30/03/2015

A brief overview of a couple of unusual claims against a deceased's estate that made newspapers headlines this year.

Claim from a kept mistress

This is (almost) a modern Pretty Woman story:

It all started in 2003 when Ms Ashton and Mr Pratt had a conversation during which he told her that, if she agreed to stop being an escort and instead became his kept mistress, he would not only pay her an allowance, her rent and travel expenses but also set up a $2.5 million trust for each of her two children.  Ms Ashton agreed; however, the arrangement was never formalised.

A couple of years later, after the relationship had ended, an associate of Mr Pratt offered Ms Ashton money and a car in exchange for her to give up any claims she may have against Mr Pratt.  Ms Ashton agreed and provided her bank account details via email.

Two years after Mr Pratt's death in 2009, Ms Ashton launched legal proceedings against his estate arguing that the 2003 conversation had given rise to a binding contract and asking the Court to enforce his promises.  She claimed $10 million.  

To the relief of faithful spouses, the NSW Supreme Court dismissed her claims, stating among other reasons that even if there was in fact such a contract, the immoral nature of the arrangement (i.e. promoting extra-marital affairs was prejudicial to the status of marriage) meant it would be void as against public policy.  Ms Ashton later appealed the decision that there was no contractual relationship between the parties.

The NSW Court of Appeal dismissed her appeal on the basis that:
•    while the parties may have had an oral agreement, the conversations did not give rise to binding legal relations between them;
•    there was no clear intention of the parties to create a binding contract and, even if there was such an agreement, it would be void for uncertainty as it failed to set out the fundamental terms of the agreement such as the duties and obligations of the parties, the duration of the agreement, the terms of the trust, etc; and
•    if Mr Pratt had owed any legal obligations to Ms Ashton, he was released from those in 2005 as the email from Mr Pratt’s associate amounted to an offer which Ms Ashton accepted.  Her argument that she did so under duress was rejected.

Claim from an illegitimate daughter

This second case illustrates the Court's discretion in making a monetary award in favour of an illegitimate child who claimed that her father's will had left her without adequate funds for her proper maintenance, support, education and advancement in life. The illegitimate daughter, Miss Mead, originally claimed $20 million from her father’s estate, later revising that amount down to $12 million.

While the will of the late Michael Wright, Miss Mead's father, entitled her to a trust fund of up to $3 million, the terms of the trust contained restrictions hindering Miss Mead’s access to the money: for example the funds could only be accessed once Miss Mead turned 30, or she would be excluded from the trust if she did not observe certain faiths or was, in the eyes of the trustee, an alcoholic or drug addict (or have any association with anyone falling under these categories). The trustee was the executor of the deceased's estate and had a broad discretion in relation to when and how to distribute the trust funds to Miss Mead.  

As the Court pointed out, this meant that Miss Mead was at the mercy of someone she had never met and, while unrelated to the deceased, was nonetheless close to the rest of the family.  The Court found the whole arrangement to be unreasonable.  

In the end the Court agreed with Miss Mead that her father's will did not make adequate provisions for her and, in exchange for her renouncing any right in the trust, awarded her $25 million from the residue of the estate.  The Court considered the amount to be reasonable in light of the significant size of the estate (estimated to be $1 billion), the fact that the other beneficiaries under the will had been more than adequately provided for (approximately $400 million each) and that no one would suffer any detriment by making the award.

The Court emphasised that its decision to make this substantial award in favour of Miss Mead was not about fairness nor was it about compensating her for the deceased's limitations as a father.  Instead, in determining whether Miss Mead had been adequately provided for, the Court looked at community expectations, any statutory duty a parent may owe to a child and the position of a wise and just testator.

For further information, please contact Townsends Business & Corporate Lawyers on (02) 8296 6222.