Further to an earlier blog back in March 2020, the decision in the Estate of Whiteway was successfully appealed in a decision recently handed down by Macfarlan JA, Meagher JA and Leeming JA.
Decision at first instance
To recap, the primary judge allowed a family provision claim by one of the adult daughters from the Estate of her father, despite the fact he had died some 13 years earlier. The primary judge permitted her to apply out of time and designated part of the wife’s estate as ‘notional estate’, from which he made further provision for the daughter.
The primary judge permitted a tracing of property from the father’s estate, to his wife, who then sold the property and used the proceeds to purchase another property. It was against this second property that the primary judge designated as notional estate.
Primary Judge’s Error
The critical aspect of the decision came down to the interpretation of the legislation, and ultimately the word “person” and “property distributed” as set out in the (now repealed) Family Provision Act (FP Act). (Similar provisions are in the Succession Act 2006).
Meaning of “person” in notional estate
The primary judge found that the relevant “person” holding property that belonged to the father’s estate, was the executor of the estate of the wife.
This ignored the factual matrix in that before the executor held the property, the property was transferred to the wife. The wife then sold the property, and with the proceeds, purchased another property. The plaintiff was attempting to claim the subsequent property was notional estate of the father. The Court of Appeal found that the relevant “person” stopped when the property was transferred to the wife from the Estate of her husband.
On all reasonable grounds, the original decision did seem a bit of a stretch too far. As it can be seen, the “person” holding the property had no real causal connection to the Estate of the father. In fact it could be argued that the purchasers of the property were more likely to be the “person” to whom s24 FP Act was referring to, which would not be a desired outcome.
The plaintiff would have had a better chance at obtaining provision from her father’s estate had she contested his will at the relevant time, and not waited until after her father’s wife had passed away.
Meaning of “property distributed”
A question arose as to what the word “distributed” as set out in s24 FP Act meant. The Court of Appeal referred to a High Court decision in which the meaning of ‘distributed‘ is where an executor takes the property as part of his residual share of the Estate. The executor holding assets for the purposes of administration, is not a distribution. The asset has to be passed legally and beneficially into the hands of another.
As a result of this finding, the Court of Appeal considered that s24 did not require a causal relationship in respect of the property. In other words, the relevant property transaction could not be traced through to the property the wife purchased after the father’s death.
Section 24 is concerned with the parting of the asset as a single event – where the personal representative of the estate transfers the property to the person nominated as beneficiary under the will or on intestacy. The section does not require a broader inquiry such as that undertaken by the primary judge.
Accordingly, the Court of Appeal found that the primary judge had erred in construing and applying s24 FP Act.
Was 13 years too late?
The other matter determined on appeal was whether the primary judge erred in granting the application for family provision being made out of time.
The time itself was not the relevant factor.
It came down, again, to the requirements of the legislation under the FP Act. An extension of time can only be granted under that Act if “sufficient cause” was shown.
As part of the analysis the Court needs to consider the impact of any further provision being made on other beneficiaries, particularly after a length of time when they had reasonably presumed their entitlement was not subject to litigation.
A substantial and detrimental change to circumstances to the person making the claim would be “sufficient cause“, however the person should not obtain a benefit for their delay in bringing a claim. A delay of 13 years would seem to be unreasonably lengthy and not one in which ‘sufficient cause‘ could readily be justified.
Essentially the Court of Appeal found that the reason submitted by the plaintiff, namely the delay was to preserve relationships and was out of respect to their father’s wife, was insufficient cause for an extension of time. If an application for further provision was going to be made, it ought to have been made by against the father’s estate within the relevant limitation period.
A key take away from this case is to seek legal advice as to whether you have a claim for further provision when your parent dies, and not wait for their spouse to die (especially if their spouse is not your parent). A lot of money has been spent on this case and the plaintiff may be required to pay some of the costs of the Estate.
Haertsch v Whiteway [2020] NSWCA 133