In New South Wales certain people, including a spouse and a child of a deceased person, and a person who had lived with the deceased in a close personal relationship are eligible to make a claim that provision or further provision ought to be made from the estate (or notional estate) of the deceased, for their proper maintenance, education and advancement in life.
If the Court is satisfied that adequate provision has not been made for the applicant in the deceased’s will (or pursuant to the laws of intestacy), it will only make the orders necessary to make adequate provision for the applicant’s needs. The Court’s role is not to rewrite the will to achieve a “fair” disposition of the estate but to only make the orders necessary to make adequate provision for the applicant’s proper maintenance, education and advancement in life.
The Court has the power to order that property which has fallen outside of the estate, either because the deceased or the executor transferred it, or because the deceased omitted to do something which would cause the property to become part of his estate (and full valuable consideration was not given for the act, transfer or omission), constitutes notional estate. It can do so if the act, transaction or omission (the “prescribed transaction”) took place within a maximum period of 3 years from the date of death, if certain other criteria are also met.
Specific examples of transactions which may be caught include failing to direct the proceeds of a life insurance policy to be paid to the estate, failing to direct superannuation or other monies payable to the deceased on death to the estate and entering into a contract providing for the transfer of property, whether before or after the person’s death, without receiving full consideration in return for this.
However, even if such a transaction has occurred, this does not necessarily mean that the Court will declare the affected asset to be notional estate. The court will only declare this asset to be notional estate, if an order for provision in favour of a plaintiff cannot be met from the actual estate and only after other factors are considered and certain other criteria are met.
The Succession Act 2006 (NSW) ("the Act") provides that an eligible person may apply for provision from a deceased person's estate. An eligible person may also apply for further provision from a deceased person'e estate if an original provision is inequitable.
Family Provision claims are made in the Supreme Court of New South Wales and Justice Hallen is currently the the Judge of the Family Provision List and in recent years there has been a streamlining of the process, with a greater emphasis on mediation, to reduce time and costs.
Limitation: Claims for Family Provision must be made within 12 months of the date of the deceased's death. However, if the limitation deadline is approaching a plaintiff may commence proceedings by filing the Summons without an accompanying affidavit but must file the affidavit at least before the first Directions Hearing, which is usually within 28 days of the filing of the Summons.
The List is generally dealt with on Fridays.
For legal practitioners Family Provision Practice Note Eq 7, which became effective on March 1st 2013, sets out the requirements for the procedures to be followed once a Summons has been filed and served.
There is a standardised form of affidavit for the Plaintiff in Annexure One of the Practice Note. This confines evidence to those factors contained in section 60 of the Act. Previously there was a requirement that a Plaintiff annex their financial documents such as tax returns, bank statements and details of superannuation interests however, whilst this requirement is no longer mandatory an Executor/Defendant may request inspection of these categories of documents.
The Executor/Defendant of the estate must file an affidavit which lists the assets and liabilities of the estate, the notional estate and eligible persons. It must serve a copy of this affidavit on all eligible persons and file an Affidavit of Service with the Court. Prior to mediation the Executor/Defendant is generally limited to one affidavit to respond to the Plaintiff's claim and one affidavit listing the other beneficiaries' financial circumstances. If the other beneficiaries' financial circumstances become an issue then the beneficiaries will be required to produce a verified schedule detailing those financial circumstances or the Plaintiff may request that they inspect documents relating to the benefiaries' financial circumstances.
In addition to the above affidavits, the Plaintiff and the Executor/Defendant must also file an affidavit estimating their respective costs, on a party/party basis up to the mediation.
Generally, the matter will be referred to mediation at the first Mention date. If the matter does not settle at or before mediation takes place then the parties may apply to the Court to file further affidavits.
There are copies of Standard Directions prepared for use at the Directions Hearings and the Court encourages practitioners to have communicated with a view to having agreement on the Directions to be made. Whilst the Standard Directions can be varied, practitioners should be prepared to provide an explanation to the Court as to why this is necessary.
A minimum outcome from the first Directions Hearing is that a timetable should be agreed upon for filing any affidavit still required to be filed, a mediation date and a return date. This date is typically approximately 2 weeks after the mediation. If there are more than one matter concerning the same estate then the parties should seek Orders that they be heard together and that the evidence in one matter may be evidence in the others. This reduces the potential for costs.
Mediation is a requirement under the Act and, as in most mediated legal disputes, settlement is reached in about 75% to 80% of matters, either at the mediation or shortly thereafter.
The mediation can be through a Court-annexed mediation, in which case the Court provides a timetable of available dates which are taken on a first come/ first served basis. If the parties intend to use private mediation services, the Plaintiff and the Executor/Defendant should have agreed on the name of mediator and date of mediation so they can inform the Court at the First Directions Hearing. In estates valued at less than $200,000 the Court may not require mediation but will diect the parties to engage in an informal settlement conference.
If a matter does not settle at mediation then the Plaintiff and the Executor/Defendant must file updated affidavits in regards to costs. The Plaintiff affidavit must include a costs estimate calculated on the ordinary basis as well as on an indemnity basis and identify any uplift in fees.
If a matter does settle at a mediation or an informal conference, any request for consent orders should include orders about: how any provision is to be shared by the beneficiaries, how the Plaintiff's and Exector/Defendant's costs are to met, the parties agree that the Plaintiff was an eligible person, the claim was filed within time, that the Schedule J affidavit of Practice Note Eq 7 has been filed and that eligible persons have been served.
Practice Note Eq 7 includes commentary that a party's costs may be capped where the estate is valued at less than $500,000. The resources of the estate and the Court are not to be used in a way that is out of proportion to the estate size and the provision that may be made.
There are two recent Court decisions that attention should be drawn to: in Ireland v Retallack; Estate of Gordon  NSWSC 846 Pembroke J remarked that an estate should not be used as a "milch cow"; and in Mikan v Velcic (No 2) (2011) NSWSC 505 Hallen J commented that the parties cannot pursue a Family Provision claim safe in the belief that the costs will always be paid out of the estate.
Other Forms of Claims Against an Estate.
In certain cases, a Plaintiff may have an equitable estoppel claim against the estate with a default family provision claim. In these cases the Plaintiff needs to file a Statement of Claim, and not a Family Provision Summons, setting out the basis of both claims in the General Equity List. Where a claim is a contested probate claim with a default family provision claim then again the Plaintiff must file a Statement of Claim and have the matter listed in the Probate List.