Friday 23 May 2008
Peter Douglas BARTLETT v Katherine COOMBER & Anor
JUDGMENT
1 MASON P: The first respondent (hereafter referred to as "the plaintiff") commenced proceedings in the Equity Division, suing by her tutor, Veronica Coomber, who is her mother. The primary relief sought in the summons was a declaration that a binding agreement to compromise a proposed claim under the Family Provision Act 1982 (the Act) had been reached and ought to be specifically performed, with an accompanying order to give it effect. There was an alternative claim for provision pursuant to s7 of the Act.
2 Following a trial restricted to the question whether the executrix (the second respondent in this appeal) was bound to perform the alleged agreement (see CB 4), Macready AsJ made findings in favour of the plaintiff and proceeded to make orders that disposed of the proceedings. His Honour ordered that the plaintiff have a legacy in the sum of $659,467 to be paid to the Public Trustee and held on her behalf during her minority.
3 This appeal is brought against those orders and the ensuing costs order.
4 The executrix adopted a submitting stance in the court below and in this Court. The labouring oar was taken up by the appellant who had applied to be joined as a second defendant in the proceedings in the circumstances outlined below.
5 The plaintiff's mother and Mr Bruce Geoffrey Thomas ("the deceased") began a relationship during 1992 which continued until some months before the plaintiff's birth on 20 February 1994. DNA testing established the deceased's paternity and he commenced to make child-support payments for his daughter.
6 The plaintiff lived with her mother and for many years had no contact with the deceased following the break-up of the mother's relationship with him. This was, of course, in no way the plaintiff's responsibility, having regard to her young age. Contact was made in February 2004 and there was a visit with the deceased in July of that year. The deceased died on 16 May 2005.
7 The deceased never married and the plaintiff was his only child. He himself was the only child of Margaret Thomas, a widow who died on 20 June 2005, ie 35 days after her son.
8 The deceased's will was made on 4 September 2000. He appointed the second respondent as his executrix and left his entire estate to his mother in the event (that happened) of her surviving him by 30 days. The will contains a clause stating that the deceased had made no arrangements in his will for "the child Catherine (sic) Coomber as I have always disavowed my paternity". Probate of the will was granted in Victoria and resealed in New South Wales.
9 The value of the estate for probate purposes was found to be $1,076,000 (J 7). (J1, J2 etc are references to paragraphs of the judgment below: Coomber v Stott [2007] NSWSC 513.) Its realised value as at about a month before the trial was found to be $1,246,158 (J 7).
10 The deceased's mother ("Mrs Thomas") left a will dated 6 June 2005 appointing the appellant as her executor. She left one-fifth of her estate to each of the appellant and three other nephews and divided the remaining one-fifth share in favour two friends. Probate of this will was granted in New South Wales on 13 October 2005.
11 Mrs Thomas' estate was swollen by the assets that passed from the deceased's estate. There were however additional assets in the form of life policies taken out on the life of the deceased.
12 None of the beneficiaries of Mrs Thomas' estate is an eligible claimant in the deceased's estate. Neither was there any suggestion that the plaintiff's mother was an eligible claimant. Accordingly, the only eligible claimant under the Act was the plaintiff.
13 In about mid-2005 the plaintiff's mother instructed her solicitors Peacocke Dickens & Price ("PDP") to consider a claim under the Act on the plaintiff's behalf against the deceased's estate. There followed written and oral communications with Perrots, solicitors who represented the executors of the respective estates, at least in New South Wales.
14 The correspondence culminated in a letter of 2 June 2006 from Perrots to PDP that "our client has accepted the offer of 50% of the estate plus costs". The singular "client" recognised that the relevant client was the deceased's executrix, the second respondent, whose authority to compromise the claim stemmed from s49 of the Trustee Act 1925.
15 Nevertheless, the letter of 2 June 2006 was sent upon the instructions of both the second respondent, the executrix of the deceased's will and the appellant, the executor of Mrs Thomas' will. The appellant presumably had the authority of the beneficiaries under Mrs Thomas' will to agree to this compromise. There was evidence that the legal personal representatives and their solicitor had relied upon the advice of counsel in the following terms:
It is clear that Ms Katherine Coomber is able to demonstrate both present and future financial need. Further Ms Coomber will be able to demonstrate a probability of an educational need stretching into tertiary education.
It would appear that Katherine Coomber is Bruce's only direct living relative, it would appear that Katherine Coomber is the only person that would fall within the eligibility requirement of the Family Provisions Act. On the basis of what is contained in my latest instructions it is my opinion that Ms Coomber is likely to receive, as a consequence of any Family Provisions application, a provision of between forty and fifty percent of the estate of Bruce Geoffrey Thomas.
16 The issue fought at the hearing before Macready AsJ was whether or not a binding agreement had been reached to settle the plaintiff's claim under the Act. That matter was resolved in the plaintiff's favour, not just on the basis of Perrot's having had ostensible authority, but on the basis that the firm had actual instructions from the legal personal representatives of the two estates. It was common ground that the agreement translated into the legacy order referred to above.
17 A ground of appeal challenging the finding that a concluded settlement agreement was reached was not pressed.
18 The submission advanced in this Court was that the Judge erred in failing to exercise his power to decline enforcement of the agreement made between the lawyers. The argument in brief was that his Honour lacked the power to make the particular order; alternatively, approached its exercise in a manner that involved relevant matters not being taken into account and irrelevant matters being taken into account.
19 The settlement may have been reached between lawyers who were acting with the authority of their respective clients and it may have been certain in its terms. But since the agreement was, in effect, that the deceased's executor would submit to a particular order under the Act in favour of the plaintiff, the Court's role involved more than placing a rubber stamp on the transaction. It was common ground before Macready AsJ and in this Court that the Judge had to do more than satisfy himself that the order he was asked to make had the consent of the plaintiff and the deceased's executrix. How much more was the topic of the debate in this Court.
20 Several factors required the Judge to examine the strength of the plaintiff's claim at least to the degree required by those factors.
21 First, because there was a party before the court additional to the parties to the agreement, the court's powers to approve the settlement were at least constrained by the mandate of procedural fairness. The appellant had retained senior and junior counsel to test whether a binding agreement had been made and to oppose the making of orders under the Act even if it had.
22 Speaking with customary bluntness, Hutley JA once observed that "beneficiaries may be allowed to intervene on special grounds, but their intervention is unwelcome" (Vasiljev v Public Trustee [1974] 2 NSWLR 497 at 503). The present appellant had earlier been joined as a second defendant in the exercise of the court's exceptional power to allow separate representation in matters.
23 No one suggests that the joinder was inappropriate in the circumstances. This, however, did not expand the issues for determination in the hearing of the separate question. It did not place the appellant in the shoes of the deceased's executrix.
24 Secondly, s76(3) of the Civil Procedure Act 2005 required the court's approval for any compromise or settlement of proceedings commenced (as these were) on behalf of a person under legal incapacity; and s76(4) armed the court with power to approve or disapprove any settlement agreement already reached. Macready AsJ held (at J65) that, although the wording of the section gives an unfettered discretion, the case law indicated that he should only approve the compromise if it were in the infant plaintiff's best interests.
25 This requirement meant that his Honour had to satisfy himself that the compromise was a good one so far as the plaintiff was concerned. Performance of this task required some consideration of the plaintiff's overall prospects and not just her prospects of obtaining minimal of relief under the Act.
26 The Judge had little difficulty in deciding that the settlement should be approved under s76. No one suggests any error in this conclusion.
27 Thirdly, the Judge was presented with an argument that the compromise should be set aside, or at least not be enforced by the making of an order, on the basis that Perrot's had ignored express instructions to include a term in the settlement that the plaintiff indemnify her grandmother's estate from any claim under the Act.
28 The exceptional power to decline enforcement by court order of a compromise agreement made by lawyers acting with ostensible authority was not in dispute. It is unnecessary to explore its outer limits. The overriding principle is that the court is concerned with the interests of justice and cannot allow its processes to become an instrument of injustice or abuse (see generally Lewis v Combell Constructions Pty Ltd (1989) 18 NSWLR 528; Mohamed v Farah [2004] NSWSC 482).
29 Macready AsJ considered and rejected the argument that this power should be exercised in the present case.
30 As regards the particular matter of a term to bar a claim on Mrs Thomas' estate, his Honour had regard to the demonstrable unlikelihood of the plaintiff establishing that she was an eligible claimant in her grandmother's estate (J33-34). I do not understand it to be suggested that his Honour erred in this regard. He was clearly correct, in my view.
31 The Judge also found that there was no injustice in making orders in accordance with the agreed compromise. His Honour pointed out (J69) that the appellant's decision to instruct his solicitors to accept the settlement was based upon advice given to him by the solicitor then representing both estates. The advice was plainly that he should accept. His Honour also concluded that there was no injustice in respect of the impact of the settlement upon the beneficiaries of Mrs Thomas' estate (J68). It will be appropriate to examine this conclusion and the reasoning upon which it is based in the context of the next matter to which I turn.
32 Fourthly, and of direct relevance to this appeal, it was argued before the Judge that, since the agreement called to be translated into an order under the Act, it was subject to approval by the court. The argument advanced before Macready AsJ was that the compromise should be set aside and no order made as sought having regard to the "character and quantum of the relief claimed by the plaintiff and the nature of the interests represented by" the appellant (J9, 36).
33 The Judge proceeded to consider the affidavit evidence filed on both sides in the pending proceedings for relief under the Act. His Honour briefly summarised the plaintiff's situation, including her educational goals and prospects, her financial needs and the (limited) financial and health capacities of her mother (J37-38, 41-45). He concluded (J45):
Bearing in mind that Katherine may have to leave Balranald to do any tertiary education and using as a rough guide the costs of secondary education, one could allow a further $100,000 for this cost. Allowing for something for contingencies the most favourable outcome on the present evidence for the plaintiff is an award in the area of $200,000 to $250,000.
34 The Judge then addressed what he saw as the other side of the ledger, in the following terms (J39-40):
39. When considering the claim of the plaintiff it is also necessary to consider others having a claim on the bounty of the deceased. The position of the beneficiaries in the estate of the late Bruce Geoffrey Thomas must be considered by the Court. There are, amongst the six beneficiaries, four nephews of the late Margaret Thomas and two close family friends who were friends of the mother Margaret Thomas for over 30 years. There is no evidence of any relationship between them and the deceased although I would infer that there was some contact between them having regard to the family background. The financial situation of the beneficiaries was put forward by the executor, Mr Peter Douglas Bartlett in his affidavit in these terms:
"Peter Douglas Bartlett
I am aged 67 and have never married. I am unemployed and receive the age pension of 517.90 a fortnight which is my sole source of income. I suffer from an arthritic condition. I own my own house at 14 Riley Street Woolloomooloo which I acquired after a lifetime employment in various industries and administrative positions.
Graham Bartlett
Aged 57 years married with one child an 11 year old daughter. He is unemployed. His wife suffers from chronic heart condition and schizophrenia. They receive a chronic disability pension of $1,150.16 a fortnight and he acts as her carer. He recently acquired the house at Balranald formerly owned by the deceased Margaret Thomas which he purchased from the legacy in her will.
Colin David Bartlett
Aged 63 years. Married with grown children.
He and his wife receive a combined disability pension of $861.20 a fortnight. They reside in a mobile home and pay site fees of $150 a fortnight.
John Ivor Bartlett
Aged 61 years. Unmarried. Casual employment only in the hospitality industry. No regular employment and dependent on casual work. Owns his own house in Brisbane.
Keith and Cynthia Gorringe
Both aged about 59 years. Both on disability pensions through work related injuries to their backs. Reside in Adelaide and own their own home. They have a mortgage of $80,000. Their combined pension is $760 a fortnight.
40. I reserved the question of the admissibility of the evidence given in respect of persons other than the executor, Mr Peter Douglas Bartlett. Given the relationship between Mr Peter Douglas Bartlett and the other persons I admit the evidence to avoid undue expense and delay in respect of what are unlikely to be controversial facts.
35 The conclusory and presently critical portions of the judgment relevant to the making of orders in accordance with the agreement were (J63-70):
63. It is to be noted that the plaintiff is the only eligible person in the estate. Although some of the beneficiaries were relatives and others were his mother's friends, on the evidence there was not a close relationship between them and the deceased. They do suffer some hardship although other than the payment of something to provide for their later years they do not seem to have any particular problems. If the settlement were approved each beneficiary could expect to receive a little less than $100,000.
64. Having regard to the facts before me it would seem to me that the plaintiff has compromised her claim for an amount which is slightly more than double what he claim is worth. This, of course, impacts on the beneficiaries but given the limited information on the beneficiaries, it is difficult to see that it would cause any particular hardship bearing in mind their relationship with the deceased.
65. Section 76 of the Civil Procedure Act provides that in respect of proceedings commenced by a person under a legal incapacity, the Court may approve or disapprove any agreement for compromise or settlement of that claim. Although the wording in the section gives an unfettered discretion it would seem that having regard to authority the Court would only approve the compromise if it were in the infant's best interests. See Permanent Trustee v Mills [2007] NSWSC 336 at [19]-[29]. In the present case, of course, the compromise is very much in favour of the infant and I would not have refused to approve the settlement under section 76.
66. There is no doubt that the Court in the circumstances of the present case would have jurisdiction to make appropriate orders. The plaintiff was left without any provision and she has an obvious need for help with her education. In an ordinary case the Court would accept a settlement where the parties are sui juris but where, as here, a party is under a disability the matter must come before the Court for its approval. Similarly where the Court is bound to make a judgment about matters such as a release of rights under section 31(5) of the Family Provision Act . See generally on this aspect Mitchell v Osborne Young J 20 May 1997 and the cases His Honour refers to in that decision.
67. In terms of the authorities, to which I have earlier referred, on the residual discretion of the Court to not approve a settlement when it is asked to make orders, the questions is whether there is any injustice in making orders in accordance with the agreed compromise. In the present case there is no injustice so far as the plaintiff is concerned. She has been able to achieve a generous settlement given the evidence available.
68. In respect of the defendants it may be said to be an injustice because they will receive less than they would have ordinarily received if the matter had been fully litigated. Although the individual circumstances of the beneficiaries are before the Court they will each receive a substantial amount from the estate and in the context of what little information the Court has about what may be described as their needs or desires, there is nothing to suggest they will suffer some injustice by receiving the sum of $100,000 rather than the sum which they would receive if the matter was fully litigated. If the matter was fully litigated after allowing for the costs of the litigation each beneficiary might expect to receive perhaps another $38,000. It is to be borne in mind that none of the beneficiaries on the evidence before me are eligible persons who could make a claim on the estate of the deceased. It was their good fortune that the deaths occurred in the sequence that they did and that they received substantial bequests.
69. The decision which the executor made to instruct his solicitors to accept the settlement was based upon advice given to the executor by the solicitor. The advice was plainly that he should accept. It may be that if that advice was wrong then some other remedy would be available.
70. Although I have concluded on the evidence before me that the settlement was generous to the plaintiff, it would require a more detailed investigation if I had to consider whether or not the solicitor or barrister advising the estate was negligent in giving the advice. However, they are not parties or witnesses in the present proceedings. In the absence of evidence which would allow me to decide whether the advice was negligent, I conclude that there is no injustice which would require me to refuse to make an order in accordance with the settlement. In my view the Court should determine the separate question and make orders in accordance with paragraphs 1 and 2 of the Summons or some other appropriate orders.
36 These conclusions addressed the case in the manner it was fought below. As indicated, a separate question was litigated, one that did not involve a full-scale hearing of the Family Provision proceedings. The present appellant was represented by experienced senior and junior counsel.
37 In the context of claims under the Act, one often encounters references to the court's "jurisdiction" to make a particular order in a particular estate. Thus, to give an example of present relevance, de Groot & Nickel, Family Provision in Australia 3rd ed, Lexis Nexis Butterworths, Chatswood, 2007 at s8.7 states that:
The court's jurisdiction depends not upon the agreement of the parties but upon the court's view of the question whether the deceased has made adequate provision for the applicant.
The learned authors cite three authorities which support this proposition and do so in the language of "jurisdiction" ( Mudford v Mudford [1947] NZLR 837 at 838; R Archibald [1950] QWN 3; Re Julso [1975] 2 NZLR 536 at 538).
38 In my opinion, "jurisdiction" and "power" are concepts that should not be blurred or subjected to ecthlipsis in the present context (see, Harris v Caladine (1991) 172 CLR 84 at 136). Macready AsJ had undoubted jurisdiction to entertain the application before him. The critical question in the appeal relates to the scope of his Honour's power to reject the settlement.
39 In McMahon v McMahon (New South Wales Supreme Court, Young J, 2 August 1985, Young J said:
An order [under the relevant NSW Family Provision Act] does not follow just because all the parties to the proceedings have agreed between themselves that such an order should be made. Whilst in general if a Court is asked by consent of all parties to make an order it will make an order, as I said in my judgment in Kalyk v Whelan 31 July 1985 where the legislature casts on the Court the duty of seeing that an order is only made in appropriate circumstances the Court is not bound to make any order tendered by all the parties by consent.
Because of this it is necessary for me to look into the facts and circumstances of the plaintiffs and the defendant so far as they are relevant to a possible claim under the Family Provision Act.
40 As the child of the deceased, the plaintiff was an eligible person by reason of paragraph (b) of the definition of "eligible person" in s6(1) of the Act.
41 It followed that the Supreme Court's power to make an order in her favour stemmed from s7 which provides that the Court:
… may order that such provision be made out of the estate … of the deceased person as, in the opinion of the court, ought, having regard to the circumstances at the time the order is made, to be made for the maintenance, education or advancement in life of the eligible person.
42 No one suggests that the deceased had made adequate provision in favour of the plaintiff during his lifetime or out of his estate. Accordingly, the requirements of s9(2) may be passed over. Section 9(3) sets out the matters that the court may take into consideration in determining what provision (if any) ought to be made in favour of the eligible person. Of present relevance, the factors include:
(c) circumstances existing before and after the death of the deceased person, and
(d) any other matter which [the court] considers relevant in the circumstances.
43 Senior counsel for the appellant accepted before us that the Judge was entitled to take account of the settlement that he found to have been reached. It was submitted, however, that his Honour was not bound to make an order in accordance with that agreement, especially where the agreement had been subsequently repudiated by the appellant who was a person with an interest in its performance.
44 Turning to the specifics, Mr Ireland QC challenged the manner in which the Judge exercised his power by the following steps: