This week the Chief Judge in Equity in New South Wales, Justice Peter Young, warned lawyers about running up huge costs in Family Provision cases.
These are cases where family members contest a will. Each state and territory has its own laws, but they follow a similar pattern. A family member who has not been adequately provided for in the will can apply for a court order to get extra money out of the estate.
It is happening more frequently these days. The increase has been caused by higher divorce rates; more de-facto partners; and more ex-wives with children from the first marriage competing against new wives with children of the second and third marriages.
In the past, it was more the practice to take the costs out the will than it is now. This just encouraged people to challenge the will and encouraged lawyers to egg them on. These days the costs come out of the estate less frequently. So people challenging a will without good cause and people resisting a challenger who has a good cause better watch out.
Often costs come out of the estate when there are arguments over a badly expressed will, but in a recent ACT case, Chief Justice Jeffrey Miles said that in family-provision cases, the loser should ordinarily pay the winner’s basic legal costs, which cost most but not all the costs. Further, if someone refuses an offer greater than what the court ultimately awards, the costs are awarded against them at a higher rate than the basic rate.
Justice Young was probably whistling in the wind in warning against costs. The very day his article in the NSW Law Society Journal became public, a judgment in yet another family-provision case came down with horrific legal costs.
It was a classic case of elderly dad pops off leaving daughter and de-facto to fight it out. In this case it was an ex-de-facto, so she did not get anything. Nevertheless, the case took three years to get to court and judgment. The bulk of the estate was the family home sold shortly after his death for $168,000. There was another $12,000 in other assets. So the total was $180,000.
Guess how much the total legal costs after the trial were? — $66,926.96. More than a third of the estate. It is an absurd amount of money to run up in a brawl over a suburban house. The moral of the story is to avoid lawyers if you can. Mediate. Sure, there will be cases of the madly obstinate who have to be resisted. As in family law it only takes one to tango. And ACT lawyers are probably better behaved than their counterparts in Sydney.
Nevertheless, if you go to court, expect it to cost far more than the money you are arguing about. There is probably no more expensive way to resolve a dispute than by going to court.
This week’s NSW case was a gem because the costs were set out. This is fairly rare. The disinfectant of publicity should be applied to costs in all cases. The parties lawyers should make a estimate of costs up to the time of trial and an estimate on each day of the trial and these amounts should be made public with the judgment. After all, costs are part of the judgment and the courts and enforcing sheriffs are paid for out of public funds. It might ring some warning bells for unrealistic potential litigants.
There have been some richly undeserved cases in the ACT and elsewhere recently. A son in his 60s got a family provision order out of his parents’ estate. Surely, when the children are grown up the testator should be able to leave his money where he wants. Siblings fight each other and de-factos fight ex-wives. Unfortunately, the courts have huge discretion. Typically judges say that each case must be decided on its own facts and circumstances, which means lengthy hearings of evidence. So the costs rise madly.
Justice Young wrote, “High fees seem to be being charged by some solicitors where the evidentiary material presented to the court appears to be simply a family history put together by simply inserting numbers before each paragraph of the client’s statement to the solicitor and where the solicitor shows no signs at all of having directed his or her mind to the essential matters that need to be established, namely the needs of the applicant . . . and the present financial means of the applicant. . . . Excessive costs are being charged for mediations.”
He warned that the court would start making its own assessments of costs if the lawyers did not behave.
Bear in mind also, a person can apply for provision out of an estate, even if there is no will.
If there are no family-provision challenges, the estate usually goes as follows:
The first $150,000 and all the chattels (furniture and things) to the spouse.
If there are no issue (children, grandchildren and down the lien) the spouse gets all of the rest.
If there is one child half the rest; if more than one child a third of the rest.
If there is no spouse, children take equally.
Spouse means de-facto of two years’ standing. If there is a spouse and a de-facto they take half the spousal share each, but if the de-facto has lived with the deceased for more than five years, the de-facto gets all the spousal share.
The $150,000 should be indexed in these days of galloping property prices. A spouse has little hope of keeping the matrimonial home against determined adult children these days.
With the Bureau of Statistics telling us that a third of marriages have one previously-married partner and 200,000 previously married people in de-facto relationships perhaps the rules on family-provisions and intestacy need a good work over. As things stand if you do not write a will there is chaos and if you do write one it can be easily challenged. Either way it is a field day for the lawyers who seem to be willing to fight until there is nothing left to fight over and whose fees seem to be more proportional to the size of the estate than the complexity of the evidence and the issues.