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• Jurisdiction, Awards And Priorities
• Making And Settling Claims

10 Other reform issues

332 A NUMBER of other matters need to be attended to. Though subordinate to the main areas of the proposed legislation, they are nevertheless important. Various more detailed matters are discussed in the Draft Act. Those dealt with in this chapter are

• Jurisdiction, awards and priorities

– which court should have jurisdiction to deal with testamentary claims (paras 333–337);

– what is the “estate” against which awards can be made (paras 338–341);

– how to deal with attempts by the will-maker to avoid the impact of testamentary claims (paras 342–345);

– priorities between conflicting claims (para 346 and Appendix B); and

– priorities between estate beneficiaries (paras 347–348).

• • making and settling claims

– time limits for making claims (paras 349–355);
– agreements to waive and settle testamentary claims (paras 356–361); and
– the relationship of the proposals in this paper to other legal doctrines which may provide other grounds to upset or interfere with a will (paras 362–364).

JURISDICTION, AWARDS AND PRIORITIES

Jurisdiction

333 Under the present law (Law Reform (Testamentary Promises) Act 1949 and the Family Protection Act 1955) the Family Court (a division of the District Court) and the High Court have concurrent jurisdiction.¹⁶⁰ The Family Court will not have jurisdiction if, when an application is filed, proceedings relating to the same matter have already been commenced in the High Court.¹⁶¹ The provisions relating to transfer of proceedings from the court in which they were commenced express no consistent preference for the Family Court or the High Court as the court of first instance. A Family Court may refer the proceedings to the High Court with or without an application by any party if the court considers that the application would be “more appropriately dealt with in the High Court.”¹⁶² Conversely, the High Court, on application by any party, must order removal of the proceedings into the High Court unless it is satisfied that the proceedings would be “more appropriately dealt with by the Family Court.”¹⁶³

334 Under the Matrimonial Property Act 1963 the Family Court and the High Court again have concurrent jurisdiction.¹⁶⁴ The 1963 Act itself makes no provision for transfer of proceedings. The Family Courts Act 1980 s 14 does so, though the wording is different from the wording in the Family Protection Act 1955 and Law Reform (Testamentary Promises) Act 1949 for transferring these proceedings commenced in the Family Court to the High Court.¹⁶⁵ Section 14 permits the Family Court, on the application of any party, or on the Court’s initiative, to transfer the proceedings to the High Court if satisfied that, because of the complexity of the proceedings or of any question in issue, it is expedient for the High Court to deal with the proceedings. A Family Court may also, on application by a party or on the Court’s initiative, state a case for the opinion of the High Court: Family Courts Act 1980 s 13.

335 Should the same arrangements apply to the new statutory testamentary claims? Two views have been expressed. The Commission’s report on The Structure of the Courts,¹⁶⁶ tentatively recommended that testamentary claims proceedings be commenced in the Family Court, and be capable of transfer to the High Court, by order of the High Court, on the grounds of their complexity or general importance or by the consent of all parties to the proceedings. Providing there is standard and principled provision for the transfer of proceedings, there is virtue in the present concurrent jurisdiction in the High Court and the Family Court. The contribution of the High Court to the development of the jurisdiction under the Matrimonial Property Act 1976 and to the law of testamentary claims is undeniable. As well, parties’ freedom of choice and the High Court’s ability to resolve complex issues support the present practice.¹⁶⁷

336 The opposing view is that the Family Court should have the exclusive original jurisdiction to hear testamentary claims. Transfers from the Family Court to the High Court would be unusual, if indeed they were permitted at all. A number of considerations support this suggestion: the particular expertise and specialty of the Family Court; its now extensive experience in the area; the fact that many parties presently initiate proceedings there and its special procedures to facilitate settlement. The Family Court’s ability to state cases presenting especially complex or important matters for the opinion of the High Court (Family Courts Act 1980 s 13) supports this approach as well. The High Court would, in its appellate jurisdiction, continue to make an important (if less regular) contribution to the jurisdiction by correcting individual trends and discrepancies which emerged and developing the policy of the law.

337 Although as now drafted section 38 of the Draft Act provides for concurrent High Court and Family Court jurisdiction, the Commission has not committed itself to a preferred view on this question. We would welcome comments on this point.

“Estates” against which awards may be made

338 A person dies. The deceased person’s personal representative (“administrator”) obtains probate and so establishes his or her right to administer the estate (being appointed in the will or by the court when there is no valid appointment under a will). The representative collects the deceased person’s property to make it available to claimants. Under the present law, broadly speaking, testamentary claimants may claim only against property which would otherwise pass to the personal representative under a deceased person’s will or intestacy.

339 The dead person may well have had property which passes independently of the will. For example, a jointly owned property passes directly to the co-owner. If the estate is insolvent, some of these assets (“non-probate assets”) may be reclaimed by creditors once the estate is formally declared insolvent under Part XVII of the Insolvency Act 1967. So they have a degree of protection. So too will testamentary claimants who can establish their claim as some form of non-statutory legal right (eg, a constructive trust or contract). However claimants under the Matrimonial Property Act 1963,¹⁶⁸ the Law Reform (Testamentary Promises) Act 1949,¹⁶⁹ and the Family Protection Act 1955¹⁷⁰ are not generally permitted to satisfy their claims out of non-probate assets.

340 The Commission proposes that courts have the power to include non-probate assets in the estate to meet testamentary claims.

341 These assets appear not to be available to the administrator now, unless it can be established in any particular case that the transaction, although arranged during the deceased person’s lifetime, was in reality a form of will disposition which fails because the formalities required in the Wills Act 1837 (UK) s 9 have not been complied with.

Anti-avoidance: enforcing duties to make provision

342 Our present proposals apply only where the will-maker has a clear duty to do something for a potential claimant. Any attempt to evade that responsibility should not be viewed favourably (see, eg, provisions for restraining or setting aside dispositions during the will-maker’s lifetime in Child Support Act 1991 ss 200–201; Matrimonial Property Act 1976 ss 44–45). Yet there is nothing in any of the present Acts dealing with testamentary claims which would prevent a will-maker from putting assets beyond the reach of claimants. Illustrations of anti-avoidance provisions for testamentary claims are found in overseas legislation including the Inheritance (Provision for Family and Dependants) Act 1975 (England) ss 10–13, the Family Provision Act 1982 (New South Wales) Division 2 and the Uniform Probate Code (1990 Revision) § 2–202.

343 Anti-avoidance provisions must achieve an appropriate balance between preventing people from avoiding their testamentary obligations, and protecting certainty and reasonable expectations arising out of property transfers made by will-makers during their lifetime.

344 Courts should not invariably bring the property comprised in these dispositions back into the estate. They can treat it as if it were included in the estate when calculating awards (especially spouses’ and de facto partners’ property division). If the estate is sufficient to satisfy awards the court makes, and appropriate adjustments can be made between the beneficiaries (paras 347–348), it may not be necessary to bring the property back into the estate.

345 The Commission’s proposals to deal with non-probate assets and avoidance would call for further consideration if it were decided that adult children (or grandchildren) should have a claim. There would not then seem to be the same compelling reasons to interfere with settled arrangements and transactions. We consider these “second-tier” arrangements should be substantially provided for out of the probate estate and any gifts made in anticipation of death (as they are under the present law).

Priorities: claimants

346 There are a number of uncertainties and anomalies in the law concerning the relative priorities of testamentary claims. These have created problems in practice.¹⁷¹ It may be that our proposals will give rise to fewer priorities problems because they are simpler and clearer, and a major category of claimants (adult children) may no longer have rights. Nevertheless new legislation setting out testamentary claims should clarify how the priority of claims is to be established in each case. Appendix B sets out proposals for resolving the relative priorities of testamentary claims.¹⁷²

Priorities: beneficiaries

347 If a substantial claim succeeds, the property available to the beneficiaries under the will is reduced. Under the general law, each legacy is categorised (as a residuary,¹⁷³ general¹⁷⁴ or specific¹⁷⁵ legacy) and abates according to that categorisation. Residuary legacies, which by value are often the largest, and hence most important dispositions of the estate, abate first (then general legacies, then specific legacies).¹⁷⁶ If the shortfall is due to a substantial testamentary claim, this approach is unsatisfactory as it is almost always inconsistent with the will-maker’s intentions.

348 The present testamentary claims legislation confers broad powers on the courts to determine which of the beneficiaries suffers as a result.¹⁷⁷ Consistently with our general approach to testamentary claims, we are not in favour of giving the court a broad discretion to do what the court thinks right. This makes it more difficult to settle disputes since, even where a claim has clear merit, there can be considerable argument about which beneficiary should bear the cost of meeting it. The most reliable touchstone is either proportionality, or what can be gathered about the will-maker’s likely intention in such a situation. As proportionality requires the court to evaluate each beneficiary’s interest, which may be onerous in some situations, the court might be excused from obtaining and applying exact valuations providing there is no significant departure from the will-maker’s intentions.

MAKING AND SETTLING CLAIMS

Time limits for making claims

The proposed testamentary claims should in general have a three-year limitation period. The limitation period runs from the date the will-maker died.

There will be no bar on making a claim after the “final distribution of the estate.” Claimants should be able to trace the estate property into the beneficiary’s hands.

Beneficiaries who receive property in good faith and change their position detrimentally because of its receipt will not have to restore it to the estate.

349 The Commission considers that testamentary claimants, like claimants in other civil proceedings, should be able to make claims within three years of the time the right of action arose, that is, the will-maker’s death.¹⁷⁸ The present law is apparently more restrictive.¹⁷⁹

350 The reason for having a tight time limit is to allow administrators to distribute estates within a reasonable time after the grant of administration. Even so, administrators may have to delay distribution until no further claims can be made. In practice, if there is no likelihood of claims, administrators frequently distribute before the time limits have expired, though they do so at their own risk.

351 We consider that now that property can readily be traced into the hands of beneficiaries,¹⁸⁰ there is no good reason for imposing a duty on the administrator to retain the property. If a period of delay is still needed to allow claims to be made, it should be no more than three months after the death of the will-maker. The people who will be able to make claims under our proposals are confined to those who, for the most part, are close to the will-maker. Support claimants will need to make a claim soon after the will-maker’s death. Those who delay making claims will run the risk that the property will be distributed to people who cannot refund it. But that is a relatively small risk and has to be balanced against the inconvenience caused by delays in distributing the estate.

352 This proposal has been viewed with concern by certain lawyers we have consulted. The tracing procedures are relatively unfamiliar; under present law they can seldom be invoked in family protection cases.¹⁸¹ It has been suggested that beneficiaries will feel doubly aggrieved if, to meet a late claim, they have to pay back what they have received from the estate.

353 Against that point of view, it may be argued that once family claims are put on a clearer basis, the family of the will-maker will normally know which family members have a claim, and how those claims might affect each beneficial interest under the will.¹⁸² They will take their share knowing the risks. Conversely, if there is no sign of a claim, even now administrators often distribute the property as soon as they are ready to do so. This is so notwithstanding the rule that no distribution should occur until six months after the court has made a grant of administration.¹⁸³ If there is an unexpected claim, then the administrator is at some risk of personal liability. This risk seems to be unjustified, when the administrator is following a sensible and well-established practice.

354 Administrators, therefore, will not be legally required to hold property longer than is necessary to ascertain and pay the ordinary debts of the will-maker. Nor will they be required to find out whether a potential claimant exists and is likely to make a claim. However, there will be some restrictions on what administrators may do when they know of a claim. They should not be able to pass the property on if they know that the claimant’s rights are likely to be defeated by distribution.

355 There is a further time limitation which deserves brief reference here, though it has already been discussed in chapter 5. This relates to the support claims of spouses and de facto partners. We propose (paras 166–169) that such claims should automatically lapse unless made within five years of the couple’s most recent separation.¹⁸⁴ The presumption here is that by that time both parties will already have established a reasonable, independent standard of living, at whatever level they have been able to achieve.¹⁸⁵ To allow one of them to try to improve their situation with a late support claim would unduly disrupt estate planning and would raise issues which could not easily be dealt with at such a distance in time.

Agreements

356 SETTLING CLAIMS – Under the present law, family protection claims cannot be settled before death. After death, it is now accepted that any compromise must be approved by the court before it is binding.¹⁸⁶ There seems to be no good reason why, in general, an adult claimant should not be able to surrender a potential property division, support award or contributors’ award. As far as the contribution or property division element of a claim is concerned, it is no different from any other property right that the claimant may surrender. If there is concern about surrenders to avoid social welfare means tests, it should normally be dealt with by appropriate provisions in welfare legislation preventing welfare beneficiaries from depriving themselves of assets.¹⁸⁷ With respect to support claims, it may perhaps be argued that they are different. But it is difficult to see why that is so.¹⁸⁸ In any event, as already stated (para 109), the welfare authorities should have no power to insist that a spouse or de facto partner take a support claim.

357 There is one exception: the support claim which can be brought by children under 25. Admittedly the law would normally assume that when they attain the age of 20, they are fully capable of looking after their own affairs and should be able to waive or compromise their rights should they wish to do so. People under 20 are also frequently able to deal with their own interests. Sometimes the advice or consent of an adult or appropriate official is an essential prerequisite.¹⁸⁹ However, Family Protection Act 1955 claims have not been able to be dealt with in this way in the past, and the only way it could be done is with the consent of the court after proceedings have been brought. The question is whether minors’ incapacity to contract before death, and to settle after death with the court’s consent, should continue for children’s claims under the proposed new legislation.

358 The Commission considers that it should, for a number of reasons:

• The child’s need for maintenance and support is so vital that it should not be able to be waived or compromised (this applies to a lesser extent, of course, when the child reaches 18).
• The child may find it difficult to assess a promise of immediate advantage, against the right to provision for the child’s longer term future.
• There is a risk of undue influence operating between a parent and their adolescent children.
• The State has a continuing interest to see that the child is provided for by its parents and that it is not thrown back on the Department of Social Welfare as a provider of last resort.

These considerations outweigh, in the Commission’s view, any concern that the proposals unduly limit children’s rights.

359 If a child of 25 years of age or over with a mental or intellectual disability has a property manager appointed under the Protection of Personal and Property Rights Act 1988, the manager may contract on the child’s behalf: ss 31, 36. The considerations we have listed in the previous paragraph do not raise serious issues in this context.

360 FORMALITIES – Under the present property division law, the dominant policy is to allow agreements but to impose adequate procedural safeguards.¹⁹⁰ We consider that this policy should apply to all testamentary claims, aside from those made by children under 25 years of age. This involves a change for contribution claims by those who are not spouses or de facto partners. Under the general law and the Law Reform (Testamentary Promises) Act 1949, there are usually no statutory formalities specifically applying to the waiver or compromise of these claims.¹⁹¹

361 SUBSTANTIVE INJUSTICE – It is accepted that for matrimonial property agreements the court should have power to refuse to enforce agreements which are unfair, or which have become unfair with the passage of time.¹⁹² We consider that the same principle is applicable to all testamentary claims, given the close relationship between claimant and will-maker which they usually imply. This is a change, since under the general law and the Matrimonial Property Act 1963 s 6(2) the courts do not go behind the parties’ common intention about property division.

Other grounds for upsetting the provisions of a will

362 The broad powers conferred by the present Family Protection Act 1955 can, if only in an indirect and unclear manner, be used by the courts to remedy other concerns about will-makers’ failure to make an adequate will. We have already considered the arguments for entitling children to “second-tier” awards when the will-maker has excluded them without good reasons (chapter 7). Whether or not claims of this kind continue to be made, there are other situations in which family members may be dissatisfied with the terms of a will and may wish to make a claim to upset the will. The legal doctrines outlined in the following paragraphs are important:

• INCAPACITY – The present legal test for capacity requires the person propounding the will to prove that the will-maker executed the will

– when they were 18 years of age or older (unless married, a privileged will-maker or the will is approved by the Public Trustee or District Court),¹⁹³ and
– with “sound mind, memory and understanding” of “the nature of the act and its effects”, fully and properly recollecting and understanding¹⁹⁴
(a) the extent of the property they were disposing of,
(b) the persons who were the objects of their bounty or the claims on the property which they ought to satisfy, and
(c) the manner in which the property would be distributed between those persons or to satisfy those claims.
A person subject to a property order under the Protection of Personal and Property Rights Act 1988 is not automatically incapable of making a will. If they are found to be incapable, a property manager can apply to have a court-directed will executed.¹⁹⁵

• UNDUE INFLUENCE – This means that the will-maker was in fact mentally coerced so that their freedom of action in making the will was destroyed. The burden of proving undue influence is (in the case of a gift by will) usually on the person alleging it, however “those who take a benefit under a will and have been instrumental in preparing or obtaining it have thrown upon them the onus of showing the righteousness of the transaction.”¹⁹⁶
• REVOCATION BY LATER MARRIAGE AND PARTIAL REVOCATION BY DIVORCE – Section 18 of the Wills Act 1837 (UK) provides that “every will made by a man or a woman shall be revoked by his or her marriage” (unless it is expressed to be made in contemplation of marriage: Wills Amendment Act 1955). Similarly the Wills Amendment Act 1977 s 2 provides that on the making of an order for the dissolution of a marriage certain specified dispositions to the will-maker’s former spouse in a will shall be null and void.
• INFORMAL WILL-MAKING AND REVOCATION – The will must be in writing and properly executed in the presence of two witnesses, failing which, the will is invalid. But the modern tendency in overseas legislation (which the Commission intends to review in a later paper) is to relax these requirements where the will-maker’s intentions are clear.

363 The usual consequence, if these laws apply, is that the will-maker dies wholly or partially intestate. Intestate distribution gives effect to a concern for equality between members of the same rank of the will-maker’s family. In other situations, however, an earlier will apparently revoked is made effective again. If only part of a will does not take effect, the property may pass under other clauses of the will or according to the intestacy provisions. Here too, modern overseas laws sometimes permit the court to give effect to other expressions of will-making intent, and these will also need to be reviewed by the Commission. There is also the possibility that the provisions of later informally made wills or earlier apparently revoked wills could be accepted and given effect by the court. Some changes to the laws of distribution on intestacy may also be appropriate.

364 The Commission welcomes comment on whether the laws in paras 362–363, taken alongside the proposals in this paper, are sufficient to allow courts to remedy will-makers’ failure to make an adequate will. Any comments can be taken into account in the next stage of the Commission’s succession project.