Glenda Phillips v James Phillips; John Matthew Phillips by his Tutor NSW Trustee & Guardian v James Phillips (No 2)

This judgment should be read with the Court’s reasons in Glenda Phillips v James Phillips; John Matthew Philips by his Tutor (NSW) Trustee & Guardian v James [2017] NSWSC 280 (the “First Judgment”). Defined terms in the First Judgment have the same meaning in these reasons.

On the second day of the hearing of these proceedings the Court allowed James’ application to amend his cross-claim to make a claim for provision from Bill’s estate. These are the reasons for that order.

For convenience I will repeat the relevant parts of the procedural history from the First Judgment:

I set out the legal principles applicable to an amendment application in my judgment in Macquarie International Healthy Clinic Pty Ltd v Sydney Local Health District; Sydney Local Health District v Macquarie Health Corporation Ltd [2013] NSWSC 764:

In a further decision in that litigation I also said (Macquarie International Healthy Clinic Pty Ltd v Sydney Local Health District; Sydney Local Health District v Macquarie Health Corporation Ltd [No 6] [2014] NSWSC 1549):

James was cross-examined on the voir dire by Mr Cheshire on the affidavit which James had filed in support of his amendment application. It was not in contest that the matters which now had led to a real constraint on James’ earning capacity had only come to a head in late December 2016. James saw his solicitor on 30 January 2017 and conceded to Mr Cheshire that they had discussed the possibility of James bringing a claim for provision at that meeting. It was, James said, “strongly being considered” and he accepted that, at the end of the meeting, it was “likely” to be done.

Turning to when James’ cross-claim had originally been filed on 17 November 2015 (seeking only declarations that Bill had capacity at the relevant times), James accepted that he “hadn’t ruled it out” that he would bring a claim for provision. However, he denied that his desire to represent the estate was a factor, at that time, as to why he did not bring a claim.

Citing Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, Mr Cheshire initially submitted that the lateness of the amendment and the potential prejudice to his clients required James to provide an explanation for the delay. The explanation offered by Mr Morrissey, and supported by affidavit, was the recent downturn in James’ financial circumstances.

Mr Cheshire next submitted that James could not continue to represent Bill’s estate if he was himself making a claim against the estate. Mr Morrissey responded that the plaintiffs could sufficiently act as contradictors to the claim or, alternatively, the Court could grant administration to a third party for the purpose of dealing with the application: see s 91 of the Succession Act 2009 (NSW).

In addition, Mr Cheshire identified three sources of alleged prejudice.

First, by failing to make his claim for family provision earlier, James had ensured his continued position as executor of Bill’s estate. This course allegedly undermined settlement negotiations, by depriving the estate of any disinterested third-party representation, and benefited James, by empowering him to pay his legal bills from the estate and mortgage property to pay for legacies.

Mr Cheshire submitted that such prejudice was relevant in the exercise of the Court’s discretion, even though s 58(2)(b)(vi) of the Civil Procedure Act 2005 (NSW), only directed attention to injustice suffered “as a consequence of” the order for amendment. In particular, he noted that it was not mandatory for the considerations in s 58(2)(b) to be taken into account.

Secondly, it was submitted that the family provision claim proposed by the amendment could reduce the plaintiffs’ potential entitlements out of the estate.

Thirdly, Mr Cheshire submitted that he had made a forensic decision not to scrutinise James’ financial circumstances because of the absence of any family provision claim by James. As a result, the amendment would require him to redirect resources to this issue during the hearing, including by preparing a cross-examination and seeking a schedule of income and expenditure. Also, subpoenas and notices to produce that might have been issued had not been pursued. Mr Morrissey responded that matters relevant to James’ proposed claim were already put in issue by his status as a competing claimant in the plaintiffs’ family provision claims: see ss 60(2)(b), 60(2)(d) and 60(2)(f) of the Succession Act 2006 (NSW),. However, Mr Cheshire submitted that parties might reasonably devote fewer resources to dealing with a competing claim as opposed to a positive claim for additional provision.

Three preliminary matters need to be noted.

First, I had been informed during the openings that the parties’ respective positions in relation to their applications for additional provision were to some extent dependent upon whether the Court upheld the 2008 Will, the 2006 Will or neither so that there was an intestacy. John pressed for provision irrespective of the outcome. James’ proposed application would only continue if the Court found there was an intestacy. Mr Cheshire indicated that, depending on the outcome, at least one or possibly two of his clients may not press their applications for provision. Therefore, the Court’s determination in relation to Bill’s testamentary capacity was likely to have a real impact upon which claims for provision would be pressed.

The second matter, and arising from the first, was that I did raise with the parties at the start of the hearing whether they saw any advantage in the Court determining testamentary capacity as a separate, preliminary question. At that point I said that I would only do so if all the parties consented. The idea went no further because Mr Cheshire informed me that his clients did not consent.

The third preliminary matter was that if James’ amendment was allowed, it would mean that his application for a family provision order was being commenced later than 12 months after Bill’s death. In those circumstances, the first question which the Court would have to consider would be the issue of leave to bring the application out of time under s 58(2) of the Succession Act 2006 (NSW).

This raised an anterior question for the purposes of the amendment application, namely whether there was an arguable case for leave to bring the application out of time. If the leave application was hopeless, then there would be no point in granting the amendment application.

James filed an affidavit in which he explained why he was bringing the application so late. For present purposes it is not necessary to set out the reasons in any detail, other than to note his evidence that his capacity to earn an income as an osteopath had been significantly reduced as a result of events which had occurred in late December 2015. That circumstance had given rise to the need upon which he would rely for the purposes of his provision application.

Without deciding the application for leave, I was satisfied that his affidavit disclosed an arguable case that leave should be granted. For that reason I proceeded to consider the merits of his amendment application.

In my view, James’ application fell within s 64(2) of the Civil Procedure Act 2005 (NSW) (the “CP Act”), insofar as it was a “necessary amendment” to be “made for the purpose of determining the real questions raised by … the proceedings, … and avoiding multiplicity of proceedings”. The issue of adequate provision for other family members was squarely before the Court. Furthermore, there could be a multiplicity of proceedings because, quite apart from amending his cross-claim, there was nothing to stop James filing a fresh summons for provision.

On that analysis, subject to s 58 of the CP Act, this was an amendment that had to be allowed. In the circumstances of this case the key factors which then had to be considered were the questions of delay, prejudice to Mr Cheshire’s clients and the extent to which that prejudice could be ameliorated.

Because of the intervening holiday period, I was not concerned that James did not see his solicitors between Christmas 2016 and 30 January 2017. However, there had been nearly four weeks delay from James’ conference with his solicitor on 30 January 2017, after which the bringing of the claim was likely, to when the amendment application was made on the first day of the hearing (27 February 2017). The other parties had been given no prior notice of the application. No explanation was offered about the delay between 30 January and 27 February 2017. In particular, the proceedings had been before me for pre-trial directions on 7 February 2017 and no reason was given as to why the question of an amendment had not been raised then.

If delay had been the only criterion then I would have refused the application. I accept Mr Cheshire’s submission that, given the lack of proper explanation, waiting until the first day of the hearing was a serious disentitling factor. However, delay is not the only matter to be taken into account. The question then becomes whether the prejudice caused by the delay, if the application were granted, is so serious as to preclude granting the application. The Court will consider the matters raised by Mr Cheshire (see paragraphs [11] to [14] above) in turn.

Mr Cheshire’s first point was that by failing to make his claim for family provision earlier, James had entrenched his position as executor of Bill’s estate and, it was said by way of example, undermined settlement negotiations. I expressly refrain from making any finding beyond noting that it was the fact that James continued as executor.

The real difficulty with this first point is that it was retrospective. While matters which the Court can consider on such an application are at large, I do not accept this consideration to be relevant in the circumstances of this case. Section 58(2)(b)(vi) of the CP Act directs attention to “the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction” (emphasis added). Whatever “injustice” may or may not have arisen as a result of James retaining his position as executor, it was certainly not injustice that would be caused as a consequence of allowing the amendment. Nor, in the circumstances of this application, was it past conduct of a kind which could be relevant to the exercise of the Court’s discretion.

Mr Cheshire’s second argument was that, if successful, James’ claim could reduce the potential entitlements of the other claimants. I do not accept that as a relevant consideration. Assuming that possibility becomes the reality, it is not an example of injustice or prejudice. It is a consequence of the working out of the legal entitlements of the parties.

Mr Cheshire’s third submission raised what the Court considers was the possibility of relevant prejudice to his clients. He accepted that James had always had a role in the proceedings as a competing claimant for the purposes of the plaintiffs’ family provision claims. However, where he was only a competing claimant and not a party actively seeking additional provision, Mr Cheshire informed the Court that a forensic decision had been made on behalf of the plaintiffs not to investigate James’ evidence about his financial circumstances in the same depth as would have been the case if James had been seeking provision. Therefore, various subpoenas and notices to produce had not been issued and Mr Cheshire had not prepared any cross-examination directed to the specifics of James’ finances.

I do not think Mr Cheshire can be criticised for taking the forensic decision which he did. I also accept that, if the amendment had been allowed and the hearing immediately continued on the basis that James’ claim was a live one, Mr Cheshire’s clients would have been prejudiced. However, Mr Cheshire also, with respect properly, acknowledged that the additional inquiries that would have be made were quite narrow, as would be any additional areas for cross-examination. Furthermore, if the Court upheld either the 2008 Will or the 2006 Will, James’ claim would not be pressed and the further enquiries and additional cross-examination would not be required.

Taking all of the matters referred to in paragraphs [29] and [30] into account, I came to the view that the amendment should be allowed and steps taken to ameliorate the prejudice identified by Mr Cheshire and still utilise all of the Court time that had been set aside for the hearing of the proceedings. That could be done by hearing all of the evidence on all of the issues (other than as to James’ finances), but determining Bill’s capacity first before all of the other issues in the proceedings. I was fortified in this approach by the fact that not only would the determination of Bill’s capacity govern whether or not James’ application proceeded, but also one or two of Mr Cheshire’s clients’ claims. In other words, everyone would know where they stood if Bill’s testamentary capacity was established first.

I also took into account that if, as has in fact now occurred, the Court came to the view that Bill died intestate, the additional evidence to be sought by Mr Cheshire’s clients and any further cross-examination would be in a narrow compass. In any event, the presentation of the arguments in relation to the provision claims would have to happen at a later time. The intervening period could be used to complete whatever interlocutory steps were required to enable Mr Cheshire’s clients to meet James’ claim if it was pressed. It could also provide an opportunity for the parties to explore settlement knowing who was still making a claim and whether the background to that claim was one of the wills or an intestacy.

I was satisfied that approaching the matter in the way I have set out in paragraphs [31] and [32] above would facilitate the just, quick and cheap resolution of the proceedings in the interests of all parties. The Court allowed the amendment accordingly.