In an unusual case published a few weeks ago, the Western Australian Court of Appeal allowed an extension of time for an adult son to bring a claim against his late father’s estate 7 years after the time limit expired. The claim was dismissed at first instance and the adult son appealed asserting 9 different grounds for appeal.
The case of Wheatley v Gwenyth Mary Wheatley as executor of the estate of the late Gerald Leopold Wheatley  WASCA 34 involved an estate worth approximately $7 million and a family farming enterprise. The deceased died on 8 May 2008 and was survived by his widow and his two children (including the claimant). The deceased left his whole estate to his widow. The deadline to commence proceedings for a family provision claim for the claimant expired on April 2009. The claimant filed his proceedings on 19 February 2016. Accordingly, a request for an extension of time was necessary.
What is interesting about this case was that it dealt with the family provision claim, but also considered the relevance of the claimant’s proceedings against the mother for a claim of specific performance for an alleged agreement between them in the years following the father’s death.
On the evidence of the claimant, the father had encouraged him to pursue the life of a farmer, to follow in the footsteps of the father and his grandfather, and created the expectation that when the father died, the claimant would receive the farms. This was so much so, that when the father became ill and injured, the claimant gave up his own carpentry business and returned to work on the farm. The move significantly reduced the claimant’s income and potentially future income prospects.
Following the death of his father, the son attempted to enter discussions with his mother about the succession of the farm. The mother assured the son that “it will all be yours, one day” and while had agreed to attend succession planning seminars with the bank, and speak with farming consultants, she appeared reluctant to plan anything too formal about the succession of the farming enterprise. The son’s accountant, who had been assisting him with his estate planning considerations, acknowledged the challenges the son had faced in having his mother agree to a real succession plan.
The relationship with the mother and son began to deteriorate in early 2010 and after leaving the farm for a short time, and subsequently returning, the son began discussing leasing arrangements with his mother to continue working in the farming enterprise. Following these discussions, the relationship continued to become challenging and a mediation was held in December 2010 which failed to resolve the matter. Throughout 2011, the son had obtained farming work elsewhere and it was then in the middle of 2012, that the mother rekindled discussions about the son returning to the farm, running the business and ultimately becoming the owner of the farms.
In December 2012, they reached a verbal agreement which would result in the son receiving two lots of land, and then the son progressively owning the remaining farmland capable of being farmed after a 3 year period. The son understood that he was given an option to purchase the farm after leasing it for a 3 year period and that the purchase price would be 50% of the market value and understanding that the price was indicative of, what the son considered, the mother’s desire to attribute a half share of her estate to each of her children. The son also understood that this would, in effect, give him the outcome that he might have hoped to expect if he made a successful claim in his father’e estate and/or put him in the position he may have been in if the farm had been left to him by his father.
Subsequently, the son obtained finance from the Commonwealth Bank to fund the leasing arrangements after the transfer of the two lots of the farmland were arranged.
In 2015/2016 a dispute arose between the mother and son about whether the agreement was binding after the son’s accountant wrote to the mother stating that the son was exercising his option to purchase the property. The mother rejected that there was any such option.
In February 2016, the son commenced proceedings against the mother to enforce the alleged agreement and then sought that this claim be heard in tandem with his claim for specific performance.
Application for Extension of Time
To consider the overall request for an extension, the Court had to be satisfied that the delay was reasonable.
Helpfully, the Court succinctly separated the delay into 3 periods:
- Between April 2010 and September 2010
- Between September 2010 and December 2012
- Between December 2012 and January 2016
Citing the authority of Clayton v Aust (1993) 9 WAR 364, at paragraph 56 of the judgement, the Court noted the following guidelines that they should have regard to in relation to an application brought out of time:
- “The discretion is unfettered. No restrictions or requirements of any kind are laid down in the Act. The discretion is to be exercised judicially and in accordance with what is just and proper.”
- “The onus lies on the applicant to establish sufficient grounds for taking the case out of the general rule, and depriving those who are protected by it of its benefits.”
- “It is material to consider how promptly and in what circumstances the applicant seeks the permission of the court after the time limit has expired. The whole of the circumstances must be looked at including the reasons for the delay and the promptitude with which the applicant gave warning to the defendants of the proposal application.”
- “If negotiations have been commenced within the time limit, and time has run out while the negotiations are proceeding, this is likely to encourage the court to extend the time. Negotiations commenced after the time limit might also aid the applicant, at any rate if the defendants have not, in relation to those negotiations, taken the point that time has expired.”
- “It is relevant to consider whether or not the estate had been distributed before a claim under the Act had been made or notified. For most people, there is a real difference between ‘the bird in the hand and the bird in the bush’. In addition, of course, the beneficiaries are more likely to have changed their position in reliance on the benefaction if they have actually received it than if it lies merely in prospect.”
- “It is relevant to consider whether a refusal to extend the time would leave the claimant without redress against anybody.”
Grounds of the Appeal
There were nine grounds of appeal, which are succinctly set out at paragraph 64 and 65. They were:
- The Master erred in law in that having found the son had an arguable case the Master then:
(a) limited his consideration of the strength of the son’s case as to whether it was an arguable case; and
(b) failed to have regard to a relevant consideration and take into account the strength of the son’s claim as a material factor when considering the justice of the case for the purpose of…. the Act.
[Ground 1, dismissed].
- The Master erred in fact in finding that the son knew that he could make a claim under the Act and knew the time limits applied to making any claim at least from September/October 2009;
[Ground 2, dismissed]
- The Master erred in fact in finding that there was no evidence as to financial status of the son after December 2010, and erred in law in failing to have regard to a relevant consideration, in that the Master failed to consider the son’s financial inability as a reason why he did not pursue legal proceedings after December 2010;
[Ground 3, upheld – see below]
- The Master erred in fact in finding that in July 2013, the son had the financial ability to fund legal proceedings from borrowed funds and erred in law by failing to have regard to a relevant consideration that funds he borrowed were for the specific purpose of performing an agreement made between the son and the widow which the son understood would resolve the need for legal proceedings;
[Ground 4, upheld – see below]
- The Master erred in law and in fact in:
(a) finding that negotiations between the parties in 2012 were not causally relevant to the son’s delay in the commencement of legal proceedings; and
(b) failing to have regard to a relevant consideration in that the son considered that the agreement he made with the mother in 2012 addressed the need to commence legal proceedings against his late father’s estate and thereby explaining three years of delay;
[Ground 5, upheld – see below]
- The Master erred:
(a) in fact and law by having regard to an irrelevant consideration, in particular assuming that there would become a need to unwind a farming business conducted by the widow and there may be difficulty in doing so, if leave were granted; and
(b)in fact and in law in failing to have regard to relevant considerations and finding that:
(i) the estate was distributed solely to the widow;
(ii) the estate was of an estimated value of $7million and was adequate in size to make provision for the son despite the widow having operated the farming business until March 2013;
(iii) the widow had ceased operating the farming business in March 2013 and the son had agreed to purchase the livestock and some of the machinery assets of that business from that time; and
(c) in law in failing to have regard to the court’s power to apply s9 of the Act and s65(5) of the Trustees Act, in making orders under the said Act.
[Ground 6, unnecessary to deal with]
- The Master erred in law in failing to have regard to a relevant consideration, in particular that no evidence of any disadvantage to the widow (in her capacity as executor beneficiary) would arise if the son were granted leave under…the Act;
[Ground 7, unnecessary to deal with]
- The Master erred in law by failing to have regard to a relevant consideration, being the son’s evidence that he wanted to avoid legal proceedings to preserve the relationship with his mother;
[Ground 8, dismissed]
- Having regard to grounds 1-8 and the affidavit material relied on by the son, the Master erred in fact and law in finding that the son’s explanation for delay was inadequate.
[Ground 9, unnecessary to deal with]
The mother, in response to the appeal, filed a notice of contention stating that it would not be “just” to grant leave, claiming (at para 65):
- The mother would be prejudiced as she had gifted 288 acres of land to the son in circumstances where she could reasonably have expected that there would not be a challenge to the will and would not otherwise have made that gift.
- In December 2-12, the son made a conscious and fully-informed decision not to seek an extension of time but rather accept a substantial gift of land from the mother and enter into an arrangement which he believed entitled him to purchase the majority of the land received by the mother at a greatly discounted price;
- The application to extend time is made as insurance against the prospect that the course referred to in 2 above, which was chosen and adopted by the son, fully informed of his legal rights, is unsuccessful and his case against the mother to enforce his alleged entitlement to purchase the farmland is unsuccessful.
In upholding grounds 3, 4 and 5, the Court said:
- In relation to Ground 3, the Court simply determined that the finding of no evidence was “incorrect” as the son had given evidence of his poor financial status from December 2010 to December 2012: paras 73-76.
- In relation to Ground 4, the Court referred further to the mother’s contention that the Master noting the borrowing of funds was ‘capable of encompassing a finding that [the son’s] loan reflected a capacity to access funds that gave him the ability to fund litigation, whether or not the funds actually borrowed were to be used for that purpose.” The Court, in reply, could not accept that contention. The Court said, in response to the effect of the Master’s findings, that:
“There was no evidence that the loan could lawfully have been applied for that purpose and, indeed the evidence prima facie pointed to the contrary. the son annexed what he said was a true copy of the Commonwealth Bank letter of offer in relation to the finance. That letter of offer described the facility as an “AgriBusiness Line of Credit”, provided for the purpose of ‘working capital’ and ‘to be applied wholly or predominately for business purposes or investment purposes other than investment in residential property’. Prima facie those purposes would not encompass litigation funding. Moreover, the loan was not in any practical sense available for litigation funding at that stage. That is because the uncontraverted evidence was that the money had been borrowed for the purpose of operating the farm business and implementing the December 2012 agreement.
“Whilst the master in that part of his reasons is addressing the son’s financial position as at December 2010, when the reasons are read as a whole, it is evident that the master found, in effect, that there was no evidence as to the son’s financial status from at least December 2010 to December 2012.
The finding of no evidence was incorrect. The son gave evidence as to his poor financial status from around December 2010 to at least December 2012.” [para 80]
- In relation to Ground 5, the Court said:
“We would uphold ground 5 insofar as it alleges that the master failed to have regard to the December 2012 agreement as a consideration relevant to the period of delay between December 2012 and February 2016. It is not to the point that the negotiations were not directed, in terms, to a compromise under the act. Negotiations to purchase the farmland, and any resulting agreement, could avoid the necessity for making a claim under the Act. This is not merely a weighting issues. The master was bound, by the principles of natural justice, to give genuine consideration to the son’s explanation for the delay before finding that there was ‘a failure…to adequately explain the delay’. The uncontroverted evidence was that the son took no steps under the Act in the (approximately) three-year period prior to February 2016, because on his understanding, he had reached an agreement in terms of the December 2012 agreement. As we have noted, the alleged agreement had the effect of placing him in the position on which he would have been had his father left half the farm to him, and provided a sound explanation for the delay between the time of the alleged agreement and the mother’s renunciation of the alleged agreement…” [para 85]
In relation to the delay and the three distinct periods of delay, the Court made comments specific to each defined period:
- In relation to the first period, the Court acknowledged that the son was still in the early stages of grieving over the loss of his father. The Court noted that the accountant had suggested some time restraints on any right to challenge his father’s will and also pointed out significant legal costs associated with that path. Additionally, during this time, the mother had told her son that he was out of time to make a claim, and the son did not have any financial ability to fund litigation, nor did he wish to strain his relationship with his mother. The Court held that this delay was reasonably explained (para 93).
- In relation to the second period, the Court acknowledged that the son had no funds to take the matter further and he was told to leave the farm after he attempted to assert his rights. The Court noted that the mediation was held but no resolution was found and the son continued to have no means of commencing litigation to address the matter. The son continued to retain the view that his mother would come back “to sort things out”, which ultimately did occur in the middle of 2012. The Court held that this delay was reasonably explained (para 94).
- In relation to the third period, the Court acknowledged that son held a genuine belief that an enforceable agreement was formed between he and his mother in December 2012 where he acquired the option to purchase the farmland at half it’s market value. The Court further noted that while it would have been prudent to have the agreement documented by a solicitor, it was not unreasonable for the son not to have had done this in light of the familial relationship between the parties and that they had seemed to ‘patch things up’ between them, notwithstanding their earlier disagreements. The Court held that this delay was reasonably explained (para 95-96).
In conclusion and in addressing the mother’s notice of contention, the Court said:
“It may be accepted, for present purposes, that the mother would not have transferred the two lots to the son had she known that the son would make a claim on the estate in the future. Again, with hindsight, it may have been prudent, from the mother’s perspective, for an agreement to that effect to have been formally documented before transferring the lots to the son, if that were her aim. [para 100]
Nevertheless, it is only if the son fails in the other proceedings to establish the December 2012 agreement that the transfer of the two lots could legally be characterised as a gift. It is not true that the son made a fully informed decision not to apply to extend time under the Act and, instead, to accept the two lots as a gift in the belief that he would subsequently purchase the farmland at a discounted price. On the son’s case, the two lots, albeit transferred for no specific consideration, were part of an overall agreement by which he undertook leasing and other obligations and was given an option to purchase. Looked at prospectively from the son’s point of view in December 2012, the son obtained the lots not as a volunteer, but as part of an overall farm succession agreement. Had he seen a solicitor at the time, and it emerged that the mother’s attitude was that there was no agreement, it is to be inferred that he would have commenced proceedings at that point. However, neither party took legal advice at the time, and the son’s decision not to do so was no unreasonable in all the particular circumstances of this case. [para 101]
To the extent that the grant of the leasehold for three years to the son and the transfer of the two lots would mean that it would be inequitable to grant the son relief or to grant him relief in full, the son may fail, wholly or in part, in any proceedings under the Act: s9 of the Act, s65(8) of the Trustees Act. However, on the evidence before this court, it cannot be said that these matters are likely to loom so large that the son’s claim on that account would be ‘doomed from the outset‘, so that the justice of the case does not require the grant of leave. [para 102]
Senior counsel for the mother also contended that there would no injustice if the application to extend time was dismissed because the con’s real complaint is that, based on representations made by the mother in around December 2012, he ‘gave up’ his rights under the Act, and that the proper remedy for that is to bring separate proceedings ‘for an estoppel by reason of the assumption that was reasonably induced’. However, that submission begs the question of whether the son ‘gave up’ his rights under the Act in December 2012. He did not if the court grants an extension of time under s7(2). Moreover, the kinds of matters relevant to the prosecution of a separate estoppel claim may, at least ordinarily, properly be taken into account under s7(2) of the Act, and even if the pursuit of separate proceedings for an estoppel were not an irrelevant consideration on the proper construction of s7(2), it is a consideration which would ordinarily carry little or no real weight. (para 103)
You can read the case here.