Half-sister's $25M Inheritance Dispute
Background to the Inheritance Dispute
Olivia Mead was the 19 year old daughter of the late Michael John Maynard Wright who died aged 74 in 2012. Wright was survived by his wife Mary and 3 other adult children born of an earlier marriage to Jennifer Turner. Olivia was born from a relationship with Elizabeth Mead and was kept a secret to most people outside of the Wright family.
The estate was in the order $1 billion. The judge described its value as “colossal” and“difficult for most people to comprehend such wealth”. Under the Will Olivia’s ½ siblings were to receive approximately $400 Million and Olivia was to receive $3 million to be managed by a trustee. The Trust contained some very complicated and strange provisions. For example if Olivia was ever convicted of a drink driving offence or if she ever converted to Buddhism, she should could receive nothing.
Olivia contested her entitlements under the Will. She said it wasn’t adequate.
The judge was critical of the trust structure as it left her fate in the hands of a man she had never met and who had close ties with other family members. The trust structure was described as “unwieldy” and “unworkable”.
It was the father’s own choosing that he did not have a close relationship with Olivia. The father did not take much interest in her welfare and contact with Olivia was limited and sporadic.
An interesting section of the decision is worthy of repeating:
42 “…. the plaintiff’s solicitors asked the plaintiff to specify expenditure she was likely to make for the rest of her life. That was a big task for a 19 year old girl. She specified expenditure on some items which were clearly fanciful. For instance the plaintiff has a keen interest in music and learned to play the guitar. When specifying what guitar she might purchase if she had funds available she specified a guitar valued at $250,000. No one needs a guitar of that value – particularly a 19 year old girl who is not now and never will be a professional musician and who has not had guitar lessons for some years. There were other items in a similar vein.
43 Counsel for the defendants was particularly effective in drawing attention to the fact the plaintiff’s likely expenditure throughout her life was overstated. But I was not left with the impression the plaintiff was a gold digger or in some way a narcissistic greedy individual. Faced with a question about what guitar she might like she let her imagination run wild. A 19 year old boy in the same position would probably, when asked about a car, have nominated a Ferrari or a Lamborghini. I do not draw any adverse inferences against the plaintiff consequent upon her answers to her solicitor’s inquiries.”
Amongst other things, Olivia also wanted 5 pairs of expensive shoes every year and a $1 Million dollar crystal encrusted piano. The Executor of the Estate effectively contended that the $3 Million trust left to Olivia was adequate.
Adequate Provision from a $1 Billion Estate
Actuarial evidence was produced by accountants in an attempt to work out what adequate provision would be. They all came up with complicated calculations and computations of estimated future expenditure and earnings. However despite the sophistication of these attempts, the judge found that the actuarial evidence was of little assistance in determining the outcome of this application.
The law does recognise the right of a testator to dispose of property in any way as he/she sees fit, however under the Succession Act, a testator also has a duty to make “adequate provision” for the “proper maintenance and support of the deceased’s spouse, child or dependent.”
A considerable amount of judicial ink has been spilt in determining what “adequate provision” is. The court has a discretion and will consider:
1. the size of the estate;
2. The needs of the plaintiff; and
3. the interest of other parties having a legitimate call on the bounty of the deceased.
There is no mathematical formula, “but the result is always what might be called atriangulation – a balancing exercise within the reference points provided by the (above)three factors”.
However the sheer size of the estate in this case was beyond the concepts of triangulation.The judge was satisfied that Olivia was an “honest level headed young woman” but“subject to all of the vagaries and uncertainties of youth”.
In the result he awarded her $25 million conditional upon her forfeiting her rights to the Trust.
The decision highlights the “moral duty” of the testator to those entitled to expect to benefit from his/her bounty.
There were two approaches to the judge’s decision both leading to the same conclusion.
1. What a wise and just testator would do in the position of the deceased; and
2. the community expectation test.
What would a “Wise and Just” Testator do?
The test involved the concept of what a wise and just testator would do in the position of the deceased. At paragraph 69 the judge provided this image and internal dialogue of what a “wise and just testator” would think:
I am a fabulously wealthy man. I am able to provide for my wife, my children and others to such an extent that all will be well provided for without any of the others suffering. My two daughters Leonie and Alexandra have proved themselves loyal and have run the Voyager Estate business extremely well. They have supported me in every possible way. They deserve the lion’s share of my estate and they will have it. My son Myles is a successful musician who has forged his own career without much help from me. I should provide for him, conscious of the knowledge he has not been involved in the family business and will always be in a position to provide for himself.
That leaves my daughter Olivia. At her age she has no real idea of what she wants to do – she might get married and have four children. She might become an arts administrator when she finishes university or she may change her mind. She should have complete financial security so that she can pursue whatever interests she wishes into the future. She is young but she is level headed and with sound advice she can doubtless invest anything I leave to her to provide for her long term benefit. I can afford to spoil her and there is no reason why I should not do so.”
The second concept is the Community Expectation Test. This test asks “what amount should be left to a person in the plaintiff’s position to meet community expectations?” In the judge’s view, an award of $25 Million would not fall outside the reasonable expectation of most members of the community. In explaining the above, the final two paragraphs of the judge’s decision are also worth restating:
“42 None of us can choose our parents. But functioning adults can choose whether or not they have children. If they do have children certain duties arise. Here I am not referring to moral duties or duties which arise as part of community expectation. I am referring to the statutory duty which arises at death by virtue of the Act. The deceased must have been aware of that duty – he was well advised by a competent solicitor. But it is a duty he could have avoided. The deceased was aware some six months before his death he was afflicted by terminal cancer. At that stage he was free to distribute his estate in any way he wished. That would have meant on his death neither the plaintiff nor anyone else could have maintained a claim – there would have been nothing to claim against. But of course if the deceased had taken that course he would have been liable for millions of dollars in, effectively, gift duty. The price the deceased paid for passing his assets tax free to his nominated beneficiaries was acceptance of the statutory duty arising under the Act to the plaintiff”. (Emphasis ours).
43 Finally, I would add this. When the $25 million is paid to the plaintiff the rest of the residuary estate will pass to the second and third defendants. They will get about $10 million each less perhaps $1 million for costs. That is on top of the $400 million they already have; and they can rest easy in the knowledge their half sister will be financially secure for the rest of her life.”
For more information please contact Evan Sarinas of Sarinas Legal.
This release is not intended as legal advice and all liability is disclaimed for reliance on it.