his assets permit him to do so, to ensure that she is secure in her home, to ensure that she has an income sufficient to permit her to live in the style to which she is accustomed, and to provide her with a fund to enable her to meet any unforeseen contingences." 1. The written submissions further referred to the appellant as a "loyal and dutiful" wife; in oral argument she was referred to as "a deserving widow". [25] 2. There are four broad reasons why these submissions should not prevail. First, and most specifically, Luciano was not a case in which the whole of the testator's estate was left to his widow: rather, it was she who made a claim for a greater share of the estate, part of which only had been given to her under the will. 3. Secondly, it is unhelpful, and sometimes misleading, to adopt the value laden language of a different age and culture. [26] 4. Thirdly, to describe a party as a "deserving widow" is to express a conclusion which will reflect fact-specific findings; it is not to state a freestanding criterion. If references in Luciano to "a broad general rule", qualified only by "the absence of special circumstances", suggests an independent standard, it is not consistent with the exercise required by s 60 of the Succession Act. 5. Fourthly, and most importantly, any such general rule would involve a conclusion reflecting only part of the statutory exercise. The widow's circumstances must be balanced against the circumstances, needs and moral claims of the claimants and other beneficiaries. To treat Luciano as establishing a legal principle, or a standard, may deflect the Court from the full exercise of its functions. 6. In the present case, the primary judge carried out the balancing exercise required by the statute without error. That the appellant cared for the deceased as his health declined is common ground. However, the role she played with respect to his relationship with his children was less clear. Whilst she took over his work in the business as he became less capable, that was partly in her own interests as a joint owner. The needs of the claimants were carefully assessed. Costs 1. Various calculations were undertaken in the course of submissions as to the value of the estate available for distribution. It is not uncommon in family provision cases for legal costs to be disproportionate to the amounts realistically in issue. On occasion it may be appropriate to protect the estate from unsuccessful claimants and, more rarely, to protect it from the costs incurred unsuccessfully by the defendant (who will usually be the executor). 2. It was submitted before the trial judge (and repeated in this Court) that the appellant's costs of the trial were in the order of $200,000 and the respondents' costs $170,000. These amounts were grossly disproportionate to the amounts in dispute. In fact, they were estimates based on a four day trial (an expectation in itself hard to justify), whereas the trial in fact concluded very early on the third day. The solicitors for both the plaintiffs and the defendant swore affidavits which were in evidence at trial indicating their assessments of costs incurred and costs likely to be incurred by the end of the trial. Further costs will have been incurred in the appeal. 3. It is not necessary to consider further whether the amounts proffered were reasonable, nor whether the work undertaken was necessary. However, to the extent that such calculations are put before a trial judge to demonstrate the net value of the estate after the determination of the case, they should be viewed with circumspection. The Court is required to adopt practices and procedures which seek to resolve the issues between the parties in such a way that the cost is proportionate to the importance and complexity of the subject matter in dispute. [27] The Court also has power to specify a gross sum instead of assessed costs when making a costs order. [28] 4. Because no error has been identified on the part of the primary judge, and it is thus not necessary for this Court to re-exercise any discretionary power, the costs alleged to be involved need not be considered further. Orders 1. The appeal should be dismissed. So far as the costs in this Court are concerned, costs should follow the event. No further or different order was sought either in the notice of appeal or in submissions. 2. MACFARLAN JA: I agree with Basten JA. 3. GLEESON JA: I agree with Basten JA. ********** Endnotes 1. Succession Act, s 58. 2. Neale v Neale [2014] NSWSC 965. 3. Judgment at [30]. 4. Judgment at [57]-[62]. 5. Judgment at [56]. 6. Judgment at [63]. 7. Judgment at [41]. 8. Judgment at [44]. 9. Judgment at [51]. 10. Ground 3. 11. Ground 4. 12. Affidavit, Craig Russell Neale, 21 November 2012, par 12. 13. Affidavit, 8 March 2013, par 5. 14. Ibid, par 7. 15. Tcpt, 14.07.14, pp 46(5)-49(15). 16. Affidavit, 21 November 2012, par 13. 17. Affidavit, 8 March 2013, pars 7 and 8. 18. Tcpt 14.07.14, p 25. 19. Succession Act, s 60(2) (a) and (b). 20. Judgment at [24]. 21. Judgment at [64]. 22. Judgment at [75]. 23. Tcpt, 15.07.14, p 96(48). 24. (1985) 2 NSWLR 65 at 69-70. 25. Tcpt, 11.06.15, p 9(10). 26. Compare 1 Epistle to Timothy ch 5; and see the challenge to "deserving widows" as perceived by "middle class morality" presented by Eliza Doolittle's father in Bernard Shaw's Pygmalion. 27. Civil Procedure Act 2005 (NSW), s 60. 28. Civil Procedure Act, s 98(4). 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: 17 July 2015