The New South Wales Court of Appeal recently handed down the interesting family provisions decision of Steinmetz v Shannon [2019] NSWCA 114. The principal issue on appeal was whether the annuity given by the deceased to his widow (‘the Appellant’) under his will was adequate provision for the appellant’s proper maintenance and advancement in life.
Introduction
Under section 59 of the Succession Act 2006 (NSW), the court has the power to interfere with the provision made under the will concerned if provision for an eligible applicant (eg spouse, former spouse, de-facto, child or dependent) is inadequate for his/her proper maintenance, education or advancement in life.
Facts of the Case
Geoffrey Steinmetz had two adult children of his first marriage. He married his second wife Gayle Steinmetz in late 2011, having been in a de facto relationship with her since 1988. The couple remained financially independent during their marriage, with their assets largely kept separate, although Geoffrey did pay for their mutual entertainment, holiday and household expenses. Gayle had also provided him with full-time care over a period of 15 years, during which Geoffrey had suffered much ill health.
On 19 September 2016 Geoffrey made his last Will in hospital, when he was about to undergo a life-threatening operation. His son-in-law, who was a solicitor, drafted the will on his instructions. Under this Will, the children of Geoffrey’s first marriage were appointed as the executors and trustees.
Geoffrey later passed away, leaving behind an estate valued at approximately $6.8 million.
In his Will Geoffrey left his wife all of his personal items and the contents of his house in Crescent Head. Subject to this specific gift and a pecuniary legacy to his godson, Geoffrey left his two children the residue of his estate. This gift was made conditional upon an annuity to his wife Gayle of $52,000 per annum (by way of quarterly payments) for the remainder of her lifetime (the ‘Annuity’). The trial judge observed that the Annuity had a present value of $880,000.
An earlier Will had been executed by Geoffrey in 2013, where more generous provision was made for his wife.
Following the death of Geoffrey, the widow Gayle made an application for orders for family provision under section 59 of the Succession Act 2006 claiming that the Will did not make adequate provision for her. At the time of the hearing, the widow valued her independent assets at approximately $700,000. She had some significant assets in addition to her residential property, including a superannuation fund, funds in bank deposits and shares of a relatively small value. She was, however, living frugally.
Decision at First Instance
At first instance trial judge Pembroke J dismissed the widow’s application, ruling that the Annuity provided adequate provision for her proper maintenance. In reaching this conclusion, Pembroke J noted the Annuity would enable the widow to continue to live in her home with an expected annual surplus of approximately $34,000.
Decision on Appeal
The main issue on appeal was whether the Annuity adequately provided for the widow’s proper maintenance and advancement in life. All three judges set aside the primary judge’s order, noting adequate provision had not been made for the widow.
In making this decision, the majority held that Geoffrey’s moral obligation to his wife should take preference over what the community would expect him to do (ie community standards). Moreover, s 59 of the Succession Act 2006 should be applied according to its terms, and not confined by notions of reluctance to interfere with testamentary freedom.
The Court held the widow was capable of managing her own affairs. This was a significant finding, as this meant it was not appropriate for the widow to be reliant on quarterly payments to be made by Geoffrey’s children for the remainder of her life. In this regard, it was relevant that there had ‘historically been tensions’ between the widow and at least one of Geoffrey’s children. Brereton JA acknowledged that the Annuity would unduly oblige the widow to have an ongoing relationship with Geoffrey’s children.
It was necessary for the Court to consider the particular circumstances of the case, including ‘the size of the estate, any competing claims, the applicant’s conduct and the applicant’s relationship with the deceased’. Therefore, regard was to be had to factors such as the care the widow had provided Geoffrey over many years, the considerable size of the estate which was ample to meet all competing claims, and the desire on behalf of the widow to relocate to Port Macquarie for medical treatment (as she suffered from significant health issues).
Brereton JA and Simpson AJA ordered the provision of a $1,750,000 legacy to the widow from Geoffrey’s estate, in lieu of the Annuity provided for under the Will. Although, White J believed a provision order in the amount of $1,500,000 would have been more appropriate.
All three judges agreed that annuity payments made up until the appeal should be regarded as interim maintenance. Therefore, such payments were not required to be repaid or brought to account.
Conclusion
This case demonstrates that an annuity provided under a will, to be paid by children of a first marriage, may not be adequate provision for the proper maintenance and advancement of a widow.
If you have been left out of a Will or inadequately provided for, call us today to speak to our friendly team.
