The decision in Mead v Lemon: A reminder that you must give very careful consideration to your estate planning

The recent Court of Appeal decision in Mead v Lemon¹ considered the laws relating to claims brought against an estate pursuant to the Family Provision Act 1972 (WA) (Act).²

The Act provides that certain family members of a deceased person can seek an order that further provision be made for them from the deceased’s estate in circumstances where they allege that the provision made for them either under the deceased’s Will, or pursuant to the terms of the Administration Act 1903 (WA)³ was inadequate.⁴

The following individuals can bring a claim under the Act:

• a spouse, or a de facto who was living with the deceased as such immediately before his or her death;
• a former spouse or defacto who was receiving maintenance, or entitled to receive maintenance from the deceased immediately before his or her death;
• a child of the deceased either living at the date of death, or born within ten months of the date of his or her death; and
• in certain circumstances, a grandchild, stepchild, or parent of the deceased.

The judgment of the Court of Appeal sets out the principles to be applied by the Court in considering whether provision made for an individual in a will was adequate, and if not, how a decision is reached as to what provision should be ordered by the Court.

Background

The plaintiff, Olivia Mead (Olivia), the daughter of the late, Mr Michael Wright, brought a claim pursuant to the Act seeking an order that the provision made for her in Mr Wright’s will was inadequate.

Mr Wright’s estate was found to be in excess of $400M and Olivia had been left the sum of $3M.  Prior to his death, Mr Wright had given the sum of $720,000 to purchase a commercial property.  The balance of the $3M was to be paid into the trust by five annual payments.  Mr Wright gifted the majority of the estate to other family members.

The trust contained some very onerous terms, allowing for Olivia to be excluded as a beneficiary if (amongst other things):

• she was, in the opinion of the trustee, suspected or known to have any involvement with illegal drugs; or
• convicted of a felony; or
• became an alcoholic; or
• became a member of a non traditional religion.⁵

Although the trust allowed monies to be advanced for Olivia’s education, it was only up until she reached the age of 23 years.⁶

Further, Olivia had no right to call for any of the capital of the trust if, for example, if she wished to buy a house.⁷

At first instance, Master Sanderson found that the provisions of Mr Wright’s will did not make adequate provision for Olivia⁸ on the basis that the structure of the trust led to the real prospect that Olivia might get nothing.⁹

Olivia was awarded the sum of $25M.  Master Sanderson rejected the argument that if Olivia was entitled to an award from the estate, then the award should ‘be no more than adequate provision for the proper maintenance’,¹⁰ and stated that the Court’s discretion under the Act was ‘unfettered’.¹¹  Master Sanderson confirmed that the one factor that had influenced him most in making the award was the size of the estate, stating that the sum of $25M would set up Olivia, her children, and perhaps their children, for life.¹²

There were seven grounds of appeal.¹³

The Court of Appeal reduced the award to Olivia to $6M.

The following principles emerge from the Court of Appeal judgment:

The Court is required to apply a two stage test pursuant to the Act.

Stage 1 requires the Court to consider whether or not the gift made in a deceased’s Will makes adequate provision for a claimant.¹⁴  This question is described as the jurisdictional question and is a question of fact.¹⁵

Stage 2 requires the Court to exercise its discretion to order adequate provision for the claimant.¹⁶  Buss J confirmed that the court is not empowered to award any more than what is ‘adequate’ provision for a claimant’s ‘proper’ maintenance.¹⁷  The determination of what is proper maintenance requires consideration of a claimant’s requirements for maintenance that were reasonably foreseeable by a deceased, and an examination of the totality of the relationship between the claimant and the deceased,¹⁸ which included:

• any sacrifices made by a claimant for the benefit of the deceased;
• any contributions made by a claimant to building up the deceased’s estate; and
• the conduct of the deceased and a claimant towards each other.¹⁹

The amount given to another beneficiary under a will was not be used as an indicator of what should be given to a claimant and provision for a claimant is based on what the claimant needs for his or her proper maintenance.²⁰  The Court must only interfere with a will to the minimum extent necessary to make adequate provision for a claimant.²¹

Lavan comment

The decision in Mead v Lemon is a reminder that you must give careful consideration to the needs of everyone who may have a claim on your estate pursuant to the Act.

If you choose to ignore them, your executor may be left to deal with expensive Supreme Court proceedings brought by a disgruntled individual.

The vast majority of issues which arise in these circumstances can largely be avoided by giving careful consideration to your estate planning.

If your will is not up to date, or your circumstances have changed, for example due to a divorce or remarriage, you should also seek legal advice.  Similarly, if you have left a gift to a former de facto in your will, you should take immediate steps to revoke that will and to make a new one as the gift to your de facto will still be valid.