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Worrall Moss Martin News

Issue 33,  June 2021

E-stop, you can't do that, can you?   You made a promise...

We frequently advise clients about claims for provision from an estate under the Testator’s Family Maintenance Act 1912 (Tas), where the client has been left without ‘adequate provision’.   However, TFM claims are not always available or appropriate, particularly where the disappointed person is not an eligible applicant, or where, because they have independent means, they are unlikely to convince a court that they require further provision for their proper maintenance and support.

In this edition of WMM News, we consider another course that might be open where a TFM claim is not appropriate or available, ‘equitable estoppel’.


What is Equitable Estoppel?   We explored the concept of equitable estoppel in our previous article ‘If You Take Care of Me, You Will Get the House When I Die ... When Are Testamentary Promises Binding?’, in Issue 25 of WMM News.

Equitable estoppel is a form of relief that may be granted by the Court where a plaintiff has acted to their detriment by relying on a shared assumption, and where the defendant has some responsibility for the existence of the shared assumption.   It is a form of ‘equity’, a legal doctrine which operates in parallel with the common law, but has some important differences.   In some respects, equity exists to remedy the absence of a ‘good faith’ doctrine within the common law.   For an equitable estoppel to be relied upon, the Court must be satisfied that it would be ‘unconscionable’ to allow the defendant to deny or depart from the shared assumption.

Equitable estoppel requires that:
  • the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant, or expected that a particular legal relationship would exist between them, and that the defendant would not be free to withdraw from the expected legal relationship;
  • the defendant somehow induced the plaintiff to adopt the assumption of expectation;
  •  the plaintiff acts or abstains from acting, in reliance on the assumption or expectation;
  •  the defendant knew or intended that the plaintiff would so act or abstain from acting;
  • the plaintiff’s actions or inaction occasion detriment if the assumption or expectation is not fulfilled; and
  • the defendant has failed to avoid that detriment, by fulfilling the expectation or assumption, or otherwise.
Ryan v Ryan [2016] TASSC 4 – the Facts:   The plaintiff, John, was the eldest child of Denis Ryan, who died in early 2012.   Under his Will, Denis’ entire estate was gifted to his wife, Christa.   Outside his estate, due to the right of survivorship (for more information about survivorship – see Issue 7 of WMM News), a property, which Denis had purchased and built a house on, also passed to Christa.   Christa sold the property in April 2012.

During the planning and building stages, Denis had told John that the land (and house) would be left to John and his sister Nadelle, and Christa would receive Denis’ superannuation.   Over the following years, Denis repeated this intention to John on several occasions.

After Denis’ death, and learning that the property had passed to Christa outside Denis’ estate, John brought an application to the Supreme Court of Tasmania seeking orders enforcing the promises that Denis had made, on the basis of an equitable estoppel.


Could John Rely on Equitable Estoppel?   In this instance, the shared assumption or expectation was that John and Nadelle would receive the property on Denis’ death.

The action, or inaction, relied on by John, was his significant contribution to the construction of the house.   He assisted during the planning stage, and also supplied labour (for free) and materials for the construction (at cost), through his construction company.   The Court found that while the representations made by Denis were not the sole inducement for John to make these contributions, they were a significant factor in his decision.

The Decision:   The Court ultimately found that it was objectively reasonable for John to have relied on Denis’ representations in making the decision to supply material and labour, and that John suffered detriment by Denis’ departure from the promises he had made.   Accordingly, it would be unconscionable for Christa to retain the entire proceeds of sale of the property.

However, because the detriment suffered by John was a relatively small, quantifiable monetary outlay (on the basis of Denis’ assurances), the Court determined not to strictly enforce Denis’ promise (for example by imposing a trust over the now sold property, or holding Christa to the full value of Denis’ promise).   The Court held that equity would be satisfied by John receiving an amount representative of his actual loss (by not charging Denis labour and materials).

Relevance in Tasmania:   Estoppel is a legal concept that applies in all states, and is an important factor to consider when making arrangements with friends or family about gifting assets.

How Can We Help?   It is not uncommon for people to make promises to neighbours, friends, or family that they do not think will have lasting consequences or will be enforceable after they die.   If there are any ongoing agreements or arrangements to gift assets to another party in exchange for some promise from the other party to do something in return, the doctrine of equitable estoppel is an important factor to contemplate to minimise the risk of costly estate litigation in the administration of an estate.

The outcome in Ryan v Ryan could have been mitigated (or possibly avoided) if the deceased had sought comprehensive advice, including about the effect of the promises he made, his subsequent change of heart, and how this could affect his Will and the distribution (and litigation) of his estate.

Worrall Moss Martin Lawyers has specialist skills and experience in Estate Planning and Estate Litigation, and can help you with any enquiries.

Please contact Kate MossRobert Meredith or Eve Hickey if you or your client need expert advice and guidance about the merits of any potential or actual, claims against an estate.

Alternatively, please contact our estate planning lawyers, Kimberley MartinCasey Goodman or Ashleigh Furminger if you, or your client, need expert advice and guidance about preparing a comprehensive estate plan, to mitigate the risk against any potential claims against an estate.

 
We need to change the terms of a Will, but the beneficiary doesn’t have the capacity to agree to it...!
It is not uncommon for the beneficiaries of an estate to wish to make changes to the distribution provisions in a deceased’s Will.   This can be achieved by, for example, entering into an agreement to alter:
  • the terms of the Will prior to the finalisation of the estate; and/or
  • the terms of a trust created by the Will, before or after the finalisation of the estate, while the Trust remains in existence.
In seeking to make these alterations, issues arise where a beneficiary lacks the capacity to deal with financial matters (including receiving estate assets), for example, because the beneficiary is a minor, or is suffering from mental incapacity.   In these circumstances, any alterations to the terms of the Will, or to the terms of a trust, must be approved by a court.  

However, obtaining a court’s approval is not a straightforward matter.   The Victorian case of Re Estate of Barns [2011] VSC 314 is a prime example of the difficulties inherent in these types of applications.


The Facts:   The deceased’s Will directed for his estate to be held on trust for his wife and daughter, Timothea.   Although his wife was entitled to receive trust distributions of both income and capital, after her death, the terms of the Trust only allowed Timothea to receive distributions of income.   After Timothea’s death, the capital of the Trust was to be gifted to charity.

Timothea suffered from an intellectual disability, requiring full time care and financial support.   After her mother’s death, the Trust income was insufficient to meet her (not insignificant) needs.   The Trustee wished to make capital distributions to provide for Timothea, and sought an order of the Court to either:
  • authorise the Trustee to deal with the trust property by making capital distributions to Timothea, on the basis that doing so would be beneficial to the management and administration of the Trust; or
  • vary the terms of the Trust, to enable capital distributions to be made to Timothea, in circumstances where the charities named in the deceased’s Will did not consent to this variation.

The Trustee argued that the deceased’s intention was for the capital of the Trust to be used to generate income for Timothea during her life.   The extent of the deceased’s charitable intention was for the remainder of his wealth to pass to charity after Timothea’s death, and it was not the intention to deny Timothea adequate support in favour of preserving his wealth for charity.

The Decision:   The Court’s powers under the Trustee Act 1958 (Vic) to authorise a trustee to deal with the trust property are limited.   It could grant the Trustee a power that would be “expedient to the administration or management of the trust property” even if to do so may alter a beneficiaries’ interest, provided that the power was to be exercised to the benefit of the trust estate as a whole.   It could not however make an order that would expressly alter the beneficiaries’ interests in the estate.

The Court held that powers sought by the Trustee did not relate to the management or administration of the Trust, but rather were to deal with the distributions of the Trust in a way that differed to the terms of the Will.   The effect of granting those powers would not be for the benefit of the estate as a whole, but solely to advance Timothea’s interests.  The Court declined to make an order permitting the Trustee to deal with the Trust by making capital distributions to Timothea.

Turning to its power of variation, the Court noted that it did not have the power to unilaterally alter the terms of the Trust.   Rather, the Court’s power was limited to approving variations to the terms of the Trust on behalf of a person (here, Timothea) who lacked capacity.   Because the charities – the ultimate capital beneficiaries – had not consented to that variation, the Court had no authority to approve the proposed amendment.

Ultimately, the distribution provisions set out in the Will were upheld, and the Court dismissed the application.

Relevance in Tasmania:   Similar legislative provisions, with similar restrictions, apply in Tasmania.   Making changes to the terms of a Will or a trust created in a Will, where beneficiaries lack capacity, can be a difficult undertaking.  

Key Points:    An important aspect of estate planning is planning for contingencies.   In Re Estate of Barns, although the Willmaker likely had a clear idea of what he wanted his Will to achieve, it was not drafted in a way that anticipated what might occur if the trust income became insufficient to provide for Timothea’s needs.

When making an application to alter or vary the terms of a trust or Will, particularly involving a beneficiary who lacks capacity, the alteration or variation must not change the intention of the deceased.   The variation must benefit the estate as a whole (or all beneficiaries must consent to the variation), rather than just an individual beneficiary.

How Can We Help?   If you would like assistance in preparing a comprehensive estate plan to ensure that all beneficiaries will be properly taken care of after your death, please contact our estate planning lawyers, Kimberley MartinCasey Goodman or Ashleigh Furminger.

Worrall Moss Martin Lawyers also has specialist skills and experience in estate administration and estate litigation.   If you need assistance in the administration of an estate or making an application to the Supreme Court to vary or revoke the terms of a Will or trust in a Will, please contact our estate administration and dispute lawyers, Kate MossRobert MeredithEve Hickey, Megan Bird or Leanne Rama.

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This newsletter contains material for general educational purposes and is not designed to be advice to any particular person about their own affairs as it does not take into account the circumstances of the reader as an individual.  It is recommended that appropriate professional advice be obtained by each reader so that reliance can be taken upon that advice.

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