Unsuccessful Part IV application to substitute trustees of estate, potential costs consequences for legal representatives

Wills and Estates: 23 March 2019

The recent decision of McDonald J in Gibb v Gibb [2015] VSC 35is a reminder to legal practitioners about the importance of complying with the Civil Procedure Act 2010 in ensuring that any claim has a proper basis, on the factual and legal material available, before issuing Court proceedings, particularly in small estates.  

In this case the deceased died leaving two minor children, who were twins aged 4. The children lived with their mother, the deceased's former partner. In his Will, the deceased appointed both his parents executors, and left his entire net estate to his children who survived him and attained the age of 25 years, and if more than one in equal shares.

Clause 6(b) of the Will stated as follows:

In the absolute discretion of my Trustees to raise and pay or apply the whole or any part of the share of my residuary Estate whether expectant or contingent or whether income or capital of any beneficiary hereunder to or for the maintenance education or advancement or otherwise for the benefit of such beneficiary in such manner as my Trustees shall think fit with power during the minority of an infant beneficiary to pay the same to the parent or guardian of such beneficiary for the said purposes without being concerned to see to the application thereof and my Trustee shall for the purpose of this sub-clause have the power to determine the value of the assets of my Estate.

The children's mother, as litigation guardian, issued a Part IV application on behalf of the two children. The application was unusual as it contended that the deceased did not make adequate provision for the children's proper maintenance and support, not by the proportion of his estate which he left to the children, but by his choice of trustees, being his parents. It was submitted that due to the lack of relationship between his parents and the children's mother, she had no confidence that they would actually make any distributions to the children prior to the age of 25 pursuant to their power to advance.  The children's mother gave evidence that she was unable to pay for private health insurance, swimming, dancing and ballet lessons for the children, and that she required funds from the estate to do so.

The application should have been one for removal of trustee, rather than a claim for further provision under Part IV. However there had not been any actual misconduct in the administration of the estate, or any other grounds which may warrant removal. 

There was no evidence that the deceased's parents would not respond favourably to any requests for financial assistance from the children's mother. No request for any financial assistance for the children was made prior to proceedings being issued. Only one request for advancement of estate funds was made, by letter dated 1 September 2014, less than two months before the final hearing on 29 October 2014, which was not responded to due to the proximity of the hearing. In the circumstances, this lack of response was not considered evidence of the unsuitability of the parents as trustees. The letter did not even state that the children's mother was unable to pay the claimed expenses from her own resources.

The claim was therefore dismissed.

Of particular concern was the effect of the costs of the litigation on the estate. The estate was valued at $151,948.26 in the Inventory, but had been depleted to $107,758.60 at the date of trial, due to funeral expenses and the estate's costs of the litigation. The Plaintiff's costs amounted to $57,394.30.

McDonald J commented that the Plaintiff's solicitors, and possibly Counsel, may have contravened their obligations under the Civil Procedure Act 2010 to ensure that the proceeding had a proper legal and factual basis, and to ensure that costs are reasonable and proportionate. He referred the matter to a further hearing to consider whether a costs order should be made against the Plaintiff's solicitors and/or Counsel. The decision on costs is pending.    

This decision is a reminder that legal practitioners should proceed with caution in incurring costs where the estate is small, and that there may be serious costs consequences for the lawyers if insufficient care is taken to ensure there is a proper basis before issuing proceedings.