Prickly statutory will for disabled child compensated millions

A Limited v J [2017] NSWSC 736

A Ltd v J (No 2) [2017] NSWSC 896

A Ltd v J (No 3) [2017] NSWSC 931

In a somewhat novel situation, an application for an urgent statutory will was brought before the Supreme Court of NSW on behalf of a child aged 13. The child had been awarded $8.5 million because of birth complications, and remained severely disabled, but faced the real prospect of not surviving imminent surgery.

The application was brought on an urgent basis because of impending surgery and deterioration in the health of the child under s 18 of the Succession Act 2006 (NSW) (QLD s.21).

The plaintiff managed the child’s estate pursuant to an order made in the Protective List. The first defendant “N” was the child’s mother and the second defendant “N” was the child’s father.

There was no dispute that the child never had capacity. The medical evidence was the child was stable and surgery may be postponed a day, however, on surgery there remained the risk that it may trigger bleeding, and infection culminating in death. The medical evidence was that the health complications were not isolated to the surgery and the child was at constant risk of death.

The impetus for the statutory will was to avoid the effects of intestacy and splitting the estate equally between the divorced parents. The child’s parents separated in 2010 and the mother who was the carer, stated that the father had not taken any real interest, had rarely seen the child over the years and had not provided for the child.

The father was notified about the application and the court accepted from his counsel without affidavit material because of the time constraints, what his evidence would be, namely that he did not contest the mother cared for the child, but given the opportunity he would have given more material or emotional support to the child, but this had been constrained by the marital breakdown.

The settlement monies were not all in the estate because there was money in superannuation, which was not before the court. The remaining estate was worth about $3.2 million, of which $1.4 million was a house in the child’s name, which the mother and other siblings lived. The mother’s version of the will, proposed that the house and certain other property be left to her, and then after payment of debts and testamentary expenses the residue be shared equally between herself and the six siblings.

The father opposed such an apportionment. The judge adjourned the matter briefly to see if the parties could reach an agreement, which they could not. The plaintiff and father submitted that the residue of the estate be divided one third to the mother and father each, with the balance to the siblings. The mother submitted the father should receive 5% and the balance shared equally between the mother and the siblings.

Robb J determined:

[56] I advised the parties of the course that I proposed to take, heard submissions from the parties, and then, in brief ex tempore reasons given on 31 May 2017, determined that the appropriate percentage to be inserted in relation to the gift to the father was 15%. That had the effect that the mother would receive 42.5%, and the siblings would share equally in the remaining 42.5%.

[57] I do not propose to expand at length upon the reasons given in the ex tempore judgment for determining these percentages. It is sufficient to say that I made an evaluative and intuitive judgment as to what I thought objectively N would reasonably have decided, had he been capable of doing so, as to the appropriate shares in his estate to be received by the members of his family. In doing that I balanced the considerations that led Palmer J in AB v CB [2009] NSWSC 680 to exclude the teenager’s estranged father from participation in the estate, against those that led the same judge in Re Elayoubi [2010] NSWSC 1004 to include a provision for the estranged father. I also recognised the force of the observation made by Lindsay J in Secretary, Department of Family & Community Services v K (above), at [81], where he said that the “Court must be careful not to be overly judgmental about personal faults within a family, and how such faults may impact on family relationships”. I acknowledged, however, that I did so having made allowance for the fact that the father had not had an opportunity to put any evidence before the Court, and that there is always a danger in the Court acting solely upon the evidence of one party to a failed marriage concerning the conduct of the other party.

The matter returned later before her Honour Ward CJ for a new statutory will. The new will sought to:

  • Amend clause 2.3, conferring power on the trustees under the will to adjust the proportions of shares of the residue in cl 2.2, to take into account the superannuation, life insurance or death benefits to the mother / father and two siblings under the age of 16 years living in the home, who may fall within the definition of dependant within the meaning of Section 10 of the Superannuation Industry (Supervision) Act 1993 (Cth);

 

  • Adjust the father’s share to be equal to the siblings share;

 

  • To provide for certain testamentary trusts.

 

The further evidence, including the mother’s evidence and that of the siblings, was the mother was resentful of the father and reluctant to make concessions as to the father’s historical contributions. However, the siblings’ evidence was more balanced about the time spent and contact with the father. Nevertheless, the “inescapable conclusion” was the mother was the primary carer, had the most significant relationship with the child, followed by the siblings.

Her Honour considered the authorities and in particular Re Fenwick, where Palmer J said (at [132]) that:

The best interests of an incapacitated person and of those having a proper claim on his or her testamentary bounty are the objects of the jurisdiction which the Court exercises under Pt 2.2 Div 2 of the Succession Act. It is a remedial and protective jurisdiction and is, accordingly, not governed by the rules of adversarial litigation. In other words, the Judge is not a referee; rather, the Judge is to endeavour to rectify a problem which is affecting people’s lives, in the best possible way.

Her Honour was satisfied that the father only had a very limited relationship with the child and that it was “highly unlikely” from a practical point that the father would establish a close relationship with the child. Her Honour accepted in the words of Palmer J in AC v CB (at [42]), that “for whatever reason” the Father does not now have day-to-day involvement in the Child’s care or emotional wellbeing (and has not had for a considerable time since the separation much involvement in that care or emotional well-being).

On that basis, her Honour accepted the mother’s proposal of sharing the residuary with the father and siblings:

[63] Those are the circumstances in which I considered that there was a fairly good chance that the proposed apportionment of residue put forward by the Mother’s proposed will reflects what a reasonable person, in the position of the Child, would do to recognise the respective claims on the Child’s testamentary bounty of the Father on the one hand and the siblings on the other. In other words, I was of the view that a reasonable person would not attach a greater significance to the Father’s claim for a share of the Child’s testamentary bounty (by reference to his contribution to the Child’s welfare in the early years of the Child’s life) than that of the respective siblings (by reference to their on-going emotional support for the Child and the physical care and assistance they have rendered during the Child’s life). Indeed, as I expressed in the course of the hearing, a reasonable person in the position of the Child but having testamentary capacity might well have formed the view that the whole of the estate should be left to the Mother, who has provided such all-encompassing care and support for the Child in circumstances which have no doubt involved an enormous emotional and physical toll on her own well-being.

As to the superannuation, her Honour ordered:

[71] In the circumstances, my view was that there should be an adjustment so that, as nearly as possible, having taken into account whatever the determination of the superannuation payout should be, the respective residuary beneficiaries will maintain, to the extent possible, that proportion of the estate, notionally including the superannuation payments as set out in the residuary provisions of the will.

[72] In those circumstances, it was my view that the will propounded by the plaintiff should be amended in order to require the trustees of the will to make such an adjustment, but to make it clear that it is only to the extent that that is arithmetically possible, having regard to whatever the determination of the superannuation trustee may ultimately be.

Dealing with the testamentary trusts, her Honour accepted the need based on the evidence of Mr Cunich that they would be appropriate in circumstances “where the estate is comprised of significant assets; where there are beneficiaries who are vulnerable for any reason and there is a risk that they will not be able to manage their inheritance, whether short-term or long-term; and where a beneficiary is young and may have, in the future, domestic relationships or a marriage which may or may not be long-lasting.”

Her Honour considered the elements in s.19 of the Act (s.23 QLD) and was satisfied on the same basis as Robb J as to the nil capacity of the child and that it was reasonably likely in the sense there is a “fairly good chance” that the distribution in the new will would accord with what a reasonable person would do, faced with the circumstances of the child.  Similarly, her Honour was satisfied with the elements in s.22 of the Act (s.24 QLD).

Her Honour concluded if there were any doubt, that it was not appropriate to apportion blame, but her Honour was satisfied that someone in the child’s position would not have elevated the father above the share of the siblings.

As to costs, the plaintiff’s costs allowed on an indemnity basis and the balance of costs reserved. On hearing costs of the defendants at a subsequent date, her Honour ordered the parent’s costs be paid out of the estate, given the value of the estate and that it would not impact on the child’s financial position, care and wellbeing on a solicitor/client (standard) basis. Her Honour refused to order indemnity costs on the basis each of the parent’s submissions had an element of self-interest.

 

David Cormack – Brisbane Barrister & Mediator

 

 

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