March 2014

Just sign here - waiving the right to make a family provision claim

Under the Succession Act (2006) (NSW), a person may release his or her right to make a claim for provision from a deceased estate.  A release is not binding unless it is approved by the Court.

Release of rights

Proceedings for the approval of a release of the right to make a claim for provision from an estate may be commenced before or after the death of the willmaker.  Once approved, a person will forfeit any right to make a claim for provision even if they satisfy the criteria of eligibility and need.  As a result, both binding financial agreements (pre-nuptial agreements) and agreements made in settlement of estate litigation commonly include a release.

An approval of a release under the Succession Act will not be made automatically.  The Court is required to have regard to all the circumstances of the case, including whether at the time of the agreement:

(a)     it was to the advantage, financially or otherwise, of the releasing party to make the release;

(b)     it was prudent for the releasing party to make the release;

(c)     the provisions of any agreement to make the release are or were fair and reasonable; and

(d)     the releasing party has taken independent advice in relation to the release and given due consideration to that advice.

The parties to the release may not contract out of the above requirements.

The Court may revoke an approval that it has previously granted if:

(a)   it is satisfied that approval by the Court was obtained by fraud;

(b)   it is satisfied that a release by a party was obtained by fraud or undue influence; or

(c)   the parties involved agree to revoke the release.

The cases

In Singer v Berghouse (1994), the High Court considered the relevance that should be given to a pre-nuptial agreement that had not been approved by the Court which included a covenant not to challenge each other’s Wills.  In rejecting the widow’s claim, the Court held that whilst not binding, the agreement showed the parties thought it was fair at the time it was signed and that the widow did not expect a more affluent life than before her marriage.

In Ernst v Mowbray (2004), an agreement that was made after the marriage and filed in the Family Court said in part:

"There have been financial matters in dispute between the parties and each of the parties hereto has been independently advised by his or her respective legal representative as to their rights and obligations … AND WHEREAS the parties have been advised as to the provisions of the Family Provisions [sic] Act (NSW) 1982 [the predecessor to the Succession Act] AND WHEREAS the parties intend that the deed shall determine for all times all matters of maintenance and property settlement between them personally AND WHEREAS in relation to such financial matters the parties have agreed as follows…"

The parties knew of the requirement to obtain Court approval of the agreement in relation to their estates and that without the requisite approval, there was the possibility of a claim on the estate by the survivor.  Without Court approval, the Supreme Court held the agreement was a statement of intention but was not binding on the parties, despite the approval of the marriage settlement by the Family Court.

Mulcahy v Weldon (2001) was a family provision claim by an ex-wife.  The marriage was dissolved by the Family Court in 1989 and Mr Mulcahy died in 1998.  The plaintiff and testator had made on agreement upon their divorce which said in part:

“Each party covenants to execute a Deed of Release of any claim against the other under the Family Provision Act, if requested to do so by the other party.”

In rejecting the ex-wife’s claim, the Court acknowledged that the agreement was not binding without its approval but went on to say:

“There had been a property settlement which on its face dealt with all property, there was no further attempt to re-open the property settlement during Mr Mulcahy’s lifetime and no grounds appear on which there could have been such an attempt; Mr Mulcahy was a party to cl.5 of the Terms of Settlement which although not effective as it had not been adopted by the Court, gave what for most purposes would give some assurance that the plaintiff was not to look to him for further provision.”

In Neil v Jacovou (2011), it was the executor who sought to have the Court approve a release made between the testator and the plaintiff five years earlier as part of a pre-nuptial agreement.  Had the Court approved the release, the plaintiff would have been prevented from making a claim for further provision.

The agreement was made a few days before the plaintiff and testator married.  Despite a solicitor having signed a certificate of independent advice in relation to the release, the Court accepted the plaintiff’s evidence that she had received no explanation from him.  The plaintiff did not appreciate until after the testator’s death that the agreement did more than address the possibility of separation through divorce.

The Court declined to approve the release on the basis that it did not satisfy any of the criteria set out in the Succession Act.

Conclusion

It is common for many people to agree to release the right to make a family provision claim either during the life of the willmaker or after the death of the willmaker.  In the vast majority of cases, these releases do not have Court approval.  It is imperative in advising those people that they be informed of the possibility that the agreement may not be viewed as any more than a statement of intention at the time of signing.

Author: Philip Davis