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Family matters

Cover Story

Cite as: March 2015 89 (3) LIJ, p.30

Changes have been made to family provision legislation and succession laws enacted by the Justice Legislation Amendment (Succession and Surrogacy) Act 2014. 

By Nancy Collins

Background

In March 2012 the Victorian Law Reform Commission (VLRC) was asked to review various succession law matters and recommend any legislative changes. The terms of reference in relation to family provision was to review and consider whether Part IV of the Administration and Probate Act 1958 (Vic) (APA) operated justly and effectively to provide for people to whom the deceased had a responsibility to make provision. The review was chaired by Dr Ian Hardingham QC.

The VLRC sought submissions about various matters in family provision, including the factors affecting a decision to settle a family provision claim, the extent of opportunistic claims, any factors that deter opportunistic claims, the effect of cost orders on estates, and whether the procedures in the Supreme Court and County Court worked well to reduce costs. The LIV made a detailed submission to the VLRC with many of its suggestions incorporated into the report.

On 15 October 2013 the VLRC’s report was tabled in the Victorian Parliament. The VLRC’s recommendations included that:

  • Victoria introduce categories of eligible claimants for family provision claims;
  • the classes of persons eligible to make a family provision claim in NSW be adopted in Victoria, with the addition of stepchildren as eligible claimants;
  • in lieu of s97(6) and s97(7) of the APA which refer to the court’s power to order costs against an unsuccessful applicant, the APA be amended to include new provisions aimed at directing the court to use its wide discretion in making cost orders in family provision proceedings;
  • the APA include provisions, similar to those in NSW,1 to allow a person to obtain court approval to release their right to make a family provision claim; and
  • notional estate provisions in NSW not be introduced in Victoria.

The VLRC’s recommendations were supported by the LIV.

On 20 August 2014 the Justice Legislation Amendment (Succession and Surrogacy) Bill 2014 (the Bill) was tabled in the Victorian Parliament. As suggested by the VLRC, the Bill introduced categories of eligible claimants for family provision claims. The Bill introduced categories of eligible claimants but not categories similar to those in NSW. Controversially, eligible claimants would exclude from making a family provision claim adult children, unless the adult child suffered from a disability or was between the ages of 18 and 25 and in full-time school. The proposed amendments went far beyond any other jurisdiction in Australia and ignored the non-financial interdependency between parents and their children.

The LIV raised serious concerns with the Bill to the Attorney- General and lobbied extensively with the opposition and minor parties urging that the Bill not be passed without amendments to allow adult children to make a family provision claim. The LIV argued that the Bill failed to grasp the nature of will-making, would unduly limit meritorious claimants and create injustice.

The LIV proposed amendments to the government and the opposition, including amendments to allow adult children to make family provision claims, which was ultimately included in the Bill. Both the government and the opposition acknowledged the “exceptionally positive” role the LIV played in helping the government and opposition arrive at a bipartisan position on the Bill. The amended Bill was passed on 16 October 2014. The Justice Legislation Amendment (Succession and Surrogacy) Act 2014 (the Act) was given royal assent on 21 October 2014.

The Act was proclaimed in the Victorian Government Gazette on 29 October 2014.

Part 1 (Preliminary) and Part 6 (relating to surrogacy) of the Act came into operation on 30 October 2014 and the remaining provisions of the Act came into operation on 1 January 2015.

The Act and changes to Part IV of the APA

The changes to Part IV of the APA apply to the estate of any person who dies on or after 1 January 2015.2

A family provision claim can be made in either the Supreme Court or the County Court. The APA refers in the definition of “Court” to the jurisdictional limit of the County Court and the Act removes that reference but there is no substantive change by this as the jurisdictional limit in civil claims was removed from the County Court in 2006. The VLRC recommended that the County Court have exclusive jurisdiction to hear family provision claims for estates not exceeding $500,000, however that recommendation was not adopted.

“Maintenance orders” will be called “family provision orders”.

Categories of persons who can make family provision claims, called “eligible persons”, are listed in the definitions at s90 of the APA. New s90A provides that (only) an eligible person can apply for a family provision order.

The VLRC recommended that the categories of eligible persons be modelled on the categories in NSW, with the addition of stepchildren. In fact, the categories of eligible persons in NSW as compared to Victoria under the Act are quite different. Furthermore, further hurdles for an eligible claimant are imposed at s91. For example:

  1. In NSW, where there is a requirement for the applicant to have been wholly or partly dependent on the deceased, dependency is broader than merely financial dependency.3 However, in Victoria under the Act, particular eligible persons must have been “wholly or partly dependent on the deceased for the eligible person’s proper maintenance and support” and the court must consider the degree of dependency, and also the amount of provision ordered must be proportionate to the eligible person’s dependency on the deceased at the time of death.4 The court may interpret these additional requirements as limiting dependency to financial dependency. They are certainly far more onerous requirements to satisfy than in the past where no financial dependency was required. The court’s scope to order an amount of provision also appears to be significantly restricted by the proportionality requirement; and
  2. Adult children can make a family provision claim in both NSW and Victoria. However, in Victoria, the court will be required to consider the degree to which the adult child is not capable, by reasonable means, of providing adequately for their own proper maintenance and support.5

Arguably, the new categories coupled with the further amendments at s91, will mean that Victoria has a narrower class of eligible persons than NSW.

Previously, the factors that the court would consider in determining whether to make an order for family provision were set out at s91. Those factors are now located at s91A. The factors remain substantially the same but are preceded by a direction that the court “must” have regard to the deceased’s will, any evidence of the deceased’s reasons for making the dispositions in the will, and any other evidence of the deceased’s intentions in relation to providing for the eligible person.

There is one additional factor – “(l) the effects a family provision order would have on the amounts received from the deceased’s estate by other beneficiaries”.

Costs

Section 97(6) and s97(7)6 were initially included in the APA with the 1998 changes on the basis that they would ensure that only genuine claims were made.7 The VLRC’s view was that they were ineffective in that regard and, in fact taken by the courts to mean that the usual cost orders for an unsuccessful plaintiff should not apply. The VLRC recommended that the sections be repealed and replaced with a specification that the court could make any order it considered just and include several examples of possible costs orders.

Although the VLRC considered the merits of including a legislative presumption submission, the VLRC varied as to what the presumption should be – that the unsuccessful applicant does not receive his or her costs from the estate or that the unsuccessful applicant pays the estate’s costs. The VLRC did not recommend the inclusion of a legislative presumption.

The Act repeals ss97(6) and 97(7). Contrary to the VLRC’s recommendation, it did not replace the sections with a section referring to the courts’ wide powers to fashion a cost order. In his second reading speech, the Attorney-General stated that the repeal of ss97(6) and 97(7) would be a signal that the usual cost rules should apply.

Releasing future rights

Despite the VLRC’s support for including provisions in the APA to enable a person to release their right to make a family provision claim in the future, the Act does not provide for releases.

Protections to the personal representative

Section 99A, which protects personal representatives from liability for having distributed the estate in certain circumstances, was unclear. It could be interpreted to extend the six month period to make a family provision claim to up to nine months where written notice that a person intends to make a family provision claim is delivered to a personal representative in the first six months of a grant of probate. The confusion arises because the written notice does not lapse for three months.

The addition of s99A(5) makes it clear that written notice sent to a personal representative that a person intends to make a family provision claim does not extend the six-month limit to make a family provision claim:

“s99A(5) Nothing in this section –

(a) extends the period within which a person can make an application for a family provision order without a Court order”.

Amendments unrelated to family provision

Insolvent estates, solvent estates, pecuniary legacies and assets with charges

The provisions of the Bankruptcy Act 1966 (Cth) applies to an insolvent estate in the following circumstances:

  • directly, because the estate is subject to a bankruptcy order; or
  • indirectly, because there are insufficient assets in the estate to pay all of the debts and in such a circumstance Part I of the Second Schedule to the APA applies. Part I of the Second Schedule provides that the administration of the estate be conducted according to the Commonwealth bankruptcy laws.

The VLRC recommended modest changes to make the two methods of administering an insolvent deceased estate more obvious.

Before the Act, s39(1) directed that insolvent estates be administered according to Part I of the Second Schedule, which itself refers to the Bankruptcy Act, and s39(2) directed that solvent estates be administered according to the APA, the court rules and that the payment of debts be made in the order set out at Part II of the Second Schedule of the APA.

The Act repeals the Second Schedule and substitutes s39 with:

  • a new s39 relating only to insolvent estates;
  • a new s39A relating to the order of payment of debts of solvent estates; and
  • a new s39B in relation to the payment of pecuniary legacies in solvent estates.

The new s39 shows the two methods of administering an insolvent estate in a much clearer way and how the Bankruptcy Act applies.

Section 39A sets out the order of the payment of debts of a solvent estate. Whereas Part II directed that property of the deceased undisposed of by will would be the first property applied to pay debts, s39A states that subject to any contrary intention in the deceased’s will, the first assets to pay debts are the assets designated by the deceased in the will or subject to a charge for the payment of a debt or liability of the estate.

Following the VLRC’s recommendation, s39B(1) directs that, subject to a contrary intention in the deceased’s will, pecuniary legacies are paid out of the residue of the estate or property in relation to which a disposition in the deceased’s will operates as the exercise of a general power of appointment.

Section 39B(2) helpfully explains, with examples, how pecuniary legacies abate when there are insufficient assets forming s39B(1). Note also that the definition of “pecuniary legacy” has been more clearly defined, with examples, at s5.

Where an estate asset has a charge over it, s40 stated that the beneficiary takes the asset subject to the charge, unless the will or other document states a contrary intention that the estate pay the charge. Section 40 has been amended so that the contrary intention must be shown in the will only. It will remain that a general direction in the will to pay debts out of the personal or residual estate does not signify a contrary intention.

Small estates

A person who is entitled to probate of a will or letters of administration may apply for aid in applying for a grant of probate or letters of administration provided the estate does not exceed a specified maximum monetary value. The maximum value is $100,000 indexed annually by CPI. The indexed maximum value will be advertised annually in the Government Gazette. This amendment is intended to encourage people to apply for grants of probate or letters of administration in small estates.

Payments or transfers of property without a grant of representation

Section 32 of the Act which dealt with the payment or transfer by an employer of moneys held on account of deceased employee, is repealed. Sections 31A, B, C and D are inserted.

Section 31A has broader application beyond simply employers. Section 31A provides that a person who holds money or personal property not exceeding the threshold amount can pay or transfer the funds without requiring a grant of representation to any of:

  • the surviving spouse or domestic partner of the deceased;
  • a child of the deceased; or
  • any other person;

provided the recipient has legal capacity and the recipient appears to be entitled to the money or personal property (s31A(1)) and that it will be a complete discharge of the liability by the person paying or transferring. Note that a person making such a payment or transfer can accept a receipt signed by a person aged 16 years or over (s31A(4)).

The threshold amount is $25,000 and indexed annually by CPI. On or before 1 July 2015 and each 1 July thereafter the indexed threshold monetary value will be declared in the Government Gazette (s31B(4)).

Section 33(1) which dealt with the liability for a person fraudulently obtaining or retaining estate assets, is repealed and its replacement is s31C. Section 31C states the extent of the person’s liability in a simpler form than was previously expressed.

Section 33(2), relating to waste or conversion of estate assets by a personal representative, is repealed and its replacement is s31D. Section 31D clarifies that where a personal representative is liable for waste or conversion and then dies, the personal representative for the personal representative liable for waste or conversion, is liable only to the extent of the assets of the deceased personal representative.

Statutory wills

Before the commencement of the Act, to apply for a statutory will one had to first apply for leave to bring the application. The Act amended s21(2) of the Wills Act 1997 so that leave is no longer required8 with consequential amendments so that an application to make a statutory will is similar to the application for leave to apply.

For example, new s21A lists the information which may be required for the application. It is the same information as was required in an application for leave (s28), with the addition of “any evidence available to the applicant of the ability of the person to participate in the proceedings and express the person’s wishes”. Section 28 is repealed, as are ss23, 26, 27 and 29. Sections 21A, B, C and D are inserted.

Conclusion

Succession laws in Victoria have now been comprehensively reformed. The LIV is proud of its key role in the provision of equitable succession laws for Victorians.


NANCY COLLINS is a senior associate at Arnold Bloch Leibler specialising in estate and trust disputes. She is a member of the LIV Succession Law Committee.

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  1. Succession Act 2006 (NSW), ss95 and 96.
  2. Transitional provisions, s101.
  3. Petrohilos v Hunter (1991) 25 NSWLR 343.
  4. APA, s91(2)(b), s91(4)(d) and s91(5)(b).
  5. APA, s91(4)(c).
  6. APA, s97(6). Subject to sub-s(7), the Court may make any order as to the costs of an application under s91 that is, in the Court’s opinion, just. APA, s97(7) If the Court is satisfied that an application for an order under s91 has been made frivolously, vexatiously or with no reasonable prospect of success, the Court may order the costs of the application to be made against the applicant.
  7. Wills Bill 1997, second reading speech.
  8. Section 27 of the Act.

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