Small v Phillips

The Statutory Framework

1. The proceedings were brought under Div 2 of Pt 2.2 of the Succession Act, which consists of ss 18 to 26. Section 18(1) relevantly provides that the Court may, on application by any person, make an order authorising a will to be made, in specific terms approved by the Court, on behalf of a person who lacks testamentary capacity. An order under s 18 of the Succession Act may authorise the making of a will that deals with the whole or part of the property of the person who lacks testamentary capacity. However, the Court is not to make an order under s 18 unless the person in respect of whom the application is made is alive when the order is made. A will that is authorised to be made must be deposited with the Registrar, but a failure to comply with that requirement does not affect the validity of the will.
2. Section 19(1) of the Succession Act provides that a person must obtain the leave of the Court to make an application for an order under s 18. In applying for leave, the person must give the Court the information specified in s 19(2). Section 20 provides that, on hearing an application for leave, the Court may give leave and allow the application for leave to proceed as an application for an order under s 18 and, if satisfied of the matters set out in s 22, make the order. Section 22 relevantly provides that the Court must refuse leave to make an application for an order under s 18 unless the Court is satisfied that: 1. there is reason to believe that the person in relation to whom the order is sought is, or is reasonably likely to be, incapable of making a will; 2. the proposed will is, or is reasonably likely to be, one that would have been made by the person if he or she had testamentary capacity; 3. it is or may be appropriate for the order to be made; 4. the applicant for leave is an appropriate person to make the application; and 5. adequate steps have been taken to allow representation, as the Court considers appropriate, of persons with a legitimate interest in the application.
3. Section 25 relevantly provides that, if it appears to the Court that the person who lacks testamentary capacity should be separately represented in proceedings under the Division, the Court may order that the person be separately represented. Mrs Phillips was joined as a defendant pursuant to that provision. Ms Michaela Money was appointed as her Tutor, who instructed senior counsel on behalf of Mrs Phillips. The Tutor has effectively been the contradictor in relation to Anthony's application.
4. Section 21 of the Succession Act relevantly provides that, in considering an application for an order under s 18, the Court may have regard to any information given to the Court in support of the application under s 19. Further, the Court may inform itself as to any other matter in any manner it sees fit and the Court is not bound by the rules of evidence.

Mrs Phillips

1. Mrs Phillips is a wealthy 90 year old woman, who has long been divorced from her husband, who predeceased her some time ago. She had three children by her former husband, being Sharonne and Robert and another daughter, Lynette, who died in tragic circumstances some time ago. Sharonne has one child, namely, Anthony, and Robert has five children. It is common ground that, since 13 April 2018, when she suffered a stroke, Mrs Phillips has lacked testamentary capacity. Her estate has been estimated to have a value of approximately $100 million although it may have a value substantially greater or lower than that.
2. Mrs Phillips retained personal control of her finances until the time of her stroke. However, the primary judge considered that a fair inference should be drawn that her capacity for the efficient conduct of business diminished over time. His Honour found that, having experienced vulnerability associated with hospitalisation following a fall on 11 May 2017, Mrs Phillips appointed Sharonne as her enduring guardian. Sharonne accepted that appointment on 27 September 2017. Despite declining health, Mrs Phillips continued to make independent decisions about her financial affairs until the time of her stroke. Thus, on 3 October 2017, she executed a deed whereby she pledged to make a substantial gift of US$15 million in favour of Tel Aviv University in Israel. At the time of the hearing before his Honour, only A$500,000 of the promised US$15 million had been paid.
3. Mrs Phillips has made at least two prior wills. The first will was made on 13 June 1972 (the 1972 Will), with codicils made on 5 December 1973 and 13 July 1978. The second will was made on 2 November 2001 (the 2001 Will). The 2001 Will revoked the 1972 Will. However, the original of the 2001 Will has not been located and Mrs Phillips was heard to say, several times after the date of the 2001 Will, that she had no will. That may give rise to an inference that she destroyed the 2001 Will with the intention of revoking it. During 2017, Mrs Phillips consulted with various advisors in connection with the preparation of a will. Those discussions resulted in the preparation of a draft will dated 22 May 2017 (the Draft Will). Although Mrs Phillips did not execute any will at that time or since, she subsequently expressed her intentions in discussions with Ms Carolyn Deigan, a solicitor who acted for her in a broad range of matters (the Deigan Discussions).
4. At the outset of the oral hearing of the appeal on 16 August 2019, the Court was informed that Mrs Phillips had suffered a seizure the previous evening. The Court was also informed, however, that Mrs Phillips' medical condition was not presently life threatening. Nevertheless, having reached a conclusion as to the outcome of the appeal, the Court considers that it is desirable to indicate the orders that it proposes to make allowing the appeal and authorising the making of a will on behalf of Mrs Phillips but will reserve its detailed reasons for doing so.
5. The Court is satisfied that, in the circumstances of this case, having regard to the position of conflict in which the managers of Mrs Phillips' estate would be placed, and the absence of any other obvious applicant, Anthony is an appropriate person to make the application for an order under s 18 of the Succession Act. The Court is satisfied that Mrs Phillips is incapable of making a will and that a will in accordance with the following is, or is reasonably likely to be, one that would have been made by Mrs Phillips if she had testamentary capacity. The Court has had regard to the gifts made by the 2001 Will, the gifts proposed by the Draft Will and the gifts foreshadowed in the Deigan Discussions and has concluded that the Draft Will reflects, to a very considerable extent, Mrs Phillips' wishes as to the disposition of her estate.
6. The Court is satisfied that, although she expressed some reservations about them, it is still reasonably likely that Mrs Phillips would have appointed Messrs Peter Philippsohn and Steven Gross as executors, as contemplated by the Draft Will. There appears to have been a fairly strongly held wish on the part of Mrs Phillips to be buried in Israel. While that is a matter for her legal personal representatives, there is no reason why the wish stated in cl 5 of the Draft Will should not be expressed in a statutory will.
7. The evidence suggests that Anthony and Sharonne were the two relatives to whom Mrs Phillips had the closest personal relationship, apart, perhaps, from her sister, Ruth Wine. While the gift to Anthony and Sharonne of paintings, of objets d'art and Judaica contained in cl 7 of the Draft Will and of other personal possessions and effects contained in cl 8 of the Draft Will did not have a precedent in the 2001 Will, such an arrangement appears to have been confirmed in the Deigan Discussions and those clauses are consistent with the conversations that Mrs Phillips had with Anthony and Sharonne after the Draft Will was produced.
8. Clause 11 of the Draft Will dealt with the property referred to as "Northfield" and expressed the intention that it be held for the benefit of Anthony and Sharonne. The Northfield property was owned by Mrs Phillips for some time and there is evidence that it was a family property. It is likely that Mrs Phillips would have wished that it remain in the family and the Deigan Discussions confirm her wish that it be held by Sharonne and Anthony jointly. The mechanism contained in the Draft Will is workable in circumstances where Northfield is owned by a company controlled by Mrs Phillips. There is no reason why a statutory will authorised should not adopt the mechanism of the Draft Will.
9. The position in relation to the property situated at Kelso, referred to as the "Bunnings property", is somewhat more equivocal. It is fairly clear that the Bunnings property was acquired with the intention that it be given to Anthony or that it passed to Anthony. However, Mrs Phillips was concerned that such a substantial gift might have some effect on Anthony's "drive". As late as March 2018, Mrs Phillips was contemplating a visit to the Bunnings property with Anthony, as confirmed by the Deigan Discussions, indicating that she retained the intention that Anthony have the Bunnings property. Her reservation about whether it would affect Anthony's drive is certainly not an indication that she preferred that the property go to Robert and Sharonne, as would be the case on intestacy. Under cl 12 of the Draft Will, Anthony was to obtain a vested interest upon attaining the age of 28 years. The Court is satisfied that the reservation expressed by Mrs Phillips would be accommodated by providing that the Bunnings property would not vest until the expiration of 5 years from the death of Mrs Phillips. Otherwise the mechanism of cl 12 of the Draft Will would reflect Mrs Phillips' intentions.
10. The 2001 Will contained a legacy of $750,000 to Sharonne. The 2001 Will also contained a legacy of $500,000 to Robert. However, there is evidence of significant disappointment on the part of Mrs Phillips in relation to Robert's conduct, which explains the absence of any gift to him in the Draft Will. Clause 13 of the Draft Will contains a legacy to Sharonne of $5 million. The relationship between Mrs Phillips and Sharonne has not been easy but the evidence indicates that Sharonne maintained a reasonably strong relationship with Mrs Phillips despite the difficulties. Nothing in the Deigan Discussions suggests a change of view in relation to that legacy.
11. Clause 14 of the Draft Will contained a gift to Robert's children of $1 million each. That is similar to the 2001 Will, which contained a legacy of $660,000 to each of Mrs Phillips' grandchildren, including Anthony. At the time of the 2001 Will, all of the grandchildren of Mrs Phillips were minors. There is no evidence to indicate that Mrs Phillips had a change of mind. The Deigan Discussions refer to gifts to Robert's children, without mentioning an amount.
12. Clause 15 of the Draft Will contemplated a legacy of $500,000 to Mrs Phillips' sister, Ruth. The 2001 Will provided for a legacy of $200,000. The Deigan Discussions record a continuing intention to give a legacy of $500,000 to Ruth.
13. Clause 16 of the Draft Will dealt with Mrs Phillips' housekeeper, Lyn Freidinger. The 2001 Will provided for a gift of $300,000 to Ms Freidinger and her husband. That has been reduced in the Draft Will, although the husband is not mentioned in the Draft Will. That may be because the husband has died. There is no reason for concluding that cl 16 of the Draft Will does not represent the intentions of Mrs Phillips.
14. Clause 17 of the Draft Will dealt with an intention to make a gift to the Sydney Jewish Museum. There is nothing in the evidence as to Mrs Phillips' conduct after the Draft Will was prepared to indicate that she had a change of heart in that regard. Clause 18 contained directions for the legal personal representatives to fulfil any obligations she had undertaken during her lifetime. It is reasonably likely that the Draft Will represents the intentions of Mrs Phillips in that regard.
15. Clause 22 dealt with the residuary estate. The objects of the charitable trust proposed by the Draft Will are consistent with those specified in the 2001 Will. The difficulties that appear to have arisen after the Draft Will was prepared relate to the control and management of the proposed charitable trust. The evidence indicates a clear charitable purpose on the part of Mrs Phillips to benefit the objects set out in the Draft Will. It would be appropriate for a statutory will to provide for the residuary estate to be held upon trust for the charitable objects named in the schedule to the Draft Will. It would be a matter for the legal personal representatives to establish a trust by way of a cy-près scheme or other application under the Charitable Trusts Act 1993 (NSW).
16. The Court proposes to direct the parties to bring in short minutes of orders, including a draft will, to give effect to the conclusions outlined above. The parties will have liberty to apply in the event of there being any disagreement as to the proposed orders. The Court will reserve for a later day the publication of its detailed reasons for the orders that it makes.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 September 2019