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The Lemon v Mead appeal decision – Wealthy Family Provision applicants

On: April 19, 2019

The much-anticipated Court of Appeal decision in Lemon v Mead[1] was handed down in November 2017.  This decision is of interest to practitioners acting for clients who are wealthy but who claim their receipt of a small (or no) portion of a colossal estate (or the form in which they receive their provision) does not, in all the circumstances, adequately provide for their proper maintenance, support, education or advancement in life.

Such claims invariably focus on:

  1. the meaning of the word “proper” within the context of the Family Provision Act 1972 (WA) (Family Provision Act);
  2. the meaning of “advancement in life” within the context of the Family Provision Act; and
  3. whether and to what extent the deceased person owed a moral duty to the claimant.

The meaning of the words ‘proper’ and ‘advancement in life’

When assessing claims under section 6 of the Family Provision Act the court is required to undergo a two-stage process.

The first stage of the process calls for an assessment of whether the provision made was inadequate for what, in all the circumstances, was the proper level of maintenance, support, education or advancement in life appropriate for the applicant having regard to:

  • the applicant’s financial position,
  • the size and nature of the deceased’s estate,
  • the totality of the relationship between the applicant and the deceased, and
  • the relationship between the deceased and other persons who have legitimate claims upon his or her bounty,

as at the date of death.

The first stage has been described as the “jurisdictional question”.

The second stage, which only arises if the jurisdictional question is determined in the applicant’s favour, requires the court to decide what provision ought to be made from the deceased’s estate.  Similar factors are considered, including:

  • the size of the estate;
  • the nature of the relationship between the applicant and the deceased;
  • the applicant’s financial and other circumstances;
  • contingencies, including remote contingencies, which may arise in the future having regard to the position and circumstances of the applicant and the vicissitudes of life generally;
  • the position and circumstances of other applicants with legitimate claims on the deceased’s bounty; and
  • what the deceased regarded as superior claims or preferable dispositions in relation to his or her estate.

The above circumstances are considered as at the date of the hearing of the matter.

The High Court addressed the use of the word “proper” in Vigolo v Bostin, as follows:[2]

[‘Proper’]… implies something beyond mere dollars and cents. Its use… invites consideration of all of the relevant surrounding circumstances and would entitle a court to have regard to a promise [made by the testator]…. The use of the word ‘proper’ means that attention may be given, in deciding whether adequate provision has been made, to such matters as what used to be called the ‘station in life’ of the parties and the expectations to which that has given rise, in other words reciprocal claims and duties based upon how the parties lived and might reasonably expect to have lived in the future.

In Re Buckland (Deceased)[3] it is stated by Adam J:

For a child, particularly a dependant daughter of an exceptionally wealthy father, the standard of maintenance may justly be set high ensuring a degree of comfort and freedom from anxiety for the future which for those not so circumstanced might well seem somewhat extravagant, but it should fairly come within the conception of maintenance and support. The greater the estate the more may contingencies, even remote contingencies which may arise in the future, be provided for in the assessment of such maintenance.

When distinguishing between the meaning of maintenance, support, education and advancement, the High Court has stated:[4]

  • ‘Maintenance’ may imply a continuity of a pre-existing state of affairs, or provision over and above a mere sufficiency of means upon which to live.
  • ‘Support’ similarly may imply provision beyond bare need. The use of the two terms serves to amplify the powers conferred upon the court.
  • Provision to secure or promote ‘advancement’ would ordinarily be provision beyond the necessities of life. It is not difficult to conceive of a case in which it appears that sufficient provision for support and maintenance has been made, but that in the circumstances, say, of a promise or an expectation reasonably held, further provision would be proper to enable a potential beneficiary to improve his or her prospects in life, or to undertake further education.

The meaning the courts have attributed to the words used in section 6 encourage the conclusion that, in some circumstances, wealthy applicants can successfully claim.  How does the position with respect to moral obligation affect that?

Moral obligation

Over the years, the question of whether the court should consider the testator’s moral obligation to the applicant has seen various State courts (particularly Victoria and New South Wales) take different approaches.

The majority decision in Singer v Berghouse[5] was the reason for this divergence.  In that case it was stated (albeit obiter) that the use of the terms “moral duty” or “moral obligation” were a gloss on the statutory language.  New South Wales did not diverge from the previously well-established body of law (that moral considerations were relevant).  Victoria, on the other hand, found the High Court’s comments to be compelling.

The decision of Vigolo v Bostin settled the issue.  It held that considerations of moral claims and moral duty were useful to the court when making the value judgments required by the Family Provision Act.  As Gleeson CJ noted:[6]

Such considerations have a proper place in the exposition of the legislative purpose, and in the understanding and application of the statutory text. They are useful as a guide to the meaning of the statute. They are not meant to be a substitute for the text.  They connect the general but value-laden language of the statute to the community standards which give it practical meaning. In some respects, those standards change and develop over time. There is no reason to deny to them the description ‘moral’…

Of significance to large estates, Gummow and Hayne JJ noted:[7]

It is not disputed that, as Williams J observed in Lieberman v Morris… of the then New South Wales legislation… ‘in the case of large estates, provision can be made for the well-to-do’. In this Court, counsel affirmed that the application under the Act was not brought on the basis of financial need, but on the basis of a ‘moral claim’ to adequate provision for the proper advancement in life of the appellant.

The Court concluded that the Family Provision Act provided a number of indications that moral considerations were relevant.  One was the very presence of the word ‘proper’.

Much, as always, depends on the individual circumstances of the wealthy applicant.  It is now relevant to turn to the circumstances of Ms Mead in the decision of Lemon v Mead.

The Court of Appeal’s approach in Lemon v Mead

Lemon v Mead involved a young adult child (Ms Mead) with no real idea of her career path or future living/family arrangements.  She had received little material financial support from the deceased during his lifetime.  None of the beneficiaries of the estate had a close relationship with the deceased.  The estate was extremely large, and it was recognised that any further provision made to the applicant would not affect the other beneficiaries.

One could have reasonably expected that the sheer size of the estate, combined with the fact that any further provision wouldn’t affect the other beneficiaries, would be two strong factors in favour of a more generous provision than was ultimately awarded.

One of the main issues in the appeal related to Master Sanderson’s interpretation of section 6(1) of the Family Provision Act.[8]  The Master failed to limit the exercise of his discretion to what was adequate provision for Ms Mead’s proper maintenance, support, education or advancement in life.

The Court of Appeal reiterated that there is a place for consideration of moral obligations.  It agreed that the deceased failed to discharge his moral obligation to Ms Mead.  However, its approach to what constituted adequate provision was quite conservative.  It concluded that Ms Mead be provided with a capital sum which was “likely to ensure her financial security for the remainder of her life”, including the ability to purchase “a reasonably substantial house with part of the capital sum” and then invest the balance so that she could draw a “reasonably substantial annuity” for the remainder of her life.  When settling on a figure the Court relied on updated tables of the kind filed in expert evidence at the original hearing of the matter – tables that outlined the present value of the sum required by Ms Mead to enable her to purchase a house and invest the remainder of the funds such that she could draw an annuity.  The Court preferred to index the annuity by reference to wage inflation rather than price inflation.  In that sense, it preferred to tie her standard of living to the working population.

The Court of Appeal also concluded that the increased award should be held on trust pending Ms Mead reaching the age of 30 years (consistent with the trust established by the Will).  In the main, the Court based this decision on the requirement to only alter the Will so far as was necessary to make adequate provision.  However, it also mentioned that Ms Mead had not led any evidence concerning how she had utilised/invested the $3 million that had already been transferred to her.  On that basis the Court of Appeal said it was difficult to conclude Ms Mead possessed the relevant financial astuteness required to give her immediate and unfettered access to the funds.

Unfortunately, Buss P did not elaborate on why the Court believed the above to be adequate for ‘proper’ maintenance, support, education or advancement.  His Honour did note, at paragraph 229, that although the discretion at the second stage of the process is very broad, the discretion must be exercised by reference to the evidence before the court or, in appropriate circumstances, facts of which the court can take judicial notice.[9]  Does this mean that the Court wanted further evidence of funds required for initiatives that fell outside of the purchase of a home and the maintenance of an annuity?

The following comments of Mitchell and Beech JJA relate to the re-exercise of the discretion:

It is impossible to describe, in terms of universal application, what adequate provision for proper maintenance etc will entail for a parent in respect of an adult child.  In many cases adequate provision for proper maintenance will not require the parent to support a capable adult child for the rest of his or her life.  However, each case will depend on its own circumstances…

In the process of re-exercising the discretion, the following observations of Adam J in Re Buckland[10] reflect our thinking:

If my order seems ungenerous to some it is because I feel that more than lip service should be paid to the injunction that it is not for this Court to rewrite the testator’s will; if to some it appears more than generous it is because I have seen fit to heed the advice not to be niggardly, by giving, in a case where the estate is large, and there are no competing moral claims of any relevance, to the words ‘adequate provision for proper maintenance and support’ as liberal a meaning as I have thought they can fairly bear.

It is not immediately clear from the judgment why the provision of ‘financial security’ for life is the most liberal outcome that the words of the Family Provision Act can bear.  It does not appear to cater for the contingencies of the type that His Honour Justice Adam referred to in Re Buckland (Deceased).

Conclusion

We are left with the conclusion that the Court of Appeal believes ‘financial security’ for life is ‘proper’ provision for an adult child, even though the size of the estate is such that any award (within reason) will not adversely affect the other beneficiaries.

Ms Mead has sought leave to appeal the decision to the High Court of Australia.  If leave is granted, perhaps the High Court will shed more light on the practical approach it takes to weighing the various factors at the second stage of the test.

In the meantime, assuming they overcome the jurisdictional question, wealthy adult children applicants can expect the Supreme Court of WA to rely on actuarial evidence to reach a conclusion on a capital sum that ensures financial security for the remainder of their life.  Wealthy adult child applicants can also expect opposing parties to compare the circumstances of their case with those of Lemon v Mead in order to suggest that any further provision be limited.

[1] [2017] WASCA 215.

[2] (2005) 221 CLR 191 at [114] Per Callinan and Heydon JJ.

[3] [1966] VR 404 at 415.

[4] Vigolo v Bostin (supra) at [115].

[5] (1994) 181 CLR 201.

[6] Vigolo v Bostin (supra) at [25].

[7] Vigolo v Bostin (supra) at [51].

[8] Which states:

If any person (in this Act called the deceased) dies, then, if the Court is of the opinion that the disposition of the deceased’s estate effected by his will… is not such as to make adequate provision from his estate for the proper maintenance, support, education or advancement in life of any of the persons mentioned in section 7… the Court may, at its discretion, on application made by or on behalf of any such person, order that such provision as the Court thinks fit is made out of the estate of the deceased for that purpose. (emphasis added)

[9] Lemon v Mead (supra) citing Chappell [31]

[10] [1966] VR 404 at 417.