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[2015] WASC 296
General information, not legal advice.
Supreme Court of WA
2015-08-14
Chaney J
Original judgment source is linked above.
1 CHANEY J: On 31 October 2014, a document entitled 'Heads of Agreement' (Mediation Agreement) was executed by, or on behalf of, the parties to this action other than the first defendant and the sixth defendant. The first defendant has at no time participated in the proceedings, and has indicated that she would abide the court's decision. The sixth defendant similarly has played no part in the proceedings, and was named as a defendant simply because the claimed relief involved potential dealings on title.
2 The second defendant, Matthew Stephen Higgins, and third defendant, Emma Laura Higgins, are minors, and are represented in the present application by their next friend, Philip Michael Higgins, who is their father.
3 The Mediation Agreement provided for settlement of this action on the terms set out. In view of the incapacity of the second and third defendants (who I will refer to as Matthew and Emma) the court's approval to the compromise of the action is required under O 70 r 12 of the Rules of the Supreme Court 1971 (WA). Philip Higgins, on behalf of Matthew and Emma, and the fourth and fifth defendants seek that approval. They also seek an order dispensing with the requirement under O 70 r 10(2) to obtain independent counsel's opinion.
4 The plaintiffs oppose the approval of the agreement. They also seek an order that pursuant to O 70 r 7 that Philip Higgins be removed as next friend of Matthew and Emma.
5 In order to understand the issues raised for consideration, it is necessary to set out the background to the proceedings.
6 The dispute concerns the estate of Shirley Crawford (deceased) who died on 25 November 2013. The deceased was survived by her sister, Merril June Williams and her brother, Neil James Williams, who are the first and second plaintiffs respectively. The fourth defendant, Gary James Crawford is the son of the deceased, and Soesanne Susanto, the fifth defendant, is Gary Crawford's wife. The deceased also had a daughter, Denise Higgins who is married to the next friend, Philip Higgins. They have two children, Emma and Matthew who were both born on 22 October 1999.
7 The deceased executed wills on 12 May 2009 (09 Will) and 5 December 2006 (06 Will). The 09 Will named Mr and Ms Williams as executors and after a gift to the first defendant, Janice Schwarzback, gave certain specified items and the residue of the estate to Matthew and Emma.
8 The 06 Will provided for the same bequest to Janice Schwarzback as the 09 Will, bequeathed certain personal possessions to Soesanne Susanto, and devised and bequeathed the residue to the deceased's husband, Walter Crawford, or, failing his survival of the deceased, to Gary Crawford as to 50% and Matthew and Emma as to the remaining 50% provided they survived the deceased and obtained the age of 25 years.
9 The deceased's estate is comprised solely of cash. Prior to the withdrawal of funds by the plaintiffs for legal costs, which is authorised under an earlier order of the court, and other expenses, the gross value of the estate was $191,507.
10 The claim in the writ is for a declaration that the 09 Will was the last will of the deceased, and for a grant of probate of the 09 Will in solemn form. At the time the writ was issued, the plaintiffs, who were then represented by solicitors and counsel, also sought an injunction to restrain the registration into the names of the fourth and fifth defendants of a property at 198 Burke Drive, Attadale (Attadale Property), registered in the joint names of Gary Crawford, Soesanne Susanto, the deceased and Walter Crawford (who had predeceased the deceased). The fourth and fifth defendants had lodged, or proposed to lodge, an application with Landgate to have the Attadale property registered in their names as joint tenants by survivorship. The plaintiffs asserted, in the application for an interlocutory injunction, that there was evidence to suggest that the registration in 2006 of the interests of the fourth and fifth defendants had been procured by fraud and that the Attadale property properly formed part of the estate.
11 By counterclaim, Gary Crawford and the seventh defendant, Arnoldus Johannes Weijers, who are named as executors in the 06 Will, sought a grant of probate of the 06 Will in solemn form.
12 Accordingly, by the time the matter was referred to mediation before a Registrar of the court, there were two areas of dispute. The first is whether the 09 Will prevailed so that the entire benefit of the estate would pass to Emma and Matthew, or the 06 Will prevailed whereby the benefit would be shared equally by Gary Crawford on the one hand and Emma and Matthew on the other. The second issue was whether the registration of the Attadale property was procured by fraud. The outcome of the second issue has a substantial impact on the value of the estate.
13 In the preparation of their cases, the parties produced conflicting expert reports as to the capacity of the deceased to make the 09 Will.
14 The basis of the fraud allegation in relation to the transfer of the Attadale property from the joint names of Walter Crawford and the deceased appears to have been that, in 2006, Walter Crawford lacked capacity to execute the transfer (2006 transfer), and that the deceased was pressured by Gary Crawford into executing the 2006 transfer. That suggestion was resisted by Gary Crawford who contended that he personally observed Walter Crawford execute the 2006 transfer. His position was that he was entitled to the transmission of the Attadale property into his and his wife's names as the surviving joint tenants.
15 In essence, the Mediation Agreement provides that the 06 Will would be subject to an application for probate on an uncontested basis, but that the executors, Gary Crawford and Arnoldus Weijers would renounce their appointment as executors in favour of an administrator, agreed by representatives of the beneficiaries of the 06 Will, being an accountant, or, in the absence of an agreement, a legal practitioner appointed by the President of the Law Society.
16 In addition, Gary Crawford and Soesanne Susanto agreed that they would pay to the trustee of a trust to be established for the benefit of Matthew and Emma a sum equivalent to one half of the realised value of the property or, if the property was not sold within three months of the date of the grant of probate, one half of the average value of the Attadale property determined by two valuations. The estate was otherwise to be administered in accordance with the 06 Will. The defendants agreed to bear their own costs in the action. There was agreement that, upon payment of the funds to the trust for Matthew and Emma, or the lodgement of a charge to secure that payment on settlement, the parties consented to the discharge of the interlocutory injunction restraining Gary Crawford and Soesanne Susanto from becoming registered proprietors of the Attadale property. The parties also agreed that the plaintiffs' costs in the action would be paid from the estate in accordance with an earlier order which I made on 12 May 2014.
17 The Mediation Agreement is conditional upon Denise Higgins confirming that she will make no claim under the Family Provision Act 1972 (WA) in respect of the Estate. That confirmation has now been provided in an affidavit filed in these proceedings.
18 The opinion of independent counsel has not been obtained in relation to the proposed settlement. The next friend did, however, seek and obtain the advice of the solicitor for the second and third defendants as to whether, in the solicitor's opinion, the Mediation Agreement is in the best interests of Emma and Matthew. The opinion was provided by Mr Shane Sirett. It was provided to the court by way of a sealed annexure to the affidavit of Philip Higgins of 14 May 2015. Mr Higgins explained that he wished to preserve the confidentiality of the advice so that if the proceedings are not concluded pursuant to the Mediation Agreement, the position of Matthew and Emma is not seriously compromised in any further proceedings. Mr Higgins also attached a sealed summary of the financial position of his family which he did not wish to make known to any other party to the proceedings having regard to the history of conflict and antagonism between members of his wife's family.
19 Attached to Mr Sirett's opinion was a table setting out the possible outcomes of the proceedings and the position of Matthew and Emma in each of those potential outcomes. A copy of that table was made available to the plaintiffs for the purposes of the application for approval of the Mediation Agreement. That table reads as follows:
If the estate comprises only the cash and personal effects (currently valued at $145,000*)
If estate comprises A(1) plus the full interest in the Attadale Property estimated at a value of $1.4M (2006 transfer invalid**)
If estate comprises A(1) and one half of the value of the Attadale property (Shirley transfer on survivorship effective, Walter's ineffective#)
Schwarzback receives $30,000 Children receive half of residual estate: $57,500, less next friend's reimbursement for legal costs (subject to costs orders)
Schwarzback receives $30,000 Children receive half of residual estate: $757,000, less next friend's reimbursement for legal costs (subject to costs orders and selling costs for house)
Schwarzback receives $30,000 Children receive half of residual estate comprising the value of Walter's interest in the Attadale property: $57,500 + $350,000 = $407,500, less next friend's reimbursement for legal costs (subject to costs orders and selling costs for house)
Schwarzback receives $30,000 Children receive half of residual estate and half the value of the Attadale property: $57,500 + $700,000 = $757,500, less next friend's reimbursement for legal costs (subject to costs orders and selling costs for house)
Schwarzback receives $30,000 Children receive all of residual estate: $145,000, less next friend's reimbursement for legal costs (subject to costs orders
Schwarzback receives $30,000 Children receive all of residual estate: $1.545M, less next friend's reimbursement for legal costs (subject to costs orders and selling costs for house)
Schwarzback receives $30,000 Children receive all of residual estate comprising the value of Walter's interest in the Attadale property: $57,500 + $700,000 = $757,500, less next friend's reimbursement for legal costs (subject to costs orders and selling costs for house)
*the plaintiff's legal fees up to the date of the mediation have been paid under court order.
**this presumes that the 2006 transfer of the Attadale property was procured by fraud actionable by Shirley's estate to invalidate both the severance of the joint tenancy and subsequent transfer of the interest of each parent to Gary and his Wife
#this presumes that Shirley was competent, she freely transferred her interest, thereby severing the joint tenancy and that her interest then became held jointly with Gary and Soesanto whilst those 3 then held their interest as tenants in common (as to ½) with Walter and he held ½ which passed to Shirley on Walter's death
Gary will receive half of residual estate and half the value of the Attadale property: $57,500 + $700,000 = $757,500, (subject to costs orders and selling costs for house)
20 I am mindful that the plaintiffs have not had the opportunity to review Mr Sirett's opinion other than the conclusions embodied in the above table which was provided to them. In reaching the conclusion I have, I have not relied upon the contents of Mr Sirett's opinion, other than the conclusion embodied in the above table.
21 Apart from the unknown effect of future legal costs, the only variable in the analysis contained in the table is the ultimate value that might be achieved for the Attadale property. Any fluctuation in the value of that property will affect the calculation as to the ultimate receipts by Emma and Matthew either upwards or downwards, but will have marginal, if any, effect on the relativities of the outcomes under the different possible scenarios.
22 I accept the analysis shown in the table. It demonstrates that the only better outcome, in financial terms, for Emma and Matthew would be if probate is granted in relation to the 09 Will, and an action is then commenced and successfully completed by the plaintiffs to set aside the 2006 transfer. All other scenarios result in Emma and Matthew being worse off (having regard to the impact of the inevitably substantial further legal costs associated with any scenario other than completion of the Mediation Agreement).
23 The plaintiffs contend that Philip Higgins should be removed as next friend by reason of statements made in his affidavit in support of the application for approval. They point to [16] of that affidavit in which Mr Higgins says there are a number of things that he and his wife would like to consider doing over the next few years that would benefit Matthew and Emma. These include Emma attending a French language intensive course in France, private tuition for Matthew to assist his progress through high school, acquiring a car for each of the children when they become eligible to learn to drive, and assisting in the children travelling to the United Kingdom to visit family members. The plaintiffs contend that the last two of those suggestions are extravagant and unnecessary and demonstrate that Mr Higgins is not acting in the best interests of the children.
24 Whether or not one considers that the expenditure suggested might be extravagant or appropriate, nothing in [16] of Mr Higgins' affidavit suggests that he is acting other than in the interests of the children or that he has any conflict of interest. There is no substance in that complaint. A similar objection was made to [13] of the affidavit which refers to the 'early receipt of trust funds' for Matthew and Emma's benefit making a substantial difference to the type of expenses which might be incurred for their advancement and to enrich their education. As I understand the plaintiffs' contention, it is that the statement demonstrates that Mr Higgins is seeking to personally benefit from payment of the funds. I reject that contention. Nothing in the words used gives rise to that inference.
25 The principal objection to the continuation of Mr Higgins as next friend appears to have been Mr Higgins' statement that the Mediation Agreement was executed by his legal representative on his behalf and on his instructions. The plaintiffs argue that the agreement is fundamentally flawed and is not in the children's interests, and therefore Mr Higgins giving instructions for the execution of the Mediation Agreement shows that he was acting contrary to the children's interests.
26 For reasons which I deal with below, I consider that the Mediation Agreement is in the interests of Matthew and Emma. It follows that, in promoting the agreement, Mr Higgins has not acted contrary to the interests of Matthew and Emma.
27 The application to remove the next friend should be refused.
28 The applicable principles were helpfully summarised by Senior Counsel for the fourth and fifth defendants. Those principles which I adopt, include:
29 This agreement was reached at a time when all relevant parties were legally represented. The plaintiffs were represented by their then solicitor, and independent counsel experienced in inheritance matters. Although the plaintiffs have now dispensed with the services of their legal representatives, Ms Williams did annex to an affidavit a letter from their former counsel in which he expressed the view that 'the result was an extraordinarily good one for the beneficiaries'. The affidavit of Philip Higgins indicates that legal advice on the settlement has been considered and understood and on that basis he favours the approval of the agreement. The fourth and fifth defendants, who made the principal concession leading to the Mediation Agreement, namely abandoning their claim to the benefit of the whole of the Attadale property, were represented by experienced legal practitioners. There is no basis to suspect any lack of experience of either of Matthew and Emma's legal advisers, nor of the plaintiffs' legal advisers. The plaintiffs bring this action as named executors under the 09 Will. They have no beneficial interest in the outcome of the action. The action is brought in the interests of Matthew and Emma. The experience of the plaintiffs' former lawyers, who obviously considered the Mediation Agreement to be beneficial to the beneficiaries of the 09 Will, is therefore relevant.
30 The Mediation Agreement clearly places Matthew and Emma in a better position than they would be if the 09 Will were proved, but the size of the estate was not increased by the setting aside of the 2006 transfer. They are in at least as good a position as they would be if the 09 Will were proved and only the transfer of Walter Crawford's interest in the Attadale property were set aside. Having regard to legal costs, they are probably in a significantly better position. The only way that Emma and Matthew might be better off than they will be if the Mediation Agreement is completed would be if the 09 Will is proved and the 2006 transfer is found to be entirely invalid. Given that the 2006 transfer occurred some nine years ago, and Walter Crawford and the deceased have passed away and cannot give evidence, the evidentiary difficulties in establishing fraud are glaringly obvious. There is at least a serious risk that the optimal outcome would not be achieved, and very significant legal costs would be incurred in pursuing both this action and a subsequent action to set aside the 2006 transfer.
31 As discussed above, I am satisfied that their next friend has given close attention to whether the Mediation Agreement is in the interests of Matthew and Emma, and has taken and considered competent legal advice on that question.
32 In my view, it is clearly in the interests of Matthew and Emma that the compromise represented by the Mediation Agreement be approved.
33 The plaintiffs raise several arguments as to why they considered that the Mediation Agreement is not in the interests of Emma and Matthew.
34 First, they rejected a submission by Senior Counsel for the fourth and fifth defendants that, whilst it is unlikely that any outcome will inspire comity between the plaintiffs and Gary Crawford, the settlement does facilitate the more important brothersister relationship of Gary Crawford and Denise Higgins and avoids pitting the interests of Gary Crawford and Denise Higgins' children against each other. The plaintiffs' submission in that regard was simply that, having regard to their knowledge of the past family disputes, the agreement will not facilitate greater family harmony. I do not consider that questions of family comity and tranquillity are a significant factor in the outcome of this application. Rather, the outcome turns upon the empirical benefit to Emma and Matthew from the compromise. Having said that, completion of the Mediation Agreement will remove a source of dispute within the family, and to that extent is desirable.
35 The second objection to the agreement was that funds would not be utilised for purposes which were in the children's interests. That submission turned upon Philip Higgins' reference to potential future expenditure on the children's behalf which I have dealt with above. That contention provides no basis to refuse approval of the deed.
36 The third argument raised by the plaintiffs was that the agreement is flawed. That contention was based upon the contents of an affidavit of Laura Jean Hunter, a solicitor employed by the fourth and fifth defendants' solicitors. That affidavit attached an addendum to Mr Sirett's opinion. In that addendum, Mr Sirett noted that he had expressed certain views as to the capacity to utilise trust funds for the purposes discussed, but had failed to have regard to the fact that the 06 Will provided for vesting of the bequest to Matthew and Emma upon their attaining 25 years of age. Mr Sirett stated that he had failed to observe the absence of a provision enabling the application of funds for the maintenance and advancement of minors in the 06 Will. Nevertheless, he continued to hold a view that the settlement was in the children's interests. The plaintiffs contend that the failure of both the solicitors and Mr Higgins to observe that limitation on the bequest demonstrates that the agreement is flawed and should not be approved.
37 Under the agreement, there is to be a trust established upon sale of the Attadale property. That trust will not form part of the estate dealt with under the 06 Will. Even if it did, it may well be that s 59 of the Trustees Act 1962 (WA) would enable the application of funds for the maintenance and advancement of the children in any event. In my view, nothing in the supplementary opinion provided by Mr Sirett impacts upon the benefit of the agreement to the children.
38 The plaintiffs' next argument was that, whilst they had difficulty understanding the table attached to Mr Sirett's opinion, they considered it very possible that they could achieve the optimal outcome of proving the 09 Will and setting aside the 2006 transfer. I have no doubt that the plaintiffs underestimate the forensic difficulties which they would confront. Assessing the benefit of the children involves assessment of all of the possible outcomes of continuation of the litigation. I do not accept that the plaintiffs' confidence, that the optimal outcome for Emma and Matthew might be achieved, is well founded. The submission is little more than assertion without any adequate foundation. It can be inferred that it is not an assertion with which the plaintiffs' former legal advisers concurred.
39 Mr Williams also raised a concern about the absence in the document of any indemnity from the next friend in relation to possible claims that might be made against the plaintiffs. It was by no means clear what possible claims he was referring to. In any event, the question now before me is whether or not the agreement is in the interests of the incapable defendants. The personal interests of the plaintiffs do not bear on that question.
40 Finally, the plaintiffs complain that the agreement is uncertain and complex. That submission appeared to be based on the proposition that there may be difficulties in selling the Attadale property. If there are, a mechanism for establishing a price to be paid for the property is contained in the agreement. I do not consider the agreement uncertain or complex.
41 The agreement arrived at mediation arose in a context where all parties were represented by lawyers. There is no basis for any concern of any lack of skill or experience of the legal advisors involved in achieving settlement. The plaintiffs have not indicated any basis to challenge the analysis contained in the table set out above. I do not consider that the opinion of independent counsel is necessary to assess the interests of the infant defendants in this case. Accordingly, I would direct that the requirement for independent counsel's opinion be dispensed with.
42 In my view, this is an appropriate case whereby the agreement between the parties on 31 October 2014 should be approved pursuant to O 70 r 12 of the Rules of the Supreme Court 1971 (WA).
43 Senior counsel for the fourth and fifth defendants took objection to the passages in the affidavits filed by the plaintiffs which deposed to and annexed certain medical records of the fourth defendant which had been obtained by the plaintiffs on subpoena in these proceedings. The objections are on the basis of relevance. The passages objected to are as follows:
Affidavit of Merril June Williams dated 12 June 2015 (affirmed 11 June 2015
Affidavit of Neil James Williams dated 12 Jun 2015 (affirmed 11 June 2015)
Affidavit of Neil James Williams dated 30 June 2015 (affirmed 30 June 2015)
44 The plaintiffs argued that the medical records were relevant to their proposition that the fourth defendant lacked capacity 'to enter into any agreement' including the Mediation Agreement and any of the transactions in which he was involved with his parents in 2006. Questions of the fourth defendant's capacity in relation to transactions in 2006 are irrelevant to the present application. As to the Mediation Agreement, it was made clear by the plaintiffs in directions hearings leading up to the hearing of the application for approval that their position was not that no such agreement had been entered into, but only that the Mediation Agreement should not be approved. Questions of capacity of the parties to the Mediation Agreement simply do not arise.
45 The material objected to is irrelevant and should be struck out. Given the sensitive nature of the material, the fourth defendant has leave to uplift the affidavits for the purpose of removal of the annexures contained in the attached table and deletion of the passages in the affidavits identified above.