Successful Wills Challenge Allows Beneficiary to Purchase $250,000 Guitar

This case study provides an interesting insight into challenging a Will.

Background

Michael Wright’s father, Peter Wright, was well known. Peter co-founded a prospecting business with Lang Hancock. Hancock was Gina Rinehart’s father. Peter became rich and Michael inherited much of that wealth.

Michael’s business interests included the Voyager Estate winery in Margaret River. He died in 2012. Michael was survived by his wife, three adult children from a previous marriage and another daughter, Olivia Mead, from a de facto relationship. Mead (‘the plaintiff’) made a claim against the estate of her late father. The case, Mead v. Lemon [2015 WASC 71], was decided in the Supreme Court of Western Australia. It is believed to be the largest award made by a court for a challenge to an estate in the country.

The Facts

The deceased left a number of specific gifts. These included a gift to his wife and to his son Myles. His two daughters (Leonie and Alexandra) were to receive the balance of his estate.

The lawyer representing the plaintiff in this case speculated that the size of the estate may be “in excess of $1 billion”. No issue was taken with that estimate by the lawyers representing the estate. In the words of the court the deceased’s estate “is colossal”. Documents filed with the court in an application for probate valued each of Leone and Alexandra’s entitlements as being “in the order of $400 million”.

The deceased made provision for the plaintiff in his will by means of a trust – the “Olivia Trust No. 2”. The court spent some time examining the terms of this trust. In essence, the trustee of the trust was the solicitor for the deceased. Any benefit which the plaintiff was to receive upon the death of the deceased was to pass to her via this trust. There was approximately $790,000 in assets in this trust and the deceased made a provision in his will to increase its capital up to $3 million. 

The court focused on the trustee’s absolute discretion to pay the plaintiff from the trust. It noted that “the plaintiff under the terms of the Trust is at the mercy of the trustee”. If the plaintiff became an “Excluded Person” under the terms of the trust she could be excluded from any benefit under the deceased’s estate.

As part of the preparation for the case the plaintiff’s lawyers asked her to specify expenditure she was likely to make for the rest of her life. As part of this “wish list”, the plaintiff (a keen guitar player) specified that she wished to purchase a guitar at an estimated cost of $250,000. Lawyers for the estate made much of this. However the court felt that the plaintiff intended no harm by this and was not “a gold digger or in some way a narcissistic greedy individual”.

Indeed, the court went on to conclude that the deceased’s will did not make adequate provision for the plaintiff. The primary reason for this decision was the sheer size of the estate. It was noted that in smaller estates there was always something of a “triangulation” exercise required in which the needs of the plaintiff, the interests of other legitimately interested parties and the size of the estate were in some way traded off against each other. In an estate of this size the court noted that “No other individual will be prejudiced no matter what award (within reason) I make”.

The Decision

On this basis the court awarded the plaintiff “a cash payment of $25 million conditional upon her forfeiting any right or interest in the Trust”.

A secondary reason for the court’s decision related to the trust structure by which the plaintiff was to receive her original entitlement under the will of up to $3 million. The discretionary nature of any payment made to the plaintiff under the trust was emphasised. 

Lessons to learn from this case

This reinforces the view that when preparing a will one of the factors that must be considered is the structure by which a beneficiary is to receive their interest. In this case the amount placed into the trust for the benefit of the plaintiff was of concern to the court. So too, however, was the fact that the plaintiff was not to have control over the money and that a trustee was effectively interposed between the plaintiff and the interest she was to take.

The estate has appealed the decision. As at the date of writing this note the appeal has not been heard. The plaintiff’s financial adviser will no doubt recommend that she wait until the outcome of the appeal before purchasing that guitar.