The observer effect – when does a court permit covert recordings in succession law matters?

The observer effect – when does a court permit covert recordings in succession law matters?

The observer effect – when does a court permit covert recordings in succession law matters?
November 20, 2020 /
The observer effect – when does a court permit covert recordings in succession law matters?

In 1998 the Weizmann Institute of Science published a paper titled ‘Quantum Theory Demonstrated: Observation Affects Reality’.

It discussed a phenomenon commonly referred to as the ‘observer effect’, which has entranced both philosopher and physicist alike. That is, in the very act of watching, the observer affects the observed reality.1

This phenomenon has now entered the realm of further provision claims in succession law.

In Rathswohl v Court [2020] NSWSC 1490 (Rathswohl), the New South Wales Supreme Court has considered the admissibility of a covert tape recording in the context of a family provision application (FPA).

This has excited the juices of many a NSW succession lawyer, but its importance in Queensland is equally relevant, even though there are significant statutory differences in our privacy and evidence legislation.

In Rathswohl, the application for further provision was made by the deceased testator’s adult son, under section 59 of the Succession Act 2006 (NSW), for provision to be made out of his father’s estate for his maintenance and advancement in life.

In issue was a covertly recorded conversation between the deceased testator and one of his daughters. The applicant son sought to tender the recording as a part of his evidence in the FPA proceedings. However, an objection was taken to that on the basis that the recording was improperly or illegally obtained pursuant to section 138, Evidence Act 1995 (NSW).

The issue for determination was whether the recording was reasonably necessary for the protection of the lawful interests of a daughter of the deceased, Mrs Davies, within the meaning of section 7(3)(b)(i) of the Surveillance Devices Act 2007 (NSW) – was it an offence under section 7(1)(b) of that Act to have covertly recorded the conversation? This legislation is in stark difference to the applicable Queensland legislation.

The sequence of events went as follows.

On 25 January 2017 a family argument broke out at their mother’s nursing home about the various care roles of each of the children for their parents. Their attempt to resolve the disagreement was to return to the family home where their father was still residing, but now on his own. While there, their dispute gave rise to a search for the father’s will[JT1] [CS2] . That will could not be found. As a result, a new will for him was procured and executed. Its effect was to provide equally for each of the testator’s adult children.

Then, on 15 March 2017, a further new will with differentiated provisions and a power of attorney was executed and copies provided to all the adult children. As a result, a further dispute between the adult children broke out.

A flurry of ‘colourful’ text messages were exchanged between the adult children about this turn of events and the usual sibling accusations about who does what for a dying parent ensued.

Part of that dispute involved the reasoning behind why the deceased testator’s daughter, Mrs Court, had moved into her parents’ home to care for the father.

The timing of this was in dispute, and it is at this point that the contested recording enters the scene.

On the evening of 29 April 2017, one of the three siblings, a sister, Mrs Davies, covertly recorded a conversation with her father, claiming that the reason she covertly recorded the conversation was with a view to establishing the date on which Mrs Court moved into their father’s property.

The conversation captured by the recording corroborates Mrs Davies’ claim as to why the covert recording was undertaken.

Under 7(1)(b), Surveillance Devices Act 2007 (NSW), it is an offence in NSW to record a conversation if the elements of that provision apply. Relevantly, whether consent of a principal participant in the conversation has been obtained and it is reasonably necessary for the protection of the lawful interests of that principal party.

While it is the first time the NSW court has been asked to consider the issue of the admissibility of a covert recording in the context of an FPA, the issue has been considered in another succession law decision involving questions of capacity (discussed further below).

Here, the court summarised the test in the NSW legislation of “reasonably necessary” for the protection of the lawful interests. At “[35] …

1. Whether the purpose of the conversation was to obtain admissions in support of a legitimate purpose. The contentious subject matter of the conversation, or the characteristics of the person being recorded, may indicate that it was necessary to make the recording in order to secure the admission. Recording a conversation for the purpose of extracting money, inducing further improper conduct or to blackmail the recorded party will indicate to the contrary.

2. Whether it was important to protect oneself from being accused of fabricating a conversation and recording the conversation was the only practical means of refuting such an allegation. This is more likely to be the case where the conversation concerns a serious criminal matter or the principal party has a genuine concern for their safety or that of their children.

3. Whether there were other practical means of recording the conversation, for example, reporting the matter to police or making a contemporaneous file note.

4. Whether there was a serious dispute on foot between the parties, including where determination of the dispute would vitally depend upon oral evidence and thus, one person’s word against another. Recordings of conversations ‘just in case’ there is a dispute, or for the sake of making an accurate record of what was said, is not enough.”

In reaching its conclusions, the court considered the ideology behind the legislation, which was said to be as follows:

“[E]stablish safeguards against the unjustified invasion of privacy that can be occasioned by the use of electronic surveillance. In so doing, it seeks to protect one of the most important aspects of individual freedom – the right of people to enjoy their private lives free from interference by the State or by others … People should not be expected to live in the fear that every word that they speak may be transmitted or recorded and later repeated to the entire world.”2

In order to ascertain if the recording fitted the exception, the court went through the second reading speeches of the Act and its predecessor. The court found they were not helpful, so went to case law in other areas of law, searching for authorities on the provision: family law, criminal law, and civil law matters.

At [11] the court said “The closest case, factually, is Thomas v Nash (2010) 107 SASR 309; [2010] SASC 153, considered at [25], where a son recorded conversations with his mother said to bear upon whether she had capacity to make a will.”

In that decision the court found that, outside of that decision, the matter sat “…comfortably within the civil claims case law”.3

Between paragraphs 12-23, the court reviewed the case law as applied in criminal law matters and family law matters – primarily domestic violence applications.

And at paragraphs 23-35, the court reviewed the civil cases.

The most detailed judgment on recordings made ‘just in case’ there is a dispute was the matter of Thomas v Nash. That matter concerned whether the deceased mother of Mr Nash had capacity to make a will. Mr Nash had recorded conversations with his mother said to bear upon this issue. There the court found this decision had “[25] the most detailed judgment on recordings made ‘just in case there is a dispute’,” however the court emphasised that each decision is an application of the expression to its particular facts.

And so the court ultimately found:

  • “[40]…The evidence here supports the existence of a serious dispute between the children as to their father’s Will and care at the time the recording was made. The children were jostling for position.”
  • “[42]…a ‘lawful interest’ does not equate with ‘legal interests’ in the sense of a legal right, title, duty or liability.”
  • It includes “[42]… an interest in ascertaining whether Ms Court’s claim to warrant a greater entitlement to the father’s Estate was truthful or exaggerated…”
  • “A dispute had crystallised into a real and identifiable concern about the imminent potential for significant harm to Mrs Davies’ lawful interests.”

Therefore, the court concluded, in this circumstance, the recording was lawful.

Warning

But in reaching its conclusion the court fired off various warnings:

  • “[44] This conclusion is referable to the facts of this case.”
  • “[45]…making a covert recording of a testator will not ordinarily reflect well.”
  • “[46]… whilst such a recorded conversation may be casual, it might not be particularly accurate as to what the testator truly thought on contentious subjects.”
  • “[47 ]…the recording may also contain evidence which is unwittingly damaging to the person who made it.”

Queensland difference

But of course, as is the case with many things, Queensland differs in a significant way.

Under our Invasion of Privacy Act 1971 (Qld), it is not an offence to covertly record a conversation so long as a simple condition is present. It is perfectly legal to covertly record a conversation so long as you are a party to the conversation. See:

“43 Prohibition on use of listening devices

(1) A person is guilty of an offence against this Act if the person uses a listening device to overhear, record, monitor or listen to a private conversation and is liable on conviction on indictment to a maximum penalty of 40 penalty units or imprisonment for 2 years.

(2) Subsection (1) does not apply—

              (a) where the person using the listening device is a party to the private conversation”

Further, the Queensland Evidence Act 1977 contains an exception to the hearsay rule:

“92 Admissibility of documentary evidence as to facts in issue

(1) In any proceeding (not being a criminal proceeding) where direct oral evidence of a fact would be admissible, any statement contained in a document and tending to establish that fact shall, subject to this part, be admissible as evidence of that fact if—
(a) the maker of the statement had personal knowledge of the matters dealt with by the statement, and is called as a witness in the proceeding; or
(b) the document is or forms part of a record relating to any undertaking and made in the course of that undertaking from information supplied (whether directly or indirectly) by persons who had, or may reasonably be supposed to have had, personal knowledge of the matters dealt with in the information they supplied, and the person who supplied the information recorded in the statement in question is called as a witness in the proceeding.

(2) The condition in subsection (1) that the maker of the statement or the person who supplied the information, as the case may be, be called as a witness need not be satisfied where—

  • the maker or supplier is dead, or unfit by reason of bodily or mental condition to attend as a witness…4

‘document’ includes, in addition to a document in writing—

(e) any disc, tape, soundtrack or other device in which sounds or other data…”

If Queensland is different to NSW, some readers might ask, then why bring this decision to your attention?

Well those things that separate us are not as broad as those things that bring us together. And this is most relevant in the warnings issued by the NSW court as to how covert recordings might be viewed by a court, even if they are found to be legitimate.

To that end, the court noted that parents are not always brutally honest with their adult children. As such, a covert recording may not satisfy a court as to the veracity of the statements made. Further, there is a great risk that the person undertaking the recording may be viewed in a dim light by a court, thereby affecting their credibility.

But notably, in an era where people have assets in other jurisdictions, the difference between the states may impact the decision-making process as to which jurisdiction might benefit the applicant. And as it is almost always the case in succession law matters, much turns on the particular facts of the case itself.

The takeaway for practitioners is that, while your client may think that a covert recording may be their silver bullet, it may also lead to their credibility being impeached, so tread lightly when considering whether to load that particular piece of evidence before the court, for “sometimes it is the quiet observer who sees the most”.5

Christine Smyth is a former President of Queensland Law Society, a QLS Accredited Specialist (succession law) – Qld, a QLS Senior Counsellor and Consultant at Robbins Watson Solicitors. She is an executive committee member of the Law Council Australia – Legal Practice Section, Court Appointed Estate Account Assessor, and member of the Proctor Editorial Committee, STEP and Deputy Chair of the STEP Mental Capacity SIG Committee.

Footnotes
1 Weizmann Institute of Science, ‘Quantum Theory Demonstrated: Observation Affects Reality.’ ScienceDaily, 27 February 1998, sciencedaily.com/releases/1998/02/980227055013.htm.
2 At [10]… “described in the second reading speech of the Listening Devices Bill 1984 by the then Attorney-General of New South Wales (extracted by Branson J in, Violi v Berrivale Orchards Ltd (2000) 99 FCR 580; (2000) 173 ALR 518; [2000] FCA 797 at [21]).”
3 [11].
4 See also Hughes v National Trustees Executors and Agency Co Ltd (1979) 143 CLR 134 at 150, Manly v. Public Trustee of Queensland (2007) QSC 388 at [36].
5 Author Kathryn L. Nelson.

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Associate appointed

Women in Law at the Races!

Granny Flat Gains

Granny Flat Gains
October 12, 2020 /

Removal of CGT will bring two major benefits


On 5 October 2020, the Treasurer, Josh Frydenberg, and the Minister for Housing and Assistant Treasurer, Michael Sukkar, announced1 the removal of Capital Gains Tax (CGT) from granny flat arrangements.

“Under the measure, CGT will not apply to the creation, variation or termination of a formal written granny flat arrangement providing accommodation for older Australians or people with disabilities,” their announcement said. “The measure will commence as early as 1 July 2021 subject to the passing of legislation.”2

The announcement is not only welcome from a tax reduction aspect but, more importantly, because of the requirement for these agreements to be in writing in order to benefit from the CGT exemption.

We know these arrangements are often entered into informally. The lack of documentation makes it difficult for both parties to evidence the true nature of the agreement, causing protracted and expensive litigation at a later time. The introduction of a requirement of writing before the parties can access the CGT exemption will hopefully encourage families to seek legal advice.

For practitioners unfamiliar with these arrangements, this article aims to address some of the general matters to which you will need to have regard.

If acting for the aged person, you must consider whether they are entitled to or seek to become entitled to social security under the Social Security Act 1991 (Cth) (Social Security Act). If they are, then restrictions apply.

For social security purposes, a ‘granny flat interest’ is defined as follows:

“A person has a granny flat interest in the person’s principal home if:
(a) the residence that is the person’s principal home is a private residence; and
(b) the person has acquired for valuable consideration or has retained:
(i) a right to accommodation for life in the residence; or
(ii) a life interest in the residence.”3

For social security purposes, where a granny flat interest is created, its value is generally the same as the amount paid for acquiring the interest.4 Importantly, for social security preservation the aged person cannot obtain legal title to the property either directly or indirectly through their partner, a trust or company they control.

The social security granny flat arrangement is further restricted by the ‘five year rule’. The Social Security Act provides that a single person or couple can make gifts up $10,0005 in a single year with a maximum of $30,0006 over a five-year rolling period (minus the $10,000) if applicable, without it impacting their social security benefits.7 Any gift valued at more than that is classified as a ‘deprived asset’ for five years from the date of the gift, and is deemed as an asset of the aged person.8

However, an exemption applies to the aged person’s home. Where the aged person’s home ownership is divested as part of the granny flat arrangement in exchange for valuable consideration in the form of a right of residence for life in another property, this forms a “special residence”9 which exempts the aged person’s home from the deprivation rule.

In exploring the viability of a granny flat arrangement, the following is a non-exhaustive list of issues to be canvassed and preferably reduced to writing:

  • Have all the parties received independent advice – legal, financial, social security?
  • Are the assets/money pledged to be gifts to the person housing the aged person?
  • What kind of personal care and support will the homeowner’s family provide, if any?
  • Is someone seeking or entitled to seek a carer payment?
  • What are the health care needs? Is the aged person in receipt of a Homecare package?10 What is to happen if their health worsens and they need to be moved to a medical facility for a prolonged period?
  • What is to happen if the homeowner suffers financial difficulty?
  • Who is responsible for maintenance and outgoings?
  • How is the arrangement to be reflected in the aged person’s will and the will of the homeowner?

The rise of the granny flat arrangement also adds complexity to family provision claims. Megerditchian v Khatchadourian [2019] NSWSC 1870 and Megerditchian v Khatchadourian [2020] NSWCA 229 is a recent example of how the benefit and burden of shared housing arrangements impact family provision applications.

In Megerditchian v Khatchadourian [2019] NSWSC 1870, the court in the first instance (upheld on appeal), found that the housing arrangements within the family were entirely relevant to the application. The son, Hampartzoum, lived with his father, Souren, his whole life. Souren had owned the family home in joint tenancy with his wife. On her death, her share of the home passed to Souren.

Later, Souren gifted a half share to his son, held in joint tenancy. Souren died aged 91 in May 2018, and Hampartzoum received the remaining share by survivorship. By that stage, Hampartzoum had held an ownership entitlement in the family home for about 10 years.

Souren’s 71-year-old daughter, Vanoush, who lived with her adult daughter, brought a claim for further provision against her father’s estate.

One of the questions for determination was whether the former family home could be subject to a notional estate order. In finding in favour of Vanoush that half of the property was liable to be designated as notional estate, the court at first instance addressed the welfare and housing arrangements between the deceased and his son, finding:

“[193] It is quite clear that ‘proper’ provision under s59(1)(c) does not require equality between the testator’s children. The deceased was entitled to make greater provision for the son who stayed close to his parents, than to the daughter who (for whatever reason) did not. Hampartzoum’s many contributions to his parents’ welfare are facts which the Court would not lightly cast aside, even if there were stronger evidence than there is that the deceased was to blame for the rift with Vanoush. In my view the Court would not be justified in rewriting the deceased’s will in a way which would nullify, or jeopardise, the intention for Hampartzoum to have the Mowbray Road property as his home after his parents died.”

On appeal, in Megerditchian v Khatchadourian [2020] NSWCA 229 Emmett AJA noted in relation to the housing arrangements between the applicant and her daughter:

“[I]t is well established that, prima facie, an infant child has a claim to be maintained and supported, an adult child capable of maintaining and supporting himself or herself usually does not. Citing Hughes v National Trustees, Executors and Agency Company of Australasia Limited (1979) 143 CLR 134 at 147 (Gibbs J); [1979] HCA 2. Furthermore, his Honour considered that, if a parent owes no obligation to provide a home for a child whilst the parent is alive, that absence of obligation does not change merely because the parent dies.”

The above is merely a snapshot of the issues for consideration in a granny flat arrangement. Some 16% (about four million) Australians are over 65 years,11 of them 63% receive income support from the Australian Government.12

For the 2019-20 financial year, around 1.45 million (73%) of Australians in receipt of a pension were classified as homeowners (with or without a mortgage).13

These figures indicate that the granny flat arrangements continue to be a significant alternative to institutional care. The initiative of tethering the CGT exemption to a formal written agreement is a welcome step in protecting vulnerable clients.

Christine Smyth is a former President of Queensland Law Society, a QLS Accredited Specialist (succession law) – Qld, a QLS Senior Counsellor and Consultant at Robbins Watson Solicitors. She is an executive committee member of the Law Council Australia – Legal Practice Section, Court Appointed Estate Account Assessor, and member of the Proctor Editorial Committee, STEP and Deputy Chair of the STEP Mental Capacity SIG Committee.


Footnotes
1 ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/removing-capital-gains-tax-granny-flats.
2 Ibid.
3 SS12C(2), (3) and 1118(1)(ga) Social Security Act 1991 (Cth).
4 SS1118(1)(c)(i)–(iii) Social Security Act 1991 (Cth), although a reasonableness test is applied. Department of Social Services, ‘Guide to Social Security Law’ (2014) [4.6.4.50].
5 S1126AA Social Security Act 1991 (Cth).
6 S1126AB Social Security Act 1991 (Cth).
7 S1118 Social Security Act 1991 (Cth).
8 Fulcher v Department of Family and Community Service [2005] AATA 332.
9 Ibid.
10 myagedcare.gov.au/help-at-home/home-care-packages.
11 abs.gov.au/ausstats/[email protected]/0/1CD2B1952AFC5E7ACA257298000F2E76.
12 superguide.com.au/in-retirement/age-pension-rates.
13 Ibid.

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Probate and due process

Probate and due process
October 2, 2020 /
“Out here, due process is a bullet,” said John Wayne,1 which may provide us with some insight into the way the United States is dealing with any number of the large-scale social issues it is facing. However, regardless of what we are experiencing in the way of challenges, our justice system is founded on the rule of law. And no matter how expedient, convenient and pragmatic a solution we think we can effect to solve a problem, we are all bound by the rule of law and its process. While the criminal law sphere may be where these concepts get media exposure, they are equally applicable in the most mundane of civil matters, such as probate matters. Only a court can declare the validity of a will. The rationale for this principle is that “[s]ubject to limited exceptions, the Will is a binding determination at large, it cannot be ‘gainsaid’ even by another court”.2 It remains for a court to be satisfied on the evidence that the document being propounded is the deceased’s last valid will. Accordingly, even where parties related to the estate agree among themselves as to questions around the validity of a testamentary document, any resolution reached by them is subject to the court’s determination.3 This issue was recently addressed in the matter of Re Picking [2020] QSC 278.4 There, the deceased, Mrs Picking, made a formally executed will dated 23 October 2001.5 However, on her death on 11 March 2020,6 a copy of that will was found at her home.7 It was found by one of her executors, Wendy Elizabeth Nielsen,8 who gave evidence that the deceased informed her a year prior to her death that her will was located “at her home”.9 The copy contained a number of alterations with notations which were neither signed nor witnessed.10 The original will was eventually located and filed in the court registry.11 The question for determination was the status of the altered copy of the will. Before probate was sought, the parties investigated the various alterations on the copy will and subsequently disclaimers of gifts made under the alteration were made with respect to those affected by the alterations. Further investigations also revealed other gifts made by the alterations were given to the recipient while the deceased was alive.12 This had the practical effect of the alterations having no real impact on the gifts in the formal will. Notwithstanding, the cooperation of the parties, the disclaimers, and the confirmation of intervivos gifts, the task for the court was to determine the status of the altered copy. In its considerations the court acknowledged that “to give probate on the alleged codicil serves no practical purpose”.13 Notwithstanding, Davis J affirmed that “[i]t would be inappropriate to grant probate of the will without granting probate to any codicil as otherwise the will to which probate was granted could not be properly described as the last will of Mrs Picking”.14 In reaching the conclusion that the altered will so the court considered various provisions of the Succession Act 1981, including: ‘Section 10 – How a will must be executed’; ‘Section 16 – How a will may be altered’ and ‘Section 18 – Court may dispense with execution requirements for will, alteration or revocation’ in the context of the jurisprudence regarding those provisions.15 After consideration of the evidence, Davis J found the altered copy to be an informal codicil and granted probate of the formal will and informal codicil.16 In reaching his conclusion Davis J affirmed the following principles of law: “[42] In Lindsay v McGrath,12 [2016] 2 Qd R 160. Boddice J, referring to Hatsatouris v Hatsatouris,13 [2001] NSWCA 408. explained the three requirements which must be fulfilled before the court ought make an order under s18 dispensing with execution requirements. His Honour said: ‘[57] In Hatsatouris v Hatsatouris14 [2001] NSWCA 408, [56]. Powell JA observed, in relation to the analogous provision in New South Wales: ‘It is, and has long been, my view that the questions arising on applications raising a question as to the applicability of s18A are essentially questions of fact, the particular questions of fact to be answered being: (a) was there a document, (b) did that document purport to embody the testamentary intentions of the relevant Deceased? (c) did the evidence satisfy the Court that, either, at the time of the subject document being brought into being, or, at some later time, the relevant Deceased, by some act or words, demonstrated that it was her, or his, then intention that the subject document should, without more on her, or his, part operate as her, or his, Will?’ This approach has been applied in Queensland.15 Re Garris [2008] 2 Qd R 59, 8; Re Edmonson [2013] QSC 54. [58] The second element requires a consideration of the expression ‘testamentary intentions’. In Re Masters (deceased)16 (1994) 33 NSWLR 446, 455. Mahoney JA observed: ‘…[The] document must state the deceased’s ‘testamentary intentions’, that is, his wishes or intentions as to how, voluntarily, his property is to pass or be disposed of after his death. A will may, of course, do other things: it may, for example, appoint a legal personal representative, exercise a special power, appoint a guardian or the like: see Halsbury’s Laws of England, par 202. But it is the disposition of the deceased’s property voluntarily after his death which is, for present purposes, the relevant characteristic of a will.’ [59] The third requirement requires the Court to be satisfied on the evidence that the deceased, either at the time of drafting the document or subsequently, formed the intention that the particular document operate as his or her Will. That requirement does not involve establishing that the deceased consciously set his or her mind to the legal formalities of making a Will.17 Hill v Plummer per Kirby P (as his Honour then was), 452. However, it is not enough that the document set out the deceased’s testamentary intentions. What must be established, by evidence, is that the deceased intended the document to operate to dispose of the deceased’s property upon death.18 Oreski v Ikak [2008] WASCA 220, [54].” (footnotes in original) Since section 18 was introduced into the Succession Act 1981, in 2006 (replacing section 9(a) and (b) of the existing Act) a wide range of material has been considered by the court under that provision.17 Add to the mix COVID-19 and the statutory and regulatory changes Queensland has made to the manner in which testamentary instruments may be executed and witnessed, and I expect a greater number of potential section 18 application to come across our desks in the near future. To that end the takeaways for practitioners are:
  1. Any material may fit the s18 requirements, no matter how inconsequential; therefore it ought to be thoroughly investigated.
  2. Only a court can make the determination as to whether is a testamentary instrument on an application for a grant.
  3. Parties to a matter themselves cannot resolve whether the material constitutes a testamentary document, only a court can do that.
  4. However, whatever reasonable steps they can take to minimise the court’s time and costs ought to be considered.
  5. If your client feels disinclined to follow the above recommendations, preferring John Wayne’s method, it might assist to advise your client he also observed that “Life is hard; it’s harder if you’re stupid.”

Christine Smyth is a former President of Queensland Law Society, a QLS Accredited Specialist (succession law) – Qld, a QLS Senior Counsellor and Consultant at Robbins Watson Solicitors. She is an executive committee member of the Law Council Australia – Legal Practice Section, Court Appointed Estate Account Assessor, and member of the Proctor Editorial Committee, STEP and Deputy Chair of the STEP Mental Capacity SIG Committee.

Footnotes 1 John Wayne, Carol Lea Mueller (2007). The Quotable John Wayne: The Grit and Wisdom of an American Icon, p60, Taylor Trade Publications. 2 McKeown at [13] citing Williams, Mortimer and Sunnucks, Executors, Administrators and Probate, 20th ed (2015) at p 564 [40-02]. 3 For a more recent recitation of this principle see McKeown v Harris & AnorIn the Will of Patricia Margaret Rice [2018] QSC 87. 4 Re Picking. 5 At [6]. 6 At [8]. 7 At [9]. 8 ‘Wendy’. 9 At [7]. 10 At [13]-[20]. 11 At [11]. 12 At [20]-[25]. 13 At [43]. 14 At [43]-[44]. 15 At [37]-[59] citing: Hatsatouris v Hatsatouris [2001] NSWCA 408, followed and Lindsay v McGrath [2016] 2 Qd R 160, followed. 16 At [48]. 17 For various examples see: Tolbert v Hicklin [2020] QSC 166 (10 June 2020) – solicitor’s instruction notes signed by the deceased; Saltmer v Rennick Lawyers Pty Ltd [2018] QSC 307 (18 December 2018) – will instructions on an insurer’s checklist; GEW, Re [2020] QSC 119 (30 March 2020) – suicide note; Re: Tinker (d’ced) [2016] QSC 217 (21 September 2016) – letter written in contemplation of suicide; In The Estate of Leslie Wayne Quinn (deceased) [2019] QSC 99; Radford v White [2018] QSC 306; Mellino v Wnuk & Ors [2013] QSC 336 [2014] 01 QLR (13/4090) Dalton J 27 November 2013 (delivered ex tempore) – video wills variously recorded on computers and iPhones; Re Nichol; Nichol v Nichol [2017] QSC 220 (9 October 2017) – unsent text message; Yu, Re [2013] QSC 322 (6 November 2013) – documents on an iPhone; Estate of Carrigan (deceased), Re [2018] QSC 206 (6 September 2018) voice mail message on the mobile telephone; Trust Company Ltd & Anor v Oates & Ors [2009] QSC 282 – document titled ‘Trust Use Only Additional Notes’.

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Pastries and professional development

Capacity, clarity, contradictors and civil procedure

Capacity, clarity, contradictors and civil procedure

Capacity, clarity, contradictors and civil procedure
September 16, 2020 /
Capacity, clarity, contradictors and civil procedure

 

For succession lawyers mental capacity issues extend far beyond the requirement for a mere will.

These days clients have any number of complex asset classes undertaking any number of decisions in giving effect to a succession plan. Accordingly, there is a broad range of mental capacity contexts that must be considered, from engagement and instructions, through to post-death implementation.

To that end, we know there is no one test for mental capacity. It sits on a continuum and is context specific.

“The law does not prescribe any fixed standard of sanity as requisite for the validity of all transactions. It requires, in relation to each particular matter or piece of business transacted, that each party shall have such soundness of mind as to be capable of understanding the general nature or what he is doing by his participation.”1

Where a question of mental capacity is raised, particularly in the context of a litigation, solicitors have a fundamental duty to the court to bring it to the court’s attention.2 In doing so use of medical evidence will often be relied on, but it is not determinative.3

It is common for medical opinions to be sought for a wide range of legal matters. Unfortunately, even the most minor of a comment in a medical report, regarding questions of capacity, can create a mischief and a consequential burden for clients and their solicitors to address. It is further compounded when deeds of settlement contain precedent clauses that raise matters of mental capacity.

 

The decision of Hyytinen v Palmer & Anor [2020] QSC 2404 (Hyytinen) is one such matter where both occurred, demonstrating the consequences that flow, when imprecision infiltrates the documentation.

In Hyytinen, the matter before the court was an application for sanction of a deed of settlement of a personal injuries claim. The deed included an introductory clause:

“Subject to the sanction by the Queensland Supreme Court or a declaration of capacity by QCAT, the matter is settled on the following terms…”5

The difficulty was that the applicant plaintiff did not consider she lacked capacity for the matter. However, the inclusion of that clause raised doubt, necessitating an application to the court. The court observed that the “inclusion of this form of words regrettably made it necessary”.6

The genesis of the issue arose from a “throwaway line”7 in a psychiatric report, which stated, “I believe she would require assistance in managing any financial award”.8 There was no other “evidence suggestive of any issue with capacity”.9

In considering the matter, the court exposed the ambiguity and peril in the “throwaway line” by noting “[t]he same observation might be made of many people who do not lack any legal capacity but are not particularly good with their money”.10 The court found that “even if the comment were intended to mean that the applicant lacks capacity, such a view is convincingly contradicted by the preponderance of other evidence relevant to the point”.11 And so, the court determined the applicant did “not have impaired capacity regarding a financial matter and is not a person under a legal disability”.12

 

However, the matter did not end there, because the respondent defendants did not “resist the application or take any point about the declarations being sought”.13 In taking that approach their position raised questions as to whether there was a contradictor to the application for the declaration of capacity. If not, then the law required that the declaration should not be made.14

Henry J identified “[t]he real issue in the application goes to the proper mechanism for relief”,15 citing section 10(2) Civil Proceedings Act 2011:

“The court may hear an application for a declaratory order only and may make a declaratory order without granting any relief as a result of making the order.”16

In examining the application of that provision, Henry J noted it was in similar “terms to s10 Equity Act 1901 (NSW)”, which was considered in Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437 where Gibb J cited Russian Commercial and Industrial Bank v The British Bank for foreign Trade:

“the question must be a real, not a theoretical question; the person raising must have a real interest to raise it; he must be able to secure a proper contradictor, that is to say, someone presently existing who has a true interest to oppose the declaration sought.”

Henry J found that passage was addressing sufficiency of standing to oppose rather than a requirement they actively oppose. In support of his view, he affirmed this statement of law,17 “where the Court held it had power to order a declaration when a party who has an interest to oppose the declaratory relief sought, nonetheless, decides not to oppose it. The Court observed the participation of a party with an interest to oppose the declaratory relief sought meant there was a proper contradictor.”18

 

Here the court found that “a contradictor clearly does exist here, has notice of the application and, indeed, appears. That the contradictor, in the form of the respondent defendants, does not oppose the declarations, is no obstacle because the jurisdictional principle goes to the existence of a contradictor, not the position taken by the contradictor.”19 In making that finding Henry J made the declarations sought.20

In taking instructions from a client involved in litigation a solicitor’s primary responsibility is to be reasonably satisfied that the client has the mental capacity to participate in the litigation and to provide proper instructions.21

If the solicitor is not satisfied, then they have limited authority to act – their authority is limited to making due inquiry into the capacity of their client and when that occurs they are assisting the court in their role as an officer of the court. The solicitor has a clear duty to raise it with the court.

In a cautionary statement, the court said: “If the party lacks mental capacity and the solicitor knew or should have known, the solicitor is at risk of having to pay indemnity costs even in the absence of impropriety…A solicitor who persists with representing a client who has lost mental capacity is liable to have costs awarded against them on an indemnity basis even if there is no impropriety.”22

To that end, it is important to be aware that the applicable common law capacity test can be and is altered by statute and rules of court. For example, in most Australian states and territories the necessary capacity to make a power of attorney is dictated by statute.23

In respect of the capacity to conduct of a court matter, a person under a legal incapacity is defined by Schedule 3 Uniform Civil Procedure Rules 1999 (Qld) (UCPR). A person under a legal incapacity includes a person who is not capable of making the decisions required of a litigant for conducting proceedings or who is deemed by an Act to be incapable of conducting proceedings. In Queensland Rule 95 of the Uniform Civil Procedure Rules 1999 (Qld) provides the court may appoint a litigation guardian if the interests of a party who is under a legal incapacity require it.

 

In the context of capacity assessments, Hyytinen sharply reminds us that not only are there a range of mental capacity levels, questions as to mental capacity must also address the task at hand.

Where medical evidence is sought to assist, any material provided to the medical practitioner ought to be framed in the context of the legal matter being addressed, detail the precise test that must be met, and seek the medical opinion specifically addresses those matters.

But most importantly, care must be taken as to the formulation of preconditions in settlement documentation, lest the parties might find themselves in the midst of an unanticipated application where the complexities of civil procedure are tested.

Christine Smyth is a former President of Queensland Law Society, a QLS Accredited Specialist (succession law) – Qld, a QLS Senior Counsellor and Consultant at Robbins Watson Solicitors. She is an executive committee member of the Law Council Australia – Legal Practice Section, Court Appointed Estate Account Assessor, and member of the Proctor Editorial Committee, STEP and Deputy Chair of the STEP Mental Capacity SIG Committee.

Notes
1 Gibbons v Wright [1954] HCA 17; (1954) 91 LCR 423, 437 at [555].
2 Pistorino v Connell & Ors [2012] VSC 438 (25 September 2012) For analysis of this case, see ‘Clients, Capacity and Court Proceedings’ by Katerina Peiros and Christine Smyth, Law Institute Journal, Victoria, August 2013; the casenote, Pistorino v Connell & Ors [2012] VSC 438 (25 September 2012) by Katerina Peiros and Christine Smyth, Retirement and Estate Planning Bulletin, October 2012.
3 Shaw v Crichton [1995] NSWCA 423 (23 August 1995).
4 My thanks to Chris Kahler of Kahler Lawyers for bringing this decision to my attention.
5 Page 1 at line 5.
6 Page 3 at line 5.
7 Page 3 at line 14.
8 Page 3 at line 15.
9 Page 3 at line 15.
10 Page 3 at line 15-20.
11 Page 3 at line 20.
12 Page 3 at line 20.
13 Page 3 at line 7.
14 Page 3 at lines 20-40.
15 Page 3 at line 10.
16 Page 4 at line 5-30.
17 Page 4 at lines 10-40.
18 Australian Competition and Consumer Commission v MSY Technology Pty Ltd (2012)201 FCR 378 referred to by McMurdo J as he then was, in Re Queensland Police Credit Union Ltd (2013) 279 FLR 420.
19 Page 5 at lines 15-20.
20 Page 5 at line 25.
21 Goddard Elliot v Fritsch [2012] VSC 87.
22 [550].
23 For Queensland, see Schedule 3 of the Powers of Attorney Act 1998, and Schedule 4 Guardianship And Administration Act 2000.

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Ranking by risk, but where are the resources?

Ranking by risk, but where are the resources?
September 11, 2020 /

Prioritisation of children’s cases according to risk level is a laudable step, but where are the resources to actually then deal with the cases before the Court?

Referred to as The Lighthouse Project, a new pilot programme focusing on parenting matters and family violence will be commencing in Brisbane registry this year. The Project involves three fundamental tenets;

  • “screening process” where parents will complete a confidential and inadmissible online questionnaire for children’s matters;
  • “triaging” where the matter will assessed and directed into the most appropriate case management pathway based on the level of risk; and
  • High risk cases will be allocated to a specialist list called the “Evatt List”

The Project will be underpinned by the Family Law Amendment (Risk Screening Protections) Bill 2020, which was created following an announcement in December last year from the Government of $13.5 million in funding for this project, in response to a range of calls to better address domestic violence. The pilot of the new family safety risk screening processes will operate from 2020 to 2022, from the Brisbane, Parramatta and Adelaide court registries, which collectively receive more than 42 per cent of filings.

The underlying premise is that ranking matters according to risk means that the Court’s resources can then be allocated to the most urgent cases, thus improving safety and outcomes for families using the family courts.   

There is heavy emphasis on resourcing the assessment process. The screening process starts with a specially developed questionnaire via a confidential and secure online platform known as Family DOORS Triage. Triage team are to be comprised of highly skilled registrars, family counsellors, and support staff with detailed knowledge in family violence and family safety risks. The Evatt List will be managed by a judge-led support team. The team will again have specialised training and is experienced in working with families where high risk safety issues have been identified.

While a laudable initiative in itself, many issues remain. 

Once a risk level is identified, what happens then? The Evatt List is for high risk cases only, and will require proper resourcing to achieve the stated outcomes. For other matters it’s not clear what other case management “pathways” are going to be available. Having court staff signpost external support services will no doubt be useful, but what about the resources to resolve the dispute before the Court?

All our members of society are entitled to expect prompt and fair access to justice. Matters that are not “High Risk” are still important.  What of the matters which are medium or low risk, what resources will be leftover for those families?   

Fundamentally, the issue is an overall shortage of resources in the Family Law system.  Until this is resolved, any prioritisation of one area (no matter how deserving) will lead to even greater delays in the areas that remain and all of the matters still need access to Judges and other resources.

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Out and about in the Gold Coast

Out and about in the Gold Coast

Banks v Goodfellow sesquicentennial – Is there anything new under the sun?

Banks v Goodfellow sesquicentennial – Is there anything new under the sun?

Banks v Goodfellow sesquicentennial – Is there anything new under the sun?
September 4, 2020 /
Banks v Goodfellow sesquicentennial – Is there anything new under the sun?

This year marks 150 years since Banks v Goodfellow [1870 LR 5 QB 549 (Eng.)] was determined.

In all this time, it has been the classic statement of law on the question of testamentary capacity. It seems almost trite to recite the ratio:

It is essential to the exercise of such a power that a testator shall understand the nature of the act and its effects; shall understand the extent of the property of which he is disposing; shall be able to comprehend and appreciate the claims to which he ought to give effect; and, with a view to the latter object, that no disorder of the mind shall poison his affections, pervert his sense of right, or prevent the exercise of his natural faculties – that no insane delusion shall influence his will in disposing of his property and bring about a disposal of it which if the mind had been sound, would not have been made.”1

The genius in the statement is how the language endows the test with flexibility, enabling the courts to adapt to changes in society and the complexities of property ownership, over the course of one and a half centuries.2 “[T]he question is one of common law principle, not of construction of the words used to frame one part of an elaborate judgment in 1870. Judgments should not be read as if they were statutes.”3

So far this year, Banks v Goodfellow has been cited and applied in no less than six determinations as to testamentary capacity in the Supreme Court of Queensland.4 So, after 150 years and innumerable applications, it comes as no surprise that the test has had its fair share of challenges, most recently in the matter of Re SB; Ex parte AC [2020] QSC 139 (Re SB).

Re SB involved an application for a statutory will and a declaration as to the execution by a financial administrator of a non-lapsing binding death benefit nomination in a superannuation fund. SB suffered a severe spinal injury5 in a motor vehicle accident, for which a compromise was reached for $10 million dollars plus costs.6

The extent of her physical injuries are significant. “She can move her head very slightly from side to side. She cannot move her trunk and limbs. She is dependent on a ventilator via a tracheostomy. She is fed via a gastric stoma. She is dependent on carers for activities of daily living. She is unable to speak but she can mouth words and make some noises. Non- family members are unable to communicate effectively with her. It appears that some family members, especially one of her sons, is able to communicate to a limited extent with her.”7

In addition, SB had no formal education, speaks no English, had never held employment in Australia, and prior to receipt of her compensation had no significant assets.8 However, “[t]here was no evidence of cognitive impairment, but objective assessment was extremely difficult due to the communication difficulties”.9

In respect of the application for a statutory will, sections 21-23 Succession Act 1981 (Qld) set out the elements which must be present for a court to make an order for a will, a fundamental criterion being that the proposed testator lacks testamentary capacity.10 The court must also be satisfied that the proposed will was one which the proposed testator would, or might, make if s/he had testamentary capacity.

Here two elements created substantial challenges for the court.

Firstly, how could an assessment of testamentary capacity be undertaken in circumstances where the proposed testator was unable to effectively communicate?11 His Honour critically observed that “[t]he language used in [Banks v Goodfellow] may not pass muster in light of advances in medical knowledge since then”.12

In that context, is Banks v Goodfellow showing its age? It is framed in such a way as to assume the ability to communicate. On that aspect, Martin J agreed with submissions that “capacity to make a will requires not only the mental acuity necessary, but also the ability to convey the testamentary intentions”.13

He accepted the assessing doctor’s opinion that “[a] general requirement for capacity is that a person is able to understand the facts involved in the decision-making and the main choices, weigh up the consequences of those choices and understand how the consequences affect them and communicate their decision. Even with the assistance of her son, SB was unable to communicate to [the doctor] her reasoning behind her decisions.”14

Accordingly, Martin J determined that the proposed testator did not have the requisite capacity to make a will.

Notably, Martin J also observed the Banks v Goodfellow test “was applied in circumstances where the instructions for a will and the formal will itself had been signed by the testator, thus ‘the question [was] whether on both or either of those days the testator was of sound mind, so as to be capable of make a will.’15 It was an assessment, then, that was made of the capacity of someone who had already made a will, not about a person’s capacity to make a will.”16

On the question of the terms of the will, here the testator had never made a will and there was little to no evidence of her prior testamentary intentions and so the court’s ability to assess whether the proposed will was one that the testator might have made was problematic. “There [was] no reliable evidence of SB’s wishes. There is no previous will and no record of any expression by her at an earlier time about her wishes or intentions.”17

Although there was “some indication for some provision to be made for her children”.18

The court noted the applicant’s evidence. The applicant was an experienced succession law solicitor who deposed “that the terms of the proposed will are consistent with what a married woman might be expected to do by way of provision for a long-term spouse and the provision of some benefit to the children of her marriage”.19

Having regard to the evidence before it, the court determined to make the order for the proposed will.20

This decision raises some interesting questions for succession lawyers to consider. On the issue of limited evidence as to the proposed testator’s testamentary wishes, to what extent must an applicant go to ascertain the testamentary wishes of the proposed testator? While the role of an applicant in a statutory will matter involves deposing to their understanding of the testamentary wishes of the proposed testator, it is unusual for an applicant to form an opinion from mere generalisations.

Are Martin J’s observations a fissure in the universality of Banks v Goodfellow? With advances in medical science and science generally,21 should the applicable test for testamentary capacity differ according to whether the court is making an assessment on validity of an existing will, vis making a determination to grant an order to make a will?

If so, ought the definition of capacity be codified generally or confined to the statutory will provisions under Part 2, Division 4, Subdivision 3 of the Succession Act 1981? Could it be that the definition of capacity as propounded in the Powers of Attorney Act 1998 (Qld)22 be adopted to also include a requirement that the person is “capable of communicating the decisions in some way”.

Or is it the case that the “[l]aw [is] marching with medicine but in the rear and limping a little…”23 with there being nothing new under the sun?

Christine Smyth is a former President of Queensland Law Society, a QLS Accredited Specialist (succession law) – Qld, a QLS Senior Counsellor and Consultant at Robbins Watson Solicitors. She is an executive committee member of the Law Council Australia – Legal Practice Section, Court Appointed Estate Account Assessor, and member of the Proctor Editorial Committee, STEP and Deputy Chair of the STEP Mental Capacity SIG Committee.

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Notes
1 Banks v Goodfellow (1870) LR 5 QB 549, 565 per Cockburn CJ.
2 To that end note the approach in Badram v Kerr [2004] NSWSC 735 [49] with respect to knowledge of the extent of property:
“In dealing with the Banks v Goodfellow test it is, I think, necessary to bear in mind the differences between life in 1870 and life in 1995. The average expectation of life for reasonably affluent people in England in 1870 was probably less than 60 years and for others less well off under 50 years: the average life expectation of males in Australia in 1995 was 75 years. Younger people can be expected to have a more accurate understanding of the value of money than older people. Younger people are less likely to suffer memory loss. When there were fewer deaths at advanced age, problems which arise with age, such as dementia, were less common. In England in 1870, if you had property it was likely to be land or bonds or shares in railway companies or government backed enterprises. Investment in ordinary companies was far less common than now. Older people living today may well be aware that they own substantial shareholdings or substantial real estate, but yet may not have an accurate understanding of the value of those assets, nor for that matter, the addresses of the real estate or the particular shareholdings which they have. Many people have handed over management of share portfolios and even real estate investments to advisers. They may be quite comfortable with what they have; they may understand that they have assets which can provide an acceptable income for them, but at the same time they may not have a proper understanding of the value of the assets which provide the income. They may however be well able to distribute those assets by will. I think that this needs to be kept in mind in 2004 when the requirement of knowing ‘the extent’ of the estate is considered. This does not necessarily mean knowledge of each particular asset or knowledge of the value of that asset, or even a particular class of assets particularly when shares in private companies are part of the estate. What is required is the bringing of the principle to bear on existing circumstances in modern life.”
3 Carr v Homersham (2018) 97 NSWLR 328 at [132] per Leeming JA.
4 In the Will of Esme Jane Ferris (deceased) [2020] QSC 26 (19/931) Crow J 2 March 2020
Re SB; Ex parte AC [2020] QSC 139 [2020] 24 QLR (BS No 4753 of 2020) Martin J 29 May 2020
Tolbert v Hicklin [2020] QSC 166 (BS 7852 of 2018) Brown J 10 June 2020
Trinder v Ciniglio [2020] QSC 176 [2020] 26 QLR (BS 6320 of 2018) Brown J 16 June 2020
Duncan v Gibson [2020] QSC 204 (BS 5172 of 2019) Boddice J 9 July 2020
Sebasio, Re [2020] QSC 247 (BS No 10388 of 2019) Callaghan J 12 August 2020.
5 At [7].
6 At [8].
7 At[7].
8 At [12]-[13].
9 At [24].
10 Section 21(1)(a) Succession Act 1981 (Qld).
11 See [26].
12 At[21].
13 At [22].
14 At [26].
15 Citing Banks v Goodfellow at 551.
16 At [20].
17 At [29].
18 At[29].
19 At [30].
20 At [32].
21 scientificamerican.com/article/wireless-brain-implant-allows-ldquo-locked-in-rdquo-woman-to-communicate/ – a woman with locked-in syndrome receives a brain implant that enables her to communicate.
22 POA Sched 3 – Dictionary
‘capacity’ , for a person for a matter, means the person is capable of—
(a) understanding the nature and effect of decisions about the matter; and
(b) freely and voluntarily making decisions about the matter; and
(c) communicating the decisions in some way.
23 Mount Isa Mines Ltd v Pusey [1970] HCA 60; (1970) 125 CLR 383, 395.