02 9222 8000

YOUR SUCCESS IS OUR COMMITMENT

The 25 Million Dollar Question

  • Wills and Estates Law
  • Christian Tager
  • No Comments
  • August 21, 2015

The 25 Million Dollar Question

Diamond Conway Legal Article

Download PDF

What Does The Decision Of Mead V Lemon Mean For Future Family Provision Claims?

It is not often that an award of $25 million to an individual is referred to as merely a “rounding error”. However, Master Sanderson did just that when delivering his judgment in Mead -v- Lemon earlier this year.

This Western Australian Supreme Court matter attracted considerable media interest due to the sums of money and the families that were involved, as the case gave the general public an insight into the immense wealth of the Wright-Hancock business partnership. As His Honour stated, “it is difficult for most people to comprehend such wealth.”

However, perhaps what has made the decision (now under appeal) newsworthy are some of the more interesting claims made by the claimant, Ms Olivia Mead, and the fact that the Court took what can be best described as a ‘progressive’ view of her claim. Furthermore, the case examines a trust that is the perfect example of an attempt to ‘rule from the grave’, and set out in clear terms why it is unfair to do so.


Background

The late Michael Wright (“the deceased”) was the son of the late Peter Wright, who was Lang Hancock’s business partner. The deceased had inherited a fortune from his father, and used part of this inheritance to establish the successful Voyager Estate Winery on the Margaret River. At the time of his death the deceased had amassed an estate that Master Sanderson described as “colossal” and “in excess of $1 billion.”

The deceased was survived by his wife, Mary Ann, whom he married in 1997, three adult children from a previous marriage (Leonie, Alexandra and Myles), and the plaintiff, Ms Mead.

Ms Mead was born from a relationship that occurred between the deceased’s third and fourth marriages. However, the deceased took no real interest in Ms Mead’s life or welfare, which the Court noted was “of the deceased’s choosing.” From his monumental fortune the deceased provided minimal assistance to Ms Mead and her mother, including a scattering of modest gifts on some birthdays, and little more. Furthermore, the deceased even subjected Ms Mead to DNA testing when she was five months old to confirm whether she was indeed his daughter.

Probate of the deceased’s 2012 Will, altered by a Codicil, was granted to the deceased’s long standing solicitor. Under this Will the deceased’s children, with the exception of Ms Mead stood to receive a minimum of $400 million each. All but a ‘mere’ $45,272,231.18 had been distributed by the time Ms Mead brought her claim.


The Olivia Trust – ruling from the grave

Despite having no real relationship with her, the deceased did not leave Ms Mead out of his Will. However, he certainly did not leave her a straight forward bequest. Instead Ms Mead was the main beneficiary of a testamentary trust named “the Olivia Trust No. 2”, which had the capacity to confer on Ms Mead a maximum of “$3 million in cash and/or property.” However, under the terms of the trust Ms Mead would not have access to these funds/assets until she turned 30. Moreover, to remain an eligible beneficiary under the trust Ms Mead could not:

  1. become an alcoholic” or someone “whose capacity for rational behaviour in a competent and satisfactory manner had been impacted by alcohol” or someone who “at any time suffered a conviction relating to drugs, their use or any other illegal association…in any recognised form”;
  2. be someone who had been “in the opinion of the [deceased’s] Trustees recently suspected or knowingly had any involvement or association whatsoever with illegal drugs” or had “become a drug addict” or someone who had been convicted of a felony prior to the deceased’s death or in the ten years preceding the deceased’s death;
  3. be someone who had been “in the opinion of the [deceased’s] Trustees a member of or in any other way involved with any religious body other than the Roman Catholic, Anglican, Presbyterian, Baptist, Uniting or other similar faiths”.

These conditions, if applied to all testamentary trusts, would see a considerable number of beneficiaries being ruled ineligible, and therefore effectively disinherited. There was also the problem of the trustee being forced to make a judgment call on whether a person is being adequately impacted by alcohol or illegal drugs to be excluded under the terms of the trust. For instance, would one night of over exuberance by Ms Mead in her twenties be enough to prevent her from receiving the $3 million held for her under the trust?

However, as rightly noted by Master Sanderson, it is the last of the abovementioned conditions that is the most “egregious”. The requirement for a person to have to adhere to specific faiths in order to receive financial benefits from an estate is tantamount to a form of moral blackmail from beyond the grave. His Honour noted that to include such a provision in a testamentary trust flies in the face of a freedom that “[m]ost Australians would regard…as part of their birthright”, and Ms Mead would have to give up this freedom to receive her entitlement under the Will.


A claim for a rhinestone studded piano?

Part of the reason this case was the lead story for many news bulletins was due to the more eccentric ways in which Ms Mead expressed her future needs. When asking the Court for further provision to their “proper maintenance, support, education and advancement in life” (being wording that appears in both the Western Australian and New South Wales succession law legislation), the average claimant on a parent’s estate would seek amounts to, for instance, pay off a mortgage or acquire a home, assist with raising children or to pay for any future medical treatment they may need (this being particularly important if they have a serious pre-existing condition).

It is fair to say Ms Mead alleged needs which went somewhat beyond these categories, and amongst her well-publicised and more colourful claims were the need for:

  1. a diamond encrusted bass guitar valued at $250,000.00 (despite the fact that Ms Mead had not undertaken guitar lessons in years);
  2. a $1,200,000USD rhinestone studded Kuhn Bosendorfer grand piano;
  3. $30,000.00 annually for overseas travel and a further $10,000 annually for holidays within Australia;
  4. $10,000 annually for handbags and other fashion accessories;
  5. Approximately $25,000.00 for shoes (again, annually);
  6. a house worth almost five times the average Perth home;
  7. funds for the upkeep of the four children Ms Mead planned to have at some future point in time (though, as Master Sanderson quipped, “of course after one child she might reconsider [this]; most sensible people d”)

Perhaps the most eccentric of Ms Mead’s claims were the yearly allowances of several thousand dollars to look after each of her pets, including a Mexican walking fish and what would be a well to do rabbit. Needless to say the executors’ and beneficiaries’ Counsel, NSW Senior Counsel Jane Needham, spent a considerable amount of time at the hearing exploring whether such figures represented genuine needs, pointing out that to the average person $2,114.00 is a considerable sum to keep one axolotl alive for a year.

Often a claimant can risk the ire of the Court by overstating their needs, particularly when done so in such a fashion. However, in this instance Ms Mead was perhaps fortunate that, despite the best efforts of the Ms Needham, the Court “was not left with the impression that the plaintiff was a gold digger”. The Court noted that a “19 year old boy in the same position would probably, when asked about a car, have nominated a Ferrari or a Lamborghini”, and that “[Ms Mead] has a life in front of her the same as any other 19 year old. Beyond that trite statement nothing is certain.”


How did the Court arrive at an order for the provision for $25,000,000?

Master Sanderson made it very clear that, in his view, given the immense size of his estate, the deceased had failed to make adequate provision for his daughter under his Will. While the trust did potentially hold $3 million for Ms Meads, His Honour ruled that the strict terms of the trust meant that there is a “real prospect that [Ms Mead] might get nothing” under the Will.

However, what is likely to have created the grounds for the appeal is His Honour’s exercise of discretion when awarding the sum of $25,000,000 to Ms Mead, particularly in circumstances where Ms Mead’s Counsel, Lindsay Ellison (also a NSW Senior Counsel), had sought that the trust be replaced with a cash payment of $12,000,000. This meant that His Honour effectively awarded Ms Mead $13,000,000 more than what she was seeking. It is rare that a Court orders even more than what is being sought by the plaintiff in Family Provision matters, let alone by more than 100%.

Master Sanderson made it very clear in his judgment that the amount awarded to Ms Mead was based on an exercise of judicial discretion. In doing so His Honour stated that he found the considerable actuarial evidence put forward by the parties “of little assistance in determining the outcome of [the] application”. Instead Master Sanderson considered what a “wise and just testator would do in the position of the deceased” when “attempting to balance the interest of his wife and children.” His Honour suggested the “internal dialogue” of the deceased might “go something like this”:

I am a fabulously wealthy man. I am able to provide for my wife, my children and others to such an extent that all will be well provided for without any of the others suffering. My two daughters Leonie and Alexandra have proved themselves loyal and have run the Voyager Estate business extremely well. They have supported me in every possible way. They deserve the lion’s share of my estate and they will have it. My son Myles is a successful musician who has forged his own career without much help from me. I should provide for him, conscious of the knowledge he has not been involved in the family business and will always be in a position to provide for himself.

That leaves my daughter Olivia. At her age she has no real idea of what she wants to do – she might get married and have four children. She might become an arts administrator when she finishes university or she may change her mind. She should have complete financial security so that she can pursue whatever interests she wishes into the future. She is young but she is levelheaded and with sound advice she can doubtless invest anything I leave to her to provide for her long term benefit. I can afford to spoil her and there is no reason why I should not do so.”

Leaving aside the potential poetic licence used by His Honour, this approach is more akin to that taken by the Court when considering applications to authorise Wills made by persons who lack testamentary capacity. In such matters the Court must consider what Will the person would have made “reasonably likely” have made “if he or she had testamentary capacity” (Fenwick: Application of Fenwick & Re Charles), which is effectively an exercise in stepping into the shoes of the incapacitated person. However, such an approach is not normally taken in family provision cases, at least not in NSW, where the focus is on identifying the legitimate needs of the plaintiff, as opposed to trying to suppose what the testator could have/should have done when making their Will.

It is the approach, and the arbitrary nature of the award, that has likely created the grounds for the executor’s and beneficiaries’ appeal. However, it is important to remember that the Court does give consideration to the “size and nature of the deceased’s estate” (Singer v Berghouse (1994) 181 CLR 201 at 209), and obviously the Court can be more (or in this case, much more) generous when granting provision from an estate as large as the late Mr Wright’s.

Conclusion

This is a difficult matter for most to get their minds around, mainly due to the amount of money being involved. A 19 year old girl received $25 million payable in 60 days, and if she successfully withstands the executor’s/beneficiaries’ appeal, she will have received a record amount for a family provision claim. On the other hand, as Master Sanderson noted in his judgment, a testator has a “moral duty” to “those entitled to benefit from his bounty”, and if “functioning adults” choose to “have children certain duties arise”, being “the statutory duty  [to provide for those children] which arises at death by the virtue of the Act.”

In His Honour’s view, the deceased neglected his duty to Ms Mead by creating a trust with terms that would either control Ms Mead’s life until she was 30, or disqualify her from receiving any inheritance at all. Given the immense funds available to the deceased, His Honour was satisfied that Ms Mead was not properly provided for, and that an award of $25 million was appropriate given that:

When the $25 million is paid to the plaintiff the rest of the residuary estate will pass to the second and third defendants. They will get about $10 million each less perhaps $1 million for costs. That is on top of the $400 million they already have; and they can rest easy in the knowledge their halfsister will be financially secure for the rest of her life.”

Unfortunately the optimism in His Honour’s last sentence appears to have been misplaced given that the second and third defendant’s, being Leonie and Alexandra, elected to appeal the decision. Until the appeal is heard it is difficult to say what, if any, bearing this case has on future family provision claims given it is rare to see such a large estate, let alone to see someone receiving such inadequate provision when such a large estate is available.


Help

If you would like any help with a family provision claim, do not hesitate to contact one of our estates team of solicitors.

 

Disclaimer

This document was prepared by Diamond Conway Lawyers.  It contains information of a general nature only and is not intended to be used as advice on specific issues.  Opinions expressed are subject to change.  Although Diamond Conway gathered the information contained in this document from sources deemed reliable, and has taken every care in preparing the document, it does not guarantee the document’s accuracy or completeness.  Diamond Conway disclaims responsibility for any errors or omissions.