Some General Principles
72It is well established that, in proceedings for a family provision order, the primary duty of the executor or administrator, as defendant, is to uphold the deceased's will and to put before the Court any necessary material that can reasonably be found to assist the Court: Vasiljev v Public Trustee [1974] 2 NSWLR 497.
73Of course, the duty to uphold the deceased's will is not an absolute duty. In In the Will of Lanfear (1940) 57 WN (NSW) 181, Williams J said, at 183:
"In an ordinary case, especially where the estate is a small one, it is the duty of the executors either to compromise the claim, or to contest it and seek to uphold the provisions of the will."
74In McCusker v Rutter [2010] NSWCA 318, Handley AJA (with whom Campbell JA agreed), said at [57]:
"An executor or administrator with the will annexed, faced with a claim under this legislation, is bound, within reason, to uphold the terms of the will. However in appropriate cases the legal personal representative will be justified in compromising the claim or even consenting to the orders sought: Re SJ Hall (dec'd) (1958) 59 SR (NSW) 219; Vasiljev v Public Trustee [1974] 2 NSWLR 497 CA, 503-4."
75Thus, the duty of the executor to uphold the will does not extend to doing so where it is of no commercial benefit to anyone, and regard should be had to the extent to which upholding the will would benefit beneficiaries. The executor or administrator, as defendant, must exercise "a due sense of proportionality in the conduct of any such defence and seek to compromise a claim, if at all possible, in a way that would save both the plaintiff and the other beneficiaries' costs": Szlazko v Travini [2004] NSWSC 610; The Application of Ferdinando Scali [2010] NSWSC 1254, at [10].
76Turning next to the role of the court, even in circumstances where the parties have reached an agreement, the court must still consider whether it has jurisdiction. In Hore v Perpetual Trustee Co Ltd (NSWSC, 8 June 1995, unreported) Windeyer J referred to the provisions of the Family Provision Act 1982 (NSW), and said at 11-12:
"Those provisions give the basis for exercise of jurisdiction by the court. Parties are absolutely entitled of course to make any rearrangement of the terms of a will they wish, if all beneficiaries are of age and absolutely entitled. That has nothing whatever to do with the jurisdiction under the relevant Act. Section 7 and s 9(2) raise jurisdictional questions. This has been described in various ways, sometimes making it appear discretionary, but there is no doubt now that for the court to assume jurisdiction, the provisions of s 9(2) must be satisfied.
As the power to make orders is governed by s 9(2) and s 7, the court cannot by consent, assume a wider jurisdiction. Parties cannot by consent, confer power upon the court to make orders which the court lacks power to make.
Settlements of claims under the Family Provision Act are of course very common. It is obviously in the interest of the parties and the court to encourage settlement and in any week the Masters and Equity Division may be asked to make a number of orders agreed between the parties in such actions. In such matters, in my experience, the court looks quickly at the evidence, and is informed of the relevant facts by counsel or solicitor, and if the matter appears to be reasonable makes the orders. No detailed consideration of jurisdiction takes place as long as the plaintiff appears to have a proper basis for his or her claim. In cases where the interests of infants or unascertained classes of persons may be affected by the orders, then the proposed orders are considered in more detail, not usually on the jurisdictional question, but more often on relevant terms of the orders themselves, and the extent of the benefit provided by them. On occasions the court refused to make the orders proposed, but this is unusual."
77In Schaechtele v Schaechtele [2008] WASC 148, Le Miere J, in the Supreme Court of Western Australia, said, at [18]:
"This Court cannot make an order giving effect to the proposed settlement unless the Court thinks that such provision should be made out of the estate of the deceased for the proper maintenance or support of the plaintiff. But that does not mean that the Court is in effect to hear the matter as if it were it a contested application and then to give or withhold orders to give effect to the settlement by comparing the settlement with the judgment which the Court would have given. The Court must give proper consideration to the evidence before it. The Court should be aware of the risks of litigation in an area in which reasonable people can reasonably reach different conclusions and give proper weight to the fact that the parties wish to effect the settlement. If the Court is satisfied that the settlement falls within the bounds of a reasonable exercise of discretion then the Court should make orders to give effect to that settlement."
78In Bartlett v Coomber [2008] NSWCA 100, the Court of Appeal had to determine an appeal from a decision of Macready As J in which his Honour had to decide whether a binding agreement to compromise a proposed claim under the Family Provision Act 1982 had been reached and ought to be specifically performed, with an accompanying order to give it effect. Although there was an alternative claim for provision pursuant to s 7 of the Family Provision Act, his Honour's decision was restricted to the question whether the executrix (the second respondent in the appeal) was bound to perform the alleged agreement. 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.
79An appeal was brought against those orders and the consequential costs order. The appeal was dismissed with costs.
80Hodgson JA said, in relation to the duty of the executor or administrator:
"[70] The parties to proceedings for such an order are generally just the applicant for the order and the legal personal representative of the deceased person: Re Lanfear (1940) 57 WN (NSW) 181; Re S J Hall [1959] SR (NSW) 219; Vasiljev v Public Trustee [1974] 2 NSWLR 497. These cases were decided under the legislation that preceded the Act, but are still applicable.
[71] According to these authorities, the duty of the legal personal representative is either to compromise the claim or to contest it and to seek to uphold the provisions of the will (or the distribution on intestacy); and to that end, to put before the court evidence made available by beneficiaries that is relevant to the issues. The beneficiaries may be joined as parties, but generally only if it appears that the legal personal representative is not fulfilling this duty to represent their interests, or there is some other reason justifying this unusual course."
81In relation to the court's power to make an order, by agreement of the parties, Mason P said, at [37] - [39]:
"[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 8.7 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; Re 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."
82On this topic, Hodgson JA said at [72]:
"As with other types of proceedings, agreements to compromise are possible, and indeed are to be encouraged. Such an agreement may be made by the parties to the proceedings, and the court will generally give effect to it. However, the court will need to be satisfied that the pre-condition in s 9(2) of the Act is fulfilled, and that the order agreed on is one which ought to be made in terms of s 7 of the Act. Because of the agreement, the court will generally be satisfied of these things without the need for any significant investigation of the evidence."
83Bryson JA said:
"[79] The agreement between Mrs Stott the executrix of the late Mr B.G. Thomas and the first respondent Katherine Coomber a minor, acting through her mother and solicitors, was an agreement which Mrs Stott was empowered to make under her power of compromise in s 49 of the Trustee Act 1925. Mrs Stott made the agreement on the advice of her solicitors and also of counsel. She was acting within the limits of her power; exercising the power of compromise in good faith for the purpose for which it was conferred and not for any ulterior or improper purpose.
...
[84] The agreement could only be given effect by an order made by the Court, and the Court could only act in exercise of the power in s 7 of the Family Provision Act 1982. If claimants and executors agree to settle a Family Provision claim their agreement cannot have effect unless the Court exercises its power under s 7 and orders provision in accordance with the agreement. Whatever their agreement says, obtaining an order of the Court is impliedly a condition of its effectiveness.
[85] If the Court simply accepted the agreement of the parties and ordered the provision for which the agreement provides without considering exercise of its power under s 7 the Court would act in error; it would in substance fail to exercise its power.
[86] An order for provision always adversely affects property rights in estate assets which somebody would otherwise have. Alterations of property rights of this kind are authorised by law only if the Court makes a decision under s 7; not otherwise."
84In relation to the Court's power to not make a consent order, Mason P, in Bartlett v Coomber, said:
"56 I accept that the court's power to reject a compromise reached in proceedings under the Act is available both where the sum to be provided is too low or too high. Either extreme might indicate, for example, that the proceedings were being conducted through to completion for a purpose foreign to that of the Act and/or that some fundamental mistake vitiated the settlement process.
57 But it must be borne in mind that litigation under the Act takes place in an adversary context in which the active parties to the particular litigation are usually expected to be the best judges of what is in their own interests. The policy of Australian law encourages the settlement of disputes (see eg Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 at 9 per Gleeson CJ and Uniform Civil Procedure Rules 2005, Part 20). Our legal system would collapse were it not for the fact that most disputes are resolved by agreement.
58 One of the principles giving effect to this policy is the principle that a valid compromise gives effect to an agreement that effectively supersedes the antecedent rights of the parties. The possibility of greater success and the risk of greater failure is transposed into an arrangement that frees the litigants and witnesses of the risks, costs and toils of further disputation. This principle is not displaced in the context of proceedings under the Act, although for reasons already outlined, the court may decline to give effect to a settlement if doing so failed to effectuate the specific policies of the Act, amounted to an abuse of process or otherwise offended public policy in a demonstrable way.
59 The compromise agreement in the present case suffered from none of these difficulties. It was reached in circumstances where the deceased's executrix availed herself of the advice of solicitor and counsel. It was also reached with the concurrence of the appellant, albeit given with a qualification about no claim being made on Mrs Thomas' estate.
60 When determining whether or not to translate a binding agreement into an order, a court proceeds in the full knowledge that it lacks full knowledge about the rights and wrongs of the yet to be litigated dispute. Allegations are necessarily undeveloped and untested.
...
65 Naturally, there will be situations where a court can be sufficiently satisfied that the proffered compromise agreement lies outside the range of possible outcomes and to such a degree that the proposed order should be regarded as giving effect to some purpose extraneous to those within the Act. But much more is required than that one party to the compromise has repented of it, a fortiori a non-party like the present appellant."
85Bryson AJA said at [88], in talking of the different discretionary powers that the Court had relation to the decision of Macready AsJ to give effect to the agreement:
"88 The third is the power of the Court to decline to make orders giving effect to a compromise where it is unjust to enforce the compromise or it is in the interests of justice that the matter proceed to trial. This power is associated with and illustrated by Harvey v Phillips [1956] HCA 27; (1956) 95 CLR 235 and Lewis v Combell Constructions Pty Ltd (1989) 18 NSWLR 528. Exercise of this power is often associated with the existence or the manner of exercise of the authority of counsel in making a compromise; there is no such question here ..."
86The decision of the Court of Appeal does not mean that any agreement reached by the parties at the mediation of a claim for a family provision order is not binding upon the parties. In such a case, the agreement will be binding on the parties, but its operation is suspended until the court approves it by making the orders: Smallman v Smallman [1972] Fam 25 at 31; Mitchell v Osborne (NSWSC, 20 May 1987, unreported); Groser v Equity Trustees Ltd [2008] VSC 163; Albany v Albany [2010] NTSC 25 at [51] per Mildren J.
87Thus, upon settlement of this type of proceeding, if a family provision order is to be made, the court, upon making such an order, even if by agreement of the parties, must be satisfied that an order is only made in appropriate circumstances, so that it must itself consider the facts and circumstances of the case: The Application of Ferdinando Scali [2010] NSWSC 1254 at [11]. Those facts will include the legitimate claims of the other parties, including the beneficiary or beneficiaries whose interests would be adversely affected by the making of an order.
88In considering whether to make the consent order, the court would also be aware of the risks of litigation in an area in which reasonable people can reach different conclusions. This is particularly so in proceedings in which a family provision order is sought: Sherborne Estate: Vanvalen and Anor v Neaves and Anor; Gilroy v Neaves and Anor (No 2) [2005] NSWSC 1003 at [56] per Palmer J.
89Even though the authorities cited refer to the former Act or the legislation in other jurisdictions, I am satisfied that the principles stated are relevant to cases under the Act.