Court of Appeal considers testamentary freedom v family provision legislation

20 March 2020

In Steinmetz v Shannon [2019] NSWCA 114, the Court of Appeal allowed an appeal from a decision dismissing a widow’s claim for provision, and ordered the appellant to receive a legacy of $1,750,000, in lieu of an annuity of $52,000 for her lifetime (present value $880,000), from an estate of $6.8 million.

The Court also found that s.59 Succession Act is to be applied according to its terms, and not confined to notions of reluctance to interfere with freedom of testation.

The Court further found that insofar as it is necessary to resort to concepts of ‘moral duty’ or ‘community standards’ as a measure of proper provision, moral duty is preferable.

Evidence of the hypothetical exercise of discretion or evaluative judgment conferred on the Family Court of Australia and Federal Circuit Court under s79 Family Law Act 1975 (Cth) in an application for property adjustment orders before the deceased’s death, and how such judgment could be determined, is not appropriate evidence in claims for family provision orders, and is ‘not one to be encouraged’.

Section 59 provides inter alia:

  1. The Court may, on application under Division 1, make a family provision order in relation to the estate of a deceased person, if the Court is satisfied that:
    1. the person in whose favour the order is to be made is an eligible person, and
    2. at the time when the Court is considering the application, adequate provision for the proper maintenance, education or advancement in life of the person in whose favour the order is to be made has not been made by the will of the deceased person, or by the operation of the intestacy rules in relation to the estate of the deceased person, or both.
  2. The Court may make such order for provision out of the estate of the deceased person as the Court thinks ought to be made for the maintenance, education or advancement in life of the eligible person, having regard to the facts known to the Court at the time the order is made.

White JA found it was not correct to equate what was adequate provision for the appellant’s proper maintenance, with a need for provision of financial necessities. In the Court below the appellant’s wish to move (from Crescent Head to Port Macquarie) was seen as a preference rather than a need, but White JA found that the appellant’s preference for her accommodation if it were ‘soundly based then it would inform the Court as to what the appellant’s “proper” maintenance required.’

Having regard to the size of the estate ($6.8 million) which was ample to meet all competing claims, the provision of an indexed annuity of $52,000 was manifestly not adequate provision for the appellant’s proper maintenance, having regard to her moral claims on the estate as his de facto partner or wife for 28 years, including 15 as his carer.

As regards guidelines for widows’ claims, and for claims by other eligible claimants, these cannot be elevated to inflexible rules but are always subject to the consideration of the circumstances of each case, such as size of the estate, any competing claims, applicant’s conduct, and relationship with the deceased.

Whilst reference to ‘community standards or expectations‘ have been referred to in past decisions, White JA found no utility in invoking a community standard or expectation against which the adequacy of provision is to be judged, and both he and Brereton JA prefer the concept of ‘moral duty‘ instead. Community standards or expectations are not one of the factors specifically identified in s.60 (2) Succession Act that the Court might consider in determining whether to make a family provision order and the nature of such order. However, the notion of moral obligation is found in s.60 (2) (b) (“the nature and extent of obligations or responsibilities owed by the deceased person to the applicant” etc).

In the course of the decision, consideration was given to the view that the deceased was the best person to assess the appellant’s claim on his testamentary bounty, and that he made a considered judgment as to what was appropriate provision for her. However, whilst it is correct to observe respect should be given to the testator’s judgment if it can be seen he has duly considered the claims on the estate, the courts can interfere pursuant to s.59 if the provision made for the claimant is less than adequate. Where it can be seen the testator was capable of giving due consideration and did so, considerable weight should be given to his testamentary wishes.

It is not however determinative. Section 59 Succession Act does interfere with testamentary freedom. Further, the legislation requires the adequacy of provision to be determined at the time the Court is hearing the application, not as at the time the testator made his will or at his death. In making the assessment as to whether adequate provision for the proper maintenance, education or advancement in life of the applicant has been made, a wide range of matters are to be taken into account, including freedom of testamentary disposition.

It is well established that under s.59 the court does not ask whether the will was fair, and does not have a power to adjust entitlements on that basis. ‘Section 59 confers on the Court power to interfere with testamentary dispositions or entitlements on intestacy only to the extent that it considers that adequate provision has not been made for the proper maintenance, education or advancement in life of the applicant.’

This article was written by Michael Henley, Partner and Christine McPhillips.

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