“Unmeritorious”: costs ordered against family provision applicant

Lawsuits motivated by ill-will or emotions often end in tears as is demonstrated in the case of this family provision applicant.

Desmond Guy died in July 2020 aged 95 without a will and survived by 6 children, a daughter from his first marriage and five children from his second marriage.

His wife and one child had died before him without any children of their own.

His estate was mainly comprised by real estate in Calliope, near Gladstone.  Under the laws of intestacy, his assets fell to be distributed equally between the 6 surviving children.

In the absence of anyone else having applied to administer the estate and its assets in limbo for more than a year, Rosemary – Desmond’s daughter from his first marriage – applied for letters of administration which were granted in August 2021.

The significant hostility among the siblings likely influenced Scott – one of Rosemary’s half brothers – to file a family provision application in October, seeking more from the estate than his one sixth share.

His brother Lloyd joined in those proceedings in March 2022.

Their family provision application eventually came before the District Court in Rockhampton in September 2023.

At the start of the first day of the trial, Scott withdrew his claim likely based on some firm advice from his lawyers who were given leave by the court to withdraw as his legal representatives.

As it turned out, Scott had withdrawn $45,000 from his father’s bank account after his death. Such conduct was – more likely than not – to reflect poorly on the court’s assessment of his character.

Lloyd – who had in the lead up to the hearing abused and threatened Rosemary and texted a message ‘1 shot 1 kill.  I was a cadet’ – decided to proceed notwithstanding his lawyers had also withdrawn, leaving him to represent himself.

After a one day trial in which he was accorded the customary accommodation to account for the unfamiliarity of DIY litigants with court procedures and rules, Judge Jeffrey Clarke ruled Lloyd to have been an unreliable witness.

Noting that much of his evidence was contradicted by independent accounts of the family circumstances, Lloyd’s claim was dismissed on multiple grounds.

First, it had not been started within the specified 9 months of the date Desmond’s death.

Second, Lloyd failed to establish he had any superior need to that of his siblings that might justify further provision from the estate.

The judge also granted the estate’s application that Lloyd pay some of its costs of the dispute.

He did so because  Lloyd’s prospects of success were – in his view – to have been “very poor, to the point of being futile” and because he had “obstructed [Rosemary’s]’s duty to administer the estate” including by thwarting her attempts to enter the properties to conduct an inventory of estate chattels, even with police assistance.

After allowing for written submissions from the parties as to liability for the estate’s legal costs, Judge Clarke ruled Lloyd’s claim to have been “completely unmeritorious”.

He ordered that part thereof – the sum of $42,000 – be deducted from Lloyd’s entitlements in the estate to go towards its legal costs of defending the doomed-from-the-start claim.

Although not mentioned in the judgment, the estate will also likely deduct the $45,000 removed by Scott from his father’s bank account, from his share of the estate.

Day v Peake [2023] QDC 178 Clarke DCJ 256 September 2023

Day v Peake [No 2] [2023] QDC 200 Clarke DCJ, 3 November 2023

source https://qldestatelawyers.com.au/unmeritorious-costs-ordered-against-family-provision-applicant/

Residuary beneficiary caught out by estate admin convenience steps

Informal agreements regarding the administration of a deceased’s estate can lead to a residuary beneficiary inadvertently relinquishing their estate entitlements.

Consider the case of Ellen McKean who died in April 1992.  By an unusual turn of events, issues concerning her estate came before the Supreme Court of Queensland some 30 years later, in November 2023.

By her last will made in November 1981, Ellen had gifted $5,000 to her brother; $40,000 to her only son, Peter; and the residue of her estate in equal shares to her grandchildren.

In the years following Ellen’s death, all grandchildren agreed with Peter that all estate assets – which consisted of properties at Prosperpine and Dingo Beach – should be transferred from the executors to Peter.

Peter then treated – as from 1995 – all of the assets owned by the estate as his own. He died in November 2020.

It appears that Peter’s will gifted his entire estate – including the assets of Ellen’s estate – to his surviving wife, Trudy.

Recognising that such bequest might defeat her rights to receive her share of Ellen’s estate, Julia Shaw – one of Ellen’s grandchildren – filed a lawsuit for a declaration that she was still entitled to a share of the residue of her grandmother’s estate.

The proceedings – to which Ellen’s estate was the respondent – turned on whether Julia had ‘disclaimed’ her interests therein.

Although uncommon in practice, a beneficiary has the right to disclaim their interest, ie they can refuse to accept a gift given to them by a will.

It was argued by Trudy – Peter’s widow, who also was acting on behalf of Ellen’s estate – that by agreeing to the transfer of estate assets to her father, Julia had disclaimed her entitlements in Ellen’s will.

This argument was supported by Peter and Trudy’s other children, being Julia’s siblings and the other residuary beneficiaries named in Ellen’s will.

On the other hand, Julia contended that the agreements regarding the transfer of estate assets to Peter could not be construed as a disclaimer of her entitlements.

Justice Catherine Muir observed there could be no disclaimer absent an unequivocal rejection of the gift in the will.

In her view, by agreeing to allow estate assets to be transferred to Peter, Julia had not rejected the gift.

On the contrary – Justice Muir noted – Julia had given directions for dealing with her gift in that she had indicated she intended to transfer her inheritance to Peter subject to certain conditions being met.

Interestingly however, the judge did not make any final conclusions or orders regarding Julia’s ownership of any assets of Ellen’s estate.

That was because all parties to the application requested Justice Muir not to determine those additional factors that might – of themselves – have defeated Julia’s claims.

These included whether Julia’s claim was time barred and whether the transfer of her interest in the assets of her grandmother’s estate to Peter in 1995 vested indefeasible title in him so as to prevent Julia claiming an interest by that means.

Those issues will come before the court on another occasion unless the parties agree on a resolution.

The case demonstrates that arrangements between family members need to be properly documented to avoid unintended consequences and expensive legal disputes further down the line.

Shaw v McKean as executor of the estate of the late Ellen Mary May McKean [2023] QSC 261

source https://qldestatelawyers.com.au/residuary-beneficiary-caught-out-by-estate-admin-convenience-steps/

Death benefit nominees disentitled by deceased’s attorney

How can a super fund member empower someone else to alter the terms of the member’s binding nomination to specify different death benefit nominees to receive the member’s fund entitlements?

Robert Stannett was the sole member of a self-managed super fund, the Robert Stannett Superannuation Fund.

The trustee of the fund was Rentis Pty Ltd of which Robert was the sole director as is required for a tax law compliant fund.

In December 2020 Robert fell from a ladder. His resulting brain injury rendered him incapable of managing his own affairs including the fund.

Fortunately he had – prior to that accident – made a will and an enduring power of attorney appointing wife Valerie and brother Peter as his attorneys.

He also had made two binding nominations specifying who would receive his entitlements in the fund and the proceeds of insurance arising as a result of his death.

A valid binding death benefit nomination requires the trustee of a super fund to pay the member’s entitlements and death benefits precisely as directed.

It removes any discretion the fund trustee might otherwise have to consider which of the member’s dependents should receive the death benefits and in what portions, for example according to their financial resources and needs.

The rules of Robert’s fund had been updated in May 2019, a week prior to him making his EPA and prior to making the binding nominations, which update allowed binding nominations to be non-lapsing, ie they did not require regular renewal as is often the case.

The first binding nomination made by Robert in June 2019 directed 100% of his super benefits to Valerie, but if she did not survive him then $200,000 to each of his two children and each of Valerie’s two children with any balance to his estate.

Importantly, his second (and last) binding nomination directed 50% of his super benefits to Valerie, and 25% to each of his children Kylie and Blair.

After Robert had lost capacity in the fall, Valerie died in February 2021 and his brother Peter became his sole attorney.

No doubt to address the death of Valerie, Peter in his capacity as attorney made two new binding nominations on 9 May and 17 May 2022.

In the first, 40% of Robert’s super benefits were allocated to his children Kylie and Blair, and 10% to each of his stepchildren Sharyn and Ross.

In the second, Peter changed the allocation to 25% of the benefits to each of Kylie and Blair, with the remaining 50% to go to Robert’s estate to be distributed in accordance with his will, where it would go to a charity.

Both differed to what Robert had specified before he lost capacity.

Robert died in December 2022, and questions were raised as to whether the binding nominations made by Peter on Robert’s behalf were valid.

Justice Peter Applegarth noted that – at least in Queensland – it is settled law that the making of a binding nomination is the exercise of a financial power that an attorney can lawfully perform for their principal.

But had the EPOA been sufficiently drafted so as to include such a power?

There was an express term in Robert’s EPOA authorised Peter as his attorney to “renew any binding death benefit nomination made by me for any superannuation benefits or entitlement.”

In deciding whether the term “renew” included “making on different terms”, Justice Applegarth had to consider whether to adopt a narrow interpretation that excluded the latter meaning or one which appeared to suit the grantor’s intentions.

Given that the recently updated super fund rules meant binding nominations did not lapse at all, it was helfd that a narrow interpretation – which would result in the power being of no effect – should be avoided.

His honour preferred a more sensible interpretation of “renew” being the dictionary definition which is “restore to freshness” or “make like new”. That interpretation permitted Peter as attorney to make a new binding nomination that addressed fresh or changed circumstances.

It was further argued that Peter’s second binding nomination – of which gifted 50% of Robert’s super to charity – did not properly reflect Robert’s testamentary intentions.

His honour noted the matter before him only concerned whether Peter as attorney had the power to make  the last binding nomination, not with whether Peter should have exercised his power in the way that he did. That dispute was left for another day.

In accordance with what was found to be the more sensible interpretation, Justice Applegarth held that the last binding nomination was within Peter’s authority and was validly made.

This case demonstrates the importance of considering estate planning holistically and not making wills, powers of attorney and super fund nominations independently of each other.

Re Rentis Pty Ltd [2023] QSC 252

 

source https://qldestatelawyers.com.au/death-benefit-nominees-disentitled-by-deceaseds-attorney/