Challenges to the validity of wills: Lessons from recent decisions

 
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The last five months have seen major decisions concerning challenges to the validity of wills due to lack of a testator’s testamentary capacity and/or lack of knowledge and approval. The decisions include:

  • Hobhouse –v- Macarthur-Onslow [2016] NSWSC 1831 (16 December 2016)
  • Roche –v- Roche [2017] SASC 8 (8 February 2017)
  • McNamara –v- Nagel [2017] NSWSC 91 (17 February 2017)
  • Estate Stojic, Deceased [2017] NSWSC 168 (3 March 2017)
  • Phillips v Phillips; Phillips by his Tutor NSW Trustee & Guardian v Phillips [2017] NSWSC 280 (22 March 2017)
  • Hookway v Hookway [2017] TASFC 4 (7 April 2017)

The first and last three decisions involved successful challenges to the will. All but Estate Stojic involved the active participation of solicitors. These decisions, in particular, provide lessons for practitioners in the preparation of wills.

Ask open questions, don’t delay, follow instructions and make file notes

The testator in Hobhouse –v- Macarthur-Onslow was Lady Macarthur-Onslow. She made a will in 1988 leaving 50% of her estate to her daughter, Lady Katrina Hobhouse and 50% to her son Lee Macarthur-Onslow. In June 2002 the testator was diagnosed with dementia. In February 2004 she gave instructions for a new will whereby her children would “pretty much share the assets”. In September 2004 the daughter secretly tape recorded her mother. The tape suggested that the testator retained testamentary capacity but wanted her children treated equally. In October 2004 she makes a will giving control of 80% of her estate to her son. The testator died in 2013. Katrina challenged the validity of the will, alleging lack of testamentary capacity, failure of knowledge and approval, and the existence of undue influence. (The undue influence allegation was jettisoned at trial.)

The challenge to testamentary capacity was unsuccessful, largely because of the evidence of her treating specialist that the testator was capable of understanding the general nature and purport of the will at the relevant time. The challenge to knowledge and approval of the contents and effect of the will was largely successful, with the court satisfied that the testator did not know and approve parts of the will which had the effect of favouring the son to the extent that they did. It considered this to be a “relatively exceptional finding”. The court severed those parts of the will and granted probate for the remainder. In the course of reaching its decision the court made adverse comments about the solicitor’s practice, such as:

  • A copy of the will was not given to the client in advance of the meeting when she could have considered it carefully and in leisure[1].
  • The solicitor did not keep a file note of the meeting[2].
  • The testator was not asked open questions[3].
  • The solicitor did nothing to test for testamentary capacity after learning that the client was diagnosed with dementia some two years earlier and was undergoing active treatment for that condition.
  • There was no explanation given to the client about the effect of the will was to give effective control of a trust to the son.
  • There was inadequate advice regarding the possibility of the nominated executors renouncing (as occurred with 2 of the originally named 4 executors).
  • Wrong advice was given about the executors distributing income from the farming operation.
  • The Will did not implement the client’s instructions.
  • There was an eight month delay in preparing the will.

Make file notes and enquire into a client’s mental capacity when aware a doubt may exist

In May 2005 Bill Phillips suffered a significant brain injury. He was aged 82 years. In April 2006 Phillips made a will and an Enduring Power of Attorney. In October 2006 Phillips made another will leaving the majority of his estate to his son James and $50,000 to each to his other 4 children. He destroyed his April will. In March 2007 Phillips received $1.2million compensation for his brain injury. In February 2008 the Supreme Court appointed a financial manager for Phillips. In May 2008 Phillips’s former doctor told Phillips’ solicitor that Phillips was incompetent to make a will. In May 2008 Phillips’ treating GP certified that Phillips was competent to make minor changes to his will. In June 2008 Bill made a new will reducing some and increasing some legacies to his other children, but the residue was still left to James. In 2014 Phillips died.

In the ensuing proceedings, the validity of the last will was successfully challenged on the basis of lack of testamentary capacity. Again, in the course of reaching its decision the court made adverse comments about the solicitor’s practice, such as:

  • The drafting solicitor’s notes were silent on the circumstances in which the 2008 will was made, and the file was ‘barely informative’.
  • The possibility that the solicitor had missed the testator’s lack of mental capacity “is implausible”.
  • The solicitor made no effort to satisfy himself that the client had testamentary capacity[4].

The outcome was that James was ordered to pay the costs of the proceedings, including part of the plaintiffs’ costs on an indemnity basis. He could not have recourse to the estate[5].

Follow instructions and keep your file notes[6]

In the last weeks of his life, Peter Hookway executed two wills, one dated 13 June 2006 and one dated 23 July 2006. He died on 24 July 2006. He was survived by his two adult children, Stirling and Tamzin. The second will, but not the first, contained a gift of valuable real estate to be held on a discretionary trust for the testator’s grandchildren. The dispositions under the two wills were otherwise identical. Stirling and Tamzin were two of the 4 executors. They were the trustees of the discretionary trust.

During 2012 there was a falling out between Stirling and Tamzin. Until then, there had been an informal arrangement that the trust property was to be treated as if it were held as to 50% for the benefit of Stirling’s 2 children, and 50% for the benefit of Tamzin’s child. (She only had one child.) As a result of the falling out, Stirling was no longer agreeable to that arrangement. In 2015, some 9 years after her father’s death, Tamzin sought the revocation of the grant of probate of the second will, and a grant for the first will. The trial judge concluded that the testator lacked testamentary capacity when the second will was signed; that the rule in Parker v Felgate (1883) LR 8 PD 171[7] did not apply because the second will did not accord with the testator’s wishes; and that it was not appropriate to refuse the relief sought by Tamzin. Those conclusions were maintained on appeal: Hookway v Hookway [2017] TASFC 4.

The argument that Tamzin’s actions as an executor (in distributing bequests to beneficiaries, defended proceedings, selling real estate, settling insurance claims, making payments of liabilities, spending money on repairs, pursuing a claim for compensation, purchasing a property for the testator’s partner, entering into leases and filing taxation returns) amounted to acquiescence, an estoppel, abuse of process, laches or the like (such that the court should not revoke the grant) did not succeed. The Full Court concluded that probate is a public act, the ultimate purpose of the court is to ensure the due and proper administration of the estate and the interests of the parties beneficially entitled to it. The lesson is that a grant of probate does not mean that the will drafting file is no longer relevant.

Darryl Browne[8]

[1] Although the legal transaction were different in each instance, similar comments have been made in Irvine –v- Irvine [2008] NSWSC 592; Evolution Lifestyles Pty Ltd v Clarke (No 3) [2016] NSWSC 1237, [151]. It should be observed that the practice of giving the client their draft will in advance of the meeting is rare.

[2] A solicitor should take detailed notes of questions asked, answers given and general observations whenever there are doubts about the client’s testamentary capacity. Apart from all else, this is because the “evidence of an experienced and impartial solicitor, who knew the deceased, would normally carry great weight”: Petrovski v Nasev; The Estate of Janakievska [2011] NSWSC 1275, [207].  A similar comment was made in Phillips v Phillips; Phillips by his Tutor NSW Trustee & Guardian v Phillips [2017] NSWSC 280, which is considered below. Notes alone though will not prevent a successful challenge to the legal transaction: Aboody –v- Ryan [2012] NSWCA 395, [40], but it can often help and sometimes will be crucial: Mace –v- Mace [2015] NSWSC 1659.

[3] Open-ended questions allow for an evaluation of the client’s understanding: Estate of Stanley William Church [2012] NSWSC 1489, [39] – [40], [43] – [44]. In Burns –v- Burns [2016] EWCA Civ 37 the purpose was stated to be to test the testator’s faculty: [24]. An illustration of this is given in Doulaveras v Daher [2009] NSWCA 58, [65]. To the same effect see Robinson –v- Spratt [2002] NSWSC 426, [31] and Petrovski v Nasev; The Estate of Janakievska [2011] NSWSC 1275, [183], [298], [306].

[4] Assessment of mental capacity needs to made in every instance that a client engages in legal action. The assessment is task, time and content specific. Accordingly, it must be made for each different action, at the time the action occurs.

[5] Glenda Phillips v James Phillips; John Matthew Phillips by his Tutor NSW Trustee & Guardian v James Phillips (No 3) [2017] NSWSC 409, [22].

[6] Apart from the facts of Hookway, the suggestion to retain the file notes indefinitely is made because the necessity for proof can arise many years after the legal work is performed. An example is Commonwealth v Cornwell [2007] HCA 16; (2007) 234 ALR 148; 81 ALJR 933. In 1999 Cornwell commenced proceedings asserting that the Commonwealth was vicariously liable for the advice given to him by an employee in 1965 which, by relying upon the advice, had meant that he had “lost the opportunity of joining the Commonwealth Superannuation Fund on and from …1965 and in consequence upon his retirement on 31 December 1994 received a lesser benefit than that which he would have received had he been admitted to the Fund on and from …1965”. The High Court determined that the claim was not statute barred.

[7] The rule was explained by Sir James Hannen in the case in the following terms: “If a person has given instructions to a solicitor to make a will, and the solicitor prepares it in accordance with those instructions, all that is necessary to make it a good will, if executed by the testator, is that he should be able to think thus far, ‘I gave my solicitor instructions to prepare a will making a certain disposition of my property. I have no doubt that he has given effect to my intention, and I accept the document which is put before me as carrying it out.'”: (1883) LR 8 PD 171, 173.

[8] Darryl Browne is the principal of BROWNE. Linkenbagh Legal Services. He is an Accredited Specialist in Wills and Estates. He is the Chair of the Law Society’s Ethics Committee. He has been a member (2010- 2014, 2016), Chair (2014) and Deputy Chair (2016) of the Elder Law and Succession Committee. He is a Councillor of the Law Society, a member of the Specialist Accreditation Board and the Society’s Property Law Committee, Criminal Law Committee, Disclosure Committee, Fidelity Fund Management Committee and the Working Group on Elder Abuse. He is a member of the Law Council of Australia’s Elder Law and Succession Committee and its Working Group on Elder Abuse. He is a member of the Legal Aid Commission Board and the University of Sydney’s Law Extension Committee. He writes bi-monthly Case Notes on wills and estates for LSJ and occasional other articles for that and other journals. He facilitates the Law Society’s online Wills and Probate Procedures for Solicitors. He designed and presents the Masterclass on Powers of Attorney. He is a member of STEP and SMSF Association. The opinions expressed in this article are his own.

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