1.Overview
2.Eligible Persons
3.Time Limit to make a Claim
4.Commencing Proceedings
5.Other Requirements when making a Claim
6.Considerations for Executors
7.When a Family Provision Order will be made
8.Procedures in Court
9.Mediation
10.Cautionary Note for Executors on Settlements at Mediation
11.The Hearing
12.Costs
13.Conclusion

1.Overview

A person might want to challenge a Will they have been left out of or consider they were not left a fair share of the estate by the deceased maker of the Will. On the other hand, a person may have been appointed executor of a Will and wants to know what is involved in defending a claim for what is called a family provision order.

Here are some basic facts for claims in New South Wales:

*    An application for a family provision order must be filed with Supreme Court of NSW within 12 months of the deceased’s date of death.

*    The applicant must prove they are an “eligible person” as defined by the Succession Act 2006 NSW.

*    The Court must determine that adequate provision was not made for an eligible person’s maintenance, education or advancement in life before it can make an appropriate order.
*    The Court will take into account the eligible person’s needs at the time of the hearing.

*    Mediation is required to take place before any hearing once the parties have filed their evidence in Court. The vast majority of cases are settled at the mediation.

*    Generally the costs of a successful application for a family provision order are paid out of the estate.

2. Eligible Persons

Section 57(1) of the Succession Act limits applications for a family provision order to eligible persons comprising:

(a) the spouse of the deceased person at the time of the deceased’s death;

(b) a person who was in a de facto relationship with the deceased at the time of their death;

(c) a child of the deceased person;

(d) a former spouse of the deceased person;

(e) a person:

(i) who was at any time wholly or partly dependent on the deceased person, and

(ii) who is a grandchild of the deceased or was, at any time, a member of the same household as the deceased; and

(f) a person living in a close personal relationship with the deceased at the time of the deceased’s death.

Although it should be straightforward to determine if a person is a spouse of former spouse of the deceased, much greater complexity can arise in order to establish whether a person was the de facto partner of the deceased at the time of their death.

While it it not necessary for the parties to have been cohabiting the Court will have regard to the definition of a “de facto relationship” in section 21C of the Interpretation Act 1987 NSW which provides that the following matters are relevant:

(a) the duration of the relationship;

(b) the nature and extent of their common residence;

(c) whether a sexual relationship exists;

(d) the degree of financial dependence or interdependence and any arrangements for financial support between the parties;

(e) the ownership, use and acquisition of property;

(f) the degree of mutual commitment to a shared life;

(g) the care and support of children;

(h) the performance of household duties; and

(i) the reputation and public aspects of the relationship.

Not all factors have to be present to establish the existence of a de facto relationship.

A child of the deceased, according to section 57(2) of the Succession Act, includes:

(a) a child born as a result of sexual relations between the parties to the relationship (including a de facto one);

(b) a child adopted by both parties; and

(c) a child in respect of which both parties have parental responsibility.

In order for a grandchild to be able to make a claim they must have been directly dependent on the deceased in cases such as where the child had lost its parents or the deceased had taken in the child and become its surrogate parent.

A close personal relationship is defined in section 3 of the Succession Act to exclude a marriage or de facto relationship and to mean one between two adults living together where one or both provide domestic support and personal care to the other or each other except where one does it for or a fee or reward or on behalf of another person or organisation.

3. Time Limit to make a Claim

Under section 58 of the Succession Act an application for a family provision order must be made no later than 12 months after the date of the death of the deceased person.

The Court can extend this time limit but only if sufficient cause is shown. Factors taken into account include the length of the delay, the reason for the delay and the prejudice to other parties.

The fact that a grant of Probate or Letters of Administration has not been made is no reason to delay an application for a family provision order as an order can be made irrespective of whether such a grant has been made.

4. Commencing Proceedings

Proceedings seeking a family provision order are commenced by filing a Summons with the Supreme Court of NSW along with a supporting Affidavit by the applicant claiming to be an eligible person.

5. Other Requirements when making a Claim

It is necessary for an applicant to show that the deceased was domiciled in New South Wales i.e. it was the place of their residence.

If appropriate, the applicant should also make a claim over the deceased’s notional estate. The Court can designate certain property not forming part of the deceased’s estate as “notional estate” i.e. property which would have been part of the estate had it not been dealt with in a particular way even if the property has already been distributed to beneficiaries.

Notional estate can catch relevant property transactions which took place up to 3 years before the deceased person’s death in certain circumstances.

6. Considerations for Executors

It is a primary duty of an executor to uphold the terms of a Will and defend any family provision claim by placing all relevant evidence before the Court.

Once an executor becomes aware of a claim they should generally not make any distributions to beneficiaries otherwise they become personally liable to satisfy a family provision order if there is any shortfall in the estate.

Upon being served with a Summons seeking a family provision order the executor is required to send notices to all other persons who might be eligible to apply for such an order so that all relevant parties have the opportunity to make claims and the Court can consider them all at the same time.

The executor will then have to file and serve an Affidavit setting out various matters including the assets and liabilities of the estate, any notional estate, current valuations of assets and details of other persons who may be entitled to make family provision claims against the estate.

7. When a Family Provision Order will be made

Section 59 of the Succession Act allows a Court to make a family provision order out of a deceased persons’ estate if it is satisfied that:

(a) the order is to be made in favour of an eligible person;

(b) in the case of an eligible person who is not a spouse, de facto partner or child of the deceased there are factors which warrant the making of the application; and

(c) at the time of the hearing adequate provision for the proper maintenance, education or advancement in life of the applicant has not been made by the deceased person’s Will or  the operation of the intestacy rules or both.

Under section 60 of the Succession Act the Court may have regard to certain matters in order to determine whether an applicant is an eligible person or whether to make a family provision order and the nature of such order including:

(a) any family or other relationship between the applicant and the deceased person;

(b) the nature and extent of any obligations or responsibilities owed by the deceased person to the applicant, to any other person in respect of whom an application has been made for a family provision order or to any beneficiary of the deceased person’s estate;

(c) the nature and extent of the deceased person’s estate (including any notional estate) and of any liabilities of the estate;

(d) the financial resources (including earning capacity) and financial needs, both present and future, of the applicant, of any other person in respect of whom an application has been made for a family provision order or of any beneficiary of the deceased person’s estate;

(e) if the applicant is cohabiting with another person-the financial circumstances of the other person;

(f) any physical, intellectual or mental disability of the applicant, any other person in respect of whom an application has been made for a family provision order or any beneficiary of the deceased person’s estate that is in existence when the application is being considered or that may reasonably be anticipated;

(g) the age of the applicant when the application is being considered;

(h) any contribution (whether financial or otherwise) by the applicant to the acquisition, conservation and improvement of the estate of the deceased person or to the welfare of the deceased person or the deceased person’s family, whether made before or after the deceased person’s death, for which adequate consideration (not including any pension or other benefit) was not received, by the applicant;

(i) any provision made for the applicant by the deceased person either during the deceased person’s lifetime or made from the deceased person’s estate;

(j) any evidence of the testamentary intentions of the deceased person, including evidence of statements made by the deceased person;

(k) whether the applicant was being maintained, either wholly or partly, by the deceased person before the deceased person’s death and, if the Court considers it relevant, the extent to which and the basis on which the deceased person did so;

(l) whether any other person is liable to support the applicant;

(m) the character and conduct of the applicant before and after the date of the death of the deceased person; and

(n) the conduct of any other person before and after the date of the death of the deceased person; and

As many of the above matters as are relevant should be included in the applicant’s supporting Affidavit when the Summons is filed with the Court.

8. Procedures in Court

After the applicant’s Summons and supporting Affidavit are filed and served the matter will come before the Court a few times for directions hearings to set a timetable for the filing of all evidence by the parties, the inspection by parties of each other’s financial documents and then to set a mediation date.

9. Mediation

Under section 98 of the Succession Act, unless there are special reasons, a Court must refer a family provision claim to mediation before any hearing.

A mediation involves the parties, their legal representatives and a mediator who is a neutral third party. The mediator attempts to assist the parties in identifying the issues and resolving the dispute. The success rate is around 80%.

Of course, if a claim is settled at a mediation then this will prevent further substantial legal costs being incurred.

Mediations are held either before a Registrar of the Court for smaller estates (involving no fee for the Registrar) or before a private mediator (who will charge for their services) for larger estates.

If the matter settles Consent Orders are prepared and filed with the Court dealing with the provision to be made for the applicant from the deceased’s estate and/or notional estate and payment of costs.

If the matter fails to settle then the matter is relisted before the Court so it can fix a timetable for filing of further Affidavits following which the matter will be listed for hearing.

10. Cautionary Note for Executors on Settlements at Mediation

If a settlement is reached between the parties at a mediation (or at any time before a final hearing) concerning the provision to be made out of the estate and/or notional estate of the deceased, Consent Orders would then be prepared and signed and sent to a Judge in Chambers to make the appropriate orders thus apparently finalising the matter forever.

However, what many are not aware of is that this is not necessarily the case. Section 59(3)(a) of the Succession Act allows an eligible person to apply for a further family provision order if there has been a substantial detrimental change in that person’s circumstances since the making of the previous family provision order.

The only way an executor can prevent an applicant having a “second bite of the cherry” is to require them, as part of the overall settlement of the first claim, to enter into a Deed of Release by which they give up their right to make make a further claim on the estate and/or notional estate.

Even this is not enough as section 95 of the Succession Act requires any such release to be approved by the Court which must determine whether:

(a) it is or was, at the time any agreement to make the release was made, to the advantage, financially or otherwise, of the releasing party to make the release;

(b) it is or was, at that time, prudent for the releasing party to make the release;

(c) the provisions of any agreement to make the release are or were, at that time, fair and reasonable; and

(d) the releasing party has taken independent advice in relation to the release and, if so, has given due consideration to that advice.

This means that instead of simply submitting Consent Orders to the Judge in Chambers the matter must be relisted before the Judge with Consent Orders including one asking for the relevant release in the Deed of Release to be approved under section 95 along with a completed form entitled “Applications for Approval of Release in Estate” providing the Judge with all the information required to satisfy the conditions imposed by section 95.

11. The Hearing

Once all the Affidavit evidence of each party has been filed and served on the other party the final hearing can take place a few months after the mediation.

The hearing, depending on the complexity of the case, will take a number of days and will involve considerable preparation by the parties’ lawyers as well as attendance at the hearing which will result in substantial legal costs.

Each side will have the opportunity to present their case and cross examine each other’s witnesses. At the conclusion of the hearing final submissions will be made by each party based on the evidence presented.

The Court, after considering all the evidence, will then deliver its judgment including its reasons for the orders it makes.

12. Costs

Under section 99 of the Succession Act the Court may order legal costs in favour of a party to be paid out of the estate and/or the notional estate.

Normally, a successful applicant will be awarded costs out of the estate/notional estate on a party/party basis. This means that not all of the costs charged by that party’s lawyers will be recoverable and the applicant will have to make up the difference.

If an applicant is unsuccessful then the risk is that the estate may claim and recover costs against them and these could be substantial.

The costs of an executor in defending the proceedings are usually ordered to be paid out of the estate/notional estate on an indemnity basis meaning all costs reasonably incurred. This is because the executor is legally bound to uphold the terms of the Will. If the executor is found to have acted unreasonably then they might receive no costs order in their favour.

13. Conclusion

Family provision cases involve a complex area of law. Whether you are a claimant or an executor, in order to ensure that you can navigate through the law to achieve a fair result in the least amount of time so as to reduce legal costs, it is imperative to obtain well informed legal advice sooner rather than later.