Australia: legislative reform in family provision claims

Imogen de Haro reviews new changes and restrictions over family provision claims in New South Wales

The provisional statistical data published by the Supreme Court of New South Wales as of 25 January 2022 indicates 1,608 applications were filed in the Equity Division of the Court in 2021. Of these, 872 were family provision claim applications.

The difficulty with the legislative provisions in Australia with respect to family provision claims is there is no ‘do not pass go’ mechanism which stops ineligible individuals from making such a claim.

There are certain criteria which must be met for an individual to be eligible to make a successful claim. However, by the time the application is set down for hearing, solicitors and counsel have been briefed, directions listings have been attended and affidavit evidence has been gathered, the costs to be borne by the deceased estate by the executors pursuing their duty in defending the same can be in the hundreds of thousands of dollars.

This figure does not take into account the potential costs of the applicant party or parties also being ordered to be borne by the estate. The high percentage of family provision claims which settle out of court does not provide reliable precedent by which the legal professional community may be guided, much less their clients.

Executors, in exercising their duties of defending the deceased estate, are often left with no option but to settle due to the subsequent exhaustion of estate assets, whether or not the applicant is eligible in accordance with legislation.

In the wider community, this means ineligible individuals can make family provision claim applications which are erroneous or even without true substance and in doing so erode the assets of the estate leaving genuinely eligible persons deprived of their entitlement.

Court mediation

In New South Wales, the criteria for ‘eligibility’ of individuals to apply for family provision orders is quite broad, with the legislation in New South Wales defining an eligible person to mean a spouse or de facto at date of death, a former spouse, a child, an individual who was wholly or partially dependant on the deceased at any particular time or was a member of a household of which the deceased was a member at any particular time.

The use of ‘at any particular time’ rather than ‘at the date of death of the deceased’ is problematic, as included in this definition could be, for example, a former stepchild or even a friend who was wholly or partially dependant on the deceased at any particular time and stayed with the deceased in their home at any particular time, thus considering themselves as a member of the household of which the deceased was a member.

That is not to say any such individual will have a successful claim at the time of the court hearing the matter: if a court-ordered mediation does not result in any agreed outcome, it is unlikely such an individual would be successful in obtaining orders for family provision on the basis of eligibility.

However, the difficulty lies in several places along the road and it is likely an executor, in weighing up their duties to the estate, will settle such a claim, which the lawyer of the individual lodging the claim very well knows.

In theory, the executor has a duty to uphold the testamentary wishes of the deceased and to defend the estate against claims for family provision. Practically, where a family provision claim has been filed, the executor must weigh up the duty to defend the estate against the potential inability to uphold the testamentary wishes of the deceased if the estate were to be exhausted by the costs of defending the claim.

Not only are there solicitor fees involved but counsel is likely to be briefed as well. The executor must consider the cost of briefing the solicitor and barrister, gathering evidence, the drafting of affidavits (and of course, the close scrutiny of the affidavits of the other side), the preparation for court-ordered mediation and subsequent disbursement costs. If that is unsuccessful, the preparation for hearing and subsequent court costs.

In an estate with moderately complicated assets, the solicitor fees alone can easily exceed $300,000 even before mediation is reached. Although there is only one court-ordered mediation required by virtue of the Supreme Court of New South Wales Practice Note No. SC EQ 7 (Supreme Court – Family Provision), that is not to say the court will not, in consideration of the circumstances, order another mediation or the parties themselves will not decide to give mediation another try. In one family provision matter on which the writer has worked, two mediations were attempted prior to hearing which were unsuccessful and the matter settled outside of court during the hearing following the second day of evidence.

Additionally, the court may also make orders as to costs, with the estate bearing those of its own legal counsel as well as that of the applicant. Thus, an executor is often likely to opt to settle an applicant’s claim rather than subject the estate to the associated costs of defending the claim, resulting in a larger number of applications filed given the applicant has a high chance of receiving a settlement offer.

Legislative provisions

When considering the broad brush with which the legislative provisions of New South Wales were drafted, most individuals lodging a family provision claim are quite likely to at least get to the stage of court ordered mediation or to have the executor offer and enter into a settlement agreement. If we look to the other states, we find the legislative provisions of New South Wales are actually quite strict in comparison (excepting Queensland, which has even stricter provisions in comparison to the other states, including New South Wales).

The legislative provisions of Victoria, South Australia, the Australian Capital Territory and Western Australia (set out below) dealing with family provision are exceptionally broad, including, in Western Australia, a grandchild born within 10 months of the date of death of the deceased and in Victoria, a person who believed the deceased to be their parent and was treated as a natural child: the law should, of course, provide for such cases, but it is also fraught with opportunities for the dishonest.

In Queensland, the eligibility requirements for an individual to lodge a family provision claim are that the individual must be a spouse, child or dependant (if the dependant is needing continuation of maintenance and support). In comparison with the legislative provisions of New South Wales, the class of eligible applicants is much stricter and in comparison, with the legislative provisions of the other states, is almost unrecognisable.

The ideal compromise would require legislative reform at a Commonwealth level: taking the eligibility requirements set out in the legislative provisions of Queensland (and requiring the completion of statutory declarations, and provision of a family tree of some sorts with original certified birth certificates and identity documents, if applicable) and coupling them aspects of the legislation of other states, but with the latter to only be considered following an application to seek leave from the Supreme Court of the relevant jurisdiction.

Applicants must satisfy a set of criteria to be considered by the court before a timetable is provided, meaning many applications would not ‘pass go’. While such a system would not be infallible to opportunists, it would certainly create extra work and prohibit some applicants (or their solicitors) from attempting an application to seek leave. Practically, it would also result in larger amounts of precedent for the legal community and their clients to rely on, both at the stage of application and from the point of view of the executor in defending the claim.

Imogen de Haro is an associate at Perpetual in Sydney, Australia perpetual.com.au