Australia: Solicitors should beware of liability to estate beneficiaries

In brief - Will drafters need to manage their risks prudently

Practitioners will be aware of a raft of recent cases dealing with claims by disappointed beneficiaries. Liability can be long tail (occurring years after the will was drafted) and the costs well out of proportion to the fees charged. As the composition of families and the economy changes, practitioners are likely to see more claims. However, being aware of some common risk management issues may help practitioners to avoid litigation.

The following case studies illustrate some of the risks that must be borne in mind when taking instructions. They are followed by practical tips to avoid similar outcomes.

Solicitor fails to use alternative procedure for client who died before signing will

Case study: A solicitor was called to visit a friend (who was also a longstanding client) in hospital with very serious burns. The client gave instructions for a will, which were written on a piece of paper, but the client died before he could sign it. The solicitor was found negligent for failing to consider/use an alternative procedure whereby the solicitor signs the will at the direction of the client (Summerville v Walsh NSWCA unreported 26.02.1998).

Practitioners should note that the section of the Succession Act 2006 referred to in this case has since been repealed. For the current legislation, please see section 8 of the Succession Act, which strictly speaking does not set out any specific form of informal will. (See also Howe v Fischer [2014] NSWCA 286.)

Practice tip:

  • Consider preparing an informal will if you are on notice that death is imminent.

You must draw on your knowledge of a longstanding client's affairs

Case studies: A solicitor had acted for the testator over a number of years and had prepared previous wills. One of those wills provided for a bequest to a long estranged daughter. The testator had two pieces of real estate purchased jointly with his step-son, and held as tenants in common. Probate included the testator's half share in each of the properties.

The estranged daughter brought a family maintenance application for provision out of the estate which led to a reduction in the net value of the estate that the claimant had expected to receive. The step-son subsequently succeeded in establishing that the solicitor's negligence lost the testator the chance to arrange his assets to minimise the risk of a claim. This decision is currently subject to an Application for Special Leave to Appeal to the High Court ( Calvert v Badenach [2015] TASFC 8).

In another case, a testatrix did not intend to dispose only of her one half interest in jointly owned property. Rather, her wish was to have her husband sell the property and distribute the whole of the sale proceeds to their children. No duty arises, however, until an unconditional intention to make a gift is formed and instructions are given to the solicitor accordingly ( Vagg v McPhee [2013] NSWCA 29).

Practice tips:

  • If you have acted for the client in the past, you will be expected to consider aspects of the testator's affairs that might not be expressly mentioned.
  • You may have a positive duty to speak up and ask the testator even about things that s/he does not mention.

Consider whether the client has capacity to give instructions or make legal decisions

See Law Society of NSW, When a client's capacity is in doubt, A practical guide for solicitors.

This guide covers what solicitors should do and what resources are available to assist them if they are concerned that their client may lack capacity to give instructions or make their own legal decisions.

Practice tip:

  • Succession Act Part 2.2 Division 2, Court authorised wills for persons who do not have testamentary capacity

Solicitors need to take full and proper instructions from the testator

Lawcover has seen many claims against solicitors by beneficiaries resulting from solicitors failing to understand the estate planning process and failing to take full and proper instructions from the testator.

Case studies: A solicitor omitted to confirm ownership of the testator's assets and was not aware those assets were held by a trust. The will drafted by the solicitor attempted to gift a number of the assets. The disappointed beneficiary successfully claimed the value of the assets from the solicitor.

In another case, a solicitor drafted a will on the basis that the testator was the beneficiary of an insurance policy and devised the proceeds of that policy to a specific beneficiary. The policy had different nominated beneficiaries and the disappointed beneficiary successfully claimed the value of the policy from the solicitor.

Practice tips:

  • Obtain full asset and full liability details from the testator and check that those details are correct.
  • Take the time to understand the testator's asset structures.
  • Make sure you have the necessary legal knowledge to advise the testator in respect of protective structures for vulnerable beneficiaries.

Always return testators' and relatives' calls

Case study: A solicitor breached his duty to his client when he failed to respond to the beneficiary's calls for urgent attention to what he must have known or suspected related to his client's health and the unexecuted will. The solicitor didn't respond to the beneficiary's repeated requests that he return calls, when a simple phone call would have satisfied the solicitor of the urgent need to discharge his duty to his client - to finalise his client's will. The testator died in the interim ( Maestrale v Aspite [2012] NSWSC 1420).

Practice tips:

  • Do not let calls from testators or their relatives go unreturned.
  • If you are too busy, do not take the matter on.

Important steps solicitors should take to avoid liability

When taking instructions, solicitors should:

  • ensure that the client has capacity
  • take full instructions
  • take detailed (typed) notes and retain them indefinitely
  • follow up with the client
  • consider an informal will in appropriate cases
Peter Moran Toby Blyth
Professional indemnity
Colin Biggers & Paisley

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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