Notional Estate | What Is a Notional Estate? A man's home is his castle - but is it his widow's?

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What Is a Notional Estate?

There is a well-known saying that “A man's home is his castle”.  First coined by Frenchman Henri Estienne in his work “The Stage of Popish Toyes” (1581), it was subsequently quoted with the force of legal authority by English judge Sir Edward Coke in 1644.  It has even been enshrined in the United States Bill of Rights as “The right of the people to be secure in their ... houses ... against unreasonable searches and seizures shall not be violated.” Most living Australians were probably first formally introduced to the concept by the popular and (as far as Aussies go) iconic 1997 movie “The Castle” in which the principle was put to the test in relation to Darryl Kerrigan’s battle to stay in his home against all odds.

However, after “a man” dies, what happens then to the status of his home in terms of the entitlement of his surviving spouse to continue to live there? What rights does a surviving spouse have to expect to be able to remain in thematrimonial home against all challenges (in an estate planning context), particularly after having enjoyed a long relationship over many years?

The question must therefore be asked:  A man's home is his castle – but is it his widow’s?

These days the question could just as easily relate to a de facto couple or to a same sex couple or to a male widower.  However, the statistical reality in terms of the relevant cases over the last few decades (plus the fact that women do tend to outlive men) is that the question has mainly been considered in the context of a surviving female spouse.

Traditionally the law has imposed a moral duty upon a person to adequately provide for their surviving spouse, in particular, with respect to their security of accommodation.  Back in Luciano v Rosenblum (1985) 2 NSWLR 65, Powell J at 69-70 stated the time honoured position thus:

“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 contingencies.”

This principle has guided the Courts in terms of making decisions in relation to estate disputes in most family situations.  As recently as last year, it seemed that the principle continued to be accorded equal weight in blended family relationships.  In Steinmetz v Shannon [2019] NSWCA 114, the deceased left an estate worth $6.8m.  The estate consisted of real estate, superannuation, a real estate business and a liquor outlet business.  In his will, the deceased left his second wife of 28 years (the appellant in the case) an indexed annuity of $52,000 for the remainder of her lifetime, with the rest of his estate going to his financially independent adult children of his first marriage.  It was observed that the annuity had a present value of $880,000.

The widow made a family provision claim, which was rejected by the trial judge who concluded that the widow had not been left without adequate provision for her proper maintenance.  In holding that the indexed annuity would enable the widow to continue to live in her home unit in the same town and with the same facilities, friends and connections, the judge noted that:

“She will not be in a position to live extravagantly, but she did not do so when married.  She will not have the benefits, the security, the holidays, the comforts and the additional financial advantages that she enjoyed during her relationship with the deceased.  But as a matter of law, should she be entitled to expect more?”

However, on appeal, the Court said instead that, in the absence of competing claims that could not be otherwise fully met out of the estate, the appropriate question was why should she be entitled to less? In particular, adequate provision for proper maintenance is not limited to the provision of financial necessities.  Further, Brereton JA commented that:

“to leave a 65 year old widow reliant for the rest of her life on quarterly payments by the children of her deceased husband’s first marriage, rather than placing her in control of her own resources, is in this day and age not an appropriate form of provision for a widow who is well and truly capable of managing her own affairs and when there have historically been tensions between her and at least the first respondent.  However reliable the respondents might be, this form of provision effectively obliges her to have an ongoing relationship with them, and to trust them to perform the obligation, and does not afford her the independence and self-reliance which, according to today’s community standards, a widow should have.  It is not only rigid and paternalistic, but demeaning and controlling.”

In the end, the widow was awarded an amount of $1.75m (plus her legal costs in both cases) in place of the annuity provided under the deceased’s will.  This sum was calculated to include the amount of $1m to provide for accommodation in Port Macquarie (essentially for her to be able to purchase her own “castle” – our words, not the Court’s), and it was noted that the objective value of the deceased’s house at the time was the same amount.

On the face of it, this case cemented the principle that the deceased had a moral duty to provide amongst other things for the secure accommodation of their surviving spouse for the rest of their life – until a more recent case this year appeared to turn that principle completely on its head.

Cowap’s Case 2020 – What’s the deal?

In Cowap v Cowap [2020] NSWCA 19, the NSW Court of Appeal refused to allow the appeal of a 91 year old widow whose eldest son (who was 64 and had a disability) managed to persuade the primary judge in his family provision claim in October 2019 against his adoptive father’s estate to claw back his own biological mother’s house (which she inherited from her deceased husband by legal right of survivorship as a joint tenant) and effectively force it to be sold so that the son could buy a house of his own.

On the face of it, the fact that the Supreme Court could be persuaded twice (both at first instance and subsequently on appeal) that a widow’s own biological son should be able to turf his own mother out of her own home of 32 years, makes a complete mockery out of the moral duty of the deceased to provide for the secure accommodation of their surviving spouse.

Note that the family was also a “blended family” in the sense that the son was not the biological son of the deceased, but rather had been legally adopted by the deceased when he married the son’s mother 57 years ago.  One can only imagine that the deceased would be turning in his grave if he knew what his adoptive son did to his own elderly mother!

However, on closer inspection it can be seen that the case is an example of the application of the proviso to the core principle moral duty expounded by Powell J back in 1985, which he prefaced with the ominous words “It seems to me that, as a broad general rule, and in the absence of special circumstances, ... ” (emphasis added).

The special circumstances that applied in Cowap v Cowap to persuade the Court to overturn the time-honoured rule included, amongst others:

• The extent of the son’s physical and cognitive disabilities and poor health, which resulted from two heart attacks which he suffered in 2016 after the death of the deceased;
• The clear need for the son to have permanent accommodation that had the security of tenure of ownership (as opposed to rental accommodation) and for such accommodation to be built to his specific needs;
• The acknowledgement that, notwithstanding the mother’s close attachment to her matrimonial home, the fact that she was 91 years of age and the son was only 64 years of age with perhaps many more years of life ahead of him meant that his interests in having the home dealt with as notional estate to meet his claim outweighed the mother’s  desire to remain in the home, in circumstances where she would eventually have to leave (with the Court saying that it was unnecessary to speculate what the reasons for that might be and when that might occur, but such a departure was inevitable);
• The fact that the figures presented in relation to the son’s claim for provision of $600,000 to enable him to build a modular kit home ($270,000), land ($250,000), a car ($20,000) and an amount for contingencies ($60,000) were unchallenged, and that if the home did have to be sold the mother would still be left with enough to buy a new home with similar characteristics to her existing home on the outskirts of Canberra; and
• The fact that the mother’s income would be minimally altered if the home had to be sold.

It should also be noted that the case illustrates the power of the “notional estate” provisions in NSW.  Although there is a three year rule in relation to prescribed transactions, the fact that the house had been originally purchased and held for over 32 years as joint tenants between the deceased and the mother was absolutely no impediment to the Court’s finding that it constituted notional estate for the purpose of satisfying the son’s claim.

Lessons from the case

At the end of the day, Cowap v Cowap is an object lesson that family provision claims turn on their specific facts, and notwithstanding that usually the need to make adequate provision for the proper accommodation, maintenance and advancement of a surviving spouse is paramount (as was the case in Steinmetz v Shannon [2019] NSWCA 114), the Court will make its own decision based on its own weighting of the relevant factors.

So as far as that old saying goes, we can probably now say that “a person's home is their castle – until they (or their NSW joint tenancy owner) dies”.  But from then on, it’s all up for grabs.

For expert legal advice and assistance with all types of wills and with issues such as those considered in this article, please contact us on 02 8296 6266.

For more information about the above article, please contact:

Brian Hor

Special Counsel – Estate Planning & Superannuation

brian@townsendslaw.com.au