Clifford v Mayr [2010] NSWCA 6 (10 February 2010)

NEW SOUTH WALES COURT OF APPEAL

CITATION:
Clifford v Mayr [2010] NSWCA 6

FILE NUMBER(S):
40133/09

HEARING DATE(S):
26 November 2009

JUDGMENT DATE:
10 February 2010

PARTIES:
Sondra Louise Clifford (Appellant)
Peter Mayr (First Respondent)
Joseph Donnelly (Second Respondent)

JUDGMENT OF:
Campbell JA Young JA Handley AJA

LOWER COURT JURISDICTION:
Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S):
4084/07

LOWER COURT JUDICIAL OFFICER:
McLaughlin AsJ

LOWER COURT DATE OF DECISION:
4 February 2009

LOWER COURT MEDIUM NEUTRAL CITATION:
Clifford v Mayr and Anor [2009] NSWSC 16

COUNSEL:
M Willmott SC; RD Wilson (Appellant)
E Gramelis (Respondents)

SOLICITORS:
Teece Hodgson & Ward, Sydney (Appellant)
NC Coombes & Co, Marrickville (Respondents)

CATCHWORDS:
SUCCESSION – FAMILY PROVISION AND MAINTENANCE – Family Provision Act 1982 ss7, 9 – de facto widow with young children – adequate provision for proper maintenance – appellate review of the jurisdictional question – principles on which relief granted – circumstances to be considered – form of order to provide widow with flexibility in housing and also provide capital for children when adult – SUCCESSION – wills, probate and administration – the construction of a will – charges on property of deceased – how burden of charges to be borne – APPEAL AND NEW TRIAL – principle for appellant intervention in decision concerning jurisdiction under Family Provision Act 1982

LEGISLATION CITED:
Conveyancing Act 1919
Family Provision Act 1982
Law of Property Act 1925 (UK)
Locke King’s Act
Statute of Wills 1540
Succession Act 2006
Succession Amendment (Family Provision) Act 2008
Trustee Act 1925

CATEGORY:
Principal judgment

CASES CITED:
Barclays Bank Ltd v Gillett [1950] Ch 102
Clifford v Mayr [2009] NSWSC 16
Countess of Bective v Federal Commissioner of Taxation [1932] HCA 22; (1932) 47 CLR 417
Foley v Ellis [2008] NSWCA 288
In Re Francis; Francis v Francis [1905] 2 Ch 295
Golosky v Golosky [1993] NSWCA 111; (NSWCA, 5 October 1993, unreported)
House v The King [1936] HCA 40; (1936) 55 CLR 499
Langley v Langley [1974] 1 NSWLR 46
Luciano v Rosenblum (1985) 2 NSWLR 65
Marshall v Carruthers [2002] NSWCA 47
O'Loughlin v O'Loughlin [2003] NSWCA 99
Re Butler [1980] Qd R 601
Re Marcuola-Bel Estate; Marcuola-Bel v Thi Ly Tran [2005] NSWSC 1182
Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201
Vigolo v Bostin [2005] HCA 11; (2005) 221 CLR 191
Warren v Coombes [1979] HCA 9; (1979) 142 CLR 531
White v Barron [1980] HCA 14; (1980) 144 CLR 431

TEXTS CITED:
Fisher & Lightwood’s Law of Mortgage, 2nd Aus ed (2005) LexisNexis Butterworths

DECISION:
Appeal allowed. Decision below set aside. Order made for additional provision for the Appellant in nature of specific devise of the family home, subject to a charge for an indexed capital sum for each child, (on terms that the charge may be transferred at Appellant's election to certain other real estate) and subject to certain obligations.

JUDGMENT:

1 CAMPBELL JA: This judgment concerns an appeal from the dismissal of an application made under the Family Provision Act 1982: Clifford v Mayr [2009] NSWSC 16.

“3. I GIVE my property at Pinaroo Place Lane Cove to SONDRA LOUISE CLIFFORD (hereinafter “Sondra”), subject to:

A. An equitable charge in favour of my Trustees, that charge being on the following terms:

(2) The amount secured by the charge shall increase at the end of each calendar quarter by an amount equal to the percentage increase in the Consumer Price Index All Groups weighted average of eight capital cities for the preceding quarter, or in the event that that index ceases to be published, by an amount equal to the percentage increase in the published statistical index that in the reasonable opinion of the Trustees most closely approximates the Consumer Price Index All Groups weighted average of eight capital cities for the preceding quarter.

(3) The benefit of the charge shall be held by my Trustees on trust for such of Lachlan Clifford, Noah Clifford and Georgia Rose Clifford as are alive when the youngest of those people then alive attains the age of 21 years, as tenants in common in equal shares.

(4) the Trustees shall permit Sondra to sell any real estate that is from time to time the subject of this charge on terms that:

a. the proceeds of sale are used wholly or predominantly in the acquisition of other Australian real estate chosen by Sondra (“Replacement Property”)

i. that itself becomes subject to a charge on the same terms as the charge hereby created,

iii. title to which is held under the Real Property Act of the State or Territory in which the real estate is located;

b. to the extent to which the net proceeds of sale are not used in the acquisition of Replacement Property, the proceeds are paid to the Trustees to be invested by them and held on trust for such of Lachlan Clifford, Noah Clifford and Georgia Rose Clifford as are alive when the youngest of those people then alive attains the age of 21 years, as tenants in common in equal shares, on the basis that:

i to the extent to which any property held on such a trust is paid to or for the benefit of the beneficiary it shall be a discharge of the obligation to pay an amount pursuant to the charge referred to in clause A1-A3, and

ii the Trustees have power to pay the whole of the capital or income of any net proceeds held by them on this trust to Sondra for the maintenance of the said Lachlan Clifford, Noah Clifford or Georgia Rose Clifford.

(5) So far as their trusteeship of the benefit of this charge is concerned, the Trustees shall act without remuneration but with the right to reimbursement of reasonable expenses associated with performance of their duties as Trustees.

(1) To permit the Trustees to lodge and maintain on the title of the said property or any Replacement Property a caveat to secure the charge created by clause A.

(2) To pay all outgoings on the property to which the charge attaches (including payment of any mortgage secured over the property), keep the property in good repair, and insure the property against loss or damage by fire.

(3) Not to raise money on the security of the said property or any Replacement Property for the purpose of investing the proceeds in any manner whatsoever.

(4) In the event that the said property or any Replacement Property is sold and the net proceeds are not used in the acquisition of a Replacement Property, to pay any part of the net proceeds not so used to the Trustees to be held by them pursuant to A(4)(b) hereof.

4. I GIVE DEVISE AND BEQUEATH the rest and residue of the whole of my estate both real and personal of whatsoever kind and wheresoever situate including any property over which I may have the power of disposition to my partner SONDRA LOUISE CLIFFORD for her own use and benefit absolutely.”

3 The Court announced, on 22 December 2009, that it would give reasons for those orders early in the new term. These are my reasons for joining in the making of those orders.

4 The Appellant is the de facto widow of the late Helmut Mayr (“the Deceased”), and the mother of his three children. The Appellant and the Deceased started going out in July 1999. In November 1999 they began living together in a unit he owned at Balgowlah. He died, aged 46, on 11 December 2006. Thus, their relationship lasted a little over seven years.

5 The defendants in the court below, and Respondents to this appeal, are the executors of the Deceased’s will. The first of them, Peter Mayr, is the Deceased’s only brother. The second of them, Joseph Donnelly, has been the de facto partner of the Deceased’s mother for decades.

6 The Appellant and the Deceased had three children, Lachlan (born August 2000), Noah (born October 2002) and Georgia (born November 2004). The children all took their mother’s surname. The Appellant, the Deceased and their three children lived together in a house at Pinaroo Place, Lane Cove, for a little over two years before the Deceased’s death, save that for the last several months of the Deceased’s life he was frequently in hospital.

7 The Deceased’s last will was made on 8 December 2006, some three days before he died. After appointing executors, it continued:

9 There is no dispute that the Appellant was an “eligible person” in relation to the Deceased, within the meaning of para (a) of the definition of that term in section 6(1) Family Provision Act 1982.

10 There was no question in the present case of any provision being sought by the Appellant from any notional estate.

11 Section 9(2) prohibits the court from making an order for provision in favour of an eligible person out of the estate of a deceased person

12 Section 9(3) confers some powers on the Court for the purpose of carrying out that task:

(i) the acquisition, conservation or improvement of property of the deceased person, or

(ii) the welfare of the deceased person, including a contribution as a homemaker,

13 Whether an applicant is able to overcome the prohibition contained in section 9(2) on making an order is frequently referred to as “the jurisdictional question”.

14 The relevant power of the court to make an order for provision is contained in section 7:

15 In the court below, the judge was not satisfied that the Appellant had been left without adequate provision for her proper maintenance. Alternatively, he held (at [54]) that the competing claims of the children were such that he:

16 He also rejected submissions that appropriate provision would be made if the Appellant were to receive the Pinaroo Place property absolutely, with the residue being held on trust for the children when they reach 21, or alternatively that the Pinaroo Place should be held by the Appellant and the three children as tenants in common in equal shares.

17 The Appellant was born in November 1971. Thus, she was aged 35 at the time of the Deceased’s death. She was brought up in Queensland. Her parents continue to live in Brisbane. She completed a Bachelor of Commerce degree at a Queensland university in February 1997, and moved to Sydney in 1997. She completed a Certified Practising Accountant course (CPA) in 2000, and worked as an accountant until Lachlan was born in August 2000.

18 The Deceased was born in Austria in November 1960. His family migrated to Australia when he was a small child. He qualified as a chartered accountant, and worked predominantly as an accountant for about the last 20 years of his life. There was a period, comparatively early in the relationship with the Appellant, when he was a day trader, buying and selling shares at home. This venture was not financially successful.

19 There was period in the second half of 2001 and first half of 2002 when the Appellant moved, with Lachlan, to live with her sister elsewhere in Sydney, but her relationship with the Deceased continued during that period. They moved back together in July 2002, and lived in a rented townhouse in Neutral Bay.

20 After the birth of Lachlan in August 2000, the Appellant did not return to work for one year. Starting in August 2001, she worked part-time for about five months. She began full-time work in January 2002. Upon the birth of Noah in October 2002 she returned to part-time work, which was feasible as she was able to work from home.

21 In 2002 the Deceased began working at the same accountancy firm as the Appellant. They were able to arrange for him to work on seven of the working days in a fortnight, while she worked on the other three working days in the fortnight.

22 Both the Deceased and the Appellant were involved in the duties of parenting, and household duties.

23 They had a measure of separation in their financial affairs. The Deceased paid for all the household expenses, including the mortgage, utilities, insurance, groceries, clothes for himself and most clothes for the children, and expenses on weekend outings. He did not pay for any of the personal expenses of the Appellant. As well as her own personal expenses, the appellant paid for the childrens’ extracurricular activities, Christmas and birthday presents for the children and their friends as well as for family members, trips to Brisbane usually once or twice a year, and all expenses (including the mortgage) for a Brisbane investment property that she bought. In December 2005 she paid $30,000 off the mortgage debt on Pinaroo Place.

24 In the course of 2004 the Appellant and the Deceased looked for a house, as the townhouse they were living in was not large enough, and the Appellant was pregnant with Georgia. The Appellant gave evidence, on which she was not challenged, that:

25 The Pinaroo Place house was purchased in the name of the Deceased alone. The Appellant’s evidence was that that course was followed “because I was pregnant with Georgia and I was too sick to go out and sign the documents”. They moved in in October 2004. It is a two-storey house with five bedrooms.

26 The purchase price was $835,000. Of this $500,000 was provided by a loan secured by a mortgage, and the balance was provided by the Deceased himself from his own funds.

27 The Appellant did not make any contribution to any part of the initial purchase price of Pinaroo Place, though as mentioned she paid $30,000 off the mortgage debt in December 2005.

28 The estimated value of the Pinaroo Place property was $900,000 at the date of death.

29 The Deceased’s mother gave him a property at Rawson Street, Lidcombe by transfer dated May 2005. It was a suburban house, divided into two flats, which were rented. It was unencumbered at the time of transfer.

30 The Deceased borrowed from Perpetual Limited secured by a first mortgage over the Rawson Street property and a second mortgage over the Pinaroo Place property. The judge inferred that the rental income from Rawson Street was appropriated to payment of the debt secured by mortgage over that property. I have no reason to doubt the correctness of that inference. We were informed on the hearing of the appeal that proceeds of the borrowing secured by the Rawson Street property were used to reduce the first mortgage on the Pinaroo Place property.

31 The Executors sold the Rawson Street property by contract dated 6 October 2007 for $420,000. Inevitably, there were expenses associated with the sale. The net proceeds were insufficient to discharge the mortgage on the Rawson Street property which, by October 2007, secured approximately $439,000.

32 Settlement of the sale of the Rawson Street property took place in November 2007. On completion of the sale of the Rawson Street property, Perpetual Limited required the whole of the debt that had been secured on the Rawson Street property to be discharged. That required a payment to Perpetual Limited of approximately $18,000, which resulted in the second mortgage on the Pinaroo Place property being discharged. The executors made that payment from their own funds. They claim its reimbursement from the estate, as part of a claim they make against the estate for expenses.

33 At the time of his death the Deceased owned shares in Alumina Limited. Those shares were sold before the hearing, and the proceeds deposited into the estate account. The Deceased also owned listed securities in Telstra. By the time of the trial those securities were worth $22,800. They were instalment receipts issued in the T3 share offer, for which payment was required to be made by instalments. The executors have made a payment of $8,000 from their own resources to meet an instalment that fell due after the Deceased’s death. That $8,000 forms part of their claim for executors’ expenses.

34 At the time of his death the Deceased owned a home unit at Centennial Avenue, Lane Cove that was unencumbered. The Deceased had owned the Centennial Avenue property when the Appellant met him. The executors sold it, with completion occurring in August 2008. They received a net balance of about $318,000, which they continued to hold at the time of the hearing below.

35 The Centennial Avenue property had been tenanted from the death of the Deceased until June 2008, shortly before it was sold. In that period it generated a gross rental income of a little under $20,000. The judge found that it was “somewhat unclear” whether that rental income was included by the executors in their list of assets in the estate.

36 In my view, the evidence is sufficiently clear on that topic. In para [48] of an affidavit sworn by Peter Mayr on 31 October 2007, he deposed to the Appellant receiving the rental income of both the Centennial Avenue and the Rawson Street properties for approximately six months following the death of the Deceased. In response to that, the Appellant, in para [25] of her affidavit of 6 December 2007 said that:

I take this to mean that it was the Deceased’s medical bills, and the Deceased’s credit card bills, that the Appellant paid using the net rents she received.

37 Thereafter, the executors set up an estate account, into which the rental income of the estate was paid. The first respondent said that the executors “have been using it to pay estate debts and liabilities”.

38 None of that evidence was cross-examined on. Thus, one can infer that the rents from the Centennial Avenue property that accrued after the death of the Deceased were either expended on liabilities of the Deceased or the estate, or form part of the present balance of the estate bank account.

39 The estate has received a land tax refund of $3,016. Of the amount refunded, $1,550 had been paid by the Appellant, and the other $1,465 had come out of a bank account of the Deceased. That land tax refund will be an asset of the estate, but the Appellant will have a claim on the estate for reimbursement of the $1,550 that she paid.

40 At the time of his death the Deceased owned the one issued share in a company called Mayr & Co Pty Ltd (“the Company”), which was set up in January 2006. The Deceased used the Company as a means of contracting out his accounting services. As well, it was the trustee of a discretionary trust established for the benefit of the Deceased, the Appellant and their three children. However, that trust had no assets.

41 At the time of the Deceased’s death the Company had two motor vehicles, a Peugeot and a Volvo. The Peugeot was sold in May 2007 by the Appellant for $12,000. After payment out of the leasing debt, a balance of $5,500 remained, that was retained by the Company, and has been used to pay expenses “through the Company”.

42 The Volvo was owned by the Company, not leased. It has come to be transferred to the Appellant through a transaction effected by book entries, with no actual payment of money. In circumstances not clearly emerging from the evidence, the Appellant had a claim that the Company owed her $14,000 as a wage. The purchase price of the Volvo, $13,500, was paid by being offset against that wage.

43 The executors gave evidence that they had advanced around $96,000 for payment of expenses connected with the estate. Of that, $25,000 was advanced by Mr Peter Mayr. He has expressed a desire to be paid interest on the amount of his advance.

44 The executors are presently proposing to make a claim for commission from the estate.

45 The Deceased was a member of a superannuation fund. A benefit of $64,763 was payable from that fund in consequence of his death. It was paid direct to the Appellant in late October 2007. It appears to have been paid to the Appellant pursuant to a nomination, and not to have ever become an asset of the estate. However, that the Deceased made a nomination of his superannuation benefit in favour of the Appellant during his lifetime, means that the amount of the superannuation benefit must be taken into account, in deciding the jurisdictional question, as part of the “provision ... made in favour of the eligible person by the deceased person ... during the person’s lifetime”.

46 At the hearing the judge was given a calculation, prepared on behalf of the executors, that purported to set out how the residue was then made up. It stated:

Proceeds of Centennial Ave	$318,155.54
Westpac Estate Account	$10,000.00
Telstra shares	$22,800.00
	$350,955.54
Less:
Executors’ Expenses	$96,557.30
Commissions (1.5%)	$17,500.00
Interest (6% x 1.5 yrs x $25 k)	$2,250.00
Costs	$101,457.00
	$217,764.83
	$133,190.71
Add Backs/notional
Superannuation	$64,763.01
Volvo (1 share in Mayr & Co)	$13,500.00
	$78,263.01
	$211,453.72

(There is a slight error in the adding, but it is only a matter of a few cents.)

47 The estimate in that document for costs was for both the executors’ costs and the Appellant’s costs. The Appellant’s legal costs had been estimated at $64,482, while the Respondents’ legal costs had been estimated at $40,500. Each of these estimates was for the total litigation. Each included some amounts that had already been paid. The difference between the total of the amounts contained in the respective solicitor’s affidavits, and the amount for costs contained in the executors’ estimate of the residue was not explained. Each estimate had been prepared on the basis of a two-day hearing. The judge expressed the view (at [20]) that even for a two-day hearing, costs in excess of $104,000 “for a case which is in no way exceptional or out of the ordinary” were excessive. I share that view. In any event, in fact the hearing took one day, not two.

49 Notwithstanding that the judge used the expression “the estate available for distribution” it is, I think, reasonably clear that what he was talking about was the residue.

50 The judge is, with respect, wrong in saying that the defendant’s estimate of “the estate available for distribution” did not take into account the value of the Volvo or the superannuation payment. It is quite clear on the face of the document quoted at [46] above that the items are part of the figure of $211,400-odd. Further, even though the fact that the superannuation payment has been received must be taken into account in deciding the jurisdictional question, it is not part of the residue of the estate. As well, to the extent that rental income derived from the Lane Cove unit had not already been expended on proper expenses, it was part of the amount in the estate account, and thus no adjustment was required to take account of it.

51 In June 2002 the Appellant purchased a home unit in Brisbane as an investment. She purchased it for $200,000, of which $180,000 was raised on mortgage, and the balance came from the Appellant’s savings. The rents were insufficient to cover the mortgage repayments. The Appellant met the difference from her own income.

52 The Appellant sold that unit by a contract entered in April 2007. She sold it because of the financial pressure caused by the Deceased’s death and the length of time taken for the grant of probate. The sale triggered a liability for capital gains tax, and as well caused the Appellant to have an obligation to re-pay to the government about $15,000 that she had received as financial assistance.

53 At the time of the hearing in August 2008, Lachlan and Noah were both at primary school, and were due to commence year 3 and year 1 respectively in 2009. When the Appellant was working, Lachlan and Noah went to before and after school care. Georgia was attending a preschool for two days a week in 2008. She was due to attend preschool for three days a week in 2009, and start school in 2010. On days when the Appellant was working she had arrangements for Georgia to be cared for both before and after preschool.

54 At the time of the hearing the Appellant was working as an accountant for four days a week. She worked for two days a week for one accountant, and two days a week for another accountant. For one of the accountants, she was able to work one of the days per week from home. One of the accountants had, shortly before the hearing, informed her that it would be lowering her hourly rate from $50 per hour to $41 per hour. At that rate of pay, most of the income would have gone in childcare fees, so she was intending to cease working for that accountant in October 2008.

55 The plaintiff gave evidence, that the judge below accepted, that at the time of the hearing (the relevant time for the purposes of his deciding the jurisdictional question) her assets consisted of $255,300, made up as follows:

	$
ING account (held for the benefit of children)	98,000
ING account	45,000
ING account (provision for income tax)	38,000
St George current account	800
Volvo V40 2004 model	13,500
Superannuation	30,000
Jewellery	30,000
Total Assets	$255,300

56 The Appellant has been saving money since Lachlan was born, with the intention of it ultimately being for the benefit of the children. By 2006 she had saved about $70,000. However, after the Deceased became unable to work when he became ill in 2006, and after his death, some of her savings needed to be spent to meet ordinary expenses. The judge accepted that the first of the ING accounts listed was held by her as trustee for the children. There appear to be no particular terms of that trust, beyond the nomination of the children as the beneficiaries. Thus, each child would be entitled to receive the capital upon ceasing to be under the disability of minority, upon attaining the age of 18. In the meantime, the Appellant’s obligation as trustee would be to hold the money for the benefit of the children. Section 44 Trustee Act 1925 confers a power on trustees of money or securities held for the benefit of a child to advance up to one half of the capital for maintenance, education and advancement or benefit of the child. However, pursuant to section 44(1A) that power is not exercisable where the trust property or the share thereof to which the child is entitled exceeds $4,000. Thus, it would not be exercisable in the present case. Thus, on this evidence the assets that she owned beneficially, or had at her disposal to apply for the benefit of the children, totalled $157,300. To that one should add her claim to be refunded $1,550 paid towards land tax. That gives $158,850 as the value of her assets.

57 The assets she held at the date of the hearing are assets that remained after she had received the Deceased’s superannuation benefit, and the net proceeds of sale of her Brisbane unit.

58 Her liabilities at the time of the hearing were $25,000, consisting of $4,000 owed on a credit card, $6,500 debt to her parents (which has been lent on the basis that she can repay it when she can afford to) and $14,500 taxation liabilities concerning the 2007/08 financial year. Thus, the net assets that she owned beneficially, or had at her disposal to apply for the benefit of the children, were $133,850.

59 Her evidence, accepted by the judge, was that her annual income at the time of the hearing was estimated to be $72,500. That amount was made up as follows:

	$
Income (estimated for YE 30 June 2009)	55,000
Interest (on cash) approximate and variable)	4,000
Interest (on Children’s money reinvested for them)	6,500
Family Assistance Benefits	7,000
Total Annual Income	$72,500

61 Of this, the interest on childrens’ money is not hers beneficially. However, section 43 Trustee Act enables the trustee of property held for the benefit of a child to apply the whole or part of the income of the property for or towards the maintenance, education or benefit of the child. Thus, the interest on the childrens’ money is a resource available to her for the purpose of meeting her own needs and those of the children. For reasons I shall explain in more detail below, it is appropriate to consider the jurisdictional question by reference to the assets that are both those of the Appellant beneficially, and those to which she is entitled to have resort for the benefit of the children. Thus, for the purpose of considering the jurisdictional question her annual income should be taken as being $72,500, as at the time of trial.

62 Of the items comprising her present annual income, it could be expected that, when she is free to work longer hours, her income will be greater than $55,000, but her entitlement to family assistance benefits will lessen or disappear.

63 She gave evidence of her annual expenditure at the time of the trial. It covered expenditure for household expenses, including rates, utilities, house insurance, car insurance and medical insurance, house maintenance, motor vehicle expenses, clothing, entertainment expenses, and other expenses related to her profession. As well, it includes various expenses specifically connected with the children, including childcare, clothing, and various extracurricular activities. Her affidavit totalled that list at $85,470.

64 The judge accepted her expenditure and outgoings in the sum of $104,000. This seems to be a figure derived from the first affidavit she filed in the proceedings in September 2007, and included larger amounts for, in particular, childcare and taxation than were current at the time of the hearing. It also included an amount of $1200 for medical treatment, which has no corresponding figure in the list of her expenditure as at the hearing. This item seems to relate to Lachlan, who was deeply upset by his father's death and needed a series of consultations with a psychiatrist. Fortunately he was no longer in need of that assistance by the time of the hearing. As well, though, her annual income in her first affidavit was greater ($94,000) than at the time of the hearing, because of the way she had cut down her working hours by the time of the hearing.

65 The Appellant accepted in cross-examination that, once Georgia was at school in 2010, there was no reason why she could not return to working four days a week. However, the evidence contained in her first affidavit, of her income and expenditure as at September 2007, a time she was working four days a week, showed annual expenditure greater than annual income by approximately $10,000. If she were to return to working a four-day week there is every reason to expect that her expenses for childcare and taxation would increase beyond the levels at which they were being incurred at the time of the trial. It seems to me to be likely that her income would continue to be insufficient to meet her expenditure, when she is the person who will be meeting all the expenses associated with the children.

66 The Appellant’s income at the time of the hearing was insufficient to pay for childcare during school vacations. The Appellant’s mother has been coming from Brisbane (at her own expense) each school holidays to look after the children.

67 The jurisdictional question under the Family Provision Act 1982 does not involve a discretionary decision: White v Barron [1980] HCA 14; (1980) 144 CLR 431 at 434-5 per Barwick CJ (dissenting), 442-3 per Mason J, 448-9 per Aickin J (dissenting), cf 456-7 per Wilson J. Rather, it is “strictly one of fact, notwithstanding that it involves the exercise of value judgments” (Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201 at 210 per Mason CJ, Deane and McHugh JJ), and “though it involves the making of value judgments, is a question of objective fact to be determined by the judge at the date of hearing” (at 211).

68 However, in Singer v Berghouse the majority, at 212, held that even though the jurisdictional question in Family Provision Act applications was not a discretionary matter, the principle that governed appellate review of discretionary decisions should apply to it. Their Honours specifically endorsed the following remarks of Kirby P in Golosky v Golosky [1993] NSWCA 111; (NSWCA, 5 October 1993, unreported):

69 That approach to appellate review of a first-instance decision on the jurisdictional question was apparently endorsed (“counsel properly emphasised ...”) by Gummow and Hayne JJ in Vigolo v Bostin [2005] HCA 11; (2005) 221 CLR 191 at 220 [82].

70 The conventional statement of the principles for appellate review of discretionary decisions is that in House v The King [1936] HCA 40; (1936) 55 CLR 499 at 504-5:

71 The Appellant submitted that “Because the question whether an applicant has been left without adequate provision involves a value judgment, such is reviewable pursuant to the principles established in Warren v Coombes [1979] HCA 9; (1979) 142 CLR 531”.

72 Support for this proposition was said to be derived from a remark of Basten JA in Foley v Ellis [2008] NSWCA 288 at [3] where Basten JA said that a finding on the jurisdictional question:

73 However, Basten JA went on, at [5], to recognise that a review of the quantum of any order for provision can be conducted only in accordance with the principles applicable to discretionary judgments, and that:

74 As Sackville AJA made clear in Foley v Ellis at [83], it was common ground in that case that the primary judge’s decision on the jurisdictional question should be reviewed in accordance with the tests applicable to discretionary judgments. Sackville AJA proceeded in accordance with that test. Beazley JA agreed with Sackville AJA. It may be that when Basten JA said that “arguably” the Warren v Coombes test applied, he was intending to refer to arguments that as a matter of principle could be open in the High Court. It does not matter, when Basten JA did not hold that the Warren v Coombes test was the correct one, nor was it the view of the Court. Nor could it be in this Court, whatever might arguably be open in the High Court, in face of the express authority of Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201. The correctness of the judge’s decision on the jurisdictional question must be reviewed in accordance with the standards applicable to discretionary judgments.

75 In Singer v Berghouse at 209-10, the majority held that determination of the jurisdictional question:

76 In Foley v Ellis at [87], Sackville AJA referred to this passage and continued at [88]-[89]:

77 I have already held, at para [49] above, that the judge has given an incorrect account of the manner in which the executors’ estimate of the size of the residue had been arrived at. The superannuation was not part of the residue, and never had been. The value of the Volvo that the Company owned at the date of the Deceased’s death had once entered indirectly into the value of the residue (insofar as it affected the value of the share in the Company that the Deceased owned), but no longer affected the value of the residue at the date of the hearing because title to the Volvo had already passed to the Appellant, and she had included it in her list of assets as at the date of the hearing (para [55] above). As section 9(2) requires the jurisdictional question to be answered as at the date of the hearing, the relevant residue to ascertain was the residue that had not already been distributed at the date of the hearing. Thus, both the superannuation, and the value of the Volvo, should have been excluded from that calculation. The land tax refund of $3,016 should have been included in the calculation.

78 However, in ascertaining the size of the residue the liabilities also must be scrutinised. The executors’ expenses of $96,557.38 included general expenses of $8,772, mortgage repayments of $41,009.93, a payment on the shortfall of the mortgage on Rawson Street of $33,113.45, the Telstra shares instalment of $8,000, and legal fees and disbursements paid of $5,662.

79 Insofar as the itemisation of the executors’ expenses includes an amount of legal fees and disbursements, there is a doubling up between the item of executors’ expenses, and the item of costs. The sum of $1,550 should have been allowed as a deduction from the residue, to recognise the obligation to make repayment to the Appellant concerning the land tax refund.

80 As became clear in the course of argument on the appeal, the claim for interest on the loan made by one executor is unsustainable. Any person who undertakes fiduciary office does so without remuneration, except to the extent that there is some specific agreement, term of a trust deed or will, or rule of law that permits remuneration. No provision in the will entitles executors to charge. The only relevant rule of law is that permitting executors to claim commission. The executor who claims payment of interest would not have been capable of joining in any agreement to pay himself interest. I recognise that it is in some circumstances possible for one of several executors to bind the estate. However, it is not necessary to examine whether that principle is capable of applying to an agreement by one executor for the estate to pay interest to another executor, as it is not suggested that as a matter of fact any such agreement was entered between the executors.

81 Insofar as the executors’ claim for reimbursement of expenses includes items for mortgage repayments and the shortfall on the mortgage in Rawson Street, it gives rise to a question of how those mortgage expenses should be borne as between the Rawson Street property and the Pinaroo Place property, that was not considered in the court below. I deal with that matter further at para [108] ff below.

82 In the court below, no question was raised about the propriety of any of the deductions that were made for the purpose of calculating the residue, apart from the legal costs.

83 With that in mind, I think that the proper way to approach this appeal involves considering first what the judge should have found the residue to be, on the basis of the way the case was argued before him. On that basis (which includes not correcting the mistaken claim for interest on executor’s loan), the residue should have been found to be made up of:

Assets	$
Proceeds of Centennial Avenue	318,155.54
Westpac estate account	10,000.00
Telstra shares	22,800.00
Land tax refund	3,016.00
Total	353,971.54

Liabilities
Executors' expenses (as claimed, minus legal fees paid)	90,895.30
Commissions as claimed	17,500.00
Interest as claimed	2,250.00
Costs	101,457.00
Liability to make repayment re land tax refund	1,550.00
Total	213,652.30
Net residue	140,319.24

84 That amount would be increased somewhat to take account of the extent to which the costs estimate was unjustifiably large.

85 The hearing below, and the written submission in the appeal, proceeded on the basis that on its correct construction the will made the executors trustees of the Pinaroo Place property, on trusts whereby they were to hold the property for three children, with the childrens’ interests vesting in possession when the youngest reached 21. I will consider the matter initially on the basis that that construction is correct.

86 On that basis, the Appellant had no legal right to live in the home at Pinaroo Place. There was no provision for the manner in which the outgoings connected with the home should be met until the youngest child reached 21. The executors had no assets, other than the home, vested in them as trustees, that could be used to pay periodical outgoings. Section 38(1A) Trustee Act 1925 enables a trustee who holds land in respect of which monies are due and payable for rates or taxes or in respect of which the trustee is under a statutory obligation to spend money to raise that money by mortgage of the trust property, or by sale, if the trustee has no other assets available. Mortgaging the home would be impractical, as the trustees would have no capacity to service the mortgage from any trust assets, and sale would defeat the evident purpose for which the Deceased created the trust. In any event, section 38(1A) does not provide a means of paying for the full range of periodical outgoings connected with a home.

87 Further, at the time of the trial the Pinaroo Place property remained subject to the first mortgage. An amount of $18,000 was owing on that mortgage. Inevitably interest would be payable periodically on the mortgage, and in the ordinary course of things at some stage the capital would need to be repaid. The trustees had no funds from which to pay either principal or interest on the mortgage. If she was to remain living there, the Appellant would have no practical choice but to make those payments herself, if she could find the money. That would be, in effect, requiring her to expend her own money in increasing the children’s equity in the property.

88 The judge took the view that the lack of provision for outgoings was not a practical problem, because the Appellant would meet them. That is in fact what has been happening since the death of the Deceased. Those outgoings are a contributor to the excess of expenditure over income that the Appellant has been undergoing.

89 Clause 6 of the will empowered the Trustees to apply trust money for maintenance, education or advancement of the children. However, the executors had no obligation to do so. If they were to choose to do so, the only source to which they could look to obtain money to advance would be sale of the house. If they were to sell the house, they have no express power to buy an alternative, cheaper house. The argument, either below or on the appeal, did not go into whether a trustee’s powers of investment under the general law would extend far enough to enable them to “invest” in an alternative house, in which they permitted the Appellant and children to live. Even if their powers extended so far, they would be under no obligation to reinvest the proceeds of sale in that fashion.

91 An acknowledgement of entitlement in evidence is not the same as an actual entitlement to reside in the house. In law, the Appellant has no such entitlement.

92 Unless the Trustees take the extreme step of selling Pinaroo Place, the Appellant would have no source of income from which to pay expenses associated with the children, other than her own earnings. To the extent that there was no other source of provision for the children than the assets and earnings of the Appellant, the Appellant’s own need for maintenance was one that extended to having enough to provide for both herself and the children. She is subject to the clearest moral duty to maintain them (which there is no hint of her not performing). The Deceased not only had a moral duty to provide for the ongoing needs of his children, he also had a moral duty to recognise that, to the extent to which he did not provide for the maintenance of the children, the Appellant would be subject to a moral duty to maintain them. To the extent that she expends her personal resources in performing that moral duty, her own need for maintenance is correspondingly increased.

93 On the basis of the way in which the case was argued in the court below, the judge should have found that the situation in which she was left was one in which she had net assets of her own of $133,850 (para [58] above), and had been left the net residue of $140,319.24, giving her total assets of $274,169.24. To that would be added an indeterminate amount for the extent to which costs had been overestimated. She had three small children, no income from the estate from which to provide for the needs of those children, and no legal entitlement to a place in which she could live. The Appellant has skills that can result in a gross income that may well be in the higher half of gross incomes in the community, but she is under a substantial practical impediment in the exercise of those skills because of her need to look after the children. Her income is not, at least at present and in the immediately foreseeable future, sufficient to meet her household expenditure, including the needs of the children. There is no suggestion that her present level of household expenditure is extravagant or out of keeping with the standard of living the family enjoyed during the lifetime of the Deceased. There was no source to which she was entitled to look, apart from her own earnings, to provide for the needs of the children. The error that the judge made in ascertaining the size of the residue is sufficiently large to be material, and is the type of factual error that justifies the setting aside of the judge’s finding on the jurisdictional question. In my view, even on the basis of the way the case was argued in the court below, the judge’s conclusion on the jurisdictional question was incorrect.

94 Some elements of a more likely construction of the will emerged in argument in this court. We gave the parties the opportunity of making additional submissions in writing on the construction of the will. They availed themselves of that opportunity, but those submissions do not address all the problems of construction that the will raises. Rather than invite even further submissions, the preferable course is for this Court to consider the jurisdictional question on the basis of constructions of the will that might arguably be open.

95 One arguably open construction of the will starts by observing that the form of clause 3 of the will is not a gift of the house to trustees to hold on trust. Instead it takes the form of a devise of the real estate to the children directly. However, it is a devise that is to take effect only at a future time, namely upon the youngest attaining the age of 21.

96 Jarman on Wills, 8^th ed (1951) vol 2, Sweet & Maxwell, at 1420 says, “... every devise of a future interest, which is not preceded by an estate of freehold, created by the same will ... is an executory devise”. The present gift meets that description.

97 In In Re Francis; Francis v Francis [1905] 2 Ch 295, Swinfen Eady J held that a gift of a specific item of real estate to a person “when she shall attain the age of twenty-five years” where that gift was not preceded by any estate of freehold was an executory devise, not a vested interest liable to be divested if the donee died under the age of 25. He also held that the will gave the residuary devisee an entitlement in fee simple to the land the subject of the devise, subject to an executory limitation to the specific devisee if and when she attained the age of 25. Clause 3 of the will does not seem to be materially different to the provision construed in In Re Francis.

98 Counsel for the executors submits that if the correct construction of the will is that the house is the subject of an executory devise to the children, taking effect upon the youngest attaining the age of 21, and in the meantime it forms part of the residue, clauses 5 and 6 of the will have no work to do. He submits that a construction that leaves some of the clauses of the will with no work to do is not to be preferred.

99 I do not accept that clause 5 would have no work to do on this construction. The residue at the time of death included both realty (the Centennial Avenue property and the Rawson Street property) and personalty (the various shares) that the executors would be entitled to sell for the purpose of paying estate liabilities. Clause 5 had work to do in entitling them to delay sale of all those assets, without personal liability.

100 It is to be observed that clause 6 is a power to maintain, not an obligation or trust to maintain. In Re Butler [1980] Qd R 601 at 604, Connolly J said:

101 A consideration not addressed in the written submissions that this Court received after argument is the effect of section 36B Conveyancing Act 1919 (NSW). That section, introduced into the New South Wales legislation in 1930, in substance reproduces section 175 of the Law of Property Act 1925 (UK). So far as presently relevant, in the form it had prior to 1 March 2008, section 36B Conveyancing Act provided:

102 (Upon the commencement of the Succession Act on 1 March 2008, section 36B Conveyancing Act in the form just quoted was repealed. The Succession Act contained its own section 34, which was intended to replace it. However, pursuant to the savings and transitional provisions in clause 3(2) of Schedule 1 Succession Act, section 34 only applies “to a will whenever made, if the testator dies on or after the commencement of this clause”, which was 1 March 2008. Thus, it would not apply to the will of the deceased in this case. Schedule 2.1 Succession Amendment (Family Provision) Act 2008, which was back-dated to have been deemed to have commenced on 1 March 2008 (see section 2), re-inserted a version of section 36B into the Conveyancing Act expressed not to apply to wills. It also inserted into the transitional provisions in Schedule 9 Conveyancing Act a new clause 13, which provided:

Thus, section 36B, in the form quoted above at para [101] applies to the will of the deceased.)

103 The decision in In Re Francis was, of course, given before the enactment of the English version of this legislation. The outcome of In Re Francis would now be different, in that the “intermediate income” of the real estate that was the subject of the executory devise would now pass to the devisee, not to the residuary beneficiary. (While the operation of section 36B is subject to the statutory provisions relating to accumulations, the period of time between the date of the Deceased’s death and the date of the youngest child attaining 21 is comfortably within the permitted period of accumulation.)

104 No submissions were made to us about whether the way in which section 36B affects the “intermediate income” of a specific devise extends to the situation involved in the present case, where the subject of the specific devise does not (at least at present) generate any income, but rather is occupied in specie by people who include the devisees. I do not intend to go into that topic without assistance.

105 Instead, I will consider what the situation would be if the correct construction is that the residue includes an estate in the house, that would terminate upon the youngest of the children attaining 21. On that construction, the Appellant would be entitled as of right to live in the house until the youngest child attained 21. She would, however, be required as an incident of her entitlement to that limited estate, to pay the periodical outgoings connected with the property while her limited estate lasted. She would still have the practical responsibility of paying the cost of bringing up the three children, with no income with which to meet that cost beyond her own earnings. She would still, in my view, have been left without adequate provision.

106 Alternatively, if the correct construction of the will is that section 36B has the effect of giving to the children the right in specie to live in the home, the situation is in practical terms little different to the construction of the will that was assumed to be correct in the court below. In consequence, the Appellant would still have been left without adequate provision.

107 There is some uncertainty about whether the proper construction is that the gift is to take place only when and if Georgia attains 21 (so that it would fail if she were to die before reaching 21), or whether it is to take effect upon the youngest of those of the children of the Deceased who attain 21 actually attaining 21. The latter construction accords better with the likely intention of the Deceased. However, even if the former construction were correct, the Appellant would still have been left without adequate provision, because she would have real estate only in the circumstances (which on the evidence there is no particular factual basis for believing will actually arise) that Georgia dies before attaining 21.

108 No attention was paid, in the court below, to the manner in which the mortgage debts should have been borne. However, it was considered in this Court.

109 Section 145 Conveyancing Act 1919 contains the New South Wales equivalent of Locke King’s Act. It provides:

(a) property, which at the time of his or her death is charged with the payment of money, whether by way of legal mortgage, equitable charge, or otherwise (including a lien for unpaid purchase money), or

(b) land in respect of which there is owing at the time of his or her death any money under a contract of purchase whether from the Crown or not,

(a) by a general direction for the payment of debts or of all the debts of the testator out of the testator’s personal estate or the testator’s residuary real and personal estate, or the testator’s residuary real estate, or

110 I agree with the statement in Fisher & Lightwood’s Law of Mortgage, 2^nd Aus ed (2005) LexisNexis Butterworths, at [29.2], concerning the Locke King’s Act provisions, that:

111 At the time of his death, the Deceased had two items of property that were “charged with the payment of money” within the meaning of section 145, namely the Pinaroo Place property, and the Rawson Street property. There is nothing in the will that addresses in any way the topic of how the mortgage debts charged on those two properties are to be borne as between the various beneficiaries, and no words that could even arguably be said to have signified any intention on that topic. Thus, concerning each of the mortgage debts “the property so charged shall, as between the different persons claiming through the deceased, be primarily liable for the payment of the charge; and every part of the property, according to its value, shall bear a proportionate part of the charge on the whole thereof.”

112 That provision comes to be applied in two separate ways in ascertaining where the burden of the mortgage debts is to fall. One such way concerns the first mortgage debt on Pinaroo Place. At the time of the death of the Deceased that mortgage debt was $30,000. It was charged on no other property. Thus, as between the various beneficiaries of the estate, the Pinaroo Place property must bear the whole of that mortgage debt.

113 The second way in which Locke King’s Act comes to operate concerns the mortgage debt that was charged on both Pinaroo Place and Rawson Street. It was a sum of $439,000 at the date of the Deceased’s death.

114 The terms of the section contemplate expressly that it is not necessary for a “contrary or other intention” to be signified only by the will – as well, it can be signified by a “deed, or other document”. It was not suggested on the hearing of the appeal that there was any such other “deed, or other document”. If that were so, the effect would be that the debt secured over both Pinaroo Place and Rawson Street would be borne by both of those properties, proportionately to value. As the value of Rawson Street at the date of death was $420,000, that would result in 31.82% of the debt being borne by Rawson Street, and 68.18% being borne by Pinaroo Place. Thus, Rawson Street would bear $139,689.80, and Pinaroo Place would bear $299,310.20.

115 The effect of allocating the mortgage debts in the way Locke King’s Act requires is that the size of the residue increases substantially. Calculating the actual extent of the increase in size of the residue, beyond that which I arrived at at para [83] above, would require the addition of the amounts of $30,000 and $299,310.20, and adjustments to take account of the extent to which the executors’ expenses include amounts that they have paid towards the various mortgages. There is no point in calculating that amount precisely, because the extra amount of residue that the Appellant is shown to be entitled to as a result of a correct application of Locke King’s Act is an asset that in practical terms she could realise only by depriving herself and the children of the opportunity of living in their home. The result is still that the Appellant has been left without adequate provision.

116 The Appellant sought leave to adduce additional evidence on the appeal, Mr Willmott SC, counsel for the Appellant, accepted that this Court could not take into account such additional evidence, if admitted, for the purpose of deciding whether the judge had erred in answering the jurisdictional question. Hence, I have not mentioned that evidence until now.

117 The particular evidence that the Appellant sought to read on the appeal is an affidavit sworn on 22 October 2009 that updated her financial circumstances and circumstances in life. Once this Court has decided that the decision below on the jurisdictional question was erroneous, it must consider for itself whether the jurisdictional question is adequately made out. Consistently with section 9(2) this Court’s consideration of that question should be carried out as at the time of writing the present judgment. Evidence updating the Appellant’s financial circumstances is relevant to carrying out that task. I would admit the affidavit for the purpose of the Court considering for itself the jurisdictional question and what, if any, provision should be made.

118 The Appellant’s total assets are now of the order of $175,000, made up as follows:

Real property		Nil
Bank accounts as follows:
ING “Lachlan’s account”	$62,841.15
ING “Savings”	$628.48
ING “Tax”	$36,910.77
St George	$5,732.74	$106,113.14
Superannuation		29,000
Motor Vehicle		10,000
Jewellery		30,000
Total assets		$175,113.14

119 The ING account called “Lachlan’s Account” is the one that the judge held was held on trust for the children. For the reasons I have given earlier, it should be excluded from the calculation of the assets of the Appellant. That would reduce her total assets, for the purpose of this application, to of the order of $112,272.

Credit Card debt		695
Other liabilities –	Tax owing for 2009	4,000
	Owe to parents	6,500
Total liabilities		$11,195

Thus, her net assets are $101,077. The decline in her net assets since the hearing is consistent with the likelihood, on the evidence as at the date of the hearing, of her income continuing to be insufficient to meet her outgoings.

121 She stopped working in December 2008, as she was exhausted and worried about her health. She stayed off work until September 2009, apart from four weeks in April and May 2009 when she worked three days a week.

122 She is currently working three days a week, for 4½ hours a day, ie a total of 13½ hours a week. For that work she is paid $50 an hour (which includes superannuation, and is before tax is taken out). That rate only applies if she does work in which she is specialised. Any other accounting work that she might do for that company is paid at the rate of $35 per hour. At the moment she is only doing work within her specialised area, but her present estimate is that for six months of the year she will be working at the lesser rate.

123 She is not expecting to work any more than this. At present Georgia is at preschool, and the Appellant works the hours that Georgia is at preschool, and therefore does not have to pay for any childcare. Even when Georgia starts school in 2010, the Appellant is not going to look for full-time work, as it does not coincide with full-time school hours. School finishes at 3:10 pm, and she takes the view that the children need someone at home when they finish school, and they need someone to take them to extracurricular activities such as sport, that she regards as important for their overall development. Her present annual income is $48,240. Her present annual expenditure for items not specifically and solely for the children (which she itemises in detail, and was not cross-examined about) is a little over $67,000 per annum. On top of this, she has expenditure of the order of $14,800 per annum for clothing, and school fees, costs of sport and music, and other expenditure connected with the children. That makes her annual expenditure $81,800, and her excess of expenditure over income $33,560.

124 She has been advised that Lachlan will require some surgery (which was booked for 20 November 2009) which will result in the Appellant being $1,000 out of pocket.

125 She is living off her savings. The extent to which she is doing so is shown by the drop in her savings from of the order of $180,000 to $100,000 in October 2009.

127 The Respondents also sought to read further evidence on the appeal. It was an updating affidavit of financial circumstances of the estate, sworn by the First Respondent on 19 October 2009. It discloses that the current balance of the mortgage secured over the Pinaroo Place property is approximately $16,985. A real estate agent’s estimation puts the current market value of the Pinaroo Place property in the range $950,000 to $975,000.

128 The estate has money in bank accounts totalling of the order of $263,600. The executors have withdrawn $51,000 from the estate bank account, in part payment of their expenses.

129 The reason for the amount owing on the Pinaroo Place property decreasing is that the executors have been paying monthly mortgage repayments from their own funds. Their total net claim for repayment of expenses is now of the order of $54,500.

131 The amount of money that is ultimately available to the Appellant will be reduced to some extent, though it is not possible on the evidence before us to say precisely to what extent, by costs associated with the present appeal.

132 The executors’ most recent affidavit annexes correspondence that was not before the judge in the court below that underlines the impossible position in which the will placed the Appellant. By 30 July 2007 the mortgagee of Pinaroo Place was threatening legal action, because the mortgage was not being paid. By letter dated 9 August 2007, the executors’ solicitors notified the Appellant’s solicitors of an intention to lease the Pinaroo Place property, and apply the rent towards servicing the mortgage. The Appellant’s response was to say she did not intend vacating until her Family Provision Act claim had been dealt with. In early October 2007 the executors’ solicitors agreed to make the rental income from the Lane Cove unit available to the Appellant on the basis that the rental would be used to meet the interest repayments on the mortgage. The executors made that concession in the belief that Perpetual would agree to discharge its mortgage over Rawson Street upon receiving the whole net proceeds from Rawson Street. When Perpetual was not prepared to discharge the mortgage over Rawson Street on that basis, the agreement appears to have fallen away.

133 The correspondence also shows that as early as 14 December 2007 the solicitors for the Appellant had disputed the entitlement of the executors to reimburse themselves from residue for amounts paid towards the mortgage on Pinaroo Place. While section 145 Conveyancing Act was not referred to in terms, the proposition was clearly put that “the obligation for repayment under a mortgage passes to the beneficiary who receives the property.”

134 By February 2009 a dispute about how the mortgage debt should be borne was well developed on the correspondence, with section 145 Conveyancing Act referred to expressly by the solicitors for the Appellant. By letter of 18 May 2009, the solicitors for the Appellant were asserting that the mortgage over Rawson Street was a principal security, “with Pinaroo Place property as collateral security”. It is not clear on what basis that assertion was made. It does not sit well with the fact that the monies raised by mortgaging Rawson Street were used to reduce the existing first mortgage over Pinaroo Place.

135 The net effect of the additional evidence admitted on appeal is that the Appellant’s financial situation is worse than it was shown to be at the time of the hearing. Thus, in deciding for myself whether the jurisdictional question is made out, I reach the conclusion that it has been.

136 Counsel for the Respondents correctly points out that the vast bulk of the assets of the Deceased at the time of his death were accumulated through his own efforts and through a gift from his family. In my view, that is of limited significance in deciding what is the extent of proper provision that the Deceased should have made for the Appellant.

137 He also points to the significant benefits that she has received, including the superannuation, the Volvo, some of the rental derived from the Lane Cove unit, and the practical benefit of sale of the Peugeot that had been owned by the Company. While she has had the practical benefit of all those assets, any benefit that she continues to retain from them is only to the extent that they might make up part of her present net assets. In considering, now, whether she has been left without adequate provision, it is of little significance that she has received some benefits in the past that derived from the Deceased, when it is not suggested that she has wasted or squirreled them away, and the present value of those benefits is fully reflected in her net assets.

138 In cross-examination, the Appellant did not rule out the possibility that she might, if she had control of the Pinaroo Place property, move elsewhere (including to Queensland), in which case she might either rent the Pinaroo Place property, or sell it.

139 The Appellant was asked about whether she had any intention to remarry at some point or to form another long-term relationship. Her answer (on which she was not further cross-examined, and that has some inherent measure of plausibility) was “I have not ruled it out but it is very difficult when you have three small children to go out, for one thing, and to meet somebody.” When asked about the effect any such future relationship might have, and in particular on whether there was a risk that a falling out between herself and a possible future partner could dilute her interest in the family home “Well, I would take every measure for that to happen when the relationship started. They are always my children and will always come first and I will always look out for them first before anybody else.”

140 The Appellant’s case at the hearing had been that she should be awarded the entire estate, or else the Pinaroo Place property free of mortgage. In her cross-examination part of the evidence she gave was:

141 The executors have informed the Court that, if the Court is minded to make an order whereby some of the estate assets are held on a trust that is partly for the benefit of the Appellant and partly for the benefit of the children, they are prepared to act as trustees without calling for any remuneration or reimbursement of expenses associated with that trust. They make clear that they retain their claim to reimbursement of expenses that they have already incurred in carrying out administration of the estate.

142 In Luciano v Rosenblum (1985) 2 NSWLR 65 at 69-70 Powell J (as he then was) said:

143 That “broad general rule” has been approved by the Court of Appeal in O'Loughlin v O'Loughlin [2003] NSWCA 99.

144 It has been held that the principle is equally applicable to the position of a person who occupies the position of a de facto wife: Re Marcuola-Bel Estate; Marcuola-Bel v Thi Ly Tran [2005] NSWSC 1182 at [31]. Inevitably, when the statute calls for the court to make a decision about what is the appropriate provision in the circumstances of the particular case before it, the principle is not one of immutable application: Marshall v Carruthers [2002] NSWCA 47.

145 The Deceased had responsibilities to both the Appellant, and his children. The Appellant’s need for income support, for her own benefit and that of the children, in the several years after his death was such that she required all the available assets of the estate other than the Pinaroo Place property.

146 That leaves the question of what provision should be made concerning the Pinaroo Place property. Conferring on the Appellant and the children rights that were in the nature of rights of residence in a particular property could not adequately provide secure accommodation for them, because it was readily foreseeable that circumstances might make it desirable for them to live elsewhere. However, provided the Appellant had flexibility in the ordinary course of events to choose the living arrangements that were appropriate to herself and children, in my view conferring on her full title to the Pinaroo Place property was more than was needed to make adequate provision for her. There should be provision for more than one change of residence. With the objective of keeping the capital invested in a way that is secure but still likely to have capital appreciation, it is desirable to bias the order to favour keeping it invested in real estate. However, as a way of allowing for the contingency of unexpectedly large expenses of maintenance of the children, there should be facility to move to less expensive housing and use the resulting spare money for maintenance of the children. Concerning that at present unlikely event, consultation and co-operation between the Appellant and the Trustees would be required. I see that as being different to the Appellant being able, in the ordinary course of events, to choose where the family lived.

147 I would accept the Appellant’s evidence that, in the event that she were to enter another relationship, she would endeavour to protect the equity in any real estate that she had, for the benefit of the children. However, if the children are to have a secure source from which capital provision is eventually made for them, it would be undesirable for the rights of the Appellant and the children in that fund to be mixed with those of another person. I have some concern, also, about the possibility, inherent in her evidence quoted at [140], that she might seek to borrow against the real estate for the purpose of making investments. Such borrowing brings with it a risk of compromising the security of accommodation that it would be a prime objective of a wise and just testator to provide for his family. It is foreseeable, however, that there might be expenses of a personal or family nature, such as if there were to be a serious illness of the Appellant or one of the children, that might necessitate the mortgaging of the house. A wise and just testator would not inhibit that occurring.

148 In fashioning an order under the Family Provision Act, a court seeks to alter the provision that the testator has made to the minimum extent that is necessary to make proper provision for an eligible applicant. To the extent that it is possible for capital provision to be made the children, I see no need to alter the date at which the Deceased decided it was appropriate for the children's entitlement to capital provision to vest. In the presently likely event that Georgia survived to 21, and if that remains the date at which capital entitlement of children vests, the vesting will take place in November 2025. If the children were to receive a significant capital payment at that time, in an amount that was secured by the housing the Appellant then occupied, it would be necessary for the Appellant either to have saved enough by then to make the payment from her own resources, or else to undertake a mortgage obligation. At that time the Appellant will be aged 54. Even given that she has skills that are likely to be readily marketable, and by 2025 she is likely to have had some years in which she is not subject to the same inhibitions that she is now subject to in exercising her skills, that is fairly late in life for her to be taking on a significant mortgage obligation. The likelihood is that the cost of maintaining the children until they leave school or such tertiary studies as they might undertake will not be less, in real terms, than it now is, and may well be more. Even if the Appellant is able to take part in the workforce to a greater extent once the children are somewhat older, the ongoing expenses associated with the children will inhibit her ability to save. These factors limit, in my view, the extent to which it is practicable to make a provision that leaves the children with gifts that are as large as those that the Respondents submit are appropriate.

149 In considering the size of the provision that is made for the children, it is appropriate to bear in mind that the effect of applying Locke King’s Act is that the Pinaroo Place property was subject to mortgage obligations totalling nearly $320,000 at the time of the Deceased’s death. Thus, at the time of death, the value of the equity in the property that the will left to the children was of the order of $580,000. That amounts to somewhat less than $200,000 per child. Any consideration of the extent to which a court order results in the children receiving less than the will gave them needs to be made with that figure in mind. The submission made by the Respondents, that an order the court might consider, if it made any order at all, was to provide the children with an indexed $225,000 each, is in my view quite unrealistic. It does not make adequate provision for the Appellant, and actually increases the gift to the children beyond that made by the will.

150 YOUNG JA: I agree with Campbell JA, but wish to add the following additional matters.

151 In any Family Provision Act proceeding, it is a fundamental requirement that one first work out: (a) what are the assets of the deceased’s estate; and (b) how those assets devolve on his or her death. For the purpose of (b), one must construe the will and one must do this before one can proceed to consider whether the applicant has been left without appropriate provision; see Langley v Langley [1974] 1 NSWLR 46.

152 Unfortunately, in the instant case, it would seem that insufficient attention was paid by the lawyers for both sides as to what the will actually meant.

153 I agree with Campbell JA that as it would seem that on any of the major answers to the problems of construing the will, the basic result is much the same, there is little to be gained in seeking further submissions from counsel on construction issues.

154 The gift in paragraph 4 of the will strongly appears to be an executory devise. Because of the Statute of Wills of 1540, executory interests, ie, those interests which flouted the old common law rules as to the limitation of estates could be created without the intervention of uses. The fact that it was not recognised illustrates the weakness in not teaching the pre-1919 property law in law schools.

155 I have doubts as to whether s 36B of the Conveyancing Act is applicable because of cases such as Barclays Bank Ltd v Gillett [1950] Ch 102.

156 Had it been vital, I would have wished to look more closely at how far a gift to minor children who are under the guardianship of a mother allowed the mother to occupy the children’s house without liability to account. There is, to my mind, a fair argument that this is the law; see Countess of Bective v Federal Commissioner of Taxation [1932] HCA 22; (1932) 47 CLR 417.

157 The costs quoted seem far too high for a relatively simple case even one involving a failed mediation. A fortiori where the lawyers seemingly have not considered the construction of the will at the proper depth. Any costs assessor should look at the proposed costs with great care.

158 HANDLEY AJA: In this appeal I have had the advantage of reading the reasons for judgment of Campbell JA and those of Young JA in draft. I agree generally with their reasons, and on 22 December 2009 I joined with them in making orders which disposed of the appeal. This enables me to briefly express my reasons for joining in making those orders.

159 There is no need to repeat the facts which are fully set out in the reasons of Campbell JA.

160 The primary Judge found that, at the date of trial, the residuary estate which passed to the widow was worth some $211,453. This finding involved a number of factual errors recorded by Campbell JA (para [50]), and the primary Judge overestimated the value of the widow's own assets by approximately $100,000 (paras [55] -- [58]).

161 It seems that all parties below overlooked the effect of s 145 of the Conveyancing Act (Locke Kings Act) in relieving the deceased’s residuary estate of the burden of the first mortgage of $30,000 over the family home at 2 Pinaroo Place Lane Cove (the Lane Cove Property) and of its proper proportion of the second mortgage (paras [108] -- [115]). These adjustments substantially increase the size of the residuary estate and diminish the value of the Lane Cove property passing to the children.

162 Under the will the children are entitled to the Lane Cove property but there are no other assets in the estate which can be used to pay the debts under the first and second mortgages, maintain the property and meet the outgoings.

163 The widow will therefore have to use her own capital, including her interest in the residuary estate and her earnings, to make the payments under the first mortgage, maintain the house, pay the outgoings, and keep the family going. Currently her net earnings are not sufficient for this purpose and she has had to draw on her limited capital.

164 The executors have used $96,600 of their own funds to pay the balance of the debt due under the mortgage on the Rawson Street property, in meeting a call on the Telstra shares, and in payments under the mortgages on the Lane Cove property (para [78]). They are entitled to reimbursement for some of this amount from residue, and for the balance from the Lane Cove property devised to the children. If the executors cannot otherwise be reimbursed for their expenditure on the Lane Cove property they would be entitled to sell it in order to pay those executorial and administration expenses.

165 Although for practical reasons the widow would be compelled to maintain the Lane Cove property until the youngest child attains 21, and to maintain the children from her own assets and earnings until they are self supporting, she will not be entitled to reimbursement for these expenditures from any source at any time.

166 She would however be entitled to reimbursement for the amount of approximately $300,000 for the share of the second mortgage apportioned to the Lane Cove property but it is not clear that she would be entitled to interest on this amount during the minorities of the children.

167 On present indications when her youngest child attains her majority the Lane Cove property will be sold, and the widow will be left with very little in the way of assets apart from the benefit of her charge pursuant to s 145 of the Conveyancing Act. This amount would not be nearly sufficient, even with interest, to enable her to purchase a residence of her own without incurring a substantial mortgage debt.

168 In these circumstances the Judge’s "jurisdictional" finding that the widow had not been left without adequate provision for her proper maintenance cannot be supported.

169 This Court therefore had to exercise the discretion under s 7 of the Family Provision Act to determine the provision that should be made for the widow out of the estate.

170 I agree with the reasons of Campbell JA (para [145] -- [149]) for making the orders for further provision for the benefit of the widow that the Court pronounced on 22 December 2009.

Supreme Court of New South Wales - Court of Appeal

Clifford v Mayr [2010] NSWCA 6 (10 February 2010)