Inheritance disputes – 5 more important lessons from recent case law

The interpretation of wills and the management of inheritance disputes is relevant to so many people in our community. We highlight here the key lessons arising from recent decisions. As always, our team is available to assist in how these cases apply to individual situations.

1. Legal impact of adoption on inheritance disputes

A recent Court of Appeal decision, Daley v Donaldson [2022] NSWCA 96, looks at the legal impact of adoption on an inheritance dispute.

The case involved a family provision claim on the deceased father’s estate by Mr Glenn Daley, the biological son of the deceased. The defendant executrix was Ms Dawn Donaldson, the biological daughter of the deceased.

The claim was settled at a Court ordered mediation. However, the executrix refused to sign off on the settlement because she claimed she was under a misapprehension. The primary judge refused to make orders giving effect to the settlement. As a result, the deceased’s son sought the leave of the Court to appeal on a number of grounds.

The main problem in proceeding with the settlement was that at the time the settlement was agreed, the executrix did not know that Mr Daley had been formally adopted many years ago by another person. This raised the legal issue of whether Mr Daley’s proper adoption meant he was no longer an ‘eligible person’ and so entitled to make a family provision claim on his deceased biological father’s estate.

In a clear judgment, Justice of Appeal Leeming referred to sections 95 and 97 of the Adoption Act 2000 (NSW) and section 109 of the Succession Act 2006 (NSW). After acknowledging a textual error in section 95(3) and previous case law reading the intended operation, the appeal of Mr Daley was dismissed.

The prior adoption of Mr Daley had the legal result that he no longer came within the definition of ‘eligible person’ in section 57(1)(c) of the Succession Act. Therefore, Mr Daley was not entitled to make a family provision claim on his deceased biological father’s estate.

2. COVID remote Will execution procedure incorrectly followed

The COVID-19 crisis resulted in the government introducing remote witnessing regulations to ensure people in isolation could still sign important documents such as Wills and Powers of Attorney, via audio visual link (AVL).

Many documents were signed and witnessed pursuant to the regulations.

The pandemic began to ease but there was significant community support for remote witnessing via AVL to continue with appropriate safeguards. The remote witnessing option would be available in addition to the traditional in person meeting to have documents signed and witnessed.

In NSW, the Electronic Transactions Amendment (Remote Witnessing) Act 2021 amended the Electronic Transaction Act 2000 to permit ongoing remote signing and witnessing via AVL as an option.

A recent Victorian case highlights the importance of correctly following the remote witnessing law. Failure to do so could lead to an inheritance dispute and result in unnecessary additional legal costs. The principles behind the Victorian law are similar to the principles behind the NSW law – remote witnessing with appropriate safeguards.

The Victorian case is Re Curtis [2022] VSC 621. It is a helpful case that clearly states the strict remote signing and witnessing requirements. In that case, the Will was not executed in accordance with the remote signing and witnessing procedure. However, Justice McMillan admitted the Will to probate as an informal will, as that was considered to be in the best interests of the estate.

The Victorian case also raised the benefits, provided all participants consent, to the making of an audio-visual recording of the remote signing and witnessing. The benefits including having other available evidence to support the probate application.

3. Will interpretation inheritance dispute

One cannot underestimate the precision required for writing a Will. The use of the wrong word, the wrong tense or errors in the ownership or control of assets can lead to costly inheritance disputes about the proper interpretation (construction) of the Will.

A recent Will interpretation case dispute was Middleton v Schofield [2022] NSWSC 1454.  Justice Robb delivered his judgment in this case on 27 October 2022.

The executor named in the deceased’s last Will was the deceased’s accountant and financial advisor. The Will was dated 30 August 2018. The date of death was 3 March 2020. Probate was granted to the executor on 6 May 2022.

The Will interpretation legal proceedings were commenced on 8 December 2020. The first practical point to note is the delay to the administration of an estate by a Will interpretation inheritance dispute – the Court hearing took place between 11-13 April 2022 and the Court judgment was handed down about 2 years and 8 months after the date of death.

The second practical point to note is that any genuine Will interpretation dispute where the interpretation issue is unclear and uncertain will almost certainly result in the significant legal costs of the parties to the dispute being paid from the estate.

The judgment of Justice Robb is a helpful reminder of the general legal principles relating to the proper interpretation (construction) of Wills ­­- see paragraphs [14] – [24] and the operation of section 32 of the Succession Act 2006 NSW - see paragraphs [25] – [27]. Finally, the judgment refers to the lawyer that drafted the Will, her evidence, and the lack of complete and timely files notes - see paragraphs [103] – [124].

4. Legal Costs are Always a Risk

Legal costs will always be a significant risk in inheritance disputes.

Some parties to the dispute may suffer an adverse costs order/result. The beneficiaries of the estate will almost always have their entitlement reduced by the costs associated with the inheritance dispute legal proceedings.

Two recent cases focus on the law and rules relating to legal costs in a Court inheritance dispute. The ultimate costs order/result is difficult to predict given the Court discretion which is exercised after considering the unique facts of each inheritance dispute.

The first case is Ballam v Ferro (No 2) [2022] NSWSC 1358. The case was decided by Justice Hallen on 10 October 2022. It was a case to determine what costs orders should be made by the Court following the earlier hearing and determination of Probate, family provision and later separate legal proceedings relating to the estate of the late Rosario Maiorana (Ballam v Ferro [2022] NSWSC 1200).

The 25-page written judgment of Justice Hallen is a very useful recap of:

• the general costs principles that are considered by the Court at [52]-[71]

• the costs principles that are considered by the Court in Probate proceedings at [72]-[80]

• the costs principles that are considered by the Court in family provision proceedings, including where Offers of Compromise are served in the proceedings in an endeavour to obtain a more favourable costs outcome, at [96]-[114].

The ultimate costs orders reflect how complicated and uncertain the issue of legal costs can become in Court inheritance disputes.

The second case is Williams v Williams (No. 2) [2022] NSWSC 1419. The case was decided by Justice Slattery on 19 October 2022. It was a case to determine what costs orders should be made following the earlier hearing and determination of family provision legal proceedings relating to the estate of Ioan Noel Williams ([2022] NSWSC 711).

In Court legal proceedings, parties to an inheritance dispute often try to mitigate the significant risk of an adverse costs order by making without prejudice settlement offers except as to the issue of legal costs. The desired consequence of making such an offer is to put the other party at risk as to a costs order if it does not accept the offer and the hearing results in the party doing worse than what it was offered.

Offers to settle Court inheritance disputes can take different forms. The offer can be a formal Offer of Compromise in accordance with the Court Civil Procedure Rules. The offer can also be made in accordance with the well accepted principles in Calderbank v Calderbank [1975] 3 All ER 333 or offer can be a combination of both.

The offer in the case was a Calderbank offer. It was not accepted. The defendant took these further proceedings to seek a more favourable costs order because its Calderbank offer was not accepted and the plaintiff did worse at the Court hearing. The Defendant’s proceedings failed for factual reasons that included it was reasonable not to accept the particular Calderbank offer.

Justice Slattery noted the legal principles applicable to Calderbank offers as well as the Court’s discretion in family provision matters. At paragraph [19] and [20], his Honour said:

19.The principles that apply to the assessment of Calderbank offers are well settled.  A party seeking an order for indemnity costs based on a Calderbank offer must persuade the Court that the other party’s refusal to accept the offer was unreasonable:  Evans Shire Council v Richardson (No. 2) [2006] NSWCA 61 (at [20]).  The considerations relevant to determining whether a refusal of a Calderbank is unreasonable were set out in Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344 (“Miwa”).

20.In applications for family provision orders under the Succession Act, the Court has additional “liberality and discrimination” in considering whether to exercise the discretion to override the usual rule in the assessment of a Calderbank offer: Chapple v Wilcox [2014] NSWCA 392 at [138]-[139] and Salmon v Osmond [2015] NSWCA 42 at [174].

5. Where it All Goes Wrong

The case of Panagopoulos v Panagopoulos [2022] NSWSC 1151 came before the Court in 2021 even though Theodoros Panagopoulos died in 2000 (the deceased).

There were numerous legal problems raised by the case because most of what could go wrong did go wrong. The importance of proper and timely advice when dealing with Wills and inheritance disputes is well and truly highlighted by this case.

The first legal problem stemmed from the fact the original Will of the deceased could not be found. The executor, the deceased’s son George, had to apply for probate of a signed but undated copy of the Will. He had to overcome the legal presumption that the original Will was destroyed by the deceased with the intention of revoking (cancelling) it. George was successful and obtained probate of a copy of the Will on 15 May 2002.

The second legal problem was that the wording of the Will was confusing, inconsistent and unclear. George had to find evidence of what the deceased intended by his Will. He then had to make a Court application to rectify (correct) the Will. This was achieved by a Consent Order with his brother Jim, and the Court rectification (correction) Order was made on about 8 March 2004.

The brother Jim then commenced these legal proceedings against George on 30 July 2018, almost 18 years after their father’s death. The legal claims were numerous. They included proper construction (interpretation) of the Will, the rectification (correction) of the Will, a constructive trust over part of the deceased’s Marrickville property as well as restitution for Jim’s financial contributions to the Marrickville property.

The legal claims also included a family provision order, a notional estate order and an order permitting Jim’s family provision claim to proceed even though it was commenced well outside the applicable limitation period (which back then was 18 months from the date of death).

The legal problems were exacerbated, especially for Jim, when it was discovered Jim became bankrupt on 18 January 2006 and was discharged from bankruptcy on 19 January 2009. Jim’s only legal claim that survived his bankruptcy was his family provision claim.

The Court did not allow Jim to proceed with his out of time family provision claim. It also stated that, in any event, it would not have exercised its direction to make a family provision order in his favour. Unfortunately for Jim, the Court made a number of costs orders against him.

Author: Gerard Basha