LEGALWISE 10 POINTS IN ONE DAY. 31 March 2010 WILLS & ESTATES PRACTICE UPDATE

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1 LEGALWISE 10 POINTS IN ONE DAY 31 March 2010 WILLS & ESTATES PRACTICE UPDATE 1. Update on Family Provision Applications - disentitling conduct / estrangement 2. Update on enduring powers of attorney 3. Review of NSW intestacy laws 1. FAMILY PROVISION APPLICATIONS There has been an increasing willingness on the part of legal practitioners to advise clients to make a family provision application in almost any circumstance because of a widely held view that the applicant will always get something. There has also been a common perception that an applicant s costs (including those of an unsuccessful applicant) are paid from the estate. Historically, costs in Queensland family provision applications have not been awarded on the traditional basis of costs following the event". 1 Instead the courts have considered whether the applicant s pursuit of the claim was reasonable. The common "rule of thumb" was that where an applicant was successful the costs of all parties would be paid on a solicitor-client basis from the estate and if the applicant was unsuccessful there would be no order as to costs. 2 This rule of thumb approach resulted in the residuary beneficiaries bearing the costs of the litigation as each step taken defending or pursuing a claim diminished the overall value of the estate. The Courts have recognised that unreasonable behaviour on the part of any party, for bringing or pursing claims which have no reasonable prospects of success, should lead to some costs sanction. Practitioners need to exercise a little caution when advising potential applicants as the Courts have disallowed costs for an unsuccessful applicant; ordered an unsuccessful applicant to pay costs; awarded costs against litigants in situations where the party has refused reasonable offers of settlement or made (or continued with) an application in circumstances where there was no real prospects of success. 3 1 UCPR R 681; McGrath v Queensland Trustees [1919] St R Qd 169; Re Joliffe [1929] St R Qd de Groot, J.K. & Nickel, B.W., Family Provision in Australia 3 rd ed., Butterworths, 2007 at Daley v Barton & Anor; Barton v Daley [2008] QSC 322; Underwood v Underwood [2009] QSC 107. one

2 There will be some family provision applications in which the claim is so unreasonable that the applicant is clearly unjustified in commencing the proceedings let alone prosecuting them to a conclusion. In such a case indemnity costs might well be ordered against the applicant. Daley v Barton & Anor; Barton v Daley [2008] QSC 322 Briefly, this case involved three inter-related proceedings brought by the deceased's son. Relevant to the issue of costs - a Calderbank 4 offer had been made by the executor of the estate on 18 and 22 January 2008 in an endeavour to settle all claims and was rejected by the applicant on 7 February 2008: 1. Contested probate of the will of 28 July The Court considered that whilst the investigation into the testator s capacity was initially justified and it was appropriate to commence the proceedings, it was not appropriate to continue the proceedings after 2 May 2007 when there was clear medical and lay evidence which indicated that there was in fact a compelling case for capacity to execute the Will. On the issue of costs the court considered the son should have discontinued the testamentary capacity proceedings when it became clear there was no reasonable basis to continue. The son s refusal to compromise was unreasonable. The son was ordered to pay the executor s costs on a standard basis from the date the Calderbank offer was rejected. 2. Family provision application by the deceased s 31 year old son. The son was successful in his application and received an award of $560, However the amount awarded did not exceed the Calderbank offer. He was ordered to pay the estate s costs on an indemnity basis from the date the offer was rejected. 3. Equitable claim in relation to ownership of a unit. The unit was held not to be owned by a family trust, the son s equitable claim failed. The usual rule of costs following the event applied. 4 Calderbank v Calderbank [1975] 3 All ER 333. two

3 Gill v RSPCA Many of you would have heard of the recent UK decision of Gill v RSPCA 5. This case involved an application by the deceased s only child, Dr Christine Gill. The applicant made a family provision application; she also claimed her mother s will should be set aside for lack of knowledge and approval of its contents and/or undue influence of the applicant s father. Further, she sought equitable relief based on a claim of proprietary estoppel. The applicant s parents made wills in 1993 leaving their estate to the survivor and upon the death of the survivor to the RSPCA. The applicant s father died in 1999 and her mother in The Court ultimately set aside the mother s will, thus triggering an intestacy. The Court held that even if the will had not been set aside the applicant would have been entitled to receive the family farm and the farming business pursuant to her claim based on proprietary estoppel. The court costs of all parties amounted to approximately 1.3 million ( 900,000 applicant; 400,000 RSPCA). During the course of the proceedings, the applicant had made an offer that would have left the RSPCA with approximately three-quarters of the estate. The RSPCA made two offers before trial. The first was an offer amounting to approximately 2% of the estate plus costs; the second was approximately 28% plus costs. The Court considered the RSPCA s reluctance to mediate the case was unreasonable, out of step with the expectation of the court and the underlying spirit of the modern procedure. On 5 February 2010, 6 Judge James Allen QC held that the RSPCA should pay most of the applicant s costs. His Honour s written judgement is not yet available. The RSPCA has released a statement saying it had acted in accordance with the deceased s wishes, as expressed in her will. Trustees of charitable trusts have expressed concern that the trustees will be caught between the legal duty to secure assets to which the charity is entitled and the threat of huge 5 Gill v Woodall & Ors [2009] EWHC B34 (Ch). 6 Reported by Norfolk, Andrew RSPCA ordered to pay lecturer's 1.3 million legal costs The Times 6 February three

4 legal costs being imposed for attempting to do so. On 6 March 2010 BBC on-line 7 reported that the RSPCA has lodged an appeal. The risk of an adverse costs order means it is imperative that clients are provided with realistic advice on prospects of success before making an application or before refusing an offer of settlement. An important factor to consider when advising your client is disentitling conduct and/or estrangement. There have been a number of cases in this area recently General approach to family provision applications The family provision legislation is a constraint on the general principal of testamentary freedom. Section 41 Succession Act 1981 (Qld) sets out the basis upon which an application in Queensland may be made. The Court does not have jurisdiction to rewrite the will in accordance with its own ideas of fairness or justice. 8 As confirmed by the High Court 9 in deciding an application the Court must consider a two stage process: 1. to determine whether the provision (if any) made in favour of the applicant is inadequate for the proper maintenance, education and advancement of the applicant (often referred to as the threshold issue or the jurisdictional question); and 2. if the Court finds that the provision was inadequate it must then consider what order for provision ought to be made. In considering the threshold issue, the Court considers the concepts of "need, moral duty" and "moral claim". However these concepts must not be looked at in isolation and the threshold issue involves an assessment of the applicant s financial position, the size and nature of the deceased s estate, the totality of the relationship between the applicant and the deceased, and the relationship between the deceased and other persons who have legitimate claims upon his or her bounty. 10 Justice Young has stated that it is not enough for an applicant to prove that he or she is an eligible person and that he or she needs more financial assistance. The Court must assess all Hughes v National Trustees, Executors & Agency Company of Australasia Limited (1979) 143 CLR 134 at Vigolo v Bostin (2005) 221 CLR 191 endorsing Singer v Berghouse No.2 (1994) 181 CLR Singer v Berghouse (1994) 181 CLR 201 at 210. four

5 of the facts and circumstances of the matter to determine whether the community would expect that a person in the position of the deceased ought to have made provision (or further provision) for the applicant. 11 As to a claim by an adult son, in Hughes v National Trustees, Executors & Agency Company of Australasia Limited 12, Gibbs J said: There are no rigid rules; the question whether adequate provision has been made for the proper maintenance and support of the adult son must depend on all the circumstances that is, on all the facts that existed at the date of the death of the testator, whether the testator knew of them or not, and all of the eventualities that might at that date reasonably have been foreseen by a testator who knew the facts. 11 Walker v Walker NSWSC 17 May 1996 Young J. 12 (1979) 143 CLR 134 at five

6 CHECKLIST FOR FAMILY PROVISION INSTRUCTIONS 1. Where are the assets located? If assets are held outside Queensland, consider who may be an eligible applicant in the State or Territory where the assets are located. Question of fact 2. Is your client an eligible applicant? Question of fact 3. What is the size of the estate? 13 Question of Obtain an inventory of the estate fact 4. What are the financial circumstances of the applicant and any competing claimants? Consider the age of the applicant, education, qualifications, work history, any promises made by the deceased to provide for the applicant, a summary of the applicant's assets, liabilities, income and expenses 5. What were the contributions of the applicant and those of competing claimants? Consider the ages and circumstances in life of the other beneficiaries. 6. What was the relationship like between the deceased and the applicant? Consider the nature and the duration of the relationship. 7. What was the relationship like between the deceased and the competing claimants? 8. What factors warrant the application? Evidence of the specific need which the deceased ought to have made provision for in favour of the applicant including evidence of the cost of meeting that need. Question of fact Question of fact Question of fact and morality Question of fact and morality Question of fact and morality 9. Is the provision adequate? Question of morality 10. What provision ought to be made. Question of morality 13 See Re May [2000] QSC 478 at [17] as to how the size of the estate may affect an applicant s claim. six

7 The new NSW family provision legislation 14 sets out a list of matters that the Court may have regard to in determining whether an applicant is an eligible person and whether provision (or further provision) ought to be made for them. (a) any family or other relationship between the applicant and the deceased person, including the nature and duration of the relationship, (b) the nature and extent of any obligations or responsibilities owed by the deceased person to the applicant, to any other person in respect of whom an application has been made for a family provision order or to any beneficiary of the deceased person s estate, (c) the nature and extent of the deceased person s estate (including any property that is, or could be, designated as notional estate of the deceased person) and of any liabilities or charges to which the estate is subject, as in existence when the application is being considered, (d) the financial resources (including earning capacity) and financial needs, both present and future, of the applicant, of any other person in respect of whom an application has been made for a family provision order or of any beneficiary of the deceased person s estate, (e) if the applicant is cohabiting with another person the financial circumstances of the other person, (f) any physical, intellectual or mental disability of the applicant, any other person in respect of whom an application has been made for a family provision order or any beneficiary of the deceased person s estate that is in existence when the application is being considered or that may reasonably be anticipated, (g) the age of the applicant when the application is being considered, (h) any contribution (whether financial or otherwise) by the applicant to the acquisition, conservation and improvement of the estate of the deceased person or to the welfare of the deceased person or the deceased person s family, whether made before or after the deceased person s death, for which adequate consideration (not including any pension or other benefit) was not received, by the applicant, 14 Section 60(2) Succession Act 2006 (NSW) seven

8 (i) any provision made for the applicant by the deceased person, either during the deceased person s lifetime or made from the deceased person s estate, (j) any evidence of the testamentary intentions of the deceased person, including evidence of statements made by the deceased person, (k) whether the applicant was being maintained, either wholly or partly, by the deceased person before the deceased person s death and, if the Court considers it relevant, the extent to which and the basis on which the deceased person did so, (l) whether any other person is liable to support the applicant, (m) the character and conduct of the applicant before and after the date of the death of the deceased person, (n) the conduct of any other person before and after the date of the death of the deceased person, (o) any relevant Aboriginal or Torres Strait Islander customary law, (p) any other matter the Court considers relevant, including matters in existence at the time of the deceased person s death or at the time the application is being considered Disentitling conduct Estrangement It is generally considered that the closer the relationship between an applicant and the deceased, the stronger the moral claim. Allegations of estrangement or conflict between the applicant and the deceased may have a significant impact on prospects of success. In fact Section 41(2)(c) Succession Act 1981 (Qld) 15 enables the Court to refuse to make an order in favour of an applicant whose character or conduct is, in the courts opinion, disentitling. A finding that conflict and/or estrangement was caused by an applicant will generally not be the sole reason to disentitle an applicant. The Court will consider the conduct in question in the context of: 15 Section 41(2)(c) Succession Act 1981 (Qld) The court may... refuse to make an order in favour of any person whose character or conduct is such as, in the opinion of the court, disentitles him or her to the benefit of an order, or whose circumstances are such as make such refusal reasonable. eight

9 1. The applicant s entire relationship with the deceased; and 2. Any other mitigating factors. In assessing a client's claim it is important to appreciate the court's view of the impact of disentitling conduct on the claim. The Court may consider that an applicant s moral claim is too weak to warrant an order when weighed against those of competing interests; or to reduce the quantum of provision ordered Parent v Child The Court accepts that some friction between parent and child is almost inevitable. The duty of a parent to provide for the needs of a child on the parent's death continues in spite of such disharmony. The legislation imposes an obligation on the Court to consider whether the parent's duty has been discharged. de Groot & Nickel state that an estrangement significantly weakens a claim. 16 The Court may consider the character or conduct of the child has been such as to disentitle the child to any (or any further) provision from the parent's estate; or it may simply refuse the child's claim. 17 However long periods of hostility or estrangement are not inconsistent with a successful application and the contribution of the testator to the estrangement is considered. 18 In deciding whether conduct is wholly or partially disentitling, the court will consider the conduct in question in the context of: 1. The applicant's entire relationship with the deceased; and 2. Any other mitigating factors. When acting for an estranged applicant it may be necessary to adduce evidence of: 1. The duration of the estrangement consider whether it was an estrangement without reconciliation; (repeated) attempts at reconciliation; or reconciled shortly prior to death; 2. Any psychological problems of the applicant at the relevant time(s) 19 consider the use of expert evidence to explain the applicant s behaviour; 3. The character and conduct of deceased; and 4. The circumstances of the estrangement - how and why the behaviour came about. 16 de Groots, J.D. & Nickel, B.W., Family Provision in Australia Butterworths, 3 rd ed., 2007 at p Kleinig v Neil [1981] 2 NSWLR 532 at Gorton v Parks (1989) 17 NSWLR 1; Wentworth v Wentworth (unreported 14 June 1991, Bryson J, NSWSC) 19 Dolman v Parker; McDougal v Rogers expert evidence was called to explain the applicant's behaviour nine

10 Although the estrangement may not justify the dismissal of the applicant s claim, other factors might lead to the application being unsuccessful e.g. the size of the estate and the claims of competing claimants Bare parenthood The leading authority on bare paternity for many years was the High Court decision of The Pontifical Society for the Propagation of the Faith v Scales. 20 That case involved an application by the deceased s 50 year old son who had had no contact with the deceased since he was 4 years old. The Court held that the deceased did not breach his duty in making no provision for his son on the basis that there existed the bare fact of paternity and no other mutual relation. 21 Since that decision there have been a number of decisions considering bare paternity: In Gordon v Parks 22 the deceased deserted his family after the birth of his fifth child. Contact was minimal and sporadic. The Court criticised the approach of Chief Justice Dixon in Scales case and instead regarded the bare fact of paternity of great importance in morality. The Court dismissed the notion that moral obligations arising from paternity do not exist if the parent fails to acknowledge his/her obligations. In Lo Surdo v Public Trustee 23 the deceased had given up the applicant for adoption and had no contact with the child for 23 years following which there was limited and sporadic contact. The claim failed because the applicant had only established the bare fact of parenthood. The Court was unable to conclude on the evidence presented that a relationship existed in any real way nor who was responsible for that situation. More recently, Nicholls v Hall 24 involved a deceased who had met his ex-nuptial son for the first time when he was 64 years of age and the son 36 years. They met at a BBQ and had a second meeting the following day. They never met again in person although they spoke on the phone 11 times over 9 years. The deceased left his $1.3 million estate to his three daughters. The Court at first instance considered the deceased's duty to provide for his three daughters was much higher than his duty to provide for his son for the following reasons: 1. The son had established little more than mere fact of paternity and did not have a close relationship with his father; 2. The son s lifestyle was comfortable; 3. The three daughters had lived with the deceased all their childhood lives and 20 (1961) 107 CLR 9 21 Ibid at p. 18 per Dixon CJ. 22 (1989) 17 NSWLR [2005] NSWSC [2006] NSWSC 1377; [2007] NSWCA 356; [2008] NSWCA 20. ten

11 had been in regular contact with him. The son appealed and the Court of Appeal awarded the son a one-sevenths share of the estate. The Court of Appeal considered the trial judge had erred in finding little more then mere paternity. The Court considered the following factors relevant: 1. The absence of provision for the son in his early years; although this was not the deceased s fault as he had no knowledge of the existence of his son; 2. That the applicant did search for and find his father and took steps to establish a relationship; 3. There was no suggestion that the failure of the relationship to blossom was the fault of the applicant any more than the deceased. Perhaps also relevant was the size of the estate from which an order could be made whilst still adequately providing for the three daughters. Even if a deceased did not know of the existence of a child - if the child had a strong case on other factors, a court could find that the child had been left without adequate provision Spouses The reported cases in this area generally deal with legal marriages and not de facto partnerships. This is due to the definition of spouse in the Queensland Succession Act 1981 (Qld). A separated de facto partner is not be able to meet the threshold requirement of having lived with the deceased for a continuous period of at least 2 years ending on the deceased s death (unless that de facto was able to meet the definition of dependent in Section 40 of the Act) and would therefore not be an eligible person to bring a family provision application. 25 The provisions of this section highlight the disparity between marriages and de facto relationships a period of separation which may otherwise be accepted in a marriage terminates a de facto partner s right to apply for provision. This position is best summarised by Justice Dutney: 26 De facto relationships are by nature fragile. The robust institution of marriage survives until formally dissolved by legal process, even though the parties are no longer a couple and exhibit none of the observable indicia of a domestic arrangement. It has been recognised, however, that the persistence of those indicia is fundamental to the continuance of a de facto relationship. 25 See Section 5AA(2) and Section 32DA Acts Interpretation Act S v B [2005] 1 Qd.R 537 at 546. eleven

12 Desertion is generally considered to be acts amounting to an intention to renounce the obligations of marriage. Desertion or separation are unlikely to disentitle an applicant where: 1. The deceased contributed to the cause (i.e. domestic violence); 2. The applicant made substantial contributions to the deceased s assets; 3. It was a long marriage and the period of desertion or separation prior to death was comparatively short. As in the case of parent/child estrangement, it would also be helpful, when acting for a deserted or separated spouse, to adduce evidence of: 1. The duration of the desertion or separation (repeated) attempts at reconciliation; 2. Any psychological problems of the applicant at the relevant time(s); 27 and 3. The character and conduct of deceased Disentitling conduct Conflict & character Mark Joseph O Donnell v Colleen Mary Gillespie & Anor 28 This decision involved an application by the deceased's eldest son. The net value of the estate was approximately $9.3 million. The deceased made no provision in his will made on 7 July 2006 for his son who had worked on the family farms for 25 years. There had been a falling out between the applicant and the deceased in The applicant attributed the falling out to discrepancies in the way in which the farms should be managed and the applicant s role in the management of the farms. There was also a claim made by the deceased's youngest son which was settled and is not subject to discussion in this paper. The son s claim was resisted on two grounds: 1. That the applicant had not satisfied the jurisdictional test that is that he had not established that provision should have been made from the estate for his proper maintenance and support. The Court considered the applicant s financial position as at the date of the testator s death. The applicant was not then in need of provision from the estate in the sense that he and his wife were able to support themselves. They were each employed and able to meet their expenses. They owned their house and had no significant debt and they had other real property which they were able to sell and use to invest for further income. They had some superannuation entitlements. The Court considered the deceased should have considered the general exigencies in life that the applicant (due to his health) may have to give up his work relatively early in life; that the income-earning capacity of either the applicant or his wife might be affected by having to care for the other; the need to support themselves into retirement. 27 Dolman v Parker [2005] NSWSC 327; McDougal v Rogers [2006] NSWSC [2010] QSC 22. twelve

13 2. That the applicant's character or conduct was such as to disentitle him to the benefit of an order. 29 The Court heard that the applicant had grown cannabis on the deceased's property during the 1980s. The applicant had been confronted by his father and following that confrontation agreed to stop growing the cannabis. The applicant s conduct in relation to cannabis is relevant not only to an issue under s 41(2)(c) Succession Act 1981 but also to this question whether provision ought to have been made. 30 Statements in the testator s own handwriting were admitted as evidence, not only of the deceased s wishes and beliefs but also of the facts stated in them. 31 The deceased stated that the applicant was involved in the drug trade although the statements did not demonstrate the basis of the deceased s knowledge. The Court considered 32 the decision of Kay v Archbold 33, wherein White J remarked that a testator is often better placed than the court to make a just assessment of all of the claims upon his or her estate, thereby providing a very sound reason for the court to be slow to depart from the testator s testamentary wishes. The Court heard that prior to the 2006 will, the deceased s wills of 1996 and 1998 provided substantial gifts to the applicant of some of the farms. The Court formed the view that whatever was the deceased s understanding of the applicant s involvement with cannabis, it was not so serious as to deprive him of those gifts for many years after the deceased learned that the applicant had been growing cannabis in The Court formed the view that the deceased s decision to disinherit the applicant by other circumstances and influences and not the applicant s involvement with cannabis. The Court was of the view that the applicant was not involved in the drug trade as alleged in the statements by the deceased and that the applicant s involvement with cannabis, whatever was its extent, did not detract from the applicant s substantial contribution to the maintenance and improvement of the farms. Justice McMurdo said that the applicant s conduct although discreditable, would not warrant the refusal of an order in his favour if an order was otherwise appropriate. 34 The Court considered the gifts in the deceased s earlier wills of 1996 and 1998 were an acknowledgement of the applicant s assistance in working the farms over a period of some 25 years and followed assurances given by the deceased that the applicant would be left the farms or part of them. 29 section 41(2)(c) Succession Act 1981 (Qld). 30 Hastings v Hastings [2008] NSWSC 1310 at [31]. 31 Evidence Act 1977 (Qld) s At [74]. 33 [2008] NSWSC 254 at [124]. 34 At 56. thirteen

14 The Court considered adequate provision was not made for the applicant's proper maintenance and support. The principal reasons were: 1. That the applicant s health revealed a real risk that he would be forced to resort to his savings to support his family and ultimately would be deprived of economic independence; 2. That the applicant had made substantial contributions to the deceased s estate with the expectation that he would be provided for. It is also relevant that the estate was a large one. The Court awarded an amount of $500,000 to the applicant. Killiner v Freeman 35 This case involved a claim by two of the deceased's four children. This paper considers the son's claim only. The deceased's will contained a statement that provision had not been made for the son as the deceased had given money to the son during his lifetime and that money had been spent by the son on gambling and drugs. The deceased alleged the son had physically assaulted him and been abusive and offensive. These threats included threats to kill the deceased which led the deceased to obtain an apprehended violence order against the son. The Court accepted that the son suffered a number of medical conditions, lived in humble circumstances and had a frugal lifestyle. He lived alone, with no assets and his serious physical and medical disabilities prevented him from working. The Court was satisfied the son was left without adequate provision. Turning to the second limb that of quantum of provision the Court considered the onus was on the son to establish the nature of any order for provision in the context of his financial and material circumstances and the size of the estate, as well as in the context of the competing claims upon the testamentary bounty of the deceased. The relationship between the son and his father was relied upon to establish that the son had been guilty of conduct disentitling him from the benefit of any order for provision an entitlement to which he might otherwise have established. 35 Killiner v Freeman [2000] NSWSC 263. fourteen

15 Master McLaughlin stated: "Garry presented as a pathetic creature, who, despite the financial benefits which he has received from his father and despite the various incidents of unfilial conduct of which he was clearly guilty, appeared, both medically and emotionally, to be one of life s losers. It is for just such a person that the exercise of the discretion of the Court should be available. It should be emphasised that an order for provision is not made as a reward for good conduct; neither is such an order (if otherwise justified) withheld as a punishment for bad conduct." 36 The Court considered the competing claims, size of the estate (approximately $630,000.00) and decided the son should receive a legacy ($80,000.00) sufficient to enable him some security of accommodation, together with a small fund which would enable him to maintain an independent lifestyle. The decision of Killiner v Freeman should be contrasted with Stewart v Murphy 37 where the applicant s claim was dismissed. The applicant was the deceased s former husband. The applicant painted a picture to the Court in his evidence of a close, harmonious relationship with the deceased. However, after consideration of all the evidence the Court found that there had in fact been a history of violence and drunkenness throughout the marriage. The Court heard that the applicant had hit, kicked and spat on the deceased; thrown ashtrays at her; broken her teeth and furniture; and beaten, cursed, frightened and intimidated her in public and in private. During the course of the hearing, the applicant was forced to admit that the evidence he had given in his first affidavit was deliberately false and given to obtain a financial gain from the deceased s estate. In dismissing his application the court considered: 1. The applicant had made no contribution to the deceased s property; 2. He had made intermittent and unsubstantial contributions to their joint daily expenses during the marriage; 3. It was not considered that the applicant was completely incapable of earning any income; 36 At [51] [52]. 37 [2004] NSWSC 569. fifteen

16 4. The applicant had poor eyesight, required dental work and had a heart condition, but otherwise was in good health; 5. The applicant had no secure accommodation. Although there was evidence suggesting that the deceased had also exhibited violent behaviour, such as shouting, spitting and scratching, and that she had abused drugs and alcohol the Court stated that however difficult or offensive the deceased's behaviour might have been at times there was no possible justification for the applicant to respond to the deceased with violent physical abuse and that such conduct would be viewed by the community as disentitling conduct. 38 The application was dismissed and the applicant ordered to pay the estate s costs. The recent decision of Pizzino v Pizzino & Anor 39 involved an application by an adult son for provision from his mother s estate. The deceased s will provided for a onehalf share of the estate to be divided equally between her son and his three children and the remaining one-half share to her daughter. The deceased's estate was estimated at $3.6 million. The Court was called to consider whether the son s gambling and substance abuse was disentitling conduct. The Court reviewed the application of the two stage process in determining a family provision application where the applicant is a spendthrift, alcoholic or gambler. The mere fact that an applicant has no assets or had a poor relationship with the testator due to past weaknesses does not preclude that applicant from endeavouring to satisfy the two stage process to obtain further provision from the testator s estate. 40 The applicant had no assets and significant debts, despite this he maintained a close relationship with his mother. The applicant had self-harmed in 2006, which cause significant anguish for the deceased. Justice Mullins found 41 that although involvement with illicit substances itself may, in some circumstances, amount to disentitling conduct, 42 the applicant s circumstances and behaviour were not sufficiently serious to be characterised as disentitling conduct. 38 At [41] [42]. 39 [2010] QSC Hunter v Hunter (1987) 8 NSWLR 573, At [64]. 42 such as in Hastings v Hastings [2008] NSWSC 1310 sixteen

17 The Court considered the applicant s behaviour needed to be considered in the context of the problems (gambling and substance abuse) he was dealing with. The Court was also satisfied that he had made genuine attempts to address his problems. The fact that the applicant had not made the best use of the financial assistance he had received from his parents in the past did not detract from the existence of his needs at the date of his mother s death. 43 The Court considered that a one-eighth share of the estate ($450,000.00) was not sufficient to allow the applicant to meet his liabilities, obtain accommodation and retain a small fund for future exigencies. The Court considered that the provision made for the applicant by the deceased was inadequate for his proper maintenance and support. The deceased s concern that her son would squander the estate to the disadvantage of her three grandsons (the applicant s children) plagued her consideration of the applicant s needs. A compelling factor in this case was the size of the estate. There were sufficient assets to enable the deceased to be generous to her daughter and to include the applicant and her grandsons under her will. The only clear guidelines that can be gleaned from the cases is that the Court will consider the applicant s conduct in the context of the applicant's entire relationship with the deceased together with any other mitigating factors. In preparing a family provision application where allegations of disentitling conduct may be raised, it is important to adduce adequate evidence to explain the applicant s behavior at the time. 44 There are no clear guidelines on how the conduct affects the quantum of the provision that ought to be made. This is a question, it seems, that can only be determined by considering the size and nature of the estate assets, the competing claims and the applicant s needs on a case-by-case basis. 43 At [61]. 44 Dolman v Parker [2005] NSWSC 327 and McDougal v Rogers [2006] NSWSC 484 where expert evidence was called to explain the applicant s psychological problems. seventeen

18 2. UPDATE ON ENDURING POWERS OF ATTORNEY The decision of Legal Services Commissioner v Ford, 45 sets out the strict obligations imposed on solicitors in assessing the capacity of a client. In this case the solicitor was found guilty of unsatisfactory professional conduct. The Court considered: the most striking example of that lack of care and attention is to be found in the form of Power of Attorney which [the solicitor] took with him [to the client s nursing home]. That document had been prepared by Mr Ford's secretary and she had left the paragraphs dealing with the actual appointment of the attorney incomplete. Certain boxes required to be ticked, in particular, the boxes for indicating what type of power of attorney was being made and the box indicating whether the power of attorney was to be limited in any way. The box indicating whether the attorney had the power to make decisions over financial matters was not ticked and the boxes indicating when the power of attorney for financial matters was to begin were also unticked, as was the question relating to the number of attorneys. When that was drawn to Mr Ford's attention, it is fair to say he candidly admitted the omissions created in his mind doubts about whether he had, in fact, gone through each of the matters in the power of attorney with [the client]. I am satisfied that those doubts were well founded. 46 The Tribunal found that the solicitor had failed to undertake an interview with the client in accordance with the Capacity Guidelines for Witnesses of Enduring Powers of Attorney 47 and that he failed to ensure section 41 of the Powers of Attorney Act 1998 was satisfied. The solicitor said that he did not follow the guidelines in hi own practice but his usual procedures and conduct achieved everything which the guidelines achieved. The Tribunal was of the view that the solicitor had failed to conduct appropriate inquiries to satisfy himself that the client fully understood the legal effect of the documents and was capable of executing them. Lexon Insurance has released a wills and powers of attorney risk procedure pack. The documents included in this pack attempt to address the shortcomings noted in the decision of LSC v Ford. Copies of the documents pertaining to enduring powers of attorney are set out as an Annexure to this paper. It is recommended that firms adopt the Lexon s forms as the minimum standard for firm file procedures in respect of wills and powers of attorney matters. 45 [2008] LPT At data/assets/pdf_file/0009/7569/capacityguidelines.pdf. eighteen

19 There is one further issue practitioners should consider when taking instructions for a power of attorney that is the appropriateness of the terms in the document. Section 32(1)(b) of the Powers of Attorneys Act 1998 enables a principal to provide conditions and limitations upon, and instructions about the exercise of the power. It is important to adopt the standard practice of clarifying the principal s requirements when taking instructions rather than simply completing the basic provisions of the standard form. Practitioners should: 1. explain to the principal that he or she can limit the powers given to an attorney and limit the duration of the power; 2. ask the principal what he or she really wants to do and why; 3. explain the content of the document and scope of the power to the principal once the documents have been drafted; 4. throughout the matter, keep written records of advice and explanations and the principal s responses and instructions. Some examples of the types of conditions, limitations or instructions clients might require are: 1. A limit on the power so that it is only operative once the principal loses capacity and a medical certificate to that effect is produced. (This clause should generally be coupled with a signed consent to disclose medical information to the attorney). The principal should be cautioned when contemplating use of this type of clause. A Doctor may not be prepared to sign a medical certificate where the principal suffers the onset of dementia but still has periods of lucidity. 2. Specifying in the power which assets or in what order the attorney is to deal with or sell, in the event that such action becomes necessary. This may be particularly important where the principal s will specifies certain assets are to go to specific people. 48 In Ensor v Frisby & Canning 49 the deceased principal s attorneys sold a property during the deceased s lifetime unaware of the contents of the principal s will. The property had been left to the attorneys in the will. The attorneys applied, pursuant to section 107 Power of Attorney Act 1998 for compensation from the deceased principal s estate. The executors brought an application seeking a declaration that the gift was not adeemed and for orders as to the disposition of the sale proceeds. The applicant s subsequently supported the executor s argument that the gift was not adeemed. 48 Although note s107 Powers of Attorney Act 1998 (enables a person whose benefit from a deceased principal s estate is lost due to a sale or other dealing by the principal s attorney to apply for compensation from the deceased s estate). 49 [2009] QSC 268 nineteen

20 In Re Viertel the issue was considered (prior to the introduction of Section 107 Powers of Attorney Act 1998) as whether an ademption is effected when a sale is lawfully made by an attorney who is ignorant of the terms of the principal s will, in circumstances where the principal was ignorant of the attorney s actions and when the intention of the principal to benefit the devisee never altered. 50 The Court was of the view that a gift of specific property cannot be interpreted as a gift of the proceeds of sale of that property, as the property had been sold pursuant to a power conferred by the deceased. The Court s view was that the deceased could have left the specific gift, or its proceeds of sale, by her will if that had been her intention. 51 The Court expressed some difficulty in justifying a departure from the words used in the will if those words are incapable of meaning anything other than a gift of specific property and not also of its proceeds of sale. However the Courts followed the approach in Re Viertel and recognised an exception to the rule of ademption of an unauthorised act of which the testator was unaware to extend to an act done under the authority of an enduring power of attorney where the principal is also ignorant of the action. The respondent, residuary beneficiary argued that Section 107 of the Powers of Attorney Act was consistent only with an ademption. The Court considered that Section 107 would apply where the principal has capacity at the time of the sale and is aware of the sale or where the proceeds of sale have been expended and are not readily identifiable. The Court held the gift of the property was not adeemed by the sale. The sale proceeds were identifiable and the court declared that the applicants were entitled to be paid those monies, an interest component less income tax on that interest. In Legal Services Commissioner v Richardson 52 a solicitor was found guilty of two charges of professional misconduct; one charge of unsatisfactory conduct and was removed from the roll of practitioners. One charge of professional misconduct arose in relation to dishonestly obtaining certificates of title through use of an enduring power of attorney. The solicitor was appointed as an attorney for Mr & Mrs Litherlands ( the Litherlands ) pursuant to two separate enduring powers of attorney. The Litherlands were long standing clients of the solicitor, they understood that they were granted the solicitor authority to act on their behalf whist they were overseas. Although they alleged they were not properly informed that they were in fact signing an enduring power of attorney. The document was witnessed by the solicitor s assistant. For the purpose of the charge against the practitioner there was no allegation that the powers of attorney were invalid. 50 [1997] 1 Qd R 110 at At [19]. 52 [2009] LPT 17 and [2009] LPT 26, Atkinson J. twenty

21 The solicitor said he had been directed by the Litherlands to execute various documents including: 1. An option agreement for the purchase of a property; 2. Notice of exercise of such option; and 3. Contract of sale and purchase pursuant to the exercise of the option. Some time after signing these documents (towards the end of November or early December) the solicitor and the Litherlands were involved in essentially what was a costs dispute which triggered the Litherlands directing the solicitor to deliver up all files and documents held on their behalf. The solicitor s retainer was terminated, although the solicitor continued to act for the Litherlands in the property transaction which settled on or about 14 December The Legal Services Commissioner alleged that: 1. on 2 January 2008 the solicitor lodged the enduring powers of attorney for registration without authority from the Litherlands; and 2. on 10 January 2008 the solicitor made an application to the Registrar of Titles for certificates of title to issue without authority from the Litherlands. The solicitor acknowledged that he did not have express authority from the Litherlands but that his actions were within the scope of his implied authority and not contrary to any express instructions provided to him. The Legal Services Commissioner also alleged that on 15 January 2008 the certificates of title issued to the solicitor. The solicitor denied that the certificates of title issued to him. He stated that the title deeds were issued to the Litherlands and were delivered to him by the Registrar of Titles. The solicitor refused to deliver up the certificates of title claiming a lien on account of unpaid fees. The solicitor established a sole director company on 4 January WLH Collections Pty Ltd to which he intended to assign the debt owed to him from the Litherlands as well as the benefit of his lien. He lodged caveats over the property claiming an equitable share or interest as mortgagee of an estate in fee simple. The solicitor decided not to assign the debt to WLH Collections Pty Ltd when the solicitor realised he could not assign the lien to WLH Collections. The caveats were requisitioned and subsequently a request to remove the caveats was lodged by the solicitor. By this stage the Registrar of Titles had sent notice of the caveats to the Litherlands who then sought legal advice. The Legal Services Commissioner alleged that the solicitor obtained the certificates of title when he had no authority to use the power of attorney to obtain them and/or that he knew or ought to have known that his personal interest in obtaining remuneration for services rendered was in conflict with his duty to exercise the powers of attorney bond fide and in the interests of the Litherlands. The Court relied on the attorney s acceptance which was signed by the solicitor acknowledging that he must exercise the power in accordance with the powers of attorney Act 1998 (Qld) and the Guardianship and Administration Act 2000 (Qld). This includes the twenty-one

22 duties to act honestly and with reasonable diligence 53 and to avoid entering into conflict of interest transactions unless authorised by the principal. 54 The Legal Services Commissioner did not dispute that there was a basis for claiming a lien over the title deeds but rather that it was improper and/or dishonest to obtain the title deeds for the purposes of claiming the lien. Whilst it might be considered that it was in the client s interests to obtain a paper title deed it was done with the intention of benefiting the practitioner in a situation where there was a conflict between the solicitor s own interests and those of his clients. 55 The Court found that the solicitor obtained the title deeds not because it was in the clients interests but because it was in his own. The solicitor breached his retainer; his duties under the Powers of Attorney Act in circumstances where he failed to make full disclosure and obtain instructions. He acted improperly and dishonestly. 3. A limit on the type of investments the attorney can make. 4. Enabling a family member/friend to continue residing in a property owned by the principal on the same terms and conditions in place prior to the principal s loss of capacity. 5. Section 17A of the Superannuation Industry Supervision Act 1993 (Cth) recognises the attorney of a member who has been appointed pursuant to an enduring power of attorney as eligible to act as a trustee in the event of the member s incapacity. If the principal has a self-managed superannuation fund instructions should be taken to whether the principal is satisfied for the proposed attorney to assume the role of trustee in the event of incapacity Enabling a family member/friend to purchase property at full market value A limit on the attorney s power so that, for example, real property cannot be mortgaged or a limit on the power of sale of real property while, for example, a certain relative is still living there. 8. Setting out that certain charitable donations, or gifts to certain people, be continued on a regular basis. 53 Section 66 Powers of Attorney Act Section 73 Powers of Attorney Act St [61]. 56 Katz v Grossman [2005] NSWSC Ede v Ede [2006] QSC 378 where an attorney sold a principal s property to the attorney s daughter. Although the attorney obtained valuations it became apparent that the sale was below market price. The Court held that the attorney had acted reasonably when he acted in accordance with an example provided on the power of attorney instrument; took legal advice and acted in accordance with it. However it was not appropriate for the attorney to be given relief from personal liability pursuant to section 105 Powers of Attorney Act 1998 (Qld) without making good the loss suffered by the principal through the attorney s breach of duty where that loss equates to a corresponding benefit to the attorney s daughter. twenty-two