Austin v Austin

HIS HONOUR: On Wednesday, 28 August 2019, I heard an application for the approval of an inter vivos release, by the Defendant, of his rights to apply for a family provision order commenced before the date of the death of the Plaintiff, his spouse, whose estate may be the subject of an order for provision upon her death. These are my reasons for approving the release, amended by the agreement of the parties, following the hearing, and before any decision had been made in regard to the release initially made by the Defendant.

The release that was the subject of the initial application for approval was contained in a Deed of Release and Indemnity dated 27 March 2019. It provided, amongst other things, that the Defendant “agrees to release his rights to make any claim for further provision against [the Plaintiff’s] estate or notional estate pursuant to Chapter 3 of the Succession Act”. In other words, the release, as initially made, was an inter vivos release, by the Defendant, in relation to the whole of the estate or notional estate of the Plaintiff.

The legal representatives of the parties requested that I deal with the matter in Chambers. I have dealt with the power of the Court to deal with a matter in Chambers in my recent decision of Kelly v Kelly [2019] NSWSC 994. In addition to the matters to which I referred in that case, I should also have referred to s 71 of the Civil Procedure Act 2005 (NSW), which section permits the business of a court, in relation to any proceedings, to be conducted in the absence of the public, “…(f) if, in proceedings in the Equity Division of the Supreme Court, the court thinks fit”.

On the first return date of the Summons, because of what I considered to be deficiencies in the evidence that had been filed and served, and because I had some reservations about whether to approve the release, I listed the matter for oral argument. I also suggested, then, that the legal representatives consider Kelly v Kelly, in which I had dealt with the principles that apply in relation to the approval by the Court of a release under s 95 of the Succession Act 2006 (NSW) (“the Act”).

During the course of the hearing on 28 August 2019, the legal representatives sought a short adjournment in circumstances to which I shall come, which was granted, and following which they informed the Court that there had been further discussions between the parties and that they had agreed the release to be made by the Defendant, which would then be sought to be approved, would be one in relation to part of the estate or notional estate of the Plaintiff, rather than in relation to the whole of her estate: Tcpt, 28 August 2019, p 18(42-47).

In the circumstances, I stood the matter over and informed the parties that if the form of the release was one in the terms that had been indicated, I would deal with the approval, and, perhaps, provide short reasons for the orders that I would make.

On Thursday 29 August 2019, a copy of a different Deed of Release and Indemnity, dated 28 August 2019, the original of which was signed by the parties, was sent to the Court as an attachment to an email of that date. The copy Deed is marked Ex. A, and it will remain in the Court papers. (To clarify, the copy Deed was not formally marked as an Exhibit, however, it has been treated as such in the proceedings, and will be hereafter referred to as Ex. A.)

The amended Deed of Release and Indemnity, relevantly, provided:

It follows that the release made by the Defendant is now one in relation to part of the estate or notional estate of the Plaintiff and that any claim for provision made by the Defendant will be limited to the “Release Excluded Amount”.

In addition, the parties provided Short Minutes of Order signed by each of the legal representatives.

Subsequently, in an email sent by my Tipstaff, at my request, the parties were informed that the matter would remain listed and that I would provide reasons for the orders to be made. I followed this course because the circumstances of the case give rise to important and difficult considerations of general importance.

The Defendant and the Plaintiff are husband and wife. They have been married for 13 years. They have three children, all of whom are minors. There is no suggestion that their marriage, which continues to subsist, is other than an harmonious, happy, and loving, one. During the hearing they were both present in Court and sat with each other. Only the Defendant, as the releasor, gave oral evidence in order to supplement his affidavit that was read.

In broad summary, the Plaintiff is almost 45 years of age. She gave evidence that she has assets, in New South Wales, of substantial value. Those assets include real estate and cash in bank. She has one significant liability, being a debt secured by a mortgage registered on the title to the matrimonial home, which is one of the parcels of real estate that she owns. In addition, she has financial resources, located in the United States of America and in Sweden. These include real estate, cash in bank, properties in different trusts, and interests, as a beneficiary, in various trusts. The value of those financial resources is slightly less than the value of the Plaintiff’s assets in New South Wales.

As well, the Plaintiff is an object of a trust in the United States of America, which trust has property, the value of which is many times greater than the value of the Plaintiff’s own assets and financial resources. Although it is uncertain (because of litigation concerning the trust there), the value of the Plaintiff’s share of that specific trust is estimated to be slightly more than double the value of the Plaintiff’s assets in New South Wales and her financial resources otherwise in the United States and Sweden.

Without going into precise detail, it is fair to say that the value of the Plaintiff’s estate, or potential estate, is in the order of many millions of dollars.

The Plaintiff gave the following evidence:

(The Plaintiff’s evidence that her Will permits the Defendant “to receive income from the testamentary trusts created in my Will” is not entirely accurate as the Will creates certain discretionary testamentary trusts, one of the objects in each of which is the Defendant. As stated in the Deed of Release and Indemnity earlier referred to, the Defendant’s current Will provides for “[A] potential income stream from the testamentary trusts created for [my] children for [the Defendant’s] and their maintenance, education, benefit and advancement in life at the discretion of the trustees of which he is one, while his children are under the age of 30 years”: Recital C(b) (my emphasis).

The Plaintiff’s current Will also provides the Defendant with a right to reside in the Plaintiff’s Australian principal place of residence at her death, rent, maintenance, and outgoing, free, or in such alternative accommodation as he may need for his life or as long as he wishes. (There is also provision of an amount to be set aside in a testamentary trust fund for the purpose of the payment of outgoings, maintenance and upkeep of the Australian principal place of residence to alleviate him from that expense.)

Finally, there is a power “to access capital in the event of an emergency, at the discretion of the trustees from the testamentary trusts created for [the] children”.

In addition, the Plaintiff stated that she had left a Memorandum of Wishes directed to the trustees regarding her Will, a copy of which Memorandum of Wishes is annexed to the copy Deed of Release and Indemnity. Clauses 3.2 and 3.3 of the copy Deed of Indemnity and Release identified certain specific parts thereof.

It is unnecessary to recite those parts as the Memorandum of Wishes is not binding upon the trustees of the testamentary trusts created by the Will. It is an express statement of what, currently, the Plaintiff hopes to achieve by her testamentary arrangements.

The Plaintiff did not state, in her affidavit, or otherwise, any intention not to revoke her current Will or state that there was an agreement in place, otherwise, not to do so (a matter that was raised in arguendo before the amendment of the terms of the release).

In support of the application, evidence was also given by Mr M V Henley, an extremely experienced, and if I may say, well respected, estate solicitor, who drafted the Will of the Plaintiff that she signed in March 2019, which “affects my property and affairs in Australia, but does not take effect in, or affect, property or affairs of [the Plaintiff] in any other part of the world”.

In his affidavit, affirmed on 27 August 2019, Mr Henley dealt, in some detail, with the property in the United States of America, the subject of the trusts. He confirmed, having taken advice from the Plaintiff’s lawyer in the United States of America, that the trustee of one of the sub-trusts was required to “pay all of the net income from the non-GST Marital assets to the defendant … if assets flow to the Non-GST Marital Trust, then the defendant will have a vested right to the net income of that sub-trust”. He also stated that the trustee of another of the sub-trusts was required to “pay all of the net income of the GST Marital assets to the defendant … [and then the defendant will] have a vested right to the net income of that sub-trust”. In this way, he made very clear that the Defendant’s entitlement is dependent entirely on assets flowing into the relevant sub-trust.

Mr Henley also stated that the trustee of another of the sub-trusts has discretion “to pay some of the capital from the assets of each sub-trust to the defendant for his health, education and support in reasonable comfort”. He pointed out that the trustee “shall be generous in exercising discretion with respect to payment of principal to or on behalf of [the Plaintiff’s] husband”.

It is clear from Mr Henley’s evidence that the receipt of the entitlement, if any, of the Defendant, in respect of the trust in the United States of America, cannot be stated with any degree of certainty.

The Defendant is 53 years of age. Comparatively, he has, currently, very little by way of property and financial resources. He is a post-doctoral research fellow employed as a lecturer at a university and is also a practising osteopath on a very regular basis. His income exceeds his expenditure: Tcpt, 28 August 2019, p 3(30) – p 3(37); p 13(5) – p 13(8).

He solely owns two parcels of real estate in the United Kingdom, a half share in the family car, and has a modest amount of cash in bank. He discloses no other financial resources of any real value. He currently has an income, which exceeds his expenditure. He has an earning capacity. It was accepted by the parties that “the financial circumstances and resources of the parties are significantly different”: Tcpt, 28 August 2019, p 3(40) – p 3(45).

The Defendant acknowledged that his financial contribution to the property of the Plaintiff, in Australia, was limited to the use, as part of the family’s income, of his own income: Tcpt, 28 August 2019, p 15(05) – p 15(16).

He gave the following evidence in relation to the application in his affidavit that was read in the proceedings:

As with the Plaintiff’s evidence, the Defendant’s evidence that “I would continue to benefit from an income stream from the trusts created in the plaintiff’s will dated 19 March 2019” is inaccurate, since he is but one of a number of objects of each discretionary testamentary trust created by the current Will of the Plaintiff.

The Defendant also gave evidence that he had given due consideration to the legal advice that he has received.

During the course of the hearing before me, the Defendant was called to give oral evidence. In answer to questions, he maintained his request that the release that he had made be approved by the Court. When it was confirmed that he had been present in Court when a number of different future scenarios had been advanced, including that the Will of the Plaintiff could be revoked at any time, and a new Will making no provision for him could be made by her, at any time, he maintained his stance, explaining that he understood the matters raised by the Court as of concern: Tcpt, 28 August 2019, p 13(5) – p 16(19).

However, almost immediately following the completion of his oral evidence, the Court was informed that the release sought to be approved would be amended. The Court adjourned, briefly, so that the parties could discuss the precise terms of any amended release. Upon returning, as stated earlier, the Court was informed that the parties had agreed that an amended Deed of Release and Indemnity would be provided as soon as reasonably possible: Tcpt, 28 August 2019, p 18(42-47). I have referred to its terms above.

Section 95 of the Act provides:

As has been stated, the Court, in this matter, is concerned with an executed instrument rather than with an agreement to execute such an instrument.

In Kelly v Kelly, I set out the principles that I considered relevant in the Court approving a release. I repeat what I wrote in that case, at [71]-[72]:

I should also mention that “a change of circumstances does not provide a basis under s 96 of the Succession Act for revocation of the approval of a release given under s 95 in relation to an existing or a prospective family provision claim”: Robinson v Robinson [2019] NSWCA 180, per Basten JA, at [5].

As has been made clear, the principles stated above are not suggested, or intended, to be an immutable statement of legal principles.

Whilst the principles that I stated are relevant, it should be noted that the facts in Kelly v Kelly are different, in one very important respect. In that case, I had the firm impression, having heard the evidence of the plaintiff in that case, that he lacked a full appreciation of the meaning, and effect, of the release that he had made and the consequences of the approval by the Court of that release.

That impression (of the Defendant’s knowledge and understanding of what he is giving up) does not exist in the present case. I have no doubt that he fully understood the terms, and the effect, of the release he had initially made, as well as the effect of the approval by the Court of that release.

(It was unnecessary to hear further evidence from the Defendant as the terms of the amended release may be, in all the circumstances, more favourable than the initial release. There is no suggestion that he does not understand the terms of the amended Deed of Release and Indemnity.)

It is because it has been established that, knowing all of the facts, the Defendant has given the release and maintained his desire to have the release approved, that the Court has been prompted to provide these written reasons.

The legal representatives of the parties strongly submitted, in this case, that one of the applicable principles to be remembered is that parties should be able to determine the terms of their succession arrangements, including entering into an agreement, intending that agreement to provide a statutory bar to there being proceedings under Chapter 3 of the Act; that they should be free to determine, for themselves, what primary obligations relating to private rights they accept; that they should be permitted to enter into an agreement, in that regard, in order to avoid future litigation; and where they have given unimpeachable evidence, including of the matters in s 95(4) of the Act, the Court should respect their autonomy, hold them to the bargain made, and not stand in the way of the agreement freely entered into by them, as adults who are sui juris.

It was also submitted that there is a public interest in parties being encouraged to settle their disputes, and potential disputes, with the confidence that if they do so, the Court will be likely to approve the terms of their agreement, if it is freely entered into on each side.

However, as was pointed out, the power given to the Court to approve the making of a release, particularly in the case of an inter vivos release, is an important, and in some ways, an exceptional, power. The section itself makes the efficacy of the release of the person's rights depend on approval by the Court. If the Court approves the release, no application for provision out of the estate or notional estate of the person whose whole estate is released can be made upon the death of the person whose estate may be the subject of the order (other than in circumstances where the Court, pursuant to s 96 of the Act, revokes an approval of a release given by it under s 95).

In Smith v Smith (No 3) (1986) 161 CLR 217; [1986] HCA 36, the members of the High Court acknowledged the principle that unless statute provides otherwise, any agreement to forego a right to apply for a family provision order is void as being contrary to public policy. If the Court refuses to approve the release, the only consequence will be that a potential barrier to the making of an application for provision out of the estate or notional estate of the person, after his, or her, death, would be removed.

I accept that there will be cases in which a party will make a reasoned judgment that making a release of rights is genuinely in his, or her, own best interests, perhaps because it provides a route to familial harmony, or otherwise, and where there is no suggestion that the release has been procured by harassment or undue pressure. Usually, on such an application, the evidence also records that the releasor was independently advised by a named legal adviser, and on the face of the evidence, the agreement does not appear to have any unethical vices.

It was submitted that this is one such case and gives rise to the conclusion that the Court should approve the release that had been made by the Defendant. However, none of the principles relied upon by the parties are absolute. In the case of a release, which requires the approval of the Court to be effective, the parties should not assume that there is an automatic entitlement to have the release approved. They cannot, by their agreement, usurp the discretion given to the Court by s 95 of the Act.

Furthermore, it seems to me, in circumstances where the Court is given a discretion by the Act whether to approve a release, that there is a protective purpose of the legislation which overrides the principles relied upon by the parties, and which provides an inherent limit on their ability to restrict the entitlement of one, or both, to make an application given to one, or both, of them by statute.

The parties are not prevented from reaching arrangements to avoid potential expensive disputes. An evaluative assessment, by the Court, whether to approve the release, however, must be made in each case. Close attention must be paid by the Court to all of the facts of the particular case, including the financial circumstances of each of the parties, the extent of the right being released, and also the matters identified in s 95(4) of the Act. Nothing within the section suggests, in terms, any restriction on the matters that might inform the exercise of the discretion of the Court.

In addition, as I wrote in Kelly v Kelly, the power of the Court to approve a release under s 95 is incidental to the exercise of the principal jurisdiction of the Court under s 59 to order provision out of the estate or notional estate of a deceased person.

As with a settlement of family provision proceedings generally, and as Bryson AJA wrote in Bartlett v Coomber [2008] NSWCA 100, at [84]-[86]:

As was also written by Dalton J in Affoo v Public Trustee of Queensland (2012) 1 Qd R 408; [2011] QSC 309, at [24]:

The statement made by Dalton J was approved by the Queensland Court of Appeal in Abrahams v Abrahams (2015) 13 ASTLR 406; [2015] QCA 286, at [30].

As earlier noted, there can be no doubt that the Court, in this case, has jurisdiction to approve the release of the rights, as amended, made by the Defendant, in respect of the Plaintiff’s estate and notional estate.

In determining the application for approval of the release, as amended, I have taken into account all of the circumstances of the case, including the four matters specifically referred to in s 95(4)(d) of the Act. Although I may not have approved the initial release made by the Defendant, it seems to me that, now, the approval of the release, in its amended form, ought to be given.

In this regard, and amongst other things, I consider that it is, at the time the agreement to make the release is made, to the advantage, financially or otherwise, of the Defendant to make the release. He has confirmed the reasons why that is so.

It is to the Defendant’s advantage otherwise to make the release because it brings to an end the concerns on the part of the Plaintiff that she has identified, and enables both of the parties to continue their familial relationship in the manner appropriate to them.

In addition, even if the Plaintiff were to change her current Will, or in the event there is a detrimental change to his financial circumstances, the Defendant, upon the death of the Plaintiff may still, if he wishes to do so, bring a claim for a family provision order, although the available estate out of which any provision may be made for him will be limited to the “Release Excluded Amount”. In other words, the Defendant’s entitlement to make a claim will survive the approval of the release because it is one made in relation to a part, albeit a significant part, of the estate and notional estate of the Plaintiff.

The Defendant believes it is prudent to make the release in its amended form. For similar reasons, I also consider that it is, currently, prudent for him to make the release as amended. The Defendant also believes the terms of the release, in its amended form, are fair and reasonable, in that only part of the Plaintiff’s estate is being released (albeit, as has been earlier stated, a substantial part). The “Release Excluded Amount”, on present indications, appears to be sufficient to satisfy any order for provision and for costs that might be made in favour of the Defendant out of the Plaintiff’s estate.

The Defendant has taken independent advice in relation to the amended release and says that he has given due consideration to that advice. This is clear by reason of the amendment to the release.

In all the circumstances, the Court: