Archive for the ‘Family Provision’ Category

Inappropriate

September 11, 2014

 

Inappropriate

That’s the caption beneath this photo, of two angry young people, published with a story about them by Geesche Jacobson in the Sydney Morning Herald in April 2011.

It starts relating how, the day their father died in July 2010, the brother and sister:

were told his former girlfriend intended to claim against his $1.5 million estate, even though his will named his two children as his only beneficiaries.

The sister:

said she was upset and angry. ”It felt so inappropriate … My brother and I haven’t had time to mourn our father.”

That was nine months ago and so far the estate has spent $22,000 in legal fees.

…..

”I think we will win the case. It is just unfair that we will have to go through the whole process,”

[the sister said.]

By the time Justice Lindsay handed down his reasons for judgment in March 2013 (after a trial in the second half of 2012) he found that an amount equal to more than half the fund of $1,407,257.03 or thereabouts available to meet the competing claims (comprising a net estate valued at about $635,718.72 together with superannuation of about $771,538.31) had been spent on lawyer-client costs.

There had been two failed mediations and the brother and sister had joined the proceedings as defendants themselves in addition to the executors. They did this because they were not happy with the settlement that the executors had reached with the “former girlfriend” and her children at one of the mediations.

They lost, though the “former girlfriend” didn’t get everything she asked for (at the trial she asked for enough to buy a flat and a bit extra).

To be fair to the brother and sister, his Honour found their father had concealed from them and their mother the true state of his relationship with the “former girlfriend” and even actively misled them about it. She was not, as in his words they contended, “nothing more than a gold-digging welfare cheat.” The judge held that she was in a de facto relationship with the deceased [sorry: that’s lawyer-talk in these cases which is hard to avoid – I’m sick of calling him “the father,” don’t want to use a pseudonym, and don’t want pronoun confusion to suggest the judge was shacked up with her] and had been since 2004. She and her four children from a prior relationship had also been dependent upon and members of the same household as him. This made them eligible for an award from the estate.

She was awarded $175,000; her children $50,000 between them; plus costs.

The brother and sister were left to pay their own costs and repay their mother with what was left over after the executor’s costs were paid from the remainder of the estate.

On my very rough reckoning, that probably is an outcome of brother and sister – not more than $500K, “ex-girlfriend” and her children – $225K less the shortfall between what they had to pay their lawyers and what they recovered from their costs from the estate – maybe they got $175K by the end between them, and lawyers – $725K or more.

That’s inappropriate.

But what I think is really inappropriate is Geesche Jacobson’s original partisan story. How did it come to be written?

Family Provision 2

September 27, 2012

I’ve posted about Family Provision before.  I still think of it as that though now it is simply “provision” under the Succession Act. I’m using acro-pseudonyms in this post to protect the young, more from search-generated publicity than anything else.

The funeral service for MM, who died on 4 November 2009, was held at St Peter’s Watson’s Bay on 11 November 2009.

The memorial notice described him as:

Late of Watsons Bay.
Loving son of
P, loving father of X, cherished brother and brother-in-law of Y and
Y2, Z and Z2, fond uncle of [etc].

Aged 57 years

That’s an early death these days.  MM died in his sleep at his home. of cancer of the throat  There was a big turn-out, and an article in the Wentworth Courier.  MM had been a teacher at Paddington Public School for two decades and by all accounts (not just in the article) had been an inspiring one.  Dozens of former students packed his funeral, the paper reported.

Obviously, dying of cancer of the throat is not the nicest of endings, but there were other respects in which MM’s final years had been less than ideal.

In 2006 he and his wife had separated. In 2007 they were divorced.  She got primary custody of their son, X.  MM saw X occasionally but eventually this stopped after an incident in 2008 in which X, then aged 15, stabbed him in the arm.  X, for his part, alleged that MM had assaulted him.  Criminal charges were brought and interim AVOs taken out.  Those charges and the AVO were ultimately dismissed on 23 April 2009 when X simply did not turn up to court on the appointed day.

During this time, Family Court property proceedings were still afoot.  MM’s health must have already been poor as his brother Z was appointed litigation guardian to conduct his case.  A settlement was reached in March 2009. It does not appear to have involved MM undertaking obligations towards either his former wife or his son.  He had been a primary school teacher; she had for some years been the CEO of Sydney Airport Corporation and before that an executive for the Macquarie Bank airports venture.

On 4 September 2009 MM made a fresh will leaving his estate to his two brothers, Z and Y (who was his twin).  He also wrote a letter on that day explaining why he did not leave anything to X.  He referred to the stabbing incident and its aftermath.  He further wrote:

3. Since that time I have made occasional attempts to restore relations by text messages on his birthday and regarding his grandmother’s serious medical condition. He has rejected my approaches clearly expressing the wish to have nothing more to do wish me.

4. X is an only child and his mother is CEO of Macquarie Airports and extremely wealthy. X has been entirely maintained by his mother since his relationship with me has broken down. I anticipate that his mother will meet all X’s needs in life until he is independent and that he will ultimately inherit a very significant interest from her estate.

5. I do not believe that anything I might have left to X would make any different to his life.

MM’s estate consisted chiefly of his house in Watson’s Bay, and superranuation which could either be paid to the estate as a lump sum or (at X’s election) paid to X at about $250 per week until X turned 25, which would be in 2018 or until he stopped undertaking approved studies if that was later.

MM’s former wife, KM, commenced proceedings in the Supreme Court as X’s tutor for provision (“Family Provision”) for X out of his father’s estate.  After X turned 18, an order was made enabling KM to continue as X’s tutor even though he was now of age.

The matter finally came to trial before Associate Justice Macready.  By that stage the house had been sold and the likelihood was that after legal costs on both sides there would be an estate of about $2.1 million.

At the time of the trial, X lived with his mother.  He owed her $14,000 which she had lent him to buy a car.  Apart from the car, he had golf clubs worth $2,000 and was part-way through a course at Bonny Doon golf course in pursuit of his ambition to become a professional golfer.

X (or perhaps more accurately, his mother, KM) sought an order that he be be provided with the whole of MM’s estate.  The following needs were put forward as being needs for which X should be provided:

(a) the purchase of a home unit in the Darling Point area in the range of prices between $775,000 to $1,975,000;

(b) costs of purchase and fit-out of $100,000;

(c) a bigger car of $21,000-22,000;

(d) golf expenditure and clothing expenditure of $13,500 per annum;

(e) running costs of the car of $10,000-11,000 per annum;

(f) food and groceries of $15,000-16,000 per annum;

(g) golfing fees to bring him up to professional status of $50,000;

(h) counselling costs.

This sort of list is often referred to in the trade as a “wish list” – not that this is particularly a term of art.  It certainly seems extravagant and you have to wonder at the idea of someone of that age undertaking a diploma to become a professional golfer, but the estate was large, X was the only eligible person (not even Y, MM’s twin, was an eligible person) so that the only competing consideration was the respect that the court should pay to to the testator’s wishes.

The reference to counselling costs is in part because quite apart from his parents’ divorce, X’s upbringing had not been an easy one.  He spent his first five years in an orphanage and arrived in Australia with no education and no English.  He had had behavioural and learning difficulties at school and a psychiatrist mentioned “impulsive behaviour and history of aggressive behaviour when provoked.” Unless his sporting ambitions came good, it was unlikely that X would be able to earn an income commensurate with the lifestyle to which he was accustomed.  Apart from sport, X’s employment prospects would at best be in the hospitality industry or some other manual work

The defendants, MM’s brothers, conceded that X was an eligible person under the relevant legislation (now the Succession Act) and that as adequate provision had clearly not been made for him (given that he had some provision should be made for him. They proposed that X receive one third of the estate.  Essentially their line was that X had rejected his father (when MM had texted him about his MM’s mother’s declining health, he had replied “Never text me again. I am trying to get on with my life.” – admittedly he can only have been 15 or 16 at the time) and that X’s mother was more than able to provide for X’s welfare and was likely to leave him a sizeable inheritance.

Associate Justice Macready did not accept either of these arguments.

As to the estrangement, he found that it was for a relatively short period.  “It was a difficult time” but about a week before MM’s death, X had visited him (with a friend – Macready AsJ makes no comment about that though you do have to wonder) for about half an hour and made some kind of rapprochement.  The breach between X and MM was not such that his Honour would reduce or decline provision on that account.

As to the wealth of KM and the prospect of a sizeable inheritance, anything that she might leave on her death was likely to be a good while off yet, and she was not obliged to provide for X while she was alive now that he was an adult.   MM had a responsibility to provide for his son out of his estate and the comments in para 4 of his note were “an attempt…to abdicate from the
responsibilities.”

His Honour ordered that X receive a legacy of $1.1 million.  This was based on $850,000 for a flat in the eastern suburbs (but not necessarily Darling Point or the like), $50,000 for costs and fit-out, $12,000 for a new car (he commented that X could trade in the present one), $63,500 for the remainder of his golfing course and a buffer (actually, by my calculations, about $124,500) to give him some years to establish himself as a golfer or alternately follow some other path. He assumed that X would then take the pension under his father’s superannuation.

There is remarkably little argument as to support this – for example, his Honour did not deduct any amount to take into account the superannuation.  It looks very much as though he has simply decided to give X about half and let him take the super.

After costs, the likely effect of this is that each of the brothers will receive about $500,000 from MM’s estate.  That’s $200,000 less each than they had proposed, though they each also stand to receive about $360,000 from their mother’s estate (an amount which is presumably increased because MM did not survive his mother to take a share).

On reflection, the outcome is not particularly surprising.  Misconduct in the young is less likely these days to count as what was once called “disentitling conduct” and even when it sometimes counted for more (in the days of the bifurcate jurisdiction in the Supreme Court of the two M[a]c Associate Justices –Laughlin and – -ready) Associate Justice Macready was always the AsJ less inclined to take that approach.  For some years there has been a developing theme of attempting to rescue children from the fallout of divorces when the time comes for either testamentary or family [now under the Succession Act] provision.

It was probably impossible for MM to exclude X from sharing in his estate, even if, at the time and as part of the Family Law property settlement (when MM’s death was probably on the fairly near horizon) some express and substantial settlement had been made by KM for X’s benefit.  Still, you can understand why the brothers might have dug their heels in, and not simply because they wanted the money for themselves.   Why shouldn’t KM have put her hand in her pocket now and settled some money on X, rather than run a court case to take it from them out of the estate of MM after all that had happened?  If you’ve had to park a car at the airport recently, you’d probably think she could easily have afforded it.

Family Provision

June 23, 2007

Years ago I read a comic legal novel where a character, in a struggle against impure thoughts, tried to govern these by thinking about “Testator’s Family Maintenance” (or TFM).  The assumption was that this was the most unsexy aspect of law imaginable, and that contemplation of it would inevitably subdue any incipient concupiscence.

TFM is now known in NSW as the Family Provision Act (FPA).  It may not be sexy, but it brings people to court who, absent divorce or some tortious misfortune, would never expect (and could never afford) to be there.

And what usually brings them there is fighting with their siblings over their parents’ estate.

Prior to the nineteenth century there were legal restrictions, at least in relation to land, to how you could leave your property by will, although these were relatively easily circumvented by the wealthy with proper legal advice.  In English law these were then replaced by absolute freedom of testamentary disposition.  The original impetus of Family Provision legislation, which was first introduced in New Zealand at the end of the nineteenth century and spread to Australia and elsewhere shortly after, was to protect widows and children against the testamentary caprices of the husband and father.  Its motivation had something in common with the first-wave feminism which underlay temperance movements of the period.

As recast in the present law, if you are an “eligible person” you can apply to the court to:

“order that such provision be made out of the estate … of the deceased person as, in the opinion of the Court, ought, having regard to the circumstances at the time the order is made, to be made for the maintenance, education or advancement in life of the eligible person”

In effect the court can rewrite a will in favour of “eligible persons” according to what it thinks a person’s will should have said if it were being written now (bearing in mind that wills are often made many years before a person dies and by the time the court considers the order the situation may have changed even further).  If there isn’t a will, it can do the same thing to vary the distribution which the law otherwise provides for in that case.

At first, courts operated according to a relatively narrowly defined orthodoxy as to what provision should have been made, using as their yardstick the “just and wise testator.” In general, the concentration was on provision for widows, children, and unmarried daughters. Even as the classes of eligible persons expanded, they took into account that the paterfamilias was entitled to use his will making power to reward the filial and to admonish or rebuke (and hence hopefully to keep in line) the unfilial or black sheep who had commited “disentitling conduct.”

Gradually, the classes of eligible persons and the range what is encompassed by “maintenance, education or advancement in life” have expanded. Judges are liberally less inclined to take any view on filial or unfilial conduct and in particular are reluctant to wade into the rights and wrongs of the behaviour of competing claimants. However, this disdain for moral minutiae is not shared by family members themselves for whom these matters are hardly minutiae and whose views are also naturally affected by their interest, one way or the other, in the outcome.

Because the discretion of the court is so widely cast, it can be difficult even for lawyers to predict the outcome of contested claims for family provision. Even if a prediction can be made, it will be even more difficult for family members to accept this. Children who have cared for their parents in their old age find it hard to accept that other, often long estranged, children will get an order in their favour. Children who have never caused their parents grief will rankle at the thought that the improvident or incompetent sibling who has only ever caused the family grief or who has, in their eyes, spent a lifetime sponging off the parents, will get yet more from the estate at their expense.

In these cases, one party will be defending the status quo and hence the interests of the principal beneficiaries. Unless that party behaves unreasonably, they will usually have their legal costs paid in full out of the estate. The claimants, if they are successful, will also probably have their costs paid out of the estate (though not necessarily in full). If claimants already have an entitlement to the estate, in effect they will end up paying their costs and possibly the costs of the person defending the status quo out of that entitlement if they lose. But even if they win, the pot of what will be left will be depleted by costs one way or the other.

The situation is ripe for a try-on by almost any family member with any kind of need. As parties run up legal costs, they can actually strengthen their claim that they need to be provided for simply because they now have to pay these costs – a bit like that scene in “Blazing Saddles” where the sheriff takes himself hostage and threatens that if he is attacked “the nigger gets it.” In the case of a typical small estate (just mum and dad’s house) there could well end up being very little left for anybody if the parties cannot step back from their views of what is right and wrong and settle the case so that, rather than the lawyers, someone in the family at least will get the money.

There have been some attempts to reform the law, and I think there is some new legislation on its way, but I am not sure if they will ever succeed.

The reason for this post is that recently I participated in a mediation in an attempt to settle a dispute over what, in the eyes of the lawyers, is a “modest estate.” It didn’t settle. Now I ask myself, did it fail to settle because I was not nasty enough to the other side? Did it fail to settle because I didn’t do enough to scare my own client about what my client stands to lose if the case goes ahead?

Of course there were other lawyers involved, and there was a court-appointed mediator who was the worst mediator I have ever seen (he was a court officer and at least he was free, but the parties got what they paid for), and there were the parties themselves, so I’m not the only one to blame. Still, it’s disappointing to see these people heading for a train wreck which is going to cost at least one of them and probably both of them quite a lot more money when neither of them has any money to spare. Even though some of that money might be coming my way, I wish I could have stopped it.