Which case won?

The case for the daughter
  • The provision my father made for me in his will was inadequate, and I have a right to claim against his estate for adequate provision, even though he died many years ago.
  • I have a recurrent history of ill-health with severe depression and hypertension. At 57 years I am not well placed to resume my business career. I do not own a home and my superannuation entitlement of $400,000 is not enough to provide for my old age.
  • The executor says that I should have made a claim at the time of my father’s death. However, I justifiably delayed out of respect for my father and stepmother. My father and I had a close and loving relationship and I understood how important it was to him to provide for my stepmother in his will. This is particularly so given that she was 27 years younger than him and likely to survive him by a substantial period. I respected my father’s concern for my stepmother’s wellbeing and so didn’t challenge his will while she was alive.
  • I also delayed due to a desire to maintain a good ongoing relationship with my stepmother. She consistently assured me over the years that my father’s personal effects and property belonged to me, saying things like “when I pass away everything will come to you and [your sister]”. I trusted her and I had no wish to put her through unnecessary litigation.
  • When my stepmother died without honouring her word, I acted promptly to bring proceedings to ensure that my father’s wealth rightly goes to his children.
  • Although the property in my father’s estate was fully distributed shortly after his death, legislation gives the court power to designate a notional estate over property held by a person “as a result of a distribution from the estate of the deceased person”. In this instance, S’s executor holds the proceeds of sale from S’s home unit “as a result of the distribution” of the matrimonial home from my father’s estate. But for that distribution, there would be no proceeds of sale for the executor to hold.
  • The court should deny the appeal and uphold the lower court’s ruling.
The case for the executor
  • The daughter cannot legally bring a family provision claim against my sister’s estate since she is not eligible under the relevant legislation to do so. Why then should the court allow her to do so “through the back door” by seeking to designate my sister’s estate as belonging to the daughter’s long dead father?
  • Any application against the father’s estate for further provision should have been made within the prescribed time limit. The daughter should not now be rewarded with an extension for her delay, particularly given that there would be a severe impact on other beneficiaries if further provision is made. After such a long period of delay these beneficiaries would have reasonably presumed their entitlement was not subject to litigation.
  • In any event, to get an extension of time, the legislation requires the daughter to show “sufficient cause” why the application was not made within the required time period after her father’s death. A delay of 14 years is unreasonably lengthy and not one in which “sufficient cause” can be justified.
  • Nor is it sufficient cause that she delayed to preserve her relationship with my sister or in reliance on any assurances my sister may have made. Though my sister may have indicated that she would make some provision for the daughter, she never said anything that guaranteed entitlement to any property. Further, she met any moral obligation she might have had to the daughter by leaving her a legacy of $100,000.
  • The daughter is of the opinion that her father’s wealth should revert to his children. However, her father was very clear that this wasn’t his intention. He even wrote a statement at the time he made his will explaining that he was not leaving more to his daughters because they were gainfully employed at the time, both were in good health and financially comfortable.
  • Further, although the court has power to designate a notional estate over property held by a person as a result of a distribution from the estate of the deceased person, that power does not apply here. I do not hold any property as a result of any distribution from the estate of the daughter’s father. My sister sold the matrimonial home that she inherited from him and purchased another property with the proceeds of sale. This subsequent property was then sold and I hold the proceeds of sale as executor. The daughter is wrongly attempting to claim that this subsequent property belonged to the estate of her father despite him never having owned it.
  • The court should grant my appeal, thereby protecting my sister’s estate.

So, which case won?

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Expert commentary on the court's decision

“As this case shows, claims are subject to time limits and other considerations. If a parent dies leaving a spouse who is not their parent, the child who is intending to make a claim for provision would be advised not to wait for the parent’s spouse to die.”
Court of Appeal finds in favour of executor

In Haertsch v Whiteway [2020] NSWCA 133 the NSW Court of Appeal upheld the appeal of the executor, Adrian Haertsch, overturning the Supreme Court’s decision and dismissing the daughter, Elizabeth Whiteway’s, claim for a family provision order.

Notional estate governed by section 24 of Family Provision Act

In determining whether the property in the stepmother, Stephne’s, estate could be designated as the notional estate of the father, Donald, the court referred to section 24 of the NSW Family Provision Act 1982 (Act).

This Act was applicable to Donald’s estate because he died in 2003, before the commencement of Ch 3 of the NSW Succession Act 2006 in 2009.

If the criterion in section 24(a) is met, then under section 24(b) if the court finds that “as a result of a distribution from the estate of the deceased person, property became held by a person”, it can make an order designating as notional estate of the deceased person such property as it may specify, being property which is held by the person.

Primary judge construes section 24(b) as inviting chain of causation inquiry

The primary judge construed section 24(b) as inviting a “chain of causation” inquiry, leading to a conclusion that the property in Stephne’s estate could be designated as the notional estate of Donald.

The primary judge found that as a result of the distribution from Donald’s estate, property became held by Stephne, and in due course by her brother Adrian in his capacity as her legal personal representative. Further:

That “property” became (and remains) held by Adrian in his capacity as the legal personal representative of Stephne “as a result of a distribution from the estate” of the deceased, [Donald], no less than it became held by Stephne “a result of a distribution” from [Donald’s] estate. Stephne’s death did not, of itself, break the causal link between the deceased and the property. “Property” emanating from the deceased’s estate, identifiably, included the deceased’s house at Burradoo [i.e. the matrimonial home], the proceeds of sale of which ($900,000) funded the purchase of Stephne’s home unit at Bowral (for $740,000), the net proceeds of sale of which by her estate have yet to be distributed.

Court of Appeal rejects primary judge’s construction of section 24(b) and rules no notional estate

The Court of Appeal rejected the primary judge’s construction of section 24(b).

The court instead construed the section as identifying a single event (ie the distribution from the deceased’s estate), and inquiring whether, as a result of its occurrence, and nothing else, property became held by a person. The court said that “if a finding is made to that effect, the power [under section 24(b)] is enlivened in respect of property of that person”.

On this construction, the court said that “the persons whose property may be designated notional estate by reason of s 24 are those who have ‘received a benefit from [the] deceased estate’”.

Adrian Haertsch was not such a person. He did not become an owner of property as a result of a distribution from Donald Whiteway’s estate, and therefore he was not a person within paragraph 24(b) whose property might be designated as the notional estate of Donald Whiteway.

Court has discretion to grant extension of time for making of family provision claim

The court also considered whether the extension of time for the making of an application should have been granted.

Section 16(1)(b) of the Act provided that claims should be made within 18 months of the death of the deceased. (Under section 58 of the Succession Act 2006, which replaced the Family Provision Act, this time limit was reduced to 12 months.)

The court had discretion to extend that 18-month period if “sufficient cause is shown for the application not having been made within that period”.

The court highlighted that an important consideration in whether to exercise its discretion is the prejudice suffered by other beneficiaries by reason of the delay.

Primary judge erred in exercising discretion to grant extension

The court disagreed with the primary judge’s finding that sufficient cause had been shown by the daughter, Elizabeth, to justify an extension of time.

The court did not accept that Stephne’s assurances to Elizabeth justified Elizabeth’s expectation that when Stephne died, she would receive a greater provision from her estate than she actually did.

The court also rejected the primary judge’s conclusion that granting an extension of time would cause no material prejudice to Stephne and the persons who claim under her.

In the court’s view, the primary judge failed to recognise the prejudice caused by departing from Stephne’s expectation in life as to the ownership of her property and her entitlement to make testamentary provisions from that property for friends and family.

Family provision claims involving notional estates are unpredictable

Family provision claims on deceased estates are often complex. Those involving potential notional estates are usually even more unpredictable.

The result of litigation may not always be in the interests of the claimant or competing beneficiaries and the outcomes may sometimes be unexpected.

For those reasons, expert legal advice should be obtained by any intending claimant for further provision, as well as by executors and beneficiaries who may be in a position of defending a will.

Do not wait until step-parent dies to make claim

As this case shows, claims are subject to time limits and other considerations.

If a parent dies leaving a spouse who is not their parent, the child who is intending to make a family provision claim would be advised not to wait for the parent’s spouse to die.

Rather, it is best to make a family provision application within the prescribed time limit, which varies from state to state.

In NSW the current time limit is 12 months from the date of death of the deceased, while in Queensland it is nine months from the date of death.

In Victoria, South Australia and Western Australia the limitation is six months from the grant of probate, whereas in Tasmania it is only three months from the grant of probate.

So that is when the clock starts ticking.

For more information about family provision claims, please see Family provision claims in NSW – spare us the details and curb your expectations.

NOTICE: This article is accurate as at the time of publication and does not constitute legal advice. Please see our legal notices page for more information. Information related to coronavirus can be outdated very quickly.

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